\ UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
------------------------
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES AND EXCHANGE ACT OF 1934
Date of report (Date of earliest event reported): August 9, 2005
AMERICAN INTERNATIONAL GROUP, INC.
(Exact Name of Registrant as Specified in Charter)
Delaware 1-8787 13-2592361
(State or Other (Commission File Number) (IRS Employer
Jurisdiction of Identification No.)
Incorporation)
70 Pine Street
New York, New York 10270
(Address of Principal Executive Offices)
Registrant's telephone number, including area code: (212) 770-7000
------------------------------------------
(Former name or Former Address, if Changed Since Last Report)
Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any of the
following provisions (see General Instruction A.2. below):
[ ] Written communications pursuant to Rule 425 under the Securities Act
(17 CFR 230.425)
[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act
(17 CFR 240.14a-12)
[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the
Exchange Act (17 CFR 240.14d-2(b))
[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the
Exchange Act (17 CFR 240.13e-4(c))
Section 2 - Financial Information
Item 2.02. Results of Operations and Financial Condition.
On August 9, 2005, American International Group, Inc. (AIG) issued a
press release announcing that it had filed its Quarterly Report on Form 10-Q for
the period ending June 30, 2005 with the Securities and Exchange Commission
(SEC). In addition, AIG also announced in the press release that it had filed a
Form 10-Q/A with respect to its Quarterly Report on Form 10-Q for the period
ending June 30, 2004 with the SEC.
A copy of the press release is attached as Exhibit 99.1 to this Current
Report on Form 8-K and is incorporated by reference herein.
Section 9 - Financial Statements and Exhibits
Item 9.01 Financial Statements and Exhibits.
(c) Exhibits.
Exhibit 99.1 Press release of American International Group, Inc.
dated August 9, 2005.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the Registrant has duly caused this report to be signed on its behalf
by the undersigned hereunto duly authorized.
AMERICAN INTERNATIONAL GROUP, INC.
(Registrant)
Date: August 9, 2005 By /s/ KATHLEEN E. SHANNON
---------------------------
Name: Kathleen E. Shannon
Title: Senior Vice President
and Secretary
EXHIBIT INDEX
Exhibit No. Description
- ----------- -----------
99.1 Press Release of American International
Group, Inc. dated August 9, 2005.
EXHIBIT 99.1
NEWS [AIG LOGO]
Contact: Charlene Hamrah (Investment Community)
(212) 770-7074
Joe Norton (News Media)
(212) 770-3144
AIG FILES SECOND QUARTER 2005 QUARTERLY REPORT ON FORM 10-Q
AND REPORTS SECOND QUARTER 2005 NET INCOME OF $3.99 BILLION
NEW YORK, NY, August 9, 2005 - American International Group, Inc. (AIG)
announced today that it has filed its Quarterly Report on Form 10-Q for the
period ending June 30, 2005 with the Securities and Exchange Commission.
Additionally, AIG filed a Form 10-Q/A restating the second quarter and the first
six months of 2004 and 2003.
Second quarter 2005 net income was $3.99 billion or $1.53 per diluted
share, compared to $2.65 billion or $1.01 per diluted share in the second
quarter of 2004. At June 30, 2005, shareholders' equity was $88.88 billion and
consolidated assets were $828.64 billion.
Net income for the first six months of 2005 was $7.68 billion or $2.93 per
diluted share, compared to $5.21 billion or $1.98 per diluted share in the first
six months of 2004.
