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 24, 2003 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 9. Regulation FD Disclosure (Information Provided Under Item 12. Results of Operations and Financial Condition). The following information, including the text of the press release attached as an Exhibit to this Form 8-K, is furnished pursuant to Item 12, "Results of Operations and Financial Condition". On July 24, 2003, American International Group, Inc. issued a press release announcing its results for the quarter ended June 30, 2003. 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 caused this report to be signed on its behalf by the undersigned hereunto duly authorized. AMERICAN INTERNATIONAL GROUP, INC. (Registrant) Date: July 24, 2003 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 24, 2003.
EXHIBIT 99.1 NEWS [AIG LOGO] AMERICAN INTERNATIONAL GROUP, INC. 70 PINE STREET NEW YORK, NY 10270 Contact: Charlene Hamrah (Investment Community) (212)770-7074 Joe Norton (News Media) (212)770-3144 AIG REPORTS SECOND QUARTER 2003 NET INCOME ROSE 26.4 PERCENT TO $2.28 BILLION; ANNOUNCES ADDITIONAL 25.0 PERCENT INCREASE IN QUARTERLY COMMON STOCK DIVIDEND NEW YORK, NY, July 24, 2003 - American International Group, Inc. (AIG) today reported that its net income for the second quarter of 2003 increased 26.4 percent to $2.28 billion, compared to $1.80 billion in the second quarter of 2002. For the first six months of 2003, net income totaled $4.23 billion, an increase of 11.9 percent compared to $3.78 billion in the same period of 2002. Following is a summary table of second quarter and six months information (in millions, except per share amounts): SECOND QUARTER PER SHARE -------------------------------- 2003 2002 Change 2003 2002 Change ---- ---- ------ ---- ---- ------ Net income $2,276.9 $1,801.2 26.4% $ 0.87 $ 0.68 27.9% Realized capital losses, net of tax $ 243.4 $ 412.2 -- $ 0.09 $ 0.16 -- Net income, excluding realized capital losses, net of tax $2,520.3 $2,213.4 13.9% $ 0.96 $ 0.84 14.3% Average shares outstanding 2,627.4 2,639.9 -more-
-2- SIX MONTHS PER SHARE -------------------------------- 2003 2002 Change 2003 2002 Change ---- ---- ------ ---- ---- ------ Net income $4,230.4 $3,781.5 11.9% $ 1.61 $ 1.43 12.6% Realized capital losses, net of tax $ 656.3 $ 562.6 -- $ 0.25 $ 0.22 -- Net income, excluding realized capital losses, net of tax $4,886.7 $4,344.1 12.5% $ 1.86 $ 1.65 12.7% Average shares outstanding 2,627.8 2,638.6 Highlights of the second quarter of 2003 include: - - Record capital funds (shareholders' equity) at June 30, 2003 exceeding $68 billion, an increase of approximately $6 billion over March 31, 2003. - - Record consolidated assets at June 30, 2003 of approximately $620 billion, an increase of approximately $28 billion over March 31, 2003. - - Record General Insurance net premiums written of $8.84 billion, an increase of 30.4 percent over the second quarter of 2002. - - Record General Insurance pretax operating income of $1.21 billion, including $83.5 million of realized capital losses. - - General Insurance combined ratio of 92.27 for the second quarter of 2003. - - Record General Insurance cash flow of $5.91 billion in the first six months of 2003. - - General Insurance net loss and loss adjustment reserves totaling $33.09 billion as of June 30, 2003, an increase of $1.57 billion and $2.74 billion for the second quarter and six months, respectively. - - Life Insurance GAAP premiums of $5.47 billion, up 6.1 percent over the second quarter of 2002. - - Record Life Insurance pretax operating income of $1.56 billion, including $171.1 million of realized capital losses. -more-
-3- Income before income taxes and minority interest in the second quarter of 2003 increased 23.9 percent. Following is a summary table of second quarter and six months information (in millions): SECOND QUARTER SIX MONTHS 2003 2002 Change 2003 2002 Change ---- ---- ------ ---- ---- ------ Income before income taxes and minority interest $3,430.4 $2,767.7 23.9% $6,354.3 $5,726.4 11.0% Pretax realized capital losses $ 356.9 $ 629.5 -- $ 988.4 $ 861.3 -- The following table outlines the impact of foreign exchange on property-casualty net premiums written and life insurance GAAP premiums for the second quarter 2003: WORLDWIDE FOREIGN WORLDWIDE FOREIGN GENERAL GENERAL LIFE LIFE INSURANCE INSURANCE INSURANCE INSURANCE --------- --------- --------- --------- Premium Growth in Original Currency 28.3% 17.2% 3.6% 3.4% Foreign Exchange Impact 2.1 7.3 2.5 3.3 Premium Growth as Reported in U.S. $ 30.4% 24.5% 6.1% 6.7% Commenting on second quarter results, AIG Chairman M.R. Greenberg said, "AIG had a very good quarter. General Insurance, Life Insurance and Financial Services all had record results. Retirement Savings & Asset Management had improved performance as equity markets made gains. "In June, we announced an agreement to buy from General Electric its life insurance operations in Japan and auto and home insurance business in the U.S. These acquisitions will enhance our position in attractive markets and businesses where AIG has proven capabilities. "Over the second quarter, assets and shareholders' equity both rose to record levels. At June 30, 2003, assets approximated $620 billion and shareholders' equity exceeded $68 billion. "GENERAL INSURANCE OPERATING INCOME IN THE SECOND QUARTER OF 2003 INCREASED 29.4 PERCENT OVER A YEAR AGO TO $1.21 BILLION INCLUDING REALIZED CAPITAL LOSSES OF $83.5 MILLION. We had excellent results in both the Domestic Brokerage Group and Foreign General operations. Net premiums written were a record $8.84 billion, up 30.4 percent over a year ago. The General Insurance combined ratio was a strong 92.27 versus 94.09 a year ago. The General Insurance expense ratio further improved to 18.44 from 20.03 a year ago. -more-
