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): July 22, 2004 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)
Item 12. Results of Operations and Financial Condition. On July 22, 2004, American International Group, Inc. issued a press release announcing its results for the quarter ended June 30, 2004. A copy of the press release is attached as Exhibit 99.1 to this Form 8-K. 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: July 22, 2004 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 July 22, 2004.
EXHIBIT 99.1 NEWS [AIG LOGO] AMERICAN INTERNATIONAL GROUP, INC. 70 PINE STREET NEW YORK, NY 10270 Contact: Charlene M. Hamrah (Investment Community) (212)770-7074 Joe Norton (News Media) (212)770-3144 AIG REPORTS SECOND QUARTER 2004 NET INCOME OF $2.86 BILLION ($1.09 PER SHARE), AN INCREASE OF 25.7 PERCENT OVER 2003; NET INCOME EXCLUDING REALIZED CAPITAL GAINS AND LOSSES INCREASED 19.2 PERCENT TO $3.00 BILLION ($1.14 PER SHARE) NEW YORK, NY, July 22, 2004 - American International Group, Inc. (AIG) today reported that its second quarter 2004 net income rose 25.7 percent to a record $2.86 billion or $1.09 per share, compared to $2.28 billion or $0.87 per share in the second quarter of 2003. Second quarter 2004 net income excluding realized capital gains (losses), increased 19.2 percent to a record $3.00 billion or $1.14 per share, compared to $2.52 billion or $0.96 per share in the same period of 2003. Net income for the first six months of 2004 rose 30.4 percent to $5.52 billion or $2.10 per share, compared to $4.23 billion or $1.61 per share in the first six months of 2003. For the first six months of 2004 net income excluding realized capital gains (losses) and the cumulative effect of an accounting change, increased 19.5 percent to $5.84 billion or $2.22 per share, compared to $4.89 billion or $1.86 per share in the same period of 2003. Income before income taxes and minority interest for the second quarter of 2004 was a record $4.39 billion, a 27.9 percent increase over $3.43 billion in the second quarter of 2003. Income before income taxes, minority interest and the cumulative effect of an accounting change for the first six months of 2004 was $8.68 billion, a 36.6 percent increase over $6.35 billion in the same period of 2003. These results include realized capital losses of $209.0 million and $204.1 million in the second quarter and six months of 2004, respectively, compared to realized capital losses of $356.9 million and $988.4 million in the second quarter and six months of 2003, respectively. -more-
-2- Following is a summary table of second quarter and six months information (in millions, except per share amounts): SECOND QUARTER PER SHARE --------- 2004 2003 Change 2004 2003 Change ---- ---- ------ ---- ---- ------ Net income $ 2,862.3 $ 2,276.9 25.7% $ 1.09 $ 0.87 25.3% Realized capital gains (losses), net of tax (141.4) (243.4) -- (0.05) (0.09) -- Net income, excluding realized capital gains (losses), net of tax $ 3,003.7 $ 2,520.3 19.2% $ 1.14 $ 0.96 18.8% Average shares outstanding 2,630.9 2,627.4 SIX MONTHS PER SHARE --------- 2004 2003 Change 2004 2003 Change ---- ---- ------ ---- ---- ------ Net income $ 5,517.9 $ 4,230.4 30.4% $ 2.10 $ 1.61 30.4% Realized capital gains (losses), net of tax (141.9) (656.3) -- (0.05) (0.25) -- Cumulative effect of an accounting change, net of tax* (181.4) -- -- (0.07) -- -- Net income, excluding realized capital gains (losses) and cumulative effect of an accounting change, net of tax $ 5,841.2 $ 4,886.7 19.5% $ 2.22 $ 1.86 19.4% Average shares outstanding 2,631.6 2,627.8 * 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". -more-
-3- HIGHLIGHTS OF THE SECOND QUARTER 2004 INCLUDE: 2004 2003 Change ---- ---- ------ CONSOLIDATED Net Income, excluding realized capital gains (losses) $3.00 BILLION $2.52 billion 19.2% Shareholders' Equity At June 30 and December 31 $73.6 BILLION $71.3 billion 3.2% Retained Earnings At June 30 and December 31 $66.1 BILLION $61.0 billion 8.4% Return on Equity (a) At June 30 and December 31 17.4% 17.2% Consolidated Assets At June 30 and December 31 $736 BILLION $678 billion 8.6% Revenues (b) $23.81 BILLION $19.89 billion 19.7% Insurance Cash Flow (c) $14.75 BILLION $8.71 billion 69.3% GENERAL INSURANCE Net Premiums Written $10.38 BILLION $8.84 billion 17.4% Operating Income (ex. realized capital gains (losses)) $1.59 BILLION $1.30 billion 22.8% Net Investment Income $892.7 MILLION $731.5 million 22.0% Loss and Loss Adjustment Reserves At June 30 and December 31 $40.78 BILLION $36.65 billion 11.3% Combined Ratio 92.35 92.27 Cash Flow $3.17 BILLION $2.67 billion 18.7% LIFE INSURANCE & RETIREMENT SERVICES (d) GAAP Premiums $6.84 BILLION $5.62 billion 21.6% Premiums, Deposits and Other Considerations $16.28 BILLION $11.62 billion 40.2% Operating Income (ex. realized capital gains (losses)) $2.17 BILLION $1.84 billion 18.2% -more-
-4- 2004 2003 Change ---- ---- ------ FINANCIAL SERVICES Operating Income $609.2 MILLION $622.9 million (2.2)% ASSET MANAGEMENT (d) Operating Income $276.5 MILLION $195.6 million 41.4% (a) See reconciliation to GAAP ROE in the supplementary earnings data. (b) Represents the sum of General Insurance net premiums earned, GAAP Life Insurance & Retirement Services premiums, net investment income, Financial Services commissions, transactions and other fees, Asset Management commissions and other fees and fee income and net investment income with respect to Guaranteed Investment Contracts (GICs), and realized capital gains (losses). (c) In addition to General Insurance cash flow, includes Life Insurance & Retirement Services cash flow for investment, which generates the investment income necessary to meet policyholder obligations and to provide a profit margin to shareholders, as well as net cash flow from GICs. (d) 2003 is restated to conform to 2004 presentation. Commenting on second quarter results, AIG Chairman M. R. Greenberg said, "AIG had a very good quarter overall, with especially strong results from Worldwide General Insurance operations and Foreign Life & Retirement Services. Second quarter net income was a record $2.86 billion, up 25.7 percent over the second quarter of 2003. Excluding realized capital gains and losses, net income increased 19.2 percent to $3.00 billion. Shareholders' equity at June 30, 2004 was $73.6 billion, and assets increased to a record $736 billion. GENERAL INSURANCE "General Insurance results were very strong both in the U.S. and worldwide. General Insurance operating income excluding realized capital gains (losses) in the second quarter of 2004 increased 22.8 percent over a year ago to a record $1.59 billion. Net premiums written were a record $10.38 billion, up 17.4 percent over a year ago. The General Insurance combined ratio was 92.35 compared to 92.27 a year ago. "Worldwide General Insurance net investment income was $892.7 million, an increase of 22.0 percent benefiting from strong cash flow resulting from good growth in our business, higher interest rates, dividend income and good private equity results. General Insurance cash flow totaled $3.17 billion and $6.71 billion in the second quarter and six months of 2004, respectively, compared to $2.67 billion and $5.91 billion a year earlier. -more-