SECOND QUARTER
(in millions, except per share amounts)
PER DILUTED SHARE (A)
2005 2004 Change 2005 2004 Change
---- ---- ------ ---- ---- ------
Net income $ 3,992 $ 2,650 50.6% $ 1.53 $ 1.01 51.5%
Realized capital gains (losses),
net of tax (b) 185 (129) -- 0.07 (0.05) --
FAS 133 gains (losses), excluding
realized capital gains (losses),
net of tax (c) 825 (120) -- 0.32 (0.04) --
Adjusted net income (d) 2,982 2,899 2.9 1.14 1.10 3.6
Cumulative effect of the ILFC (333) -- -- (0.13) -- --
correction, net of tax (e)
Adjusted net income excluding the $ 3,315 $ 2,899 14.3% $ 1.27 $ 1.10 15.5%
cumulative effect of the ILFC
correction
Average shares outstanding 2,623 2,640
SIX MONTHS
(in millions, except per share amounts)
PER DILUTED SHARE (A)
2005 2004 Change 2005 2004 Change
---- ---- ------ ---- ---- ------
Net income $ 7,676 $ 5,206 47.4% $ 2.93 $ 1.98 48.0%
Realized capital gains (losses),
net of tax (b) 232 (46) -- 0.09 (0.02) --
FAS 133 gains (losses), excluding
realized capital gains (losses),
net of tax (c) 1,275 (159) -- 0.49 (0.05) --
Cumulative effect of an accounting
change, net of tax (f) -- (144) -- -- (0.06) --
Adjusted net income (d) 6,169 5,555 11.1 2.35 2.11 11.4
Cumulative effect of the ILFC
correction, net of tax (e) (333) -- -- (0.13) -- --
Adjusted net income excluding the
cumulative effect of the ILFC
correction $ 6,502 $ 5,555 17.0% $ 2.48 $ 2.11 17.5%
Average shares outstanding 2,623 2,641
- -----------------------------------------------------------------------------------------------------------------
(a) Assumes conversion of contingently convertible bonds due to the adoption
of EITF Issue No. 04-8 "Accounting Issues Related to Certain Features of
Contingently Convertible Debt and the Effect on Diluted Earnings per
Share" of $2 million and $5 million, net of tax, for the second quarter
and six months 2005, respectively, compared to $3 million and $6 million,
net of tax, for the second quarter and six months 2004, respectively.
(b) Includes a $58 million loss, net of tax, attributable to FAS 133
"Accounting for Derivative Instruments and Hedging Activities", in the
second quarter 2005 and no effect for the six months 2005, compared to a
loss of $2 million and $54 million, net of tax, in the second quarter and
six months 2004, respectively.
(c) Includes the unrealized gain (loss) attributable to economic hedges not
qualifying for hedge accounting treatment under FAS 133, including the
related foreign exchange gains and losses.
(d) Excludes realized capital gains (losses) which includes pricing net
investment gains, cumulative effect of an accounting change and FAS 133,
net of tax.
(e) Represents the cumulative effect of the correction of an error relating to
certain manufacturers' payments to ILFC.
(f) Represents the cumulative effect of an accounting change, net of tax,
related to SOP 03-1 "Accounting and Reporting by Insurance Enterprises for
Certain Nontraditional Long-Duration Contracts and for Separate Accounts".
2
Commenting on second quarter earnings, AIG President and Chief Executive
Officer Martin J. Sullivan said, "In a quarter where the company devoted
significant time and attention to its internal review, our operations stayed
focused on their customers and business, achieving good results. Market
conditions and other trends evident in the first quarter largely continued
through the second quarter. Worldwide General Insurance, Foreign Life Insurance
& Retirement Services and Consumer Finance were among our best performing
businesses. A flat yield curve affected our spread businesses, and transaction
volume in Domestic Life Insurance & Retirement Services and Capital Markets was
lower as a result of regulatory and related issues. Our second quarter results
were also adversely affected by the recording of a charge for the cumulative
effect of the correction of an error relating to certain manufacturers' payments
made for the benefit of ILFC. These factors were offset, however, by solid
underwriting results and strong investment returns throughout our businesses.
