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): October 21, 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) 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 October 21, 2004, American International Group, Inc. issued a press release announcing its results for the quarter ended September 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: October 21, 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 October 21, 2004.
EXHIBIT 99.1 NEWS [AIG LOGO] Contact: Charlene M. Hamrah (Investment Community) (212) 770-7074 Joe Norton (News Media) (212) 770-3144 AIG REPORTS THIRD QUARTER 2004 NET INCOME OF $2.51 BILLION ($0.95 PER SHARE) AND NET INCOME EXCLUDING REALIZED CAPITAL GAINS AND LOSSES OF $2.54 BILLION ($0.97 PER SHARE); BOTH INCLUDE NET CATASTROPHE LOSSES OF $512.2 MILLION ($0.19 PER SHARE) NEW YORK, NY, October 21, 2004 - American International Group, Inc. (AIG) today reported third quarter 2004 net income of $2.51 billion or $0.95 per share, compared to $2.34 billion or $0.89 per share in the third quarter of 2003. Third quarter 2004 net income excluding realized capital gains (losses), was $2.54 billion or $0.97 per share, compared to $2.58 billion or $0.98 per share in the same period of 2003. Third quarter 2004 after tax net catastrophe losses from hurricanes and typhoons were $512.2 million or $0.19 per share, compared to after tax net catastrophe losses of $46.2 million or $0.02 per share in the third quarter of 2003. Third quarter 2004 net income excluding realized capital gains (losses) and catastrophe losses increased 16.5 percent to $3.06 billion or $1.16 per share, compared to $2.62 billion or $1.00 per share in the same period of 2003. THIRD QUARTER (in millions, except per share amounts) PER SHARE --------- 2004 2003 Change 2004 2003 Change ---- ---- ------ ---- ---- ------ Net income $2,512.5 $2,336.5 7.5% $0.95 $0.89 6.7% Realized capital gains (losses), net of tax (31.6) (241.6) - (0.02) (0.09) - Net income, excluding realized capital gains (losses), net of tax 2,544.1 2,578.1 (1.3) 0.97 0.98 (1.0) Catastrophe losses, net of tax (512.2) (46.2) - (0.19) (0.02) - Net income, excluding realized capital gains (losses) and catastrophe losses, net of tax $3,056.3 $2,624.3 16.5% $1.16 $1.00 16.0% Average shares outstanding 2,628.3 2,627.6 -more-
-2- Net income for the first nine months of 2004 rose 22.3 percent to $8.03 billion or $3.05 per share, compared to $6.57 billion or $2.50 per share in the first nine months of 2003. For the first nine months of 2004, net income excluding realized capital gains (losses) and the cumulative effect of an accounting change increased 12.3 percent to $8.39 billion or $3.19 per share, compared to $7.46 billion or $2.84 per share in the same period of 2003. After tax net catastrophe losses for the first nine months of 2004 were $512.2 million or $0.19 per share, compared to $46.2 million or $0.02 per share in the same period of 2003. For the first nine months of 2004, net income excluding realized capital gains (losses), the cumulative effect of an accounting change and catastrophe losses increased 18.5 percent to $8.90 billion or $3.38 per share, compared to $7.51 billion or $2.86 per share in the same period of 2003. NINE MONTHS (in millions, except per share amounts) PER SHARE --------- 2004 2003 Change 2004 2003 Change ---- ---- ------ ---- ---- ------ Net income $8,030.4 $6,566.9 22.3% $3.05 $2.50 22.0% Realized capital gains (losses), net of tax (173.5) (897.8) - (0.07) (0.34) - 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 8,385.3 7,464.7 12.3 3.19 2.84 12.3 Catastrophe losses, net of tax (512.2) (46.2) - (0.19) (0.02) - Net income, excluding realized capital gains (losses), cumulative effect of an accounting change and catastrophe losses, net of tax $8,897.5 $7,510.9 18.5% $3.38 $2.86 18.2% Average shares outstanding 2,630.0 2,627.7 * 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- Income before income taxes and