-5- "At June 30, 2004, General Insurance net loss and loss adjustment reserves totaled $40.78 billion, an increase of $2.03 billion and $4.13 billion for the second quarter and six months, respectively. "In the United States, the Domestic Brokerage Group had a very good quarter. Net premiums written in the second quarter of 2004 increased 14.8 percent over a year ago to a record $5.81 billion. The combined ratio was 95.00 compared to 94.43 in the second quarter of 2003. The Domestic Brokerage Group is benefiting from the flight to quality - since a Triple A balance sheet is important for many classes of long tail business - a strong profit center focus and vast and growing distribution channels. "We have maintained a disciplined approach to pricing and risk selection. Where pricing, terms and conditions or loss experience did not meet our standards, we chose to non-renew approximately $275 million in premiums in the Domestic Brokerage Group as well as nearly $50 million in our Foreign General operations in the second quarter. While the market generally has taken a rational approach to pricing, a few foreign and domestic companies have under-priced certain more difficult classes of long tail lines of business. These companies often lack the specialized knowledge, underwriting skills and claim management expertise that these lines require. Such pricing practices unsettle the market and add to long term volatility. "Reforming the U.S. tort system is more than an insurance industry issue. It is critical to the economy and the country. Necessary class action reforms had significant support in Congress, and it is unfortunate that debate over the number of non-germane amendments attached to the bill led to what we hope is a temporary setback. Efforts are underway to reconcile these differences, and the bill could be reintroduced at a later date. We will continue to work for its passage. "The Domestic Personal Lines business had good premium growth and solid underwriting performance in the second quarter. Operating income was $91.7 million in the second quarter compared to $28.8 million a year ago. Net premiums written were $1.08 billion, up 20.4 percent over a year ago. The combined ratio was 95.68. "HSB Group, Inc. had outstanding underwriting results. Losses have declined as a result of HSB's leading engineering, inspection and loss mitigation capabilities. The recent integration of AIG Consultants into HSB enhances our cross-sell opportunities and our capabilities for providing engineering and loss control services to a global client base. "United Guaranty Corporation had a good quarter. Premiums grew and refinancings declined as interest rates rose. UGC's delinquency ratio, always well below the industry average, was up modestly over a year ago, but has been declining over the past two quarters consistent with the improving job market. UGC's foreign operations, which we have been nurturing, are profitable, and we are planning to enter several new markets around the world. -more-
-6- "Transatlantic Holdings, Inc. had good growth and underwriting results. Net premiums written increased 15.5 percent to $927.2 million led by significant growth in international business. Operating income was up 15.7 percent to $111.6 million. The combined ratio was 95.69 compared to 96.30 in the second quarter of 2003. "Foreign General Insurance had excellent results from all regions of the world. Net premiums written were $2.42 billion, an increase of 23.8 percent over the second quarter of 2003. The combined ratio continues to be outstanding at 86.24, compared to 86.53 a year ago. "In Japan, the improving economy has contributed to our growth, especially in the growing commercial lines business and personal accident operations. The U. K., European and Australasian regions had excellent results. Latin America has had another good quarter, too. "In China, our landmark venture with PICC Property and Casualty Company Limited to develop the market for accident and health products is up and running. Also, we expect, by the end of 2004, to extend our general insurance operations to more cities in China as the market opens up in compliance with WTO rules. LIFE INSURANCE & RETIREMENT SERVICES "Worldwide Life Insurance & Retirement Services had excellent top and bottom line growth. Operating income before realized capital gains (losses) was a record $2.17 billion, an increase of 18.2 percent, compared to $1.84 billion in the second quarter of 2003. Worldwide Life Insurance & Retirement Services GAAP premiums were $6.84 billion, an increase of 21.6 percent over the second quarter of 2003. Premiums, deposits and other considerations totaled $16.28 billion, up 40.2 percent compared to the second quarter of 2003. Cash flow continues to be outstanding. "AIG's extensive Foreign Life Insurance & Retirement Services operations had excellent results. Operating income excluding realized capital gains (losses) was $1.22 billion in the second quarter compared to $990.2 million a year ago. GAAP premiums were $5.28 billion, up 24.0 percent. Premiums, deposits and other considerations were $8.99 billion, compared to $5.74 billion in the second quarter of 2003. Japan and Southeast Asia, our two largest regions, had strong growth. "In Japan, AIG Edison Life is being integrated successfully into our life operations. AIG Star is growing first year premiums as a result of new product introductions and an expanded agency force, and is benefiting from more successful conservation of in-force business. The annuity business in Japan is growing rapidly through product innovation and packaging skills and the confidence engendered by the financial strength of AIG companies. In addition, our deep and diverse distribution, which includes bancassurance, worksite marketing, direct marketing and strong agency organizations, provides us with a powerful platform for growth. -more-