"General Insurance operating income before realized capital gains (losses)
increased 20.5 percent compared to the second quarter of 2004. The combined
ratio was 92.04. Premium growth of 4.2 percent reflects the underwriting
discipline that we are maintaining in an environment that has been characterized
by softer pricing in the domestic and international markets. Terms and
conditions continue to be largely unchanged. The Domestic Brokerage Group had a
combined ratio of 96.05, and the Foreign General combined ratio was an excellent
82.04. Domestic Personal Lines had premium growth of 7.5 percent and a combined
ratio of 95.92. Mortgage Guaranty had premium growth of 6.6 percent and a
delinquency ratio that continues to run well below the industry average. General
Insurance cash flow was $2.71 billion and $6.21 billion in the second quarter
and first six months of 2005, respectively. Pretax third quarter 2005 losses
arising from hurricanes Emily and Dennis are estimated to be $40 million.
"In the Life Insurance & Retirement Services business, operating income
before realized capital gains (losses) and including pricing net investment
gains increased 13.1 percent in the second quarter of 2005 compared to a year
ago. Our overseas operations were the strongest contributors to these results.
In addition to excellent business performance, foreign life results were
favorably affected by the weaker U.S. dollar.
"Foreign Life Insurance & Retirement Services operating income before
realized capital gains (losses) and including pricing net investment gains
increased 18.8 percent. Japan had strong first year premium growth of 31.8
percent in the second quarter, driven by strong life insurance sales at all
three of our companies. Total foreign annuity production rose 43.3 percent. We
are successfully leveraging the annuity product knowledge we have developed in
Japan and Korea into other markets where we have a strong local presence.
3
"Domestic Life Insurance & Retirement Services operating income before
realized capital gains (losses) increased 5.1 percent in the second quarter of
2005. Domestic Life Insurance had mixed results. Following the filing of our
2004 Form 10-K, the advisor-driven brokerage and affluent market platforms
experienced good recurring premiums in the last month of the quarter. Payout
annuity sales, were negatively affected by the tight spread environment,
although margins remain adequate as a result of our pricing discipline. The
Domestic Retirement Services business continued to be affected by challenging
market conditions. The second quarter sales environment for individual variable
annuities was affected by lackluster domestic equity markets, while the
flattening yield curve and competitive fixed income alternatives adversely
affected fixed annuity sales.
"Financial Services operating income, before the effect of FAS 133 and the
cumulative effect of the ILFC correction, declined 2.9 percent compared to the
second quarter of 2004. Weak Capital Markets results were somewhat offset by
excellent results in our global Consumer Finance business. ILFC continues to
benefit from improving lease rates and residual values and the demand for the
modern, fuel-efficient aircraft they provide. The Capital Markets business was
adversely affected by difficult market conditions and customer uncertainty
during much of the quarter surrounding the negative ratings actions and the
ongoing investigations. American General Finance has continued its strong
receivables growth, while maintaining its emphasis on controlling operating
expenses and adhering to strict underwriting guidelines, which is reflected in
its improving net charge off and delinquency ratios. Robust receivables growth
in the Poland consumer finance business and the Taiwan and Hong Kong credit card
businesses contributed to the strong performance in the overseas operations.
"Asset Management operating income increased by 10.0 percent in the second
quarter, or 8.4 percent excluding the effect of FIN46R, compared to second
quarter 2004. Third party assets under management increased to over $61 billion
from $55 billion at March 31, 2005. Significant new mandates for its
International Small Cap Equity, European Government Bond, and High Yield
strategies resulted in new assets for the Institutional Asset Management
business. The increase in Domestic Guaranteed Investment Contract (GIC)
operating income was primarily due to an increase in partnership income over the
prior year. The sharp decline in second quarter GIC deposits reflects the delay
in the launch of AIG's previously announced matched investment program.
"In conclusion, AIG performed well and demonstrated great resilience in
the second quarter of 2005. Our strong global presence, diverse product range
and the discipline and dedication of our employees around the world were
instrumental in achieving these results."
4
# # #
ADDITIONAL SUPPLEMENTARY FINANCIAL DATA IS AVAILABLE IN THE INVESTOR
INFORMATION SECTION OF WWW.AIGCORPORATE.COM.
A conference call for the investment community will be held tomorrow,
Wednesday, August 10, 2005 at 8:30 a.m. EDT. The call will be broadcast live on
the Internet at www.aigwebcast.com. A replay will be archived at the same URL
through Friday, August 19, 2005.