minority interest for the third quarter of 2004 was $3.96 billion, a 13.0 percent increase over $3.50 billion in the third quarter of 2003. Income before income taxes, minority interest and cumulative effect of an accounting change for the first nine months of 2004 was $12.64 billion, a 28.2 percent increase over $9.86 billion in the same period of 2003. The following chart provides a summary of the realized capital gains (losses) and catastrophe losses included in these results: NINE MONTHS THIRD QUARTER (in millions) 2004 2003 Change 2004 2003 Change ---- ---- ------ ---- ---- ------ Income before income taxes, minority interest and cumulative effect of an accounting change $12,637.7 $9,857.8 28.2% $3,957.4 $ 3,503.5 13.0% Realized capital gains (losses) (248.5) (1,347.8) - (44.4) (359.3) - Catastrophe Losses: Domestic Brokerage Group 405.8 47.5 - 405.8 47.5 - Personal Lines 24.7 5.0 - 24.7 5.0 - Transatlantic Holdings, Inc. (a) 165.0 3.5 - 165.0 3.5 - Foreign General 140.3 16.5 - 140.3 16.5 - Life (Home Service) (b) 4.7 - - 4.7 - - Minority owned companies - AIG share: Allied World Assurance Holdings, Ltd 39.4 - - 39.4 - - IPC Holdings, Ltd. 24.4 - - 24.4 - - Fuji Fire & Marine Insurance Company Limited 10.0 - - 10.0 - - ---- --------- --------- ---------- Total Catastrophe Losses (814.3) (72.5) - (814.3) (72.5) - Income before income taxes, minority interest, cumulative effect of an accounting change, realized capital gains (losses) and catastrophe losses $13,700.5 $11,278.1 21.5% $4,816.1 $3,935.3 22.4% (a) AIG's share is $99.0 million in 2004 and $2.1 million in 2003. (b) Relates to minor property-casualty subsidiaries currently in runoff. -more-
-4- HIGHLIGHTS OF THE THIRD QUARTER 2004 INCLUDE: 2004 2003 Change ---- ---- ------ CONSOLIDATED Net Income, excluding realized capital gains (losses) $2.54 BILLION $2.58 billion (1.3%) Net Income, excluding realized capital gains (losses) and catastrophe losses $3.06 BILLION $2.62 billion 16.5% Shareholders' Equity At September 30 and December 31 $78.9 BILLION $71.3 billion 10.7% Retained Earnings At September 30 and December 31 $68.4 BILLION $61.0 billion 12.1% Return on Equity (a) At September 30 and December 31 As presented 16.4% 17.2% Excluding catastrophe losses 17.1% 17.3% Consolidated Assets At September 30 and December 31 $776 BILLION $678 billion 14.5% Revenues (b) $25.41 BILLION 20.31 billion 25.1% Insurance Cash Flow (c) $14.93 BILLION $12.46 billion 19.8% GENERAL INSURANCE Net Premiums Written $10.73 BILLION $8.97 billion 19.7% Operating Income (excluding realized capital gains (losses)) $894.3 MILLION $1.32 billion (32.0%) Operating Income (excluding realized capital gains (losses) and catastrophe losses) $1.63 BILLION $1.39 billion 17.5% Net Investment Income $869.0 MILLION $741.9 million 17.1% Loss and Loss Adjustment Reserves At September 30 and December 31 $43.82 BILLION $36.65 billion 19.6% Combined Ratio 99.89 93.05 Catastrophe Loss Ratio 7.13 0.88 Combined Ratio, excluding catastrophe losses 92.76 92.17 Cash Flow $3.64 BILLION $3.58 billion 1.7% -more-
-5- 2004 2003 Change ---- ---- ------ LIFE INSURANCE & RETIREMENT SERVICES (d) GAAP Premiums $7.37 BILLION $5.58 billion 32.1% Premiums, Deposits and Other Considerations $17.25 BILLION $13.49 billion 27.9% Operating Income (excluding realized capital gains (losses)) $2.19 BILLION $1.83 billion 19.9% FINANCIAL SERVICES Operating Income $655.5 MILLION $608.3 million 7.8% ASSET MANAGEMENT (d)(e) Operating Income $353.1 MILLION $208.1 million 69.6% (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. (e) Includes the results of certain AIG managed private equity and real estate funds consolidated effective December 31, 2003 pursuant to FIN46R, "Consolidation of Variable Interest Entities". For the third quarter and nine months 2004, operating income includes $116 million and $147 million, respectively, of third-party limited partner earnings offset in Minority Interest Expense. Commenting