-4- "In the United States, Domestic Brokerage Group net premiums written in the second quarter of 2003 increased 37.4 percent over a year ago to a record $5.06 billion. The combined ratio was 94.43 compared to 97.25 in the second quarter of 2002. "Property-casualty rates in the Domestic Brokerage Group continued to rise in the quarter. Rate increases ranged from 30 to 40 percent in most casualty lines, more in certain lines such as directors and officers insurance and excess casualty coverages. Property rates, which had increased significantly over the last few years, were up modestly in the second quarter. During the quarter we introduced new products including comprehensive protection for directors and officers, new coverages against cyber security threats and new aviation coverages. "HSB Group, Inc. (HSB) is achieving excellent results and is working closely with Domestic Brokerage Group and Foreign General operations identifying new opportunities. HSB is the industry leader in providing equipment breakdown insurance and related engineering and loss control services. "Domestic Personal Lines had very good current results in the second quarter. Net premiums written were $900.4 million, up 11.6 percent over the prior year. Rates have continued to firm. The combined ratio was 100.07 or 95.84 excluding 4.23 points associated with 21st Century Insurance Group's $37 million increase in 1994 Northridge earthquake loss reserves for claims reopened by California Senate Bill 1899, as previously reported by 21st Century. The combined ratio was 99.67 in the second quarter of 2002. The pending acquisition of GE's U.S. based automobile insurance units will complement AIG's existing domestic personal automobile insurance business. "United Guaranty Corporation, AIG's mortgage guaranty insurance operation, achieved an excellent combined ratio of 35.80. Reflecting the continuing high level of refinancings, new business was offset by a decline in renewal premiums. "Foreign General Insurance had excellent results from its unrivalled worldwide franchise. Net premiums in the second quarter increased 24.5 percent over the second quarter of 2002, to a record $1.96 billion. The combined ratio was an outstanding 86.53 compared to 88.39, a year ago. Southeast Asia and the U.K. had double digit premium growth. The Japan and European operations continue to benefit from the flight to quality. Economic weakness in many parts of the world has not deterred our growth as a result of our unsurpassed ability to provide strong financial security, a wide range of innovative products and responsive service. "AT TRANSATLANTIC HOLDINGS, INC., A MAJORITY-OWNED AIG SUBSIDIARY, NET PREMIUMS WRITTEN IN THE SECOND QUARTER OF 2003 ROSE 35.6 PERCENT TO $802.9 MILLION. The combined ratio improved to 96.30 from 98.22. Transatlantic is the largest broker-market reinsurance organization in the United States and a leader in the specialty casualty field. -more-
-5- "General Insurance cash flow continues to be very strong. NEW CASH FLOW FOR INVESTMENTS FROM GENERAL INSURANCE OPERATIONS IN THE FIRST SIX MONTHS OF 2003 WAS A RECORD $5.91 BILLION, COMPARED TO $2.79 BILLION IN THE FIRST SIX MONTHS OF 2002. Net cash flow has increased $13.34 billion since the beginning of 2002. Net investment income rose 7.6 percent to $731.5 million in the second quarter of 2003 and 6.3 percent to $1.52 billion for the first six months of 2003. The growth in investment income is a direct reflection of the strong growth in net cash flow and improving results in partnership income. "WE ADDED $1.57 BILLION AND $2.74 BILLION TO AIG'S GENERAL INSURANCE NET LOSS AND LOSS ADJUSTMENT RESERVES FOR THE QUARTER AND SIX MONTHS, RESPECTIVELY, bringing the total of those reserves to $33.09 billion at June 30, 2003. "WORLDWIDE LIFE INSURANCE OPERATING INCOME IN THE SECOND QUARTER OF 2003 WAS $1.56 BILLION, INCLUDING $171.1 MILLION OF REALIZED CAPITAL LOSSES, COMPARED TO $1.22 BILLION, INCLUDING $310.7 MILLION OF REALIZED CAPITAL LOSSES, A YEAR AGO. GAAP premiums were $5.47 billion, an increase of 6.1 percent over the second quarter of 2002. Total life production, which includes premiums, deposits and other considerations, was $11.58 billion, a decline of 12.8 percent, compared to second quarter 2002. Guaranteed Investment Contracts are an opportunistic business and in the second quarter we reduced our issuances, especially in the domestic market. Worldwide life production, excluding worldwide guaranteed investment contracts