-7- "In China, our life insurance business continues to grow very rapidly. Total first year premiums were up 43.4 percent in the second quarter over the prior year. By comparison, the overall industry has experienced modest growth, with some companies showing decreases in first year premiums. The skill and training of our agency force, financial strength and excellent management are the primary contributors to our success. "In India, the new government has proposed to Parliament legislation that would allow foreign companies to increase their ownership in life as well as general insurance companies to 49 percent from the current 26 percent. Passage of this legislation would present a significant opportunity for us to enhance our presence in this attractive market, where our life and general insurance joint ventures have had rapid growth throughout the country. "Domestic Life Insurance & Retirement Services operating income excluding realized capital gains (losses) totaled $953.5 million in the second quarter of 2004, an increase of 12.4 percent compared to $848.1 million in the second quarter of 2003. GAAP premiums were $1.56 billion, up 14.2 percent. Premiums, deposits and other considerations were $7.29 billion, a 24.1 percent increase compared to $5.87 billion in the second quarter of 2003. "AIG's domestic life operations had strong universal and term life sales and good performance from the independent distribution segment. Structured settlements also had strong growth. The group business domestically fell below our growth standards. We chose not to renew several accounts where pricing was unacceptable and we are reviewing our growth strategies for this business. At AGLA, the home services business, a number of the initiatives we have taken in recent months to accelerate growth, such as introducing new products, hiring new agents and retraining existing agents, will take some time before the results are evident. However, the business is solidly profitable with strong cash flow. "Domestic Retirement Services had a solid quarter. The businesses most correlated to the equity markets performed well, with the strongest sales growth in the individual variable annuity segment. AIG VALIC, the group retirement services business, which has approximately half of client assets in equities, also benefited from improved equity market performance. AIG VALIC has had a successful start cross-selling individual variable annuities, fixed annuities and mutual funds. AIG Annuity, the individual fixed annuity business, had very good performance with increased deposits, stable spreads and growth in operating income, even as consumers shifted assets to equity-based products. -more-
-8- FINANCIAL SERVICES "Financial Services had operating income of $609.2 million in the second quarter of 2004, a decline of 2.2 percent compared to $622.9 million a year ago. "International Lease Finance Corporation reported operating income of $182.6 million in the quarter, compared to $183.6 million in the second quarter of 2003. Excluding the impact of the securitization of approximately $2 billion in aircraft in late 2003 and early 2004, these results would have increased approximately 5 percent from second quarter 2003. ILFC sold five aircraft during the second quarter, and lease rates continue to rise. The turnaround in the global aviation business is increasingly evident. "Capital Markets operating income was $233.6 million, down 15.6 percent compared to a very strong second quarter of 2003. This transaction-oriented business continues to be very profitable. We have a diverse product portfolio, which we continue to expand, and we see opportunity in each of the major regions around the world where we do business. The consolidation of AIG Trading into AIG Financial Products Corp. is delivering expected synergies as clients are recognizing the benefits of working with a platform that can readily deliver multi-disciplined opportunities. "Consumer Finance had excellent results in both domestic and foreign operations. Operating income increased 15.3 percent to $192.3 million. In the United States, credit quality continues to be strong and receivables grew substantially. Foreign consumer finance operations performed very well and we see new opportunities in several additional international markets. ASSET MANAGEMENT "Asset Management operating income increased 41.4 percent in the second quarter of 2004 to $276.5 million. Improved equity markets and a strong and diverse global product portfolio contributed to these results as well as a $1 billion increase in assets under management, bringing the total to over $49 billion. In July, we received approval to prepare for the establishment of a joint venture fund management company in China. "Guaranteed Investment Contract (GIC) operating income totaled $178.0 million in the second quarter of 2004, compared to $139.2 million a year ago. GICs are an opportunistic business, which we write when interest rate spreads are attractive. Market conditions in the second quarter were very favorable. "In the Other Income/Deductions - net category, AIG reported a loss of $51.1 million in the second quarter of 2004, compared to a loss of $164.7 million a year earlier. The improvement is primarily attributable to increased income related to SunAmerica partnership investments." -more-
-9- # # # # AIG is the world's leading international insurance and financial services organization, with operations in more than 130 countries and jurisdictions. AIG member companies serve commercial, institutional and individual customers through the most extensive worldwide property-casualty and life insurance networks of any insurer. In the United States, AIG companies are the largest underwriters of commercial and industrial insurance and AIG American General is a top-ranked life insurer. AIG's global businesses also include financial services, retirement services and asset management. AIG's financial services businesses include aircraft leasing, financial products, trading and market making. AIG's growing global consumer finance business is led in the United States by American General Finance. AIG also has one of the largest U.S. retirement services businesses through AIG SunAmerica and AIG VALIC, and is a leader in asset management for the individual and institutional markets, with specialized investment management capabilities in equities, fixed income, alternative investments and real estate. AIG's common stock is listed on the New York Stock Exchange, as well as the stock exchanges in London, Paris, Switzerland and Tokyo. # # # # A conference call for the investment community will be held today at 9:00 a.m. EDT. The call will be broadcast live on the Internet at: www.aigwebcast.com The call will be archived at the same URL through Friday, July 30, 2004. CAUTION CONCERNING FORWARD-LOOKING STATEMENTS This press release contains forward-looking statements. Please refer to the AIG Quarterly Report on Form 10-Q for the quarter ended March 31, 2004 and its 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. -more-
-10- COMMENT ON REGULATION G This press release, including the financial highlights and supplementary earnings data, includes certain non-GAAP financial measures. The reconciliations of such measures to the most comparable GAAP figures in accordance with Regulation G are included herein. 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 of net income and operating income, AIG shows both net income and operating income exclusive of realized capital gains (losses). 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 created 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 quarterly business performance. 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 gains and losses in their analyses for the same reason, and consistently request that AIG provide the non-GAAP information. AIG presents life and retirement services production (premiums, deposits and other considerations), net premiums written and combined ratios 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.