Additionally, AIG's 2005 Annual Meeting of Shareholders scheduled for
Thursday, August 11, at 10:00 a.m. EDT will be broadcast live on the Internet at
www.aigwebcast.com.
# # #
This press release contains forward-looking statements. Please refer to
the AIG Quarterly Report on Form 10-Q for the period ended June 30, 2005 and
AIG's past and future filings and reports filed with the Securities and Exchange
Commission for a description of the business environment in which AIG operates
and the important factors that may affect its business. AIG is not under any
obligation to (and expressly disclaims any such obligation to) update or alter
its forward-looking statements whether as a result of new information, future
events or otherwise.
5
COMMENT ON REGULATION G
This press release, including the financial highlights, includes certain
non-GAAP financial measures. The reconciliations of such measures to the most
comparable GAAP figures in accordance with Regulation G are included within the
relevant tables or in the Second Quarter 2005 Supplementary Financial Data
available in the Investor Information section of AIG's corporate website,
www.aigcorporate.com.
Throughout this press release, AIG presents its operations in the way it
believes will be most meaningful and useful, as well as most transparent, to the
investing public and others who use AIG's financial information in evaluating
the performance of AIG. That presentation includes the use of certain non-GAAP
measures. In addition to the GAAP presentations, in some cases, revenues, net
income, operating income and related rates of performance are shown exclusive of
realized capital gains (losses), cumulative effect of an accounting change in
2004, the effect of FIN46R, the effect of FAS 133 and the cumulative effect of
the ILFC correction.
Although the investment of premiums to generate investment income (or
loss) and realized capital gains or losses is an integral part of both life and
general insurance operations, the determination to realize capital gains or
losses is independent of the insurance underwriting process. Moreover, under
applicable GAAP accounting requirements, losses can be recorded as the result of
other than temporary declines in value without actual realization. In sum,
investment income and realized capital gains or losses for any particular period
are not indicative of business performance for such period.
AIG believes that a major part of the discipline of a successful general
insurance company is to produce an underwriting profit, and it evaluates the
performance of and manages its operations on that basis. Providing only a GAAP
presentation of net income and operating income makes it much more difficult for
users of AIG's financial information to evaluate AIG's success or failure in its
basic business, that of insurance underwriting, and may, in AIG's opinion, lead
to incorrect or misleading assumptions and conclusions. The equity analysts who
follow AIG exclude the realized capital transactions in their analyses for the
same reason, and consistently request that AIG provide the non-GAAP information.
Life and retirement services production (premiums, deposits and other
considerations), gross premiums written, net premiums written and combined
ratios are presented in accordance with accounting principles prescribed or
permitted by insurance regulatory authorities because these are standard
measures of performance used in the insurance industry and thus allow for more
meaningful comparisons with AIG's insurance competitors.
6
# # #
American International Group, Inc. (AIG), world leaders in insurance and
financial services, is the leading international insurance organization with
operations in more than 130 countries and jurisdictions. AIG companies serve
commercial, institutional and individual customers through the most extensive
worldwide property-casualty and life
insurance networks of any insurer. In addition, AIG companies are leading
providers of retirement services, financial services and asset management around
the world. AIG's common stock is listed in the U.S. on the New York Stock
Exchange and ArcaEx, as well as the stock exchanges in London, Paris,
Switzerland and Tokyo.
# # #
American International Group, Inc.
70 Pine Street, New York, NY 10270
AMERICAN INTERNATIONAL GROUP, INC.