and domestic individual fixed annuities, increased 6.4 percent in the second quarter of 2003, compared to the second quarter 2002. Life insurance cash flow from both foreign and domestic operations continues to be outstanding. "Asia, the largest region of Foreign Life, had good operating income and premium growth. While the outbreak of SARS in Asia had a short term impact on first year life insurance policy sales in April and May, conditions have improved dramatically since then. Beijing, Shanghai, Southern China and Hong Kong are virtually back to normal. Conditions in Taiwan and Singapore also are much improved. The SARS epidemic has heightened the awareness of the importance of protection policies, and we have been introducing a series of new products to serve this need. In China, second quarter production, comprised of premiums, deposits and other considerations, rose 28 percent. In the past six months, new business increased 30 percent in China and more than 10 percent in Hong Kong. "In Japan, the world's second largest life insurance market after the United States, we had good results. ALICO, our largest life operation in Japan, had strong performance in terms of premium growth and operating income. When we complete the acquisition of GE Edison Life in Japan, AIG will have the leading foreign life insurance presence in the marketplace and a strong distribution platform for serving the life, annuity, and accident and health insurance needs of this important market. Additionally, our Korean operation performed well this quarter. -more-
-6- "Domestic Life also had good results. AIG American General, which was the most profitable life insurer in the United States in 2002, had good growth through new products and cross selling initiatives. Domestic Life operating income including realized capital losses in the second quarter of 2003 was $594.3 million. AIG American General's transition to a profit center structure has enabled it to respond quickly to new opportunities, such as the recently launched voluntary benefits unit, which will sell payroll deduction life and accident and health products. "The individual fixed annuity business, which is reported in the Life Insurance segment, performed well. We have been lowering annuity crediting rates, so the net interest margin in this business has remained steady or improved even as interest rates remain low. In markets where we were not able to reduce rates and maintain adequate margins we deliberately curtailed sales in the second quarter. That trend is reversing itself in the third quarter and business is off to a very strong start. "FINANCIAL SERVICES had excellent results, achieving solid profits derived from a diversified range of businesses and products. OPERATING INCOME GREW 14.9 PERCENT TO $622.9 MILLION IN THE SECOND QUARTER OF 2003, COMPARED TO $542.0 MILLION IN THE SECOND QUARTER OF 2002. "International Lease Finance Corporation (ILFC) reported operating income of $183.6 million in the second quarter of 2003, versus $207.7 million a year ago. Despite the challenging environment, demand for ILFC's modern and efficient fleet continues to be strong. All new and used aircraft deliveries in 2003 have been placed, and 78 percent of 2004 new aircraft deliveries have been leased. While some of the new lease rates for aircraft that have been redeployed are lower, this is largely offset by very low interest rates, which reduce ILFC's financing costs. Air travel in Asia, a major market for ILFC, has increased substantially now that the risk of SARS has dramatically abated. Approximately 88 percent of ILFC's fleet is leased outside of the United States. "AIG Financial Products Corp. (AIGFP) reported operating income of $254.2 million in the second quarter of 2003, an increase of 41.0 percent over the second quarter of 2002. AIGFP's interest rate, currency and credit derivative segments contributed to the strong growth. AIGFP serves customer needs and is not dependent on taking positions on the direction of interest rates and other markets. AIG Trading Group Inc. also had good results, with operating income of $22.6 million compared to $21.0 million in the second quarter of 2002. To take better advantage of the synergies between businesses in the capital markets, we intend to combine AIGFP and AIG Trading into one reporting unit. "Both U.S. and foreign consumer finance businesses had good results in the quarter. Operating income increased 18.4 percent in the second quarter of 2003 to $166.9 million. American General Finance had a good quarter as credit quality continues to be strong. AIG's international consumer finance operations posted good growth. -more-
