AIG Reports Third Quarter 2018 Results
- Net loss of
$1.3 billion , or$1.41 per share, for the third quarter of 2018, compared to a net loss of$1.7 billion , or$1.91 per share, in the prior-year quarter - Adjusted after-tax loss of
$301 million , or$0.34 per share, for the third quarter of 2018, compared to an adjusted after-tax loss of$1.1 billion , or$1.22 per share, in the prior-year quarter - Net pre-tax catastrophe losses of
$1.6 billion ($1.3 billion after-tax or$1.45 per share) within previously disclosed range - Net prior year loss reserve development was flat year-to-date, including net unfavorable prior year loss reserve development of
$170 million in the third quarter of 2018 General Insurance focus continues on key strategic priorities including underwriting, reinsurance and expense reduction- Life and Retirement delivered another quarter of solid double-digit adjusted ROEs and sales growth in Individual and Group Retirement and Life Insurance
- Share and warrant repurchases of
$350 million for the third quarter of 2018 and$1.0 billion year-to-date
“In the third quarter we continued to execute against our strategic priorities for delivering long-term, profitable growth,” said
Mr. Duperreault added, “Looking ahead, we continue to work with a sense of urgency and are taking decisive actions across the company to position AIG for the future.”
THIRD QUARTER FINANCIAL SUMMARY*
Three Months Ended
September 30, |
||||||||||
($ in millions, except per share amounts) | 2018 | 2017 | ||||||||
Net loss | $ | (1,259 | ) |
$ |
(1,739 | ) | ||||
Net loss per diluted share | $ | (1.41 | ) |
$ |
(1.91 | ) | ||||
Adjusted after-tax loss | $ | (301 | ) |
$ |
(1,111 | ) | ||||
Adjusted after-tax loss per diluted share | $ | (0.34 | ) |
$ |
(1.22 | ) | ||||
Return on equity |
(8.4 |
)% |
(9.5 | )% | ||||||
Adjusted return on equity |
(2.4 |
)% |
(8.4 | )% | ||||||
Adjusted return on attributed equity - Core | (3.6 | )% | (11.6 | )% | ||||||
Book value per common share | $ |
66.23 |
$ |
80.62 | ||||||
Book value per common share, excluding accumulated other comprehensive income | 66.83 | 74.01 | ||||||||
Adjusted book value per common share | 55.58 | 57.44 |
*Refer to the Comments on Regulation G and the tables that follow for a discussion of non-GAAP financial measures and the reconciliations of the non-GAAP financial measures to GAAP measures. |
THIRD QUARTER 2018 HIGHLIGHTS
Previously Disclosed Pre-tax Catastrophe Losses of
General Insurance Accident Year Combined Ratio Slightly Deteriorates, Accident Year Loss Ratio Improves – Severe Loss Global Aggregate Cover Attaches – Third quarter
Life and Retirement Earnings Deliver Solid Double Digit Adjusted ROE – Third quarter adjusted pre-tax income was
Legacy Results Include Catastrophe Losses – Third quarter adjusted pre-tax income of
Net Investment Income Reflects Strong Private Equity Returns – Third quarter net investment income from our insurance companies, including the Legacy insurance portfolios, increased 1.4% from the prior-year quarter to
Liquidity and Capital – As of
Book Value per Common Share – As of
GENERAL INSURANCE
Three Months Ended September 30, | |||||||||||||
($ in millions) | 2018 | 2017 | Change | ||||||||||
Total General Insurance | |||||||||||||
Gross premiums written | $ | 8,668 | $ | 8,426 | 3 | % | |||||||
Net premiums written | $ | 6,835 | $ | 6,577 | 4 | ||||||||
Underwriting loss | $ | (1,726 | ) | $ | (3,796 | ) | 55 | ||||||
Adjusted pre-tax loss | $ | (825 | ) | $ | (2,933 | ) | 72 | ||||||
Underwriting ratios: | |||||||||||||
Loss ratio | 88.6 | 124.1 |
(35.5) pts |
||||||||||
Impact on loss ratio: | |||||||||||||
Catastrophe losses and reinstatement premiums | (22.0 | ) | (45.4 | ) | 23.4 | ||||||||
Prior year development | (2.7 | ) | (12.7 | ) | 10.0 | ||||||||
Adjustments for ceded premium under reinsurance | |||||||||||||
contracts and other | (0.3 | ) | - | (0.3 | ) | ||||||||
Accident year loss ratio, as adjusted | 63.6 | 66.0 | (2.4 | ) | |||||||||
Expense ratio | 35.8 | 33.0 | 2.8 | ||||||||||
Combined ratio | 124.4 | 157.1 | (32.7 | ) | |||||||||
Accident year combined ratio, as adjusted | 99.4 | 99.0 | 0.4 | ||||||||||
Three Months Ended September 30, | |||||||||||||
($ in millions) | 2018 | 2017 | Change | ||||||||||
North America | |||||||||||||
Net premiums written | $ | 3,164 | $ | 2,942 | 8 | % | |||||||
Commercial Lines | 2,229 | 2,118 | 5 | ||||||||||
Personal Insurance | 935 | 824 | 13 | ||||||||||
Underwriting loss | $ | (987 | ) | $ | (2,940 | ) | 66 | ||||||
Commercial Lines | (609 | ) | (2,684 | ) | 77 | ||||||||
Personal Insurance | (378 | ) | (256 | ) | (48 | ) | |||||||
Adjusted pre-tax loss | $ | (160 | ) | $ | (2,193 | ) | 93 | ||||||
Underwriting ratios: |
|||||||||||||
North America | |||||||||||||
Loss ratio | 98.8 | 175.0 |
(76.2) pts |
||||||||||
Impact on loss ratio: | |||||||||||||
Catastrophe losses and reinstatement premiums | (23.7 | ) | (78.8 | ) | 55.1 | ||||||||
Prior year development | (4.8 | ) | (19.0 | ) | 14.2 | ||||||||
Adjustments for ceded premium under reinsurance | |||||||||||||
contracts and other | (0.5 | ) | - | (0.5 | ) | ||||||||
Accident year loss ratio, as adjusted | 69.8 | 77.2 | (7.4 | ) | |||||||||
Expense ratio | 31.1 | 26.8 | 4.3 | ||||||||||
Combined ratio | 129.9 | 201.8 | (71.9 | ) | |||||||||
Accident year combined ratio, as adjusted | 100.9 | 104.0 | (3.1 | ) | |||||||||
North America Commercial Lines | |||||||||||||