on AIG's results, AIG Chairman, M.R. Greenberg said, "AIG had third quarter net income of $2.51 billion, up 7.5 percent, even after accounting for the unprecedented succession of storms, which included four hurricanes and three typhoons. Excluding realized capital gains (losses) and catastrophe losses, net income in the third quarter of 2004 increased 16.5 percent over a year ago. For the first nine months of 2004, net income was a record $8.03 billion, up 22.3 percent. Excluding realized capital gains (losses), cumulative effect of an accounting change and catastrophe losses, net income for the first nine months increased 18.5 percent. "This storm season was the most costly in history, and it resulted in a tragic loss of life. AIG's third quarter 2004 after tax catastrophe losses of $512.2 million compare to average annual after tax catastrophe losses over the prior 15 years of approximately $50 million. The importance of AIG's claims handling expertise, strong financial position and diverse business mix is evident in this quarter's results. more-
-6- "For many years, the insurance industry has sought the ability to set up catastrophe reserves specifically to provide for serious events, such as those in the third quarter. The U.S. Congress and Treasury have not supported these efforts. However, I would hope that, following the impact of these destructive storms, more attention will be paid to this matter. GENERAL INSURANCE "General Insurance had a strong quarter in the U.S. and around the world. General Insurance operating income excluding realized capital gains (losses) in the third quarter of 2004 was $894.3 million compared to $1.32 billion a year ago. Excluding catastrophe losses and realized capital gains (losses), General Insurance operating income increased 17.5 percent. Net premiums written were a record $10.73 billion, up 19.7 percent over a year ago. The General Insurance combined ratio was 99.89, or 92.76 excluding catastrophe losses, compared to 93.05, or 92.17 excluding catastrophe losses, a year ago. "Worldwide General Insurance net investment income was $869.0 million, an increase of 17.1 percent. Strong cash flow in our business resulted in increased interest and dividend income. We also had good realizations from our private equity investments compared to the prior year. General Insurance cash flow totaled $3.64 billion and $10.35 billion in the third quarter and nine months of 2004, respectively, compared to $3.58 billion and $9.49 billion a year earlier. "Underwriting is a process of careful risk by risk selection as well as pricing discipline. We will maintain this approach in order to assure that AIG receives adequate returns for the risks we accept. While industry pricing has eroded more than it should have in some classes of business, we are still able to identify profitable opportunities and build attractive new business as a result of our broad product line and extensive distribution reach. "At September 30, 2004, General Insurance net loss and loss adjustment reserves totaled $43.82 billion, an increase of $3.04 billion ($2.30 billion excluding catastrophe losses) and $7.17 billion ($6.44 billion excluding catastrophe losses) for the third quarter and nine months, respectively. "In the United States, the Domestic Brokerage Group had excellent premium growth of 20.6 percent in the third quarter. We continue to benefit from a flight to quality in a number of key lines of business. Net premiums written were a record $6.19 billion. The combined ratio was 101.76, or 94.95 excluding catastrophe losses, compared to 94.78, or 93.74 excluding catastrophe losses, in the third quarter of 2003. "The Domestic Personal Lines business had good premium growth. Third quarter underwriting performance was solid, even with the impact of catastrophes. Third quarter operating income was $72.7 million, or $97.4 million excluding catastrophe losses, compared to $74.9 million, or $79.9 million excluding catastrophe losses, a year ago. Net premiums written were $1.09 billion, up 18.7 percent over a year ago. The combined ratio -more-