-7- "RETIREMENT SAVINGS & ASSET MANAGEMENT operating income increased 7.7 percent over a year ago to $301.7 million. The Group Retirement Savings business, led by AIG VALIC in the United States, earned $226.6 million in the second quarter of 2003, compared to $219.1 million a year ago. Operating income in the individual variable annuity and mutual fund businesses was $6.6 million in the second quarter of 2003, compared to $11.4 million in second quarter of 2002 and a loss of $1.3 million in the first quarter of 2003. Our institutional asset management operation continues to attract new business. At June 30, 2003, AIG's third party assets under management, including institutional accounts and retail mutual funds, totaled over $43 billion. "AIG had pretax realized capital losses of $356.9 million in the second quarter of 2003, compared to $629.5 million in the second quarter of 2002. The largest portion of these losses continues to be derived from the inclusion of unrealized losses on investments previously written down to market through shareholders' equity. Upon the ultimate disposition of these holdings, a portion of these losses may be recovered depending on future market conditions. "In the Other Income/Deductions-net category, AIG reported net deductions of $164.7 million in the second quarter of 2003, compared to net deductions of $49.7 million a year earlier. Principal components of this category are administrative, interest and pension expenses. "In light of the substantial increase in AIG's shareholders' equity in the second quarter of 2003 and the recent congressional action decreasing the tax rate on corporate dividends paid to shareholders, AIG'S BOARD OF DIRECTORS HAS INCREASED ITS PREVIOUSLY DECLARED DIVIDEND OF 5.2 CENTS PER COMMON SHARE TO BE PAID IN SEPTEMBER 2003 TO 6.5 CENTS PER COMMON SHARE. This is an increase of 25.0 percent over the previously declared dividend and a 38.3 percent increase over the 4.7 cents per common share paid in June 2003." -more-
-8- # # # # AIG is the world's leading international insurance and financial services organization, with operations in approximately 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 savings 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 savings 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, August 1, 2003. CAUTION CONCERNING FORWARD-LOOKING STATEMENTS This press release contains forward-looking statements. Please refer to the AIG Quarterly Report on Form 10-Q/A for the quarter ended March 31, 2003 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-
-9- 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 transactions in their analyses for the same reason, and consistently request that AIG provide the non-GAAP information. AIG presents life 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, 2003 2002 CHANGE 2003 2002 CHANGE ---- ---- ------ ---- ---- ------ GENERAL INSURANCE OPERATIONS: Net Premiums Written $ 17,087,134 $ 13,116,940 30.3% $ 8,844,050 $ 6,782,657 30.4% Net Premiums Earned 15,041,107 11,365,691 32.3 7,754,344 5,859,163 32.3 Underwriting Profit 1,096,386 725,935 51.0 563,847 416,234 35.5 Net Investment Income 1,515,341 1,425,413 6.3 731,467 680,047 7.6 Income before Realized Capital Gains (Losses) 2,611,727 2,151,348 21.4 1,295,314 1,096,281 18.2 Realized Capital Gains (Losses) (255,977) (281,860) - (83,470) (160,102) - OPERATING INCOME $ 2,355,750 $ 1,869,488 26.0% $ 1,211,844 $ 936,179 29.4% ------------ ------------ ---- ------------ ------------ ---- Loss Ratio 73.99 74.63 73.83 74.06 Expense Ratio 18.70 20.27 18.44 20.03 Combined Ratio 92.69 94.90 92.27 94.09 ------------ ------------ ---- ------------ ------------ ---- LIFE INSURANCE OPERATIONS: GAAP Premiums $ 11,133,328 $ 9,943,011 12.0% $ 5,474,838 $ 5,159,564 6.1% Net Investment Income 6,695,110 5,949,324 12.5 3,454,709 3,046,738 13.4 Income before Realized Capital Gains (Losses) 3,272,187 2,883,765 13.5 1,732,134 1,528,374 13.3 Realized Capital Gains (Losses) (516,072) (339,411) - (171,113) (310,650) - OPERATING INCOME 2,756,115 2,544,354 8.3 1,561,021 1,217,724 28.2 FINANCIAL SERVICES OPERATING INCOME 1,153,371 1,015,928 13.5 622,910 542,014 14.9 RETIREMENT SAVINGS & ASSET MANAGEMENT OPERATING INCOME 584,478 579,893 0.8 301,680 280,215 7.7 Other Realized Capital Gains (Losses) (216,366) (240,039) - (102,332) (158,719) - Other Income (Deductions) - net (279,025) (43,216) - (164,670) (49,708) - INCOME BEFORE INCOME TAXES AND MINORITY INTEREST 6,354,323 5,726,408 11.0 3,430,453 2,767,705 23.9 Income Taxes 1,936,116 1,763,644 - 1,059,754 871,816 - INCOME BEFORE MINORITY INTEREST 4,418,207 3,962,764 11.5 2,370,699 1,895,889 25.0 Minority Interest, after-tax - Income before Realized Capital Gains (Losses) (189,754) (178,679) - (97,826) (91,655) - Minority Interest, after-tax - Realized Capital Gains (Losses) 1,957 (2,590) - 4,012 (3,039) - NET INCOME 4,230,410 3,781,495 11.9 2,276,885 1,801,195 26.4 REALIZED CAPITAL GAINS (LOSSES), NET OF TAX (656,253) (562,589) - (243,407) (412,194) - NET INCOME, EXCLUDING REALIZED CAPITAL GAINS (LOSSES), NET OF TAX $ 4,886,663 $ 4,344,084 12.5% $ 2,520,292 $ 2,213,389 13.9% ------------ ------------ ---- ------------ ------------ ---- PER SHARE - DILUTED: NET INCOME $ 1.61 $ 1.43 12.6% $ 0.87 $ 0.68 27.9% REALIZED CAPITAL GAINS (LOSSES), NET OF TAX (0.25) (0.22) - (0.09) (0.16) - NET INCOME, EXCLUDING REALIZED CAPITAL GAINS (LOSSES), NET OF TAX $ 1.86 $ 1.65 12.7% $ 0.96 $ 0.84 14.3% ------------ ------------ ---- ------------ ------------ ---- AVERAGE DILUTED COMMON SHARES OUTSTANDING 2,627,789 2,638,607 2,627,407 2,639,921 * Including reconciliation in accordance with Regulation G.