Loss ratio | 98.5 | 205.0 |
(106.5) pts |
||||||||||
Impact on loss ratio: | |||||||||||||
Catastrophe losses and reinstatement premiums | (21.6 | ) | (95.7 | ) | 74.1 | ||||||||
Prior year development | (0.6 | ) | (25.6 | ) | 25.0 | ||||||||
Adjustments for ceded premium under reinsurance | |||||||||||||
contracts and other | (0.7 | ) | - | (0.7 | ) | ||||||||
Accident year loss ratio, as adjusted | 75.6 | 83.7 | (8.1 | ) | |||||||||
Expense ratio | 26.6 | 23.3 | 3.3 | ||||||||||
Combined ratio | 125.1 | 228.3 | (103.2 | ) | |||||||||
Accident year combined ratio, as adjusted | 102.2 | 107.0 | (4.8 | ) | |||||||||
North America Personal Insurance | |||||||||||||
Loss ratio | 99.8 | 96.4 |
3.4 pts |
||||||||||
Impact on loss ratio: | |||||||||||||
Catastrophe losses and reinstatement premiums | (29.7 | ) | (34.6 | ) | 4.9 | ||||||||
Prior year development | (16.9 | ) | (1.7 | ) | (15.2 | ) | |||||||
Accident year loss ratio, as adjusted | 53.2 | 60.1 | (6.9 | ) | |||||||||
Expense ratio | 43.3 | 35.8 | 7.5 | ||||||||||
Combined ratio | 143.1 | 132.2 | 10.9 | ||||||||||
Accident year combined ratio, as adjusted | 96.5 | 95.9 | 0.6 | ||||||||||
All comparisons are against the third quarter of 2017, unless otherwise indicated. Refer to the AIG Third Quarter 2018 Financial Supplement, which is posted on AIG's website in the Investors section, for further information.
- Adjusted pre-tax loss of
$160 million included$791 million of catastrophe-related losses, net of reinsurance, and$88 million of severe losses. Net unfavorable prior year loss reserve development of$134 million included$148 million of unfavorable prior year loss development inPersonal Insurance primarily related to development from 2017 catastrophe losses, partially offset by$14 million of favorable prior year loss development from Commercial Lines which included the amortization of the deferred gain from the ADC withNICO . The increase in net investment income was primarily driven by theValidus acquisition. - Net premiums written increased by 7.5%, largely due to additional premiums from the acquisition of
Validus of$275 million , lower ceded premiums due to changes in the 2018 reinsurance programs and growth inPersonal Insurance businesses. - The improvement in the
North America loss ratio was driven by significantly lower catastrophe losses and lower unfavorable prior year loss reserve development. The accident year loss ratio, as adjusted, improved 7.4 points, benefiting from changes in portfolio mix and the impact of lower severe losses (1.1 pts) compared to the prior-year quarter, partially offset by the impact of changes in 2018 reinsurance programs. The third quarter 2017 included a year-to date increase in accident year loss estimates for Property. - The increase in the expense ratio reflected a higher acquisition expense ratio driven by changes in Personal Insurance’s portfolio mix and an increase in GOE related to strategic initiatives.
Three Months Ended September 30, | |||||||||||||
($ in millions) |
2018 | 2017 | Change | ||||||||||
International | |||||||||||||
Net premiums written | $ | 3,671 | $ | 3,635 | 1 | % | |||||||
Commercial Lines | 1,810 | 1,652 | 10 | ||||||||||
Personal Insurance | 1,861 | 1,983 | (6 | ) | |||||||||
Underwriting loss | $ | (739 | ) | $ | (856 | ) | 14 | ||||||
Commercial Lines | (423 | ) | (956 | ) | 56 | ||||||||
Personal Insurance | (316 | ) | 100 | NM | |||||||||
Adjusted pre-tax loss | $ | (665 | ) |
$ |
(740 | ) | 10 | ||||||
Three Months Ended September 30, | |||||||||||||
($ in millions) | 2018 | 2017 | Change | ||||||||||
Underwriting ratios: |
|||||||||||||
International | |||||||||||||
Loss ratio | 79.7 | 85.0 |
(5.3) pts |
||||||||||
Impact on loss ratio: | |||||||||||||
Catastrophe losses and reinstatement premiums | (20.5 | ) | (19.8 | ) | (0.7 | ) | |||||||
Prior year development | (1.0 | ) | (7.9 | ) | 6.9 | ||||||||
Accident year loss ratio, as adjusted | 58.2 | 57.3 | 0.9 | ||||||||||
Expense ratio | 39.9 | 37.9 | 2.0 | ||||||||||
Combined ratio | 119.6 | 122.9 | (3.3 | ) | |||||||||
Accident year combined ratio, as adjusted | 98.1 | 95.2 | 2.9 | ||||||||||
International Commercial Lines | |||||||||||||
Loss ratio | 87.6 | 124.1 |
(36.5) pts |
||||||||||
Impact on loss ratio: | |||||||||||||
Catastrophe losses and reinstatement premiums | (20.6 | ) | (41.7 | ) | 21.1 | ||||||||
Prior year development | (3.6 | ) | (17.9 | ) | 14.3 | ||||||||
Accident year loss ratio, as adjusted | 63.4 | 64.5 | (1.1 | ) | |||||||||
Expense ratio | 35.6 | 31.3 | 4.3 | ||||||||||
Combined ratio | 123.2 | 155.4 | (32.2 | ) | |||||||||
Accident year combined ratio, as adjusted | 99.0 | 95.8 | 3.2 | ||||||||||
International Personal Insurance | |||||||||||||
Loss ratio | 72.4 | 51.7 |
20.7 pts |
||||||||||
Impact on loss ratio: | |||||||||||||
Catastrophe losses and reinstatement premiums | (20.5 | ) | (1.1 | ) | (19.4 | ) | |||||||
Prior year development | 1.5 | 0.7 | 0.8 | ||||||||||
Accident year loss ratio, as adjusted | 53.4 | 51.3 | 2.1 | ||||||||||
Expense ratio | 43.8 | 43.4 | 0.4 | ||||||||||
Combined ratio | 116.2 | 95.1 | 21.1 | ||||||||||
Accident year combined ratio, as adjusted | 97.2 | 94.7 | 2.5 | ||||||||||
All comparisons are against the third quarter of 2017, unless otherwise indicated. Refer to the AIG Third Quarter 2018 Financial Supplement, which is posted on AIG's website in the Investors section, for further information.