AMERICAN INTERNATIONAL GROUP, INC. FINANCIAL HIGHLIGHTS* (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) SIX MONTHS ENDED JUNE 30, THREE MONTHS ENDED JUNE 30, 2004 2003 CHANGE 2004 2003 CHANGE ---- ---- ------ ---- ---- ------ GENERAL INSURANCE OPERATIONS: Net Premiums Written $ 20,593,331 $ 17,087,134 20.5% $10,380,387 $ 8,844,050 17.4% Net Premiums Earned 18,725,264 15,041,107 24.5 9,485,835 7,754,344 22.3 Underwriting Profit 1,341,575 1,096,386 22.4 698,024 563,847 23.8 Net Investment Income 1,749,480 1,515,341 15.5 892,664 731,467 22.0 Income before Realized Capital Gains (Losses) 3,091,055 2,611,727 18.4 1,590,688 1,295,314 22.8 Realized Capital Gains (Losses) 58,290 (255,977) -- (8,722) (83,470) -- OPERATING INCOME $ 3,149,345 $ 2,355,750 33.7% $ 1,581,966 $ 1,211,844 30.5% ------------ ------------ ---- ----------- ------------ ---- Loss Ratio 73.25 73.99 72.80 73.83 Expense Ratio 19.53 18.70 19.55 18.44 Combined Ratio 92.78 92.69 92.35 92.27 ------------ ------------ ---- ----------- ------------ ---- LIFE INSURANCE & RETIREMENT SERVICES OPERATIONS (a): GAAP Premiums $ 13,734,971 $ 11,405,858 20.4% $ 6,835,360 $ 5,621,100 21.6% Net Investment Income 7,770,528 6,600,502 17.7 3,829,171 3,418,259 12.0 Income before Realized Capital Gains (Losses) 4,216,358 3,486,717 20.9 2,172,783 1,838,257 18.2 Realized Capital Gains (Losses) (81,037) (532,909) -- (129,712) (194,737) -- OPERATING INCOME 4,135,321 2,953,808 40.0 2,043,071 1,643,520 24.3 FINANCIAL SERVICES OPERATING INCOME 1,132,211 1,153,371 (1.8) 609,174 622,910 (2.2) ASSET MANAGEMENT OPERATING INCOME (a) 515,639 369,948 39.4 276,464 195,557 41.4 Other Realized Capital Gains (Losses) (a) (181,335) (199,529) -- (70,569) (78,708) -- Other Income (Deductions) - net (70,891) (279,025) -- (51,148) (164,670) -- INCOME BEFORE INCOME TAXES, MINORITY INTEREST AND CUMULATIVE EFFECT OF AN ACCOUNTING CHANGE 8,680,290 6,354,323 36.6 4,388,958 3,430,453 27.9 Income Taxes 2,756,598 1,936,116 -- 1,400,432 1,059,754 -- INCOME BEFORE MINORITY INTEREST AND CUMULATIVE EFFECT OF AN ACCOUNTING CHANGE 5,923,692 4,418,207 34.1 2,988,526 2,370,699 26.1 Minority Interest, after-tax -- Income before Realized Capital Gains (Losses) (219,221) (189,754) -- (124,863) (97,826) -- Realized Capital Gains (Losses) (5,142) 1,957 -- (1,375) 4,012 -- INCOME BEFORE CUMULATIVE EFFECT OF AN ACCOUNTING CHANGE 5,699,329 4,230,410 34.7 2,862,288 2,276,885 25.7 Cumulative Effect of an Accounting Change, net of tax (b) (181,431) 0 -- 0 0 -- NET INCOME 5,517,898 4,230,410 30.4 2,862,288 2,276,885 25.7 REALIZED CAPITAL GAINS (LOSSES), NET OF TAX (141,910) (656,253) -- (141,366) (243,407) -- CUMULATIVE EFFECT OF AN ACCOUNTING CHANGE, NET OF TAX (b) (181,431) 0 -- 0 0 -- NET INCOME, EXCLUDING REALIZED CAPITAL GAINS (LOSSES) AND CUMULATIVE EFFECT OF AN ACCOUNTING CHANGE, NET OF TAX $ 5,841,239 $ 4,886,663 19.5% $ 3,003,654 $ 2,520,292 19.2%
AMERICAN INTERNATIONAL GROUP, INC. FINANCIAL HIGHLIGHTS* (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) SIX MONTHS ENDED JUNE 30, THREE MONTHS ENDED JUNE 30, 2004 2003 CHANGE 2004 2003 CHANGE ---- ---- ------ ---- ---- ------ PER SHARE - DILUTED: NET INCOME $ 2.10 $ 1.61 30.4% $ 1.09 $ 0.87 25.3% REALIZED CAPITAL GAINS (LOSSES), NET OF TAX (0.05) (0.25) -- (0.05) (0.09) -- CUMULATIVE EFFECT OF AN ACCOUNTING CHANGE, NET OF TAX (b) (0.07) 0.00 -- 0.00 0.00 -- NET INCOME, EXCLUDING REALIZED CAPITAL GAINS (LOSSES) AND CUMULATIVE EFFECT OF AN ACCOUNTING CHANGE, NET OF TAX $ 2.22 $ 1.86 19.4% $ 1.14 $ 0.96 18.8% AVERAGE DILUTED COMMON SHARES OUTSTANDING 2,631,597 2,627,789 2,630,887 2,627,407 * Including reconciliation in accordance with Regulation G. (a) 2003 is restated to conform to 2004 presentation. (b) 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".
AMERICAN INTERNATIONAL GROUP, INC. OPERATING INCOME (IN THOUSANDS) SIX MONTHS ENDED JUNE 30, THREE MONTHS ENDED JUNE 30, 2004 2003 CHANGE 2004 2003 CHANGE ---- ---- ------ ---- ---- ------ GENERAL INSURANCE: Domestic Brokerage Group $ 1,619,542 $ 1,387,503 16.7% $ 818,890 $ 678,656 20.7% Personal Lines 177,466 98,052 81.0 91,675 28,752 218.8 Mortgage Guaranty 201,520 218,577 (7.8) 101,768 108,582 (6.3) Transatlantic Holdings 221,131 175,826 25.8 111,593 96,426 15.7 Foreign General (a) 871,159 728,335 19.6 466,643 381,181 22.4 Intercompany Adjustments 237 3,434 -- 119 1,717 -- Realized Capital Gains (Losses) 58,290 (255,977) -- (8,722) (83,470) -- LIFE INSURANCE & RETIREMENT SERVICES (b): Domestic Life Insurance 440,537 390,242 12.9 237,123 210,601 12.6 Home Service 208,096 202,167 2.9 103,845 101,949 1.9 Group Life/Health 44,782 57,972 (22.8) 19,201 29,490 (34.9) Payout Annuities (c) 70,680 60,677 16.5 34,153 29,609 15.3 Retirement Services Group Retirement Products 534,255 445,241 20.0 253,967 226,644 12.1 Individual Fixed Annuities 450,922 332,385 35.7 217,981 189,962 14.7 Individual Variable Annuities 80,135 13,108 511.3 40,620 10,166 299.6 Individual Annuities - Runoff (d) 96,238 105,306 (8.6) 46,649 49,736 (6.2) Intercompany Adjustments (175) (127) -- (87) (64) -- Realized Capital Gains (Losses) (152,610) (203,034) -- (186,867) (183,928) -- Foreign Life Insurance 1,501,790 1,345,327 11.6 797,876 719,334 10.9 Personal Accident & Health 551,035 397,137 38.8 289,610 199,645 45.1 Group Products 136,303 94,825 43.7 70,170 47,016 49.2 Retirement Services Individual Fixed Annuities 107,416 49,066 118.9 65,359 25,247 158.9 Individual Variable Annuities 2,879 (438) -- 584 2,007 (70.9) Intercompany Adjustments (8,535) (6,171) -- (4,268) (3,085) -- Realized Capital Gains (Losses) 71,573 (329,875) -- 57,155 (10,809) -- FINANCIAL SERVICES: Aircraft Finance 342,595 357,885 (4.3) 182,553 183,614 (0.6) Capital Markets 416,106 488,021 (14.7) 233,602 276,780 (15.6) Consumer Finance 375,494 314,961 19.2 192,326 166,858 15.3 Other (e) (1,984) (7,496) -- 693 (4,342) -- ASSET MANAGEMENT (b)(f): Guaranteed Investment Contracts Domestic 314,497 238,323 32.0 166,824 127,646 30.7 Foreign 20,487 19,679 4.1 11,132 11,553 (3.6) Institutional Asset Management (g) 143,449 87,896 63.2 81,469 44,238 84.2 Brokerage Services and Mutual Funds 37,206 24,050 54.7 17,039 12,120 40.6 Other Realized Capital Gains (Losses) (b) (181,335) (199,529) -- (70,569) (78,708) -- Other Income (Deductions) - net (70,891) (279,025) -- (51,148) (164,670) -- INCOME BEFORE INCOME TAXES, MINORITY INTEREST AND CUMULATIVE EFFECT OF AN ACCOUNTING CHANGE 8,680,290 6,354,323 36.6 4,388,958 3,430,453 27.9 INCOME BEFORE INCOME TAXES, MINORITY INTEREST, REALIZED CAPITAL GAINS (LOSSES) AND CUMULATIVE EFFECT OF AN ACCOUNTING CHANGE $ 8,884,372 $ 7,342,738 21.0% $ 4,597,961 $ 3,787,368 21.4% (a) Foreign General insurance excludes the foreign operations of Transatlantic Holdings, Inc. (b) 2003 is restated to conform to 2004 presentation. (c) Includes Structured Settlements, Single Premium Immediate Annuities and Terminal Funding Annuities. (d) Represents runoff annuity business sold through merger related discontinued distribution relationships. (e) Includes Other Financial Services Companies and Intercompany Reclassifications. (f) At June 30, 2004, AIG's third party assets under management, including mutual funds and institutional accounts, totaled over $49 billion. (g) Includes AIG Global Investment Group and certain smaller asset management operations.