-7- was 97.69, or 95.41 excluding catastrophe losses, compared to 97.20, or 96.66 excluding catastrophe losses, a year ago. "HSB Group, Inc. had outstanding underwriting results and continues to expand its global client base. The third quarter 2004 combined ratio was 74.42 including catastrophe losses. "United Guaranty Corporation (UGC) had another good quarter. Premiums grew and refinancings continued to decline as interest rates rose. UGC's delinquency ratio remains well below the industry average. UGC is moving forward with plans to enter new international markets. "The results of Transatlantic Holdings, Inc. were impacted by the high level of catastrophes in the quarter. The third quarter combined ratio was 113.01, or 95.47 excluding catastrophe losses, compared to 96.16, or 95.76 excluding catastrophe losses, a year ago. Net premiums written grew 9.6 percent, to $987.4 million. "AIG's Foreign General Insurance operations had excellent results even though they were adversely impacted by the Asia typhoons and hurricanes in the Caribbean. Premiums in the third quarter were up 23.4 percent to $2.30 billion. The combined ratio was 92.95, or 86.61 excluding catastrophe losses, compared to 88.31, or 87.39 excluding catastrophe losses, a year ago. "The Far East region had excellent growth. In Japan, corporate and personal accident business expanded. Commercial lines in Europe continue to exhibit strong growth, as did our personal lines operations in Brazil and Latin America. Additionally, our joint venture in India has expanded its commercial lines leadership among the private sector companies. LIFE INSURANCE & RETIREMENT SERVICES "Worldwide Life Insurance & Retirement Services had outstanding results. Operating income before realized capital gains (losses) was a record $2.19 billion, an increase of 19.9 percent, compared to $1.83 billion in the third quarter of 2003. Worldwide Life Insurance & Retirement Services GAAP premiums were $7.37 billion, an increase of 32.1 percent over the third quarter of 2003. Premiums, deposits and other considerations totaled $17.25 billion, up 27.9 percent compared to the third quarter of 2003. Cash flow continues to be outstanding. "AIG's Foreign Life Insurance & Retirement Services operations had outstanding results. Operating income excluding realized capital gains (losses) was a record $1.23 billion in the third quarter compared to $992.6 million a year ago. GAAP premiums were $5.78 billion, up 38.8 percent. Excluding a reinsurance transaction involving the group products segment's terminal funding business, third quarter 2004 GAAP premiums increased approximately 23 percent. Premiums, deposits and other considerations were $10.65 billion, compared to $6.09 billion in the third quarter of 2003. -more-
-8- "In Japan, we have an agreement and have obtained regulatory approvals that will enable the Sumitomo Life Insurance Company to market insurance products underwritten by ALICO. Sumitomo will initially market ALICO's cancer insurance coverage through the Sumitomo sales channel of approximately 40,000 sales representatives. ALICO and Sumitomo have also agreed to consider expanding the relationship to include other insurance products in the future. "Our life insurance businesses in Japan - ALICO, AIG Star Life, and AIG Edison Life - all had good results in the quarter, benefiting from their financial strength, diversified product portfolio and broad distribution. Total first year premiums increased 31.3 percent. "In China, our life operations also had a good quarter. Life insurance first year premiums were up 23.4 percent, significantly in excess of the industry average. The timing of sales contests can affect the quarter-over-quarter and sequential sales results. Additionally, personal accident sales reflect the repricing of certain