- Adjusted pre-tax loss of
$665 million included$776 million of catastrophe-related losses, net of reinsurance, severe losses of$65 million and unfavorable prior year loss reserve development of$38 million . The decrease in net investment income reflects lower income from equity method investments and fair value option securities. - Net premiums written increased slightly on a reported and constant dollar basis. The increase in net premiums written was due to the inclusion of additional premiums of
$165 million from the acquisition ofValidus , growth in our European Financial Lines business and Accident and Health and Personal Lines businesses inAsia Pacific . - The third quarter loss ratio was 79.7. The accident year loss ratio, as adjusted, increased 0.9 points to 58.2, driven by higher attritional losses in Commercial Lines, partially offset by lower severe losses (1.8 pts) compared to the prior-year quarter.
- The expense ratio increased due to a higher acquisition ratio from changes in business mix combined with changes in the 2018 reinsurance program.
LIFE AND RETIREMENT
Three Months Ended September 30, | |||||||||||||
($ in millions) | 2018 | 2017 | Change | ||||||||||
Life and Retirement | |||||||||||||
Premiums & Fees | $ | 943 | $ | 2,001 | (53 | )% | |||||||
Net Investment Income | 1,960 | 1,907 | 3 | ||||||||||
Adjusted Revenue | 3,146 | 4,136 | (24 | ) | |||||||||
Benefits, losses and expenses | 2,433 | 2,978 | (18 | ) | |||||||||
Adjusted pre-tax income | 713 | 1,158 | (38 | ) | |||||||||
Premiums and deposits | 6,779 | 6,797 | - | ||||||||||
Individual Retirement | |||||||||||||
Premiums & Fees | $ | 213 | $ | 212 | - | % | |||||||
Net Investment Income | 956 | 973 | (2 | ) | |||||||||
Adjusted Revenue | 1,335 | 1,343 | (1 | ) | |||||||||
Benefits, losses and expenses | 942 | 625 | 51 | ||||||||||
Adjusted pre-tax income | 393 | 718 | (45 | ) | |||||||||
Premiums and deposits | 3,616 | 2,526 | 43 | ||||||||||
Net flows | (545 | ) | (718 | ) | 24 | ||||||||
Group Retirement | |||||||||||||
Premiums & Fees | $ | 124 | $ | 121 | 2 | % | |||||||
Net Investment Income | 531 | 524 | 1 | ||||||||||
Adjusted Revenue | 718 | 702 | 2 | ||||||||||
Benefits, losses and expenses | 476 | 453 | 5 | ||||||||||
Adjusted pre-tax income | 242 | 249 | (3 | ) | |||||||||
Premiums and deposits | 2,116 | 1,860 | 14 | ||||||||||
Net flows | (986 | ) | (15 | ) | NM | ||||||||
Life Insurance | |||||||||||||
Premiums & Fees | $ | 520 | $ | 727 | (28 | )% | |||||||
Net Investment Income | 275 | 260 | 6 | ||||||||||
Adjusted Revenue | 809 | 1,000 | (19 | ) | |||||||||
Benefits, losses and expenses | 793 | 888 | (11 | ) | |||||||||
Adjusted pre-tax income | 16 | 112 | (86 | ) | |||||||||
Premiums and deposits | 978 | 935 | 5 | ||||||||||
Institutional Markets | |||||||||||||
Premiums & Fees | $ | 86 | $ | 941 | (91 | )% | |||||||
Net Investment Income | 198 | 150 | 32 | ||||||||||
Adjusted Revenue | 284 | 1,091 | (74 | ) | |||||||||
Benefits, losses and expenses | 222 | 1,012 | (78 | ) | |||||||||
Adjusted pre-tax income | 62 | 79 | (22 | ) | |||||||||
Premiums and deposits | 69 | 1,476 | (95 | ) | |||||||||
All comparisons are against the third quarter of 2017, unless otherwise indicated. Refer to the AIG Third Quarter 2018 Financial Supplement, which is posted on AIG's website in the Investors section, for further information.
- In Individual Retirement, adjusted pre-tax income reflected net unfavorable adjustments as a result of the annual actuarial assumption update of
$52 million compared to net favorable adjustments of$242 million in the prior-year quarter. Fee income increased primarily from strong levels of assets under management. Net investment income decreased due to lower yield enhancement income and alternative investment income. Net flows excluding Retail Mutual Funds were positive and reflected strong sales. - In Group Retirement, adjusted pre-tax income reflected continued investments made in the business partially offset by higher fee income and advisory fee income primarily from strong levels of assets under administration. Yield enhancement income increased primarily due to increased income from bond call and tender and other investment income. Base spreads, excluding accretion and other investment income, were in line with the prior-year quarter. Group Retirement net flows reflect outflows due to the loss of two large plan accounts.