FINANCIAL HIGHLIGHTS*
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
THREE MONTHS ENDED JUNE 30, SIX MONTHS ENDED JUNE 30,
2005 2004 (A) CHANGE 2005 2004 (A) CHANGE
---- -------- ------ ---- -------- ------
GENERAL INSURANCE OPERATIONS:
Net Premiums Written $ 10,640 $ 10,207 4.2% $ 21,433 $ 20,242 5.9%
Net Premiums Earned 10,234 9,377 9.1 20,372 18,470 10.3
Underwriting Profit 698 616 13.3 1,270 1,075 18.1
Net Investment Income 1,039 825 25.9 2,072 1,622 27.7
Income before Realized Capital Gains (Losses) 1,737 1,441 20.5 3,342 2,697 23.9
Realized Capital Gains (Losses) 138 3 -- 230 188 --
OPERATING INCOME $ 1,875 $ 1,444 29.8% $ 3,572 $ 2,885 23.8%
------ ------ ---- ------ ------ ----
Loss Ratio 69.84 73.39 70.78 73.58
Expense Ratio 22.20 19.99 21.94 20.53
Combined Ratio 92.04 93.38 92.72 94.11
----- ----- ----- -----
LIFE INSURANCE & RETIREMENT SERVICES OPERATIONS :
GAAP Premiums $ 7,307 $ 6,819 7.2% $ 14,851 $ 13,708 8.3%
Net Investment Income 4,159 3,666 13.4 8,418 7,444 13.1
Pricing Net Investment Gains (b) 100 67 49.3 181 145 24.8
Income before Realized Capital Gains (Losses) 2,350 2,078 13.1 4,637 4,085 13.5
Realized Capital Gains (Losses) (b) 212 220 -- 148 (2) --
OPERATING INCOME 2,562 2,298 11.5 4,785 4,083 17.2
FINANCIAL SERVICES OPERATIONS:
Operating Income excluding FAS 133 and the
Cumulative Effect of the ILFC Correction 576 593 (2.9) 1,155 1,081 6.8
FAS 133 (c) 1,000 (584) -- 1,464 (527) --
Cumulative Effect of the ILFC Correction (d) (516) -- -- (516) -- --
OPERATING INCOME 1,060 9 -- 2,103 554 279.6
ASSET MANAGEMENT OPERATING INCOME (E) 475 432 10.0 1,001 785 27.5
Other Realized Capital Gains (Losses) (205) (431) -- (226) (357) --
Other Income (Deductions) - net 28 221 -- 3 (38) --
INCOME BEFORE INCOME TAXES, MINORITY INTEREST AND
CUMULATIVE EFFECT OF AN ACCOUNTING CHANGE 5,795 3,973 45.9 11,238 7,912 42.0
Income Taxes 1,674 1,218 -- 3,287 2,387 --
INCOME BEFORE MINORITY INTEREST AND CUMULATIVE
EFFECT OF AN ACCOUNTING CHANGE 4,121 2,755 49.6 7,951 5,525 43.9
Minority Interest, after-tax:
Income before Realized Capital Gains (Losses) (127) (104) -- (265) (170) --
Realized Capital Gains (Losses) (2) (1) -- (10) (5) --
INCOME BEFORE CUMULATIVE EFFECT OF AN
ACCOUNTING CHANGE 3,992 2,650 50.6 7,676 5,350 43.5
Cumulative Effect of an Accounting Change,
net of tax (f) -- -- -- -- (144) --
NET INCOME $ 3,992 $ 2,650 50.6% $ 7,676 $ 5,206 47.4%
7
FINANCIAL HIGHLIGHTS
THREE MONTHS ENDED JUNE 30, SIX MONTHS ENDED JUNE 30,
2005 2004 (A) CHANGE 2005 2004 (A) CHANGE
---- -------- ------ ---- -------- ------
NET INCOME $ 3,992 $ 2,650 50.6% $ 7,676 $ 5,206 47.4%
REALIZED CAPITAL GAINS (LOSSES), NET OF TAX (G) 185 (129) -- 232 (46) --
FAS 133 GAINS (LOSSES), EXCLUDING REALIZED
CAPITAL GAINS (LOSSES), NET OF TAX 825 (120) -- 1,275 (159) --
CUMULATIVE EFFECT OF AN ACCOUNTING CHANGE,
NET OF TAX (F) -- -- -- -- (144) --
ADJUSTED NET INCOME (H) 2,982 2,899 2.9 6,169 5,555 11.1
CUMULATIVE EFFECT OF THE ILFC
CORRECTION, NET OF TAX (D) (333) -- -- (333) -- --
ADJUSTED NET INCOME EXCLUDING THE CUMULATIVE
EFFECT OF THE ILFC CORRECTION $ 3,315 $ 2,899 14.3% $ 6,502 $ 5,555 17.0%
PER SHARE - DILUTED (I):
NET INCOME $ 1.53 $ 1.01 51.5% $ 2.93 $ 1.98 48.0%