key products to improve profit margins. "AIG's Domestic Life Insurance & Retirement Services businesses are on target for the quarter. Domestic Life Insurance & Retirement Services operating income excluding realized capital gains (losses) totaled $962.1 million in the third quarter of 2004, an increase of 15.0 percent compared to $836.4 million in the third quarter of 2003. GAAP premiums were $1.59 billion, up 12.2 percent. Premiums, deposits and other considerations were $6.60 billion compared to $7.40 billion in the third quarter of 2003 with a significant part of the decrease related to lower fixed annuity sales that resulted from our disciplined response to inadequate competitor pricing. "Life Insurance results from term, universal and structured settlement products were particularly strong. Restructuring at the home services business, AGLA, is proceeding under a new president who has significant experience in this business. He is implementing structural changes and developing new strategies. We believe this is a potentially valuable distribution channel that will be able to make a meaningful contribution to our overall growth. "Domestic retirement services had a good quarter as all three main businesses - group retirement products and individual fixed and variable annuities - reported solid growth in operating income due to improvements in U.S. equity markets and increased fixed annuity balances over the past year. -more-
-9- FINANCIAL SERVICES "Financial Services had operating income of $655.5 million in the third quarter of 2004, compared to $608.3 million a year ago. "International Lease Finance Corporation reported operating income of $204.3 million in the quarter, compared to $190.5 million in the third 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 12.8 percent from third quarter 2003. Lease rates have firmed considerably, as a result of strong demand spurred by a rapidly recovering global commercial aviation market, especially in Asia. Sales have begun to pick up, and we expect them to be even stronger in future periods. "Capital Markets operating income was $247.7 million, up modestly from the second quarter of 2004 and third quarter of 2003. We have a diverse product portfolio. The consolidation of AIG Trading Group into AIG Financial Products Corp. continues to meet its strategic objective of providing clients a full range of solutions. "Consumer Finance again had excellent results in both domestic and foreign operations. Operating income increased 17.5 percent to $203.9 million. In the United States, credit quality remains strong and receivables grew significantly. Foreign consumer finance operations performed very well as the operations in Poland continued its strong growth and the Hong Kong credit card business benefited from the strengthening local economy. ASSET MANAGEMENT "Asset Management operating income was $353.1 million in the third quarter of 2004 compared to $208.1 million last year. Third quarter 2004 institutional asset management results include $116 million in third party limited partner earnings from certain AIG managed private equity and real estate funds, now required to be consolidated according to FIN46R. Assets under management grew $1 billion to over $50 billion. Guaranteed Investment Contracts (GICs) will continue to be sold on an opportunistic basis. "In the Other Income/Deductions - net category, AIG reported a loss of $93.1 million in the third quarter of 2004 ($19.4 million loss excluding the catastrophe losses of minority owned companies), compared to a loss of $97.7 million a year earlier. The underlying improvement continues to be primarily attributable to increased income related to SunAmerica partnership investments." -more-
-10- Please see the attached statement with respect to the New York State Attorney General's investigation of certain brokerage practices. # # # # 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, October 29, 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 June 30, 2004 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. -more-