- In Life Insurance, adjusted pre-tax income reflected net unfavorable adjustments as a result of the annual actuarial assumption update of
$63 million compared to net favorable adjustments of$29 million in the prior-year quarter. Mortality was favorable to pricing expectations. - In Institutional Markets, adjusted pre-tax income reflected increased longevity, and lower policy fees, partially offset by strong in-force business and higher net investment income.
CONFERENCE CALL
AIG will host a conference call tomorrow,
Additional supplementary financial data is available in the Investors section at www.aig.com.
The conference call (including the conference call presentation material), the earnings release and the financial supplement may include, and officers and representatives of AIG may from time to time make and discuss, projections, goals, assumptions and statements that may constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. These projections, goals, assumptions and statements are not historical facts but instead represent only a belief regarding future events, many of which, by their nature, are inherently uncertain and outside AIG’s control. These projections, goals, assumptions and statements include statements preceded by, followed by or including words such as “will,” “believe,” “anticipate,” “expect,” “intend,” “plan,” “focused on achieving,” “view,” “target,” “goal” or “estimate.” These projections, goals, assumptions and statements may relate to future actions, prospective services or products, future performance or results of current and anticipated services or products, sales efforts, expenses, the outcome of contingencies such as legal proceedings, anticipated organizational, business or regulatory changes, anticipated sales, monetization and/or acquisitions of businesses or assets, or successful integration of acquired businesses, management succession and retention plans, exposure to risk, trends in operations and financial results.
It is possible that AIG’s actual results and financial condition will differ, possibly materially, from the results and financial condition indicated in these projections, goals, assumptions and statements.
Factors that could cause AIG’s actual results to differ, possibly materially, from those in the specific projections, goals, assumptions and statements include:
- changes in market and industry conditions;
- negative impacts on customers, business partners and other stakeholders;
- the occurrence of catastrophic events, both natural and man-made;
- AIG’s ability to successfully reorganize its businesses, as well as improve profitability, without negatively impacting client relationships or its competitive position;
- AIG’s ability to successfully dispose of, monetize and/or acquire businesses or assets, or successfully integrate acquired businesses;
- changes in judgments concerning insurance underwriting and insurance liabilities;
- changes in judgments concerning potential cost saving opportunities;
- the impact of potential information technology, cybersecurity or data security breaches, including as a result of cyber-attacks or security vulnerabilities;
- disruptions in the availability of AIG’s electronic data systems or those of third parties;
- AIG’s ability to successfully manage Legacy portfolios;
- concentrations in AIG’s investment portfolios;
- actions by credit rating agencies;
- the requirements, which may change from time to time, of the global regulatory framework to which AIG is subject, including as a global systemically important insurer;
- significant legal, regulatory or governmental proceedings;
- changes in judgments concerning the recognition of deferred tax assets; and
- such other factors discussed in Part I, Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A) in AIG’s Quarterly Report on Form 10-Q for the quarterly period ended
September 30, 2018 (which will be filed with theSEC ), Part I, Item 2. MD&A and Part II, Item 1A. Risk Factors in AIG’s Quarterly Report on Form 10-Q for the quarterly period endedJune 30, 2018 , Part I, Item 2. MD&A in AIG’s Quarterly Report on Form 10-Q for the quarterly period endedMarch 31, 2018 and Part II, Item 7. MD&A and Part I, Item 1A. Risk Factors in AIG’s Annual Report on Form 10-K for the year endedDecember 31, 2017 .
AIG is not under any obligation (and expressly disclaims any obligation) to update or alter any projections, goals, assumptions or other statements, whether written or oral, that may be made from time to time, whether as a result of new information, future events or otherwise.
COMMENT ON REGULATION G
Throughout this press release, including the financial highlights, AIG presents its financial condition and results of operations in the way it believes will be most meaningful and representative of its business results. Some of the measurements AIG uses are “non-GAAP financial measures” under
Book Value per Common Share, Excluding Accumulated Other Comprehensive Income (AOCI) and Book Value per Common Share, Excluding AOCI and Deferred Tax Assets (DTA) (Adjusted Book Value per Common Share) are used to show the amount of AIG’s net worth on a per-share basis. AIG believes these measures are useful to investors because they eliminate items that can fluctuate significantly from period to period, including changes in fair value of AIG’s available for sale securities portfolio, foreign currency translation adjustments and U.S. tax attribute deferred tax assets. These measures also eliminate the asymmetrical impact resulting from changes in fair value of AIG’s available for sale securities portfolio wherein there is largely no offsetting impact for certain related insurance liabilities. AIG excludes deferred tax assets representing U.S. tax attributes related to net operating loss carryforwards and foreign tax credits as they have not yet been utilized. Amounts for interim periods are estimates based on projections of full-year attribute utilization. As net operating loss carryforwards and foreign tax credits are utilized, the portion of the DTA utilized is included in these book value per common share metrics. Book value per common share, excluding AOCI, is derived by dividing Total AIG Shareholders’ equity, excluding AOCI, by total common shares outstanding. Adjusted Book Value per Common Share is derived by dividing Total AIG shareholders’ equity, excluding AOCI and DTA (Adjusted Shareholders’ Equity), by total common shares outstanding.
AIG Return on Equity – Adjusted After-tax Income Excluding AOCI and DTA (Adjusted Return on Equity) is used to show the rate of return on shareholders’ equity. AIG believes this measure is useful to investors because it eliminates items that can fluctuate significantly from period to period, including changes in fair value of AIG’s available for sale securities portfolio, foreign currency translation adjustments and U.S. tax attribute deferred tax assets. This measure also eliminates the asymmetrical impact resulting from changes in fair value of AIG’s available for sale securities portfolio wherein there is largely no offsetting impact for certain related insurance liabilities. AIG excludes deferred tax assets representing U.S. tax attributes related to net operating loss carryforwards and foreign tax credits as they have not yet been utilized. Amounts for interim periods are estimates based on projections of full-year attribute utilization. As net operating loss carryforwards and foreign tax credits are utilized, the portion of the DTA utilized is included in Adjusted Return on Equity. Adjusted Return on Equity is derived by dividing actual or annualized adjusted after-tax income attributable to AIG by average Adjusted Shareholders’ Equity.