REALIZED CAPITAL GAINS (LOSSES), NET OF TAX (G) 0.07 (0.05) -- 0.09 (0.02) --
FAS 133 GAINS (LOSSES), EXCLUDING REALIZED
CAPITAL GAINS (LOSSES), NET OF TAX 0.32 (0.04) -- 0.49 (0.05) --
CUMULATIVE EFFECT OF AN ACCOUNTING CHANGE,
NET OF TAX (F) -- -- -- -- (0.06) --
ADJUSTED NET INCOME (H) 1.14 1.10 3.6 2.35 2.11 11.4
CUMULATIVE EFFECT OF THE ILFC
CORRECTION, NET OF TAX (D) (0.13) -- -- (0.13) -- --
ADJUSTED NET INCOME EXCLUDING THE CUMULATIVE
EFFECT OF THE ILFC CORRECTION $ 1.27 $ 1.10 15.5% $ 2.48 $ 2.11 17.5%
AVERAGE DILUTED COMMON
SHARES OUTSTANDING (I) 2,623 2,640 2,623 2,641
* Including reconciliation in accordance with Regulation G.
(a) Certain accounts have been reclassified in 2004 to conform to the 2005
presentation.
(b) For purposes of this presentation, pricing net investment gains are
segregated out of total realized capital gains (losses). They represent
certain amounts of realized capital gains where gains are an inherent
element in pricing certain life products in some foreign countries.
(c) Includes the unrealized gain (loss) attributable to economic hedges not
qualifying for hedge accounting treatment under FAS 133 "Accounting for
Derivative Instruments and Hedging Activities", including the related
foreign exchange gains and losses.
(d) Represents the cumulative effect of the correction of an error relating to
certain manufacturers' payments to ILFC.
(e) Includes the results of certain AIG managed private equity and real estate
funds that are consolidated effective December 31, 2003 pursuant to FIN46R,
"Consolidation of Variable Interest Entities". For the second quarter and
six months 2005, operating income includes $37 million and $112 million,
respectively, compared to $28 million and $32 million for the second
quarter and six months 2004, respectively, of third-party limited partner
earnings offset in Minority Interest Expense. Excluding the effects of
FIN46R, operating income increased 8.4 percent and 18.1 percent for the
second quarter and six months ended June 30, 2005, respectively.
(f) Represents the cumulative effect of an accounting change, net of tax,
related to SOP 03-1 "Accounting and Reporting by Insurance Enterprises for
Certain Nontraditional Long-Duration Contracts and for Separate Accounts".
(g) Includes a $58 million loss, net of tax, attributable to FAS 133
"Accounting for Derivative Instruments and Hedging Activities", in the
second quarter 2005 and no effect for the six months 2005, compared to a
loss of $2 million and $54 million, net of tax, in the second quarter and
six months 2004, respectively.
(h) Adjusted net income excludes realized capital gains (losses) which includes
pricing net investment gains, cumulative effect of an accounting change and
FAS 133 "Accounting for Derivative Instruments and Hedging Activities", net
of tax.
(i) Assumes conversion of contingently convertible bonds due to the adoption of
EITF Issue No. 04-8 "Accounting Issues Related to Certain Features of
Contingently Convertible Debt and the Effect on Diluted Earnings per Share"
of $2 million and $5 million, net of tax, for the second quarter and six
months 2005, respectively, compared to $3 million and $6 million, net of
tax, for the second quarter and six months 2004, respectively.
8