AMERICAN INTERNATIONAL GROUP, INC. SUPPLEMENTARY EARNINGS DATA* (IN THOUSANDS) SIX MONTHS ENDED JUNE 30, THREE MONTHS ENDED JUNE 30, 2004 2003 CHANGE 2004 2003 CHANGE ---- ---- ------ ---- ---- ------ GENERAL INSURANCE OPERATIONS: NET PREMIUMS WRITTEN Domestic Brokerage Group $ 11,360,564 $ 9,603,342 18.3% $ 5,810,145 $ 5,063,200 14.8% Personal Lines 2,196,963 1,784,612 23.1 1,084,209 900,414 20.4 Mortgage Guaranty 289,809 241,487 20.0 136,135 120,299 13.2 Transatlantic Holdings 1,834,667 1,570,931 16.8 927,197 802,850 15.5 Foreign General (a) 4,911,328 3,886,762 26.4 2,422,701 1,957,287 23.8 ------------ ------------ ------------ ------------ TOTAL 20,593,331 17,087,134 20.5 10,380,387 8,844,050 17.4 OPERATING INCOME Domestic Brokerage Group 1,619,542 1,387,503 16.7 818,890 678,656 20.7 Personal Lines 177,466 98,052 81.0 91,675 28,752 218.8 Mortgage Guaranty 201,520 218,577 (7.8) 101,768 108,582 (6.3) Transatlantic Holdings 221,131 175,826 25.8 111,593 96,426 15.7 Foreign General (a) 871,159 728,335 19.6 466,643 381,181 22.4 Intercompany Adjustments 237 3,434 -- 119 1,717 -- ------------ ------------ ------------ ------------ TOTAL BEFORE REALIZED CAPITAL GAINS (LOSSES) 3,091,055 2,611,727 18.4 1,590,688 1,295,314 22.8 Realized Capital Gains (Losses) 58,290 (255,977) -- (8,722) (83,470) -- OPERATING INCOME $ 3,149,345 $ 2,355,750 33.7% $ 1,581,966 $ 1,211,844 30.5% ------------ ------------ ---- ------------ ------------ ----- COMBINED RATIO: Domestic Brokerage Group 95.36 94.61 95.00 94.43 Personal Lines 95.56 98.28 95.68 100.07 Mortgage Guaranty 49.29 41.07 48.84 35.80 Transatlantic Holdings 95.75 96.85 95.69 96.30 Foreign General (a) 86.62 87.63 86.24 86.53 TOTAL 92.78 92.69 92.35 92.27 ------------ ------------ ---- ------------ ------------ ----- Losses and Loss Expenses Paid (b) $ 9,583,053 $ 8,390,322 14.2% $ 4,879,985 $ 4,156,667 17.4% Change in Loss and Loss Expense Reserve 4,132,789 2,737,961 50.9 2,026,060 1,568,196 29.2 ------------ ------------ ------------ ------------ Losses and Loss Expenses Incurred 13,715,842 11,128,283 23.3 6,906,045 5,724,863 20.6 Net Loss and Loss Expense Reserve 40,779,877 33,087,900 23.2 UNDERWRITING PROFIT $ 1,341,575 $ 1,096,386 22.4% $ 698,024 $ 563,847 23.8% ------------ ------------ ---- ------------ ------------ FOREIGN EXCHANGE IMPACT ON GROWTH OF NET PREMIUMS WRITTEN WORLDWIDE Growth in Original Currency 17.8% 15.4% Foreign Exchange Impact 2.7 2.0 Growth as Reported in U.S. $ 20.5 17.4 FOREIGN GENERAL (a) Growth in Original Currency 16.1 15.7 Foreign Exchange Impact 10.3 8.1 Growth as Reported in U.S. $ 26.4% 23.8% * Including reconciliation in accordance with Regulation G. (a) Foreign General insurance excludes the foreign operations of Transatlantic Holdings, Inc. (b) The paid loss ratios for the six months ended June 30, 2004 and 2003 were 51.18 and 55.79, respectively. The paid loss ratios for the three months ended June 30, 2004 and 2003 were 51.44 and 53.61, respectively. Additionally, 2004 paid losses were impacted by the inclusion of GE personal lines business.