Core and Life and Retirement Adjusted Attributed Equity is an attribution of total AIG Adjusted Shareholders’ Equity to these segments based on AIG’s internal capital model, which incorporates the segments’ respective risk profiles. Adjusted attributed equity represents AIG’s best estimates based on current facts and circumstances and will change over time.
Core and Life and Retirement Return on Equity– Adjusted After-tax Income (Adjusted Return on Attributed Equity) is used to show the rate of return on Adjusted Attributed Equity. Adjusted Return on Attributed Equity is derived by dividing actual or annualized Adjusted After-tax Income by Average Adjusted Attributed Equity.
Adjusted After-tax Income Attributable to Core and Life and Retirement is derived by subtracting attributed interest expense and income tax expense from adjusted pre-tax income. Attributed debt and the related interest expense is calculated based on AIG’s internal capital model. Tax expense or benefit is calculated based on an internal attribution methodology that considers among other things the taxing jurisdiction in which the segments conduct business, as well as the deductibility of expenses in those jurisdictions.
Adjusted Revenues exclude Net realized capital gains (losses), income from non-operating litigation settlements (included in Other income for GAAP purposes) and changes in fair value of securities used to hedge guaranteed living benefits (included in Net investment income for GAAP purposes). Adjusted revenues is a GAAP measure for AIG’s operating segments.
AIG uses the following operating performance measures because AIG believes they enhance the understanding of the underlying profitability of continuing operations and trends of AIG’s business segments. AIG believes they also allow for more meaningful comparisons with AIG’s insurance competitors. When AIG uses these measures, reconciliations to the most comparable GAAP measure are provided on a consolidated basis.
Adjusted Pre-tax Income (APTI) is derived by excluding the items set forth below from income from continuing operations before income tax. This definition is consistent across AIG’s segments. These items generally fall into one or more of the following broad categories: legacy matters having no relevance to AIG’s current businesses or operating performance; adjustments to enhance transparency to the underlying economics of transactions; and measures that AIG believes to be common to the industry. APTI is a GAAP measure for AIG’s segments. Excluded items include the following:
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Adjusted After-tax Income attributable to AIG (AATI) is derived by excluding the tax effected APTI adjustments described above and the following tax items from net income attributable to AIG:
- deferred income tax valuation allowance releases and charges;
- changes in uncertain tax positions and other tax items related to legacy matters having no relevance to AIG’s current businesses or operating performance; and
- net tax charge related to the enactment of the Tax Cuts and Jobs Act (Tax Act).
See page 16 for the reconciliation of Net income attributable to AIG to Adjusted After-tax Income Attributable to AIG.
Ratios: AIG, along with most property and casualty insurance companies, uses the loss ratio, the expense ratio and the combined ratio as measures of underwriting performance. These ratios are relative measurements that describe, for every
Accident year loss and combined ratios, as adjusted: both the accident year loss and combined ratios, as adjusted, exclude catastrophe losses and related reinstatement premiums, prior year development, net of premium adjustments, and the impact of reserve discounting. Natural and man-made catastrophe losses are generally weather or seismic events having a net impact on AIG in excess of
Underwriting ratios are computed as follows:
a) Loss ratio = Loss and loss adjustment expenses incurred ÷ Net premiums earned (NPE)
b) Acquisition ratio = Total acquisition expenses ÷ NPE
c) General operating expense ratio = General operating expenses ÷ NPE
d) Expense ratio = Acquisition ratio + General operating expense ratio
e) Combined ratio = Loss ratio + Expense ratio
f) Accident year loss ratio, as adjusted (AYLR) = [Loss and loss adjustment expenses incurred – CATs – PYD] ÷ [NPE +/(-) Reinstatement premiums related to catastrophes (CYRIPs) +/(-) RIPs related to prior year catastrophes (PYRIPs) + (Additional) returned premium related to PYD on loss sensitive business ((AP)RP) + Adjustment for ceded premiums under reinsurance contracts related to prior accident years]
g) Accident year combined ratio, as adjusted = AYLR + Expense ratio
h) Catastrophe losses (CATs) and reinstatement premiums = [Loss and loss adjustment expenses incurred – (CATs)] ÷ [NPE +/(-) CYRIPs] – Loss ratio
i) Prior year development net of (additional) return premium related to PYD on loss sensitive business = [Loss and loss adjustment expenses incurred – CATs – PYD] ÷ [NPE +/(-) CYRIPs +/(-) PYRIPs + (AP)RP] – Loss ratio – CAT ratio
Premiums and deposits: includes direct and assumed amounts received and earned on traditional life insurance policies, group benefit policies and life-contingent payout annuities, as well as deposits received on universal life, investment-type annuity contracts,
Results from discontinued operations are excluded from all of these measures.