AMERICAN INTERNATIONAL GROUP, INC. SUPPLEMENTARY EARNINGS DATA (IN THOUSANDS) SIX MONTHS ENDED JUNE 30, THREE MONTHS ENDED JUNE 30, 2003 2002 CHANGE 2003 2002 CHANGE ---- ---- ------ ---- ---- ------ GENERAL INSURANCE OPERATIONS: NET PREMIUMS WRITTEN Domestic Brokerage Group $ 9,603,342 $ 7,130,809 34.7% $ 5,063,200 $ 3,684,647 37.4% Personal Lines 1,784,612 1,533,214 16.4 900,414 807,114 11.6 Mortgage Guaranty 241,487 248,353 (2.8) 120,299 126,131 (4.6) Transatlantic Holdings 1,570,931 1,155,581 35.9 802,850 592,026 35.6 Foreign General (a)(b) 3,886,762 3,048,983 27.5 1,957,287 1,572,739 24.5 ------------- ------------- ------------ ------------ TOTAL 17,087,134 13,116,940 30.3 8,844,050 6,782,657 30.4 OPERATING INCOME Domestic Brokerage Group 1,387,503 1,042,738 33.1 678,656 511,650 32.6 Personal Lines 98,052 85,987 14.0 28,752 62,851 (54.3) Mortgage Guaranty 218,577 236,424 (7.5) 108,582 124,775 (13.0) Transatlantic Holdings 175,826 145,632 20.7 96,426 73,584 31.0 Foreign General (a) 728,335 629,202 15.8 381,181 317,739 20.0 Intercompany Adjustments 3,434 11,365 - 1,717 5,682 - ------------- ------------- ------------ ------------ TOTAL BEFORE REALIZED CAPITAL GAINS (LOSSES) 2,611,727 2,151,348 21.4 1,295,314 1,096,281 18.2 Realized Capital Gains (Losses) (255,977) (281,860) - (83,470) (160,102) - OPERATING INCOME $ 2,355,750 $ 1,869,488 26.0% $ 1,211,844 $ 936,179 29.4% ------------- ------------- ---- ------------ ------------ ---- COMBINED RATIO: Domestic Brokerage Group 94.61 97.44 94.43 97.25 Personal Lines 98.28 100.36 100.07 99.67 Mortgage Guaranty 41.07 35.58 35.80 29.76 Transatlantic Holdings 96.85 98.19 96.30 98.22 Foreign General (a) 87.63 90.06 86.53 88.39 TOTAL 92.69 94.90 92.27 94.09 ------------- ------------- ---- ------------ ------------ ---- Losses and Loss Expenses Paid $ 8,390,322 $ 7,977,671 5.2% $ 4,156,667 $ 3,961,354 4.9% Change in Loss and Loss Expense Reserve 2,737,961 504,972 - 1,568,196 378,006 - ------------- ------------- ---- ------------ ------------ Losses and Loss Expenses Incurred 11,128,283 8,482,643 31.2 5,724,863 4,339,360 31.9 Net Loss and Loss Expense Reserve 33,087,900 26,400,484 25.3 UNDERWRITING PROFIT $ 1,096,386 $ 725,935 51.0% $ 563,847 $ 416,234 35.5% (a) Foreign General insurance excludes the foreign operations of Transatlantic Holdings, Inc. (b) The growth in Foreign General net premiums written in original currency was 17.2 percent and 21.0 percent for the second quarter and six months 2003, respectively.