SUPPLEMENTARY EARNINGS DATA - PAGE 2 SIX MONTHS ENDED JUNE 30, THREE MONTHS ENDED JUNE 30, 2004 2003 (a) CHANGE 2004 2003 (a) CHANGE ---- -------- ------ ---- -------- ------ LIFE INSURANCE & RETIREMENT SERVICES OPERATIONS: GAAP PREMIUMS DOMESTIC Life Insurance $ 905,783 $ 837,781 8.1% $ 475,794 $ 410,178 16.0% Home Service 410,064 417,962 (1.9) 204,078 209,217 (2.5) Group Life/Health 554,879 511,884 8.4 287,408 279,636 2.8 Payout Annuities (b) 753,920 717,377 5.1 379,807 296,723 28.0 Retirement Services Group Retirement Products 154,438 113,161 36.5 78,013 59,711 30.7 Individual Fixed Annuities 27,542 19,935 38.2 14,975 13,163 13.8 Individual Variable Annuities 199,325 152,992 30.3 99,133 79,692 24.4 Individual Annuities - Runoff (c) 39,600 39,568 0.1 19,629 17,117 14.7 ----------- ----------- ----------- ----------- TOTAL 3,045,551 2,810,660 8.4 1,558,837 1,365,437 14.2 FOREIGN Life Insurance 7,594,028 6,384,087 19.0 3,724,332 3,148,962 18.3 Personal Accident & Health 2,087,289 1,439,187 45.0 1,057,867 748,019 41.4 Group Products 802,954 633,029 26.8 386,783 283,525 36.4 Retirement Services Individual Fixed Annuities 176,474 130,995 34.7 91,253 70,176 30.0 Individual Variable Annuities 28,675 7,900 263.0 16,288 4,981 227.0 ----------- ----------- ----------- ----------- TOTAL 10,689,420 8,595,198 24.4 5,276,523 4,255,663 24.0 TOTAL GAAP PREMIUMS 13,734,971 11,405,858 20.4 6,835,360 5,621,100 21.6 ----------- ----------- ----- ----------- ----------- ----- PREMIUMS, DEPOSITS AND OTHER CONSIDERATIONS (d) DOMESTIC Life Insurance 1,375,524 1,300,488 5.8 720,666 661,283 9.0 Home Service 489,805 484,559 1.1 244,048 249,943 (2.4) Group Life/Health 542,427 507,835 6.8 282,292 271,076 4.1 Payout Annuities 1,119,525 871,976 28.4 542,863 320,260 69.5 Retirement Services Group Retirement Products 2,691,521 2,499,832 7.7 1,372,230 1,260,760 8.8 Individual Fixed Annuities 5,618,144 4,917,455 14.2 2,860,277 2,214,885 29.1 Individual Variable Annuities 2,340,612 1,569,532 49.1 1,197,950 803,994 49.0 Individual Annuities - Runoff 137,277 191,670 (28.4) 69,031 92,339 (25.2) ----------- ----------- ----------- ----------- TOTAL 14,314,835 12,343,347 16.0 7,289,357 5,874,540 24.1 FOREIGN Life Insurance 9,322,332 7,295,380 27.8 4,583,073 3,628,142 26.3 Personal Accident & Health 2,121,697 1,441,204 47.2 1,091,948 748,795 45.8 Group Products 1,414,208 1,082,827 30.6 662,538 513,004 29.1 Retirement Services Individual Fixed Annuities 5,364,105 750,186 615.0 2,215,201 501,971 341.3 Individual Variable Annuities 812,142 580,137 40.0 437,973 349,175 25.4 ----------- ----------- ----------- ----------- TOTAL 19,034,484 11,149,734 70.7 8,990,733 5,741,087 56.6 TOTAL PREMIUMS, DEPOSITS AND OTHER CONSIDERATIONS $33,349,319 $23,493,081 42.0% $16,280,090 $11,615,627 40.2% (a) Restated to conform to 2004 presentation. (b) Includes Structured Settlements, Single Premium Immediate Annuities and Terminal Funding Annuities. (c) Represents runoff annuity business sold through merger related discontinued distribution relationships. (d) Premiums, deposits and other considerations represent aggregate business activity during the respective periods presented on a non-GAAP basis.
SUPPLEMENTARY EARNINGS DATA - PAGE 3 SIX MONTHS ENDED JUNE 30, THREE MONTHS ENDED JUNE 30, ----------------------------------- ----------------------------------- 2004 2003 (a) CHANGE 2004 2003 (a) CHANGE ----------- ----------- ---- ----------- ----------- --- LIFE INSURANCE & RETIREMENT SERVICES OPERATIONS: NET INVESTMENT INCOME DOMESTIC Life Insurance $ 731,847 $ 617,899 18.4% $ 351,598 $ 333,937 5.3% Home Service 351,336 339,315 3.5 176,596 170,738 3.4 Group Life/Health 61,250 56,823 7.8 30,090 28,892 4.1 Payout Annuities 400,331 319,994 25.1 201,600 151,373 33.2 Retirement Services Group Retirement Products 1,066,531 998,676 6.8 524,683 507,944 3.3 Individual Fixed Annuities 1,494,697 1,193,899 25.2 736,968 625,287 17.9 Individual Variable Annuities 121,775 108,283 12.5 66,395 54,523 21.8 Individual Annuities - Runoff 544,517 691,818 (21.3) 267,937 360,534 (25.7) Intercompany Adjustments (175) (127) -- (87) (64) -- ----------- ----------- ----------- ----------- TOTAL 4,772,109 4,326,580 10.3 2,355,780 2,233,164 5.5 FOREIGN Life Insurance 2,181,796 1,883,897 15.8 1,088,058 981,442 10.9 Personal Accident & Health 86,815 76,411 13.6 45,031 39,883 12.9 Group Products 202,792 169,104 19.9 96,124 86,963 10.5 Retirement Services Individual Fixed Annuities 445,399 149,606 197.7 236,914 79,289 198.8 Individual Variable Annuities 90,152 1,075 -- 11,532 603 -- Intercompany Adjustments (8,535) (6,171) -- (4,268) (3,085) -- ----------- ----------- ----------- ----------- TOTAL 2,998,419 2,273,922 31.9 1,473,391 1,185,095 24.3 TOTAL NET INVESTMENT INCOME $ 7,770,528 $ 6,600,502 17.7% $ 3,829,171 $ 3,418,259 12.0% (a) Restated to conform to 2004 presentation.