Additional information about AIG can be found at www.aig.com |
AIG is the marketing name for the worldwide property-casualty, life and retirement, and general insurance operations of
American International Group, Inc. | ||||||||||||||||||||||||||
Selected Financial Data and Non-GAAP Reconciliation | ||||||||||||||||||||||||||
($ in millions, except per share data) | ||||||||||||||||||||||||||
Reconciliations of Adjusted Pre-tax and After-tax Income (Loss) | ||||||||||||||||||||||||||
Three Months Ended September 30, | ||||||||||||||||||||||||||
2018 | 2017 | |||||||||||||||||||||||||
Pre-tax | Tax Effect | After-tax | Pre-tax | Tax Effect | After-tax | |||||||||||||||||||||
Pre-tax income/net income (loss), including noncontrolling interests | $ | (1,527 | ) | $ | (307 | ) | $ | (1,258 | ) | $ | (2,803 | ) | $ | (1,091 | ) | $ | (1,714 | ) | ||||||||
Noncontrolling interest | - | - | (1 | ) | - | - | (25 | ) | ||||||||||||||||||
Pre-tax income/net income (loss) attributable to AIG | (1,527 | ) | (307 | ) | (1,259 | ) | (2,803 | ) | (1,091 | ) | (1,739 | ) | ||||||||||||||
Adjustments: | ||||||||||||||||||||||||||
Changes in uncertain tax positions and other tax adjustments | - | (54 | ) | 54 | - | (11 | ) | 11 | ||||||||||||||||||
Deferred income tax valuation allowance (releases) charges | - | (5 | ) | 5 | - | 2 | (2 | ) | ||||||||||||||||||
Changes in fair value of securities used to hedge | ||||||||||||||||||||||||||
guaranteed living benefits | 14 | 3 | 11 | (26 | ) | (9 | ) | (17 | ) | |||||||||||||||||
Changes in benefit reserves and DAC, VOBA and | ||||||||||||||||||||||||||
SIA related to net realized capital gains (losses) | (76 | ) | (16 | ) | (60 | ) | (84 | ) | (29 | ) | (55 | ) | ||||||||||||||
Unfavorable (favorable) prior year development and related | ||||||||||||||||||||||||||
amortization changes ceded under retroactive reinsurance agreements | 605 | 128 | 477 | (7 | ) | (2 | ) | (5 | ) | |||||||||||||||||
(Gain) loss on extinguishment of debt | 1 | - | 1 | 1 | 1 | - | ||||||||||||||||||||
Net realized capital losses* | 524 | 127 | 397 | 922 | 316 | 606 | ||||||||||||||||||||
Noncontrolling interest on net realized capital losses | - | - | (1 | ) | - | - | 1 | |||||||||||||||||||
Loss from discontinued operations | - | - | 39 | - | - | 1 | ||||||||||||||||||||
(Income) loss from divested businesses | (2 | ) | (1 | ) | (1 | ) | 13 | 7 | 6 | |||||||||||||||||
Non-operating litigation reserves and settlements | 5 | 2 | 3 | - | - | - | ||||||||||||||||||||
Net loss reserve discount (benefit) charge | (86 | ) | (18 | ) | (68 | ) | 48 | 20 | 28 | |||||||||||||||||
Pension expense related to a one-time lump sum payment | ||||||||||||||||||||||||||
to former employees | - | - | - | 49 | 16 | 33 | ||||||||||||||||||||
Integration and transaction costs associated with acquired businesses | 91 | 19 | 72 | - | - | - | ||||||||||||||||||||
Restructuring and other costs | 35 | 6 | 29 | 31 | 10 | 21 | ||||||||||||||||||||
Adjusted pre-tax loss/Adjusted after-tax loss | $ | (416 | ) | $ | (116 | ) | $ | (301 | ) | $ | (1,856 | ) | $ | (770 | ) | $ | (1,111 | ) | ||||||||
Nine Months Ended September 30, | ||||||||||||||||||||||||||
2018 | 2017 | |||||||||||||||||||||||||
Pre-tax | Tax Effect | After-tax | Pre-tax | Tax Effect | After-tax | |||||||||||||||||||||
Pre-tax income/net income (loss), including noncontrolling interests | $ | 952 | $ | 291 | $ | 623 | $ | 591 | $ | (18 | ) | $ | 610 | |||||||||||||
Noncontrolling interest | - | - | (7 | ) | - | - | (34 | ) | ||||||||||||||||||
Pre-tax income/net income (loss) attributable to AIG | 952 | 291 | 616 | 591 | (18 | ) | 576 | |||||||||||||||||||
Adjustments: | ||||||||||||||||||||||||||
Changes in uncertain tax positions and other tax adjustments | - | (53 | ) | 53 | - | (27 | ) | 27 | ||||||||||||||||||
Deferred income tax valuation allowance (releases) charges | - | (42 | ) | 42 | - | 23 | (23 | ) | ||||||||||||||||||
Changes in fair value of securities used to hedge | ||||||||||||||||||||||||||
guaranteed living benefits | 127 | 27 | 100 | (117 | ) | (41 | ) | (76 | ) | |||||||||||||||||
Changes in benefit reserves and DAC, VOBA and | ||||||||||||||||||||||||||
SIA related to net realized capital gains (losses) | (46 | ) | (10 | ) | (36 | ) | (195 | ) | (68 | ) | (127 | ) | ||||||||||||||
Unfavorable (favorable) prior year development and related | ||||||||||||||||||||||||||
amortization changes ceded under retroactive reinsurance agreements | 607 | 128 | 479 | 258 | 91 | 167 | ||||||||||||||||||||
(Gain) loss on extinguishment of debt | 10 | 2 | 8 | (4 | ) | (1 | ) | (3 | ) | |||||||||||||||||
Net realized capital losses* | 388 | 97 | 291 | 1,106 | 401 | 705 | ||||||||||||||||||||
Noncontrolling interest on net realized capital losses | - | - | (2 | ) | - | - | 6 | |||||||||||||||||||
(Income) loss from discontinued operations | - | - | 40 | - | - | (7 | ) | |||||||||||||||||||