SUPPLEMENTARY EARNINGS DATA CONTINUED SIX MONTHS ENDED JUNE 30, THREE MONTHS ENDED JUNE 30, 2003 2002 Change 2003 2002 Change ---- ---- ------ ---- ---- ------ LIFE INSURANCE OPERATIONS: GAAP Premiums Domestic Life Insurance $ 844,879 $ 818,215 3.3 % $ 414,132 $ 421,967 (1.9)% Individual Fixed Annuities 24,845 22,651 9.7 12,542 11,228 11.7 Guaranteed Investment Contracts 3,730 16,187 (77.0) 57 15,414 (99.6) Home Service 417,962 430,626 (2.9) 209,217 214,709 (2.6) Group Life/Health 511,884 478,148 7.1 279,636 240,238 16.4 Pension and Investment Products 744,937 493,520 50.9 310,507 274,704 13.0 ------------- ------------ ----------- ----------- TOTAL 2,548,237 2,259,347 12.8 1,226,091 1,178,260 4.1 Foreign Life Insurance 6,458,463 5,878,741 9.9 3,190,582 3,085,227 3.4 Personal Accident 1,439,187 1,167,842 23.2 748,019 602,015 24.3 Group Products 633,029 589,084 7.5 283,525 273,009 3.9 Guaranteed Investment Contracts 54,412 47,997 13.4 26,621 21,053 26.4 ------------- ------------ ----------- ----------- TOTAL 8,585,091 7,683,664 11.7 4,248,747 3,981,304 6.7 TOTAL GAAP PREMIUMS 11,133,328 9,943,011 12.0 5,474,838 5,159,564 6.1 PREMIUMS, DEPOSITS AND OTHER CONSIDERATIONS (a)(b) Domestic Life Insurance 1,326,950 1,300,105 2.1 674,530 644,338 4.7 Individual Fixed Annuities 5,057,295 5,320,599 (4.9) 2,284,369 3,058,654 (25.3) Guaranteed Investment Contracts 3,755,442 6,061,197 (38.0) 1,285,964 2,569,171 (49.9) Home Service 484,559 429,746 12.8 249,943 213,735 16.9 Group Life/Health 507,835 479,147 6.0 271,076 233,991 15.8 Pension and Investment Products 897,344 870,759 3.1 329,868 470,014 (29.8) ------------- ------------ ----------- ----------- TOTAL 12,029,425 14,461,553 (16.8) 5,095,750 7,189,903 (29.1) Foreign Life Insurance 7,308,378 6,510,136 12.3 3,632,112 3,422,470 6.1 Personal Accident 1,441,204 1,174,558 22.7 748,795 611,089 22.5 Group Products 1,082,827 921,946 17.5 513,004 434,835 18.0 Guaranteed Investment Contracts 2,731,090 3,031,371 (9.9) 1,590,003 1,624,085 (2.1) ------------- ------------ ----------- ----------- TOTAL (c) 12,563,499 11,638,011 8.0 6,483,914 6,092,479 6.4 TOTAL PREMIUMS, DEPOSITS AND OTHER CONSIDERATIONS $ 24,592,924 $ 26,099,564 (5.8)% $11,579,664 $13,282,382 (12.8)% (a) Represents a non-GAAP measurement used by AIG to help manage its life insurance operation, and may not be comparable to similarly captioned measurements used by other life insurance companies. (b) Premiums, deposits and other considerations represent aggregate business activity during the respective periods. (c) The growth in foreign premiums, deposits and other considerations in original currency was 2.0 percent in the second quarter and 3.6 percent for the six months.
SUPPLEMENTARY EARNINGS DATA CONTINUED SIX MONTHS ENDED JUNE 30, THREE MONTHS ENDED JUNE 30, ---------- ---------- --- ---------- ---------- ----- 2003 2002 Change 2003 2002 Change ---- ---- ------ ---- ---- ------ LIFE INSURANCE OPERATIONS: NET INVESTMENT INCOME Domestic Life Insurance $ 680,552 $ 704,575 (3.4)% $ 364,149 $ 361,691 0.7% Individual Fixed Annuities 1,798,477 1,564,733 14.9 943,865 832,766 13.3 Guaranteed Investment Contracts 1,020,395 984,207 3.7 512,432 502,898 1.9 Home Service 339,315 335,751 1.1 170,738 166,993 2.2 Group Life/Health 56,823 52,662 7.9 28,892 26,978 7.1 Pension and Investment Products 452,864 383,568 18.1 217,640 181,832 19.7 Intercompany Adjustments (127) (113) -- (64) (56) - -- -------- -- -------- -- -------- -- -------- TOTAL 4,348,299 4,025,383 8.0 2,237,652 2,073,102 7.9 Foreign Life Insurance 1,910,100 1,577,251 21.1 1,000,773 801,544 24.9 Personal Accident 76,411 66,463 15.0 39,883 33,406 19.4 Group Products 169,104 121,994 38.6 86,963 62,025 40.2 Guaranteed Investment Contracts 197,367 163,748 20.5 92,523 79,419 16.5 Intercompany Adjustments (6,171) (5,515) -- (3,085) (2,758) - -- -------- -- -------- -- -------- -- -------- TOTAL 2,346,811 1,923,941 22.0 1,217,057 973,636 25.0 TOTAL NET INVESTMENT INCOME 6,695,110 5,949,324 12.5 3,454,709 3,046,738 13.4 OPERATING INCOME Domestic Life Insurance 408,431 369,027 10.7 218,732 204,827 6.8 Individual Fixed Annuities 427,784 333,663 28.2 226,149 166,395 35.9 Guaranteed Investment Contracts 238,323 300,727 (20.8) 127,646 159,519 (20.0) Home Service 202,167 193,224 4.6 101,949 97,834 4.2 Group Life/Health 57,972 50,859 14.0 29,490 24,305 21.3 