SUPPLEMENTARY EARNINGS DATA - PAGE 4 SIX MONTHS ENDED JUNE 30, THREE MONTHS ENDED JUNE 30, ------------------------------------- ------------------------------------- 2004 2003 (a) CHANGE 2004 2003 (a) CHANGE ----------- ----------- ------- ----------- ----------- ------- LIFE INSURANCE & RETIREMENT SERVICES OPERATIONS: OPERATING INCOME DOMESTIC Life Insurance $ 440,537 $ 390,242 12.9% $ 237,123 $ 210,601 12.6% Home Service 208,096 202,167 2.9 103,845 101,949 1.9 Group Life/Health 44,782 57,972 (22.8) 19,201 29,490 (34.9) Payout Annuities 70,680 60,677 16.5 34,153 29,609 15.3 Retirement Services Group Retirement Products 534,255 445,241 20.0 253,967 226,644 12.1 Individual Fixed Annuities 450,922 332,385 35.7 217,981 189,962 14.7 Individual Variable Annuities 80,135 13,108 511.3 40,620 10,166 299.6 Individual Annuities - Runoff 96,238 105,306 (8.6) 46,649 49,736 (6.2) Intercompany Adjustments (175) (127) -- (87) (64) -- ----------- ----------- ----------- ----------- TOTAL DOMESTIC BEFORE REALIZED CAPITAL GAINS (LOSSES) 1,925,470 1,606,971 19.8 953,452 848,093 12.4 Realized Capital Gains (Losses) (152,610) (203,034) -- (186,867) (183,928) -- ----------- ----------- ----------- ----------- DOMESTIC OPERATING INCOME 1,772,860 1,403,937 26.3 766,585 664,165 15.4 FOREIGN Life Insurance 1,501,790 1,345,327 11.6 797,876 719,334 10.9 Personal Accident & Health 551,035 397,137 38.8 289,610 199,645 45.1 Group Products 136,303 94,825 43.7 70,170 47,016 49.2 Retirement Services Individual Fixed Annuities 107,416 49,066 118.9 65,359 25,247 158.9 Individual Variable Annuities 2,879 (438) -- 584 2,007 (70.9) Intercompany Adjustments (8,535) (6,171) -- (4,268) (3,085) -- ----------- ----------- ----------- ----------- TOTAL FOREIGN BEFORE REALIZED CAPITAL GAINS (LOSSES) 2,290,888 1,879,746 21.9 1,219,331 990,164 23.1 Realized Capital Gains (Losses) 71,573 (329,875) -- 57,155 (10,809) -- ----------- ----------- ----------- ----------- FOREIGN OPERATING INCOME 2,362,461 1,549,871 52.4 1,276,486 979,355 30.3 WORLDWIDE LIFE INSURANCE & RETIREMENT SERVICES BEFORE REALIZED CAPITAL GAINS (LOSSES) 4,216,358 3,486,717 20.9 2,172,783 1,838,257 18.2 Realized Capital Gains (Losses) (81,037) (532,909) -- (129,712) (194,737) -- ----------- ----------- ----------- ----------- WORLDWIDE OPERATING INCOME $ 4,135,321 $ 2,953,808 40.0% $ 2,043,071 $ 1,643,520 24.3% (a) Restated to conform to 2004 presentation.
SUPPLEMENTARY EARNINGS DATA - PAGE 5 SIX MONTHS ENDED JUNE 30, THREE MONTHS ENDED JUNE 30, ---------------------------------------- -------------------------------------- 2004 2003 (a) CHANGE 2004 2003 (a) CHANGE ------------- ------------- ----- ------------- ------------- ----- LIFE INSURANCE & RETIREMENT SERVICES OPERATIONS: DOMESTIC - OTHER DATA LIFE INSURANCE Periodic Premium Sales (b): Individual/Retail $ 234,540 $ 170,670 37.4% $ 119,190 $ 91,880 29.7 % Institutional Markets 20,260 36,740 (44.9) 7,210 6,530 10.4 ------------- ------------- ------------- ------------- Total Periodic Sales 254,800 207,410 22.8 126,400 98,410 28.4 Unscheduled & Single Deposits 220,480 169,340 30.2 122,280 88,740 37.8 Life Insurance Reserves 19,877,895 18,563,143 7.1 HOME SERVICE Product Sales Life/Accident & Health (b) 58,696 54,550 7.6 32,570 28,550 14.1 Fixed Annuity 55,698 59,000 (5.6) 27,725 34,100 (18.7) Total Insurance Reserves 7,129,504 6,974,000 2.2 GROUP LIFE/HEALTH Annualized Earned Premium 1,246,000 1,188,485 4.8 PAYOUT ANNUITIES Insurance Reserves 10,357,570 8,976,556 15.4 GROUP RETIREMENT PRODUCTS Deposits (c) 3,155,595 2,729,261 15.6 1,548,158 1,370,153 13.0 NET FLOWS Group Retirement Products (c) 793,621 1,553,537 (48.9) 738,416 769,982 (4.1) Individual Fixed Annuities 4,485,170 4,165,462 7.7 2,260,965 1,831,731 23.4 Individual Variable Annuities 1,080,900 495,146 118.3 569,972 289,944 96.6 Individual Annuities - Runoff (603,875) (583,300) -- (292,826) (287,165) -- ------------- ------------- ------------- ------------- TOTAL $ 5,755,816 $ 5,630,845 2.2% $ 3,276,527 $ 2,604,492 25.8 % SURRENDER RATES Group Retirement Products (c) 9.3%(d) 5.5% 6.4% 5.5% Individual Fixed Annuities 5.6% 5.0% 5.8% 4.8% Individual Variable Annuities 10.3% 11.0% 10.2% 10.2% GENERAL AND SEPARATE ACCOUNT RESERVES Group Retirement Products (c) $ 52,656,708 $ 46,253,287 13.8% Individual Fixed Annuities 47,112,896 36,709,085 28.3 Individual Variable Annuities 25,107,281 20,973,516 19.7 Individual Annuities - Runoff 21,334,856 22,071,651 (3.3) ------------- ------------- TOTAL $ 146,211,741 $ 126,007,539 16.0% (a) Restated to conform to 2004 presentation. (b) Life Insurance sales represent premiums from new sales that are expected to be collected over a one year period. (c) Includes group retirement annuities and group mutual funds. (d) Excluding the loss of a single account declined to be written at an inadequate profit level in first quarter 2004, the surrender rate was 6.9 percent.