(Income) loss from divested businesses | (35 | ) | (8 | ) | (27 | ) | 173 | 41 | 132 | |||||||||||||||||
Non-operating litigation reserves and settlements | 30 | 7 | 23 | (86 | ) | (30 | ) | (56 | ) | |||||||||||||||||
Net loss reserve discount (benefit) charge | (305 | ) | (64 | ) | (241 | ) | 283 | 101 | 182 | |||||||||||||||||
Pension expense related to a one-time lump sum payment | ||||||||||||||||||||||||||
to former employees | - | - | - | 50 | 17 | 33 | ||||||||||||||||||||
Integration and transaction costs associated with acquired businesses | 91 | 19 | 72 | - | - | - | ||||||||||||||||||||
Restructuring and other costs | 259 | 54 | 205 | 259 | 90 | 169 | ||||||||||||||||||||
Adjusted pre-tax income/Adjusted after-tax income | $ | 2,078 | $ | 448 | $ | 1,623 | $ | 2,318 | $ | 579 | $ | 1,705 |
* Includes all net realized capital gains and losses except earned income (periodic settlements and changes in settlement accruals) on derivative instruments used for non-qualifying (economic) hedging or for asset replication. |
American International Group, Inc. | ||||||||||||||||||||||||
Selected Financial Data and Non-GAAP Reconciliation (continued) | ||||||||||||||||||||||||
($ in millions, except per share data) | ||||||||||||||||||||||||
Summary of Key Financial Metrics | ||||||||||||||||||||||||
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||||||||||
% Inc. | % Inc. | |||||||||||||||||||||||
2018 | 2017 | (Dec.) | 2018 | 2017 | (Dec.) | |||||||||||||||||||
Loss per common share: |
||||||||||||||||||||||||
Basic | ||||||||||||||||||||||||
Income (loss) from continuing operations | $ | (1.37 | ) | $ | (1.91 | ) | 28.3 | % | $ | 0.72 | $ | 0.60 |
20.0 |
% |
||||||||||
Income (loss) from discontinued operations | (0.04 | ) | - | NM | (0.04 | ) | 0.01 | NM | ||||||||||||||||
Net income (loss) attributable to AIG | $ | (1.41 | ) | $ | (1.91 | ) | 26.2 | $ | 0.68 | $ | 0.61 | 11.5 | ||||||||||||
Diluted | ||||||||||||||||||||||||
Income (loss) from continuing operations | $ | (1.37 | ) | $ | (1.91 | ) | 28.3 | $ | 0.71 | $ | 0.59 | 20.3 | ||||||||||||
Income (loss) from discontinued operations | (0.04 | ) | - | NM | (0.04 | ) | 0.01 | NM | ||||||||||||||||
Net income (loss) attributable to AIG | $ | (1.41 | ) | $ | (1.91 | ) | 26.2 | $ | 0.67 | $ | 0.60 | 11.7 | ||||||||||||
Adjusted after-tax income (loss) attributable to AIG per diluted share | $ | (0.34 | ) | $ | (1.22 | ) | 72.1 | % | $ | 1.77 | $ | 1.77 |
- |
% |
||||||||||
Weighted average shares outstanding: | ||||||||||||||||||||||||
Basic | 895.2 | 908.7 | 902.1 | 938.1 | ||||||||||||||||||||
Diluted (a)(b) | 895.2 | 908.7 | 916.8 | 961.3 | ||||||||||||||||||||
Return on equity (c) |
(8.4 |
)% |
|
(9.5 |
)% |
|
1.3 |
% |
|
1.0 |
% |
|
||||||||||||
Adjusted return on equity (d) |
(2.4 |
)% |
|
(8.4 |
)% |
|
4.3 |
% |
|
4.1 |
% |
|
||||||||||||
As of period end: |
September 30, 2018 | June 30, 2018 | September 30, 2017 | December 31, 2017 | |||||||||||
Total AIG shareholders' equity | $ | 58,586 | $ | 61,186 | $ | 72,468 | $ | 65,171 | |||||||
Accumulated other comprehensive income (AOCI) | (536 | ) | 230 | 5,939 | 5,465 | ||||||||||
Total AIG shareholders' equity, excluding AOCI | 59,122 | 60,956 | 66,529 | 59,706 | |||||||||||
Deferred tax assets (e) | 9,953 | 9,853 | 14,897 | 10,492 | |||||||||||
Total adjusted AIG shareholders' equity | $ | 49,169 | $ | 51,103 | $ | 51,632 | $ | 49,214 | |||||||
September 30, | June 30, | September 30, | December 31, | ||||||||||||||||||||
As of period end: |
2018 | 2018 | % Inc. (Dec.) | 2017 | % Inc. (Dec.) | 2017 | % Inc. (Dec.) | ||||||||||||||||
Book value per common share (f) | $ | 66.23 | $ | 68.65 |
(3.5 |
)% |
$ | 80.62 |
(17.8 |
)% |
$ | 72.49 |
(8.6 |
)% |
|||||||||
Book value per common share, excluding AOCI (g) | $ | 66.83 | $ | 68.40 | (2.3 | ) | $ | 74.01 | (9.7 | ) | $ | 66.41 | 0.6 | ||||||||||
Adjusted book value per common share (h) | $ | 55.58 | $ | 57.34 | (3.1 | ) | $ | 57.44 | (3.2 | ) | $ | 54.74 | 1.5 | ||||||||||
Total common shares outstanding | 884.6 | 891.2 | 898.9 | 899.0 | |||||||||||||||||||
Financial highlights - notes | ||
(a) |
For the three-month periods ended September 30, 2018 and 2017, because we reported net losses and adjusted after-tax losses, all common stock equivalents are anti-dilutive and are therefore excluded from the calculation of diluted shares and diluted per share amounts. The shares excluded from these calculations were 13,538,168 and 22,459,868 shares, respectively. |
|
(b) |
Diluted shares in the diluted EPS calculation represent basic shares for the three-month periods ended September 30, 2018 and 2017 due to the net losses in those periods. |
|
(c) |
Computed as Annualized net income (loss) attributable to AIG divided by average AIG shareholders' equity. Equity includes AOCI and DTA. |
|
(d) |
Computed as Annualized Adjusted after-tax income attributable to AIG divided by Adjusted Shareholders' Equity. |