Pension and Investment Products 84,290 60,426 39.5 50,737 22,764 122.9 Intercompany Adjustments (127) (113) -- (64) (56) - -- -------- -- -------- -- -------- -- -------- TOTAL DOMESTIC BEFORE REALIZED CAPITAL GAINS (LOSSES) 1,418,840 1,307,813 8.5 754,639 675,588 11.7 Realized Capital Gains (Losses) (186,197) (349,309) -- (160,304) (330,974) - -- -------- -- -------- -- -------- -- -------- DOMESTIC OPERATING INCOME 1,232,643 958,504 28.6 594,335 344,614 72.5 Foreign Life Insurance 1,344,437 1,173,346 14.6 719,199 648,623 10.9 Personal Accident 397,137 313,409 26.7 199,645 159,823 24.9 Group Products 94,825 76,213 24.4 47,016 37,236 26.3 Guaranteed Investment Contracts 23,119 18,499 25.0 14,720 9,862 49.3 Intercompany Adjustments (6,171) (5,515) -- (3,085) (2,758) - -- -------- -- -------- -- -------- -- -------- TOTAL FOREIGN BEFORE REALIZED CAPITAL GAINS (LOSSES) 1,853,347 1,575,952 17.6 977,495 852,786 14.6 Realized Capital Gains (Losses) (329,875) 9,898 -- (10,809) 20,324 - -- -------- -- -------- -- -------- -- -------- FOREIGN OPERATING INCOME 1,523,472 1,585,850 (3.9) 966,686 873,110 10.7 Worldwide Life before Realized Capital Gains (Losses) 3,272,187 2,883,765 13.5 1,732,134 1,528,374 13.3 Realized Capital Gains (Losses) (516,072) (339,411) -- (171,113) (310,650) - -- -------- -- -------- -- -------- -- -------- WORLDWIDE OPERATING INCOME $2,756,115 $2,544,354 8.3 % $1,561,021 $1,217,724 28.2 %
SUPPLEMENTARY EARNINGS DATA CONTINUED SIX MONTHS ENDED JUNE 30, THREE MONTHS ENDED JUNE 30, -- ---------- ---------- - -- ---------- ---------- --- 2003 2002 Change 2003 2002 Change -- -- -- -- -- ---- -- -- -- -- -- ---- FINANCIAL SERVICES: REVENUES International Lease Finance Corp. $1,486,858 $1,366,582 8.8% $764,747 $725,740 5.4% AIG Financial Products Corp. 675,823 538,135 25.6 404,100 266,040 51.9 Consumer Finance 1,292,805 1,226,489 5.4 653,929 613,552 6.6 AIG Trading Group Inc. 132,272 114,188 15.8 79,365 70,967 11.8 Other 22,073 (4,863) -- 14,808 (2,259) - -- -------- -- -------- -- -------- -- -------- TOTAL 3,609,831 3,240,531 11.4 1,916,949 1,674,040 14.5 OPERATING INCOME International Lease Finance Corp. 357,885 380,762 (6.0) 183,614 207,674 (11.6) AIG Financial Products Corp. 450,095 356,461 26.3 254,213 180,289 41.0 Consumer Finance 314,961 265,282 18.7 166,858 140,911 18.4 AIG Trading Group Inc. 37,926 31,094 22.0 22,567 20,979 7.6 Other (a) (7,496) (17,671) -- (4,342) (7,839) - -- -------- -- -------- -- -------- -- -------- TOTAL 1,153,371 1,015,928 13.5 622,910 542,014 14.9 RETIREMENT SAVINGS & ASSET MANAGEMENT (b): Revenues AIG VALIC (c) 1,111,837 1,066,871 4.2 567,655 532,376 6.6 AIG SunAmerica (d) 250,031 305,646 (18.2) 129,053 151,714 (14.9) Other Asset Management and Annuity Operations (e) 449,925 363,762 23.7 218,976 187,370 16.9 -- -------- -- -------- -- -------- -- -------- TOTAL 1,811,793 1,736,279 4.3 915,684 871,460 5.1 OPERATING INCOME AIG VALIC (c) 445,241 410,607 8.4 226,644 219,072 3.5 AIG SunAmerica (d) 5,263 50,213 (89.5) 6,576 11,388 (42.3) Other Asset Management and Annuity Operations (e) 133,974 119,073 12.5 68,460 49,755 37.6 -- -------- -- -------- -- -------- -- -------- TOTAL 584,478 579,893 0.8 301,680 280,215 7.7 VARIABLE ANNUITY NET SALES Sales AIG VALIC 2,499,832 2,521,723 (0.9) 1,260,760 1,237,587 1.9 AIG SunAmerica 1,569,532 1,503,089 4.4 803,994 798,251 0.7 Surrenders AIG VALIC 1,133,659 1,283,524 (11.7) 579,577 655,008 (11.5) AIG SunAmerica 1,074,386 1,058,375 1.5 514,050 553,327 (7.1) Net Sales AIG VALIC 1,366,173 1,238,199 10.3 681,183 582,579 16.9 AIG SunAmerica 495,146 444,714 11.3 289,944 244,924 18.4 -- -------- -- -------- -- -------- -- -------- TOTAL NET SALES $1,861,319 $1,682,913 10.6% $971,127 $827,503 17.4% EFFECTIVE TAX RATES: Net Income 30.47% 30.80% 30.89% 31.50% Realized Capital Gains (Losses) 33.41% 34.98% 30.68% 35.00% (a) Includes Other Financial Services Companies and Intercompany Reclassifications. (b) At June 30, 2003 AIG's third party assets under management, including mutual funds and institutional accounts, totaled over $43 billion. (c) Reflects the sale of variable annuity products with fixed annuity options. (d) Includes variable annuity, mutual fund and broker-dealer operations. (e) Includes AIG Global Investment Group, John McStay Investment Counsel, L.P. and certain overseas variable annuity operations.