SUPPLEMENTARY EARNINGS DATA - PAGE 6 SIX MONTHS ENDED JUNE 30, THREE MONTHS ENDED JUNE 30, ------------------------------------ ---------------------------------- 2004 2003 (a) CHANGE 2004 2003 (a) CHANGE ----------- ----------- ---- ----------- ----------- ---- LIFE INSURANCE & RETIREMENT SERVICES OPERATIONS: FOREIGN - OTHER DATA FIRST YEAR PREMIUMS LIFE INSURANCE Japan $ 345,984 $ 279,492 23.8% $ 176,403 $ 141,342 24.8% China 55,915 33,527 66.8 31,543 18,466 70.8 Asia excluding Japan and China 803,513 893,738 (10.1) 366,304 334,342 9.6 All Other Regions 122,957 91,219 34.8 67,250 48,761 37.9 ----------- ----------- ----------- ----------- TOTAL 1,328,369 1,297,976 2.3 641,500 542,911 18.2 PERSONAL ACCIDENT & HEALTH Japan 355,395 201,066 76.8 185,327 112,119 65.3 China 14,752 14,246 3.6 7,182 8,544 (15.9) Asia excluding Japan and China 117,136 96,321 21.6 56,184 45,708 22.9 All Other Regions 53,205 45,448 17.1 26,077 23,783 9.6 ----------- ----------- ----------- ----------- TOTAL 540,488 357,081 51.4 274,770 190,154 44.5 GROUP PRODUCTS Japan 12,518 12,036 4.0 3,930 5,058 (22.3) Asia excluding Japan and China 27,956 23,835 17.3 14,072 12,833 9.7 All Other Regions 336,125 301,980 11.3 173,057 175,002 (1.1) ----------- ----------- ----------- ----------- TOTAL 376,599 337,851 11.5 191,059 192,893 (1.0) TOTAL FIRST YEAR PREMIUMS Japan 713,897 492,594 44.9 365,660 258,519 41.4 China 70,667 47,773 47.9 38,725 27,010 43.4 Asia excluding Japan and China 948,605 1,013,894 (6.4) 436,560 392,883 11.1 All Other Regions 512,287 438,647 16.8 266,384 247,546 7.6 ----------- ----------- ----------- ----------- TOTAL 2,245,456 1,992,908 12.7 $ 1,107,329 $ 925,958 19.6% RETIREMENT SERVICES RESERVES Individual Fixed Annuities 23,595,473 6,449,620 265.8 Individual Variable Annuities $ 3,053,330 $ 992,564 207.6% FOREIGN EXCHANGE IMPACT ON GROWTH OF: GAAP PREMIUMS WORLDWIDE Growth in Original Currency 15.3% 16.7% Foreign Exchange Impact 5.1 4.9 Growth as Reported in U.S. $ 20.4 21.6 FOREIGN Growth in Original Currency 17.6 17.5 Foreign Exchange Impact 6.8 6.5 Growth as Reported in U.S. $ 24.4 24.0 PREMIUMS, DEPOSITS AND OTHER CONSIDERATIONS (b) WORLDWIDE Growth in Original Currency 38.3 36.7 Foreign Exchange Impact 3.7 3.5 Growth as Reported in U.S. $ 42.0 40.2 FOREIGN Growth in Original Currency 63.1 49.7 Foreign Exchange Impact 7.6 6.9 Growth as Reported in U.S. $ 70.7% 56.6% (a) Restated to conform to 2004 presentation. (b) Premiums, deposits and other considerations represent aggregate business activity during the respective periods presented on a non-GAAP basis.
SUPPLEMENTARY EARNINGS DATA - PAGE 7 SIX MONTHS ENDED JUNE 30, THREE MONTHS ENDED JUNE 30, ---------------------------------------- -------------------------------------- 2004 2003 CHANGE 2004 2003 CHANGE ------------ ------------ --- ------------ ------------ --- FINANCIAL SERVICES: REVENUES Aircraft Finance $ 1,562,433 $ 1,486,858 5.1% $ 810,295 $ 764,747 6.0% Capital Markets 734,597 808,095 (9.1) 402,063 483,465 (16.8) Consumer Finance 1,415,658 1,292,805 9.5 722,617 653,929 10.5 Other (a) 17,189 22,073 (22.1) 9,313 14,808 (37.1) ------------ ------------ ------------ ------------ TOTAL 3,729,877 3,609,831 3.3 1,944,288 1,916,949 1.4 OPERATING INCOME Aircraft Finance 342,595 357,885 (4.3) 182,553 183,614 (0.6) Capital Markets 416,106 488,021 (14.7) 233,602 276,780 (15.6) Consumer Finance 375,494 314,961 19.2 192,326 166,858 15.3 Other (a) (1,984) (7,496) -- 693 (4,342) -- ------------ ------------ ------------ ------------ TOTAL 1,132,211 1,153,371 (1.8) 609,174 622,910 (2.2) ASSET MANAGEMENT (b)(c): REVENUES Guaranteed Investment Contracts Domestic 1,145,177 1,024,125 11.8 594,645 512,489 16.0 Foreign 196,529 212,791 (7.6) 87,280 99,392 (12.2) Institutional Asset Management (d) 474,770 299,916 58.3 285,874 144,630 97.7 Brokerage Services and Mutual Funds 123,311 97,039 27.1 62,632 49,361 26.9 ------------ ------------ ------------ ------------ TOTAL 1,939,787 1,633,871 18.7 1,030,431 805,872 27.9 OPERATING INCOME Guaranteed Investment Contracts Domestic 314,497 238,323 32.0 166,824 127,646 30.7 Foreign 20,487 19,679 4.1 11,132 11,553 (3.6) Institutional Asset Management (d) 143,449 87,896 63.2 81,469 44,238 84.2 Brokerage Services and Mutual Funds 37,206 24,050 54.7 17,039 12,120 40.6 ------------ ------------ ------------ ------------ TOTAL 515,639 369,948 39.4 276,464 195,557 41.4 GUARANTEED INVESTMENT CONTRACTS DEPOSITS Domestic 6,806,192 3,755,442 81.2 4,239,088 1,285,964 229.6 Foreign 2,119,827 2,450,111 (13.5) 1,427,987 1,376,092 3.8 ------------ ------------ ------------ ------------ TOTAL 8,926,019 6,205,553 43.8 $ 5,667,075 $ 2,662,056 112.9% RESERVES Domestic 43,734,217 35,734,042 22.4 Foreign 7,126,860 7,932,069 (10.2) ------------ ------------ TOTAL $ 50,861,077 $ 43,666,111 16.5% EFFECTIVE TAX RATES: Net Income 31.76% 30.47% 31.91% 30.89% Realized Capital Gains (Losses) 32.98% 33.41% 33.02% 30.68% (a) Includes Other Financial Services Companies and Intercompany Reclassifications. (b) 2003 is restated to conform to 2004 presentation. (c) At June 30, 2004, AIG's third party assets under management, including mutual funds and institutional accounts, totaled over $49 billion. (d) Includes AIG Global Investment Group and certain smaller asset management operations.
SUPPLEMENTARY EARNINGS DATA - PAGE 8 ADDITIONAL RECONCILIATION IN ACCORDANCE WITH REGULATION G SIX MONTHS TWELVE MONTHS ENDED ENDED JUNE 30, DECEMBER 31, 2004 2003 ---- ---- RETURN ON EQUITY RECONCILIATION Return on Equity, GAAP basis 14.9% 14.1% Percent Related to Reconciliation 2.5 3.1 ---- ---- Return on Equity, as presented (a) 17.4% 17.2% (a) Return on Equity, as presented is net income, before realized capital gains (losses) and cumulative effect of an accounting change, expressed as a percentage of average shareholders' equity, exclusive of unrealized appreciation (depreciation) of investments, net of tax.