|
(e) |
Represents deferred tax assets only related to U.S. net operating loss and foreign tax credit carryforwards on a U.S. GAAP basis and excludes other balance sheet deferred tax assets and liabilities. |
|
(f) |
Represents total AIG shareholders' equity divided by Total common shares outstanding. |
|
(g) |
Represents total AIG shareholders' equity, excluding AOCI, divided by Total common shares outstanding. |
|
(h) |
Represents Adjusted Shareholders' Equity, divided by Total common shares outstanding. |
|
American International Group, Inc. | ||||||||||
Selected Financial Data and Non-GAAP Reconciliation | ||||||||||
($ in millions, except per share amounts) | ||||||||||
Reconciliations of Life and Retirement Adjusted Return on Equity | ||||||||||
Three Months Ended | ||||||||||
September 30, | ||||||||||
2018 | 2017 | |||||||||
Adjusted pre-tax income | $ | 713 | $ | 1,158 | ||||||
Interest expense on attributed financial debt | 30 | 5 | ||||||||
Adjusted pre-tax income including attributed interest expenses | 683 | 1,153 | ||||||||
Income tax expense | 134 | 374 | ||||||||
Adjusted after-tax income | 549 | 779 | ||||||||
Ending adjusted attributed equity | $ | 19,254 | $ | 20,983 | ||||||
Average adjusted attributed equity | $ | 19,613 | $ | 20,934 | ||||||
Adjusted return on attributed equity | 11.2 | % | 14.9 | % | ||||||
Annual actuarial assumption update, net of tax | $ | (79 | ) | |||||||
Adjusted return on attributed equity (excluding Annual actuarial assumption update) | 12.8 | % | ||||||||
Reconciliations of Core Adjusted Return on Equity | ||||||||||
Three Months Ended | ||||||||||
September 30, | ||||||||||
2018 | 2017 | |||||||||
Adjusted pre-tax loss | $ | (500 | ) | $ | (2,142 | ) | ||||
Interest expense (benefit) on attributed financial debt | - | (42 | ) | |||||||
Adjusted pre-tax loss including attributed interest expenses | (500 | ) | (2,100 | ) | ||||||
Income tax benefit | (134 | ) | (849 | ) | ||||||
Adjusted after-tax loss | (366 | ) | (1,251 | ) | ||||||
Ending adjusted attributed equity | $ | 40,358 | $ | 41,751 | ||||||
Average adjusted attributed equity | $ | 41,097 | $ | 43,161 | ||||||
Adjusted return on attributed equity | (3.6 | )% | (11.6 | )% | ||||||
Net Premiums Written - Change in Constant Dollar | |||||
Three Months Ended | |||||
General Insurance - International |
September 30, 2018 | ||||
Foreign exchange effect on worldwide premiums: | |||||
Change in net premiums written | |||||
Increase (decrease) in original currency | 1.9 | % | |||
Foreign exchange effect | (0.9 | ) | |||
Increase (decrease) as reported in U.S. dollars | 1.0 | % | |||
Reconciliation of Insurance Company Net Investment Income | ||||||||||||||||
Three Months Ended | Nine Months Ended | |||||||||||||||
September 30, | September 30, | |||||||||||||||
2018 | 2017 | 2018 | 2017 | |||||||||||||
Net investment income per Consolidated Statement of Operations | $ | 3,396 | $ | 3,416 | $ | 9,722 | $ | 10,715 | ||||||||
Changes in fair value of securities used to hedge guaranteed living benefits | 14 | (26 | ) | 127 | (117 | ) | ||||||||||
Net realized capital gains related to non-qualifying hedges | 28 | - | 66 | - | ||||||||||||
Total Insurance Company Net investment income | $ | 3,438 | $ | 3,390 | $ | 9,915 | $ | 10,598 | ||||||||
American International Group, Inc. | |||||||||
Selected Financial Data and Non-GAAP Reconciliation (continued) | |||||||||
($ in millions, except per share amounts) | |||||||||
Reconciliations of Premiums and Deposits | |||||||||
Three Months Ended | |||||||||
September 30, | |||||||||
2018 | 2017 | ||||||||
Individual Retirement: |
|||||||||
Premiums | $ | 9 | $ | 22 | |||||
Deposits | 3,609 | 2,504 | |||||||
Other | (2 | ) | - | ||||||
Total premiums and deposits | $ | 3,616 | $ | 2,526 | |||||
Group Retirement: |
|||||||||
Premiums | $ | 9 | $ | 8 | |||||
Deposits | 2,107 | 1,852 | |||||||
Other | - | - | |||||||
Total premiums and deposits | $ | 2,116 | $ | 1,860 | |||||
Life Insurance: |
|||||||||
Premiums | $ | 379 | $ | 384 | |||||
Deposits | 410 | 371 | |||||||
Other | 189 | 180 | |||||||
Total premiums and deposits | $ | 978 | $ | 935 | |||||
Institutional Markets: |
|||||||||
Premiums | $ | 46 | $ | 897 | |||||
Deposits | 17 | 573 | |||||||
Other | 6 | 6 | |||||||
Total premiums and deposits | $ | 69 | $ | 1,476 | |||||
Total Life and Retirement: |
|||||||||
Premiums | $ | 443 | $ | 1,311 | |||||
Deposits | 6,143 | 5,300 | |||||||
Other | 193 | 186 | |||||||
Total premiums and deposits | $ | 6,779 | $ | 6,797 |
View source version on businesswire.com: https://www.businesswire.com/news/home/20181031005840/en/
Source:
American International Group, Inc.
Investors:
Liz Werner, 212-770-7074
elizabeth.werner@aig.com
or
Investors:
Fernando Melon, 212-770-4630
fernando.melon@aig.com
or
Media:
Daniel O’Donnell, 212-770-3141
daniel.odonnell@aig.com
or
Media:
Claire Talcott, 212-458-6343
claire.talcott@aig.com