AMERICAN INTERNATIONAL GROUP, INC. PRETAX OPERATING INCOME (IN THOUSANDS) SIX MONTHS ENDED JUNE 30, THREE MONTHS ENDED JUNE 30, -- ----------------------- -- ------------------------- 2003 2002 CHANGE 2003 2002 CHANGE -- -- -- -- -- ---- -- -- -- -- -- ---- GENERAL INSURANCE: Domestic Brokerage Group $1,387,503 $1,042,738 33.1% $678,656 $511,650 32.6% Personal Lines 98,052 85,987 14.0 28,752 62,851 (54.3) Mortgage Guaranty 218,577 236,424 (7.5) 108,582 124,775 (13.0) Transatlantic Holdings 175,826 145,632 20.7 96,426 73,584 31.0 Foreign General (a) 728,335 629,202 15.8 381,181 317,739 20.0 Intercompany Adjustments 3,434 11,365 -- 1,717 5,682 -- Realized Capital Gains (Losses) (255,977) (281,860) -- (83,470) (160,102) -- LIFE INSURANCE: Domestic Life Insurance 408,431 369,027 10.7 218,732 204,827 6.8 Individual Fixed Annuities 427,784 333,663 28.2 226,149 166,395 35.9 Guaranteed Investment Contracts 238,323 300,727 (20.8) 127,646 159,519 (20.0) Home Service 202,167 193,224 4.6 101,949 97,834 4.2 Group Life/Health 57,972 50,859 14.0 29,490 24,305 21.3 Pension and Investment Products 84,290 60,426 39.5 50,737 22,764 122.9 Intercompany Adjustments (127) (113) -- (64) (56) -- Realized Capital Gains (Losses) (186,197) (349,309) -- (160,304) (330,974) -- Foreign Life Insurance 1,344,437 1,173,346 14.6 719,199 648,623 10.9 Personal Accident 397,137 313,409 26.7 199,645 159,823 24.9 Group Products 94,825 76,213 24.4 47,016 37,236 26.3 Guaranteed Investment Contracts 23,119 18,499 25.0 14,720 9,862 49.3 Intercompany Adjustments (6,171) (5,515) -- (3,085) (2,758) -- Realized Capital Gains (Losses) (329,875) 9,898 -- (10,809) 20,324 -- FINANCIAL SERVICES: International Lease Finance Corp. 357,885 380,762 (6.0) 183,614 207,674 (11.6) AIG Financial Products Corp. 450,095 356,461 26.3 254,213 180,289 41.0 Consumer Finance 314,961 265,282 18.7 166,858 140,911 18.4 AIG Trading Group Inc. 37,926 31,094 22.0 22,567 20,979 7.6 Other (b) (7,496) (17,671) -- (4,342) (7,839) -- RETIREMENT SAVINGS & ASSET MANAGEMENT (c): AIG VALIC (d) 445,241 410,607 8.4 226,644 219,072 3.5 AIG SunAmerica (e) 5,263 50,213 (89.5) 6,576 11,388 (42.3) Other Asset Management and Annuity Operations (f) 133,974 119,073 12.5 68,460 49,755 37.6 Other Realized Capital Gains (Losses) (216,366) (240,039) -- (102,332) (158,719) -- Other Income (Deductions)-- net (279,025) (43,216) -- (164,670) (49,708) -- INCOME BEFORE INCOME TAXES AND MINORITY INTEREST 6,354,323 5,726,408 11.0 3,430,453 2,767,705 23.9 INCOME BEFORE INCOME TAXES, MINORITY INTEREST AND REALIZED CAPITAL GAINS (LOSSES) $7,342,738 $6,587,718 11.5% $3,787,368 $3,397,176 11.5% (a) Foreign General insurance excludes the foreign operations of Transatlantic Holdings, Inc. (b) Includes Other Financial Services Companies and Intercompany Reclassifications. (c) At June 30, 2003 AIG's third party assets under management, including mutual funds and institutional accounts, totaled over $43 billion. (d) Reflects the sale of variable annuity products with fixed annuity options. (e) Includes variable annuity, mutual fund and broker-dealer operations. (f) Includes AIG Global Investment Group, John McStay Investment Counsel, L.P. and certain overseas variable annuity operations.