-11- 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) and catastrophe 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 net income and operating income excluding catastrophe losses because those losses are deemed to be significant for the third quarter and nine months 2004. AIG believes that this separate presentation is both meaningful and useful for users of AIG's financial 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) NINE MONTHS ENDED SEPTEMBER 30, THREE MONTHS ENDED SEPTEMBER 30, 2004 2003 CHANGE 2004 2003 CHANGE ------------ ------------ -------- ------------ ----------- -------- GENERAL INSURANCE OPERATIONS: Net Premiums Written $ 31,323,183 $ 26,052,589 20.2 % $ 10,729,852 $ 8,965,455 19.7 % Net Premiums Earned 29,048,877 23,331,101 24.5 10,323,613 8,289,994 24.5 Underwriting Profit 1,366,889 1,669,578 (18.1) 25,314 573,192 (95.6) Net Investment Income 2,618,471 2,257,238 16.0 868,991 741,897 17.1 Income before Realized Capital Gains (Losses) 3,985,360 3,926,816 1.5 894,305 1,315,089 (32.0) Realized Capital Gains (Losses) 18,854 (330,725) - (39,436) (74,748) - OPERATING INCOME 4,004,214 3,596,091 11.3 854,869 1,240,341 (31.1) OPERATING INCOME, EXCLUDING REALIZED CAPITAL GAINS (LOSSES) AND CATASTROPHE LOSSES $ 4,721,160 $ 3,999,316 18.0 % $ 1,630,105 $ 1,387,589 17.5 % - ------------------------------------------------------------------------------------------------------------------------------------ Loss Ratio 75.65 73.87 80.02 73.65 Expense Ratio 19.65 18.94 19.87 19.40 Combined Ratio 95.30 92.81 99.89 93.05 Combined Ratio, excluding Catastrophe Losses 92.77 92.50 92.76 92.17 - ------------------------------------------------------------------------------------------------------------------------------------ LIFE INSURANCE & RETIREMENT SERVICES OPERATIONS (a): GAAP Premiums $ 21,101,450 $ 16,984,067 24.2 % $ 7,366,479 $ 5,578,209 32.1 % Net Investment Income 11,642,075 9,945,410 17.1 3,871,547 3,344,908 15.7 Income before Realized Capital Gains (Losses) 6,408,402 5,315,640 20.6 2,192,044 1,828,923 19.9 Realized Capital Gains (Losses) (106,323) (656,518) - (25,286) (123,609) - OPERATING INCOME 6,302,079 4,659,122 35.3 2,166,758 1,705,314 27.1 FINANCIAL SERVICES OPERATING INCOME 1,787,737 1,761,717 1.5 655,526 608,346 7.8 ASSET MANAGEMENT OPERATING INCOME (a)(b) 868,697 578,096 50.3 353,058 208,148 69.6 Other Realized Capital Gains (Losses) (a) (161,014) (360,517) - 20,321 (160,988) - Other Income (Deductions) - net (164,038) (376,699) - (93,147) (97,674) - INCOME BEFORE INCOME TAXES, MINORITY INTEREST AND CUMULATIVE EFFECT OF AN ACCOUNTING CHANGE 12,637,675 9,857,810 28.2 3,957,385 3,503,487 13.0 Income Taxes 4,036,409 3,004,488 - 1,279,811 1,068,372 - INCOME BEFORE MINORITY INTEREST AND CUMULATIVE EFFECT OF AN ACCOUNTING CHANGE 8,601,266 6,853,322 25.5 2,677,574 2,435,115 10.0 Minority Interest, after-tax - Income before Realized Capital Gains (Losses) (381,848) (283,828) - (162,627) (94,074) - Realized Capital Gains (Losses) (7,621) (2,593) - (2,479) (4,550) - INCOME BEFORE CUMULATIVE EFFECT OF AN ACCOUNTING CHANGE 8,211,797 6,566,901 25.0 2,512,468 2,336,491 7.5 Cumulative Effect of an Accounting Change, net of tax (c) (181,431) 0 - 0 0 - NET INCOME 8,030,366 6,566,901 22.3 2,512,468 2,336,491 7.5 REALIZED CAPITAL GAINS (LOSSES), NET OF TAX (173,522) (897,835) - (31,612) (241,582) - CUMULATIVE EFFECT OF AN ACCOUNTING CHANGE, NET OF TAX (c) (181,431) 0 - 0 0 - NET INCOME, EXCLUDING REALIZED CAPITAL GAINS (LOSSES) AND CUMULATIVE EFFECT OF AN ACCOUNTING CHANGE, NET OF TAX 8,385,319 7,464,736 12.3 2,544,080 2,578,073 (1.3) CATASTROPHE LOSSES, NET OF TAX (512,206) (46,215) - (512,206) (46,215) - NET INCOME, EXCLUDING REALIZED CAPITAL GAINS (LOSSES), CUMULATIVE EFFECT OF AN ACCOUNTING CHANGE AND CATASTROPHE LOSSES, NET OF TAX $ 8,897,525 $ 7,510,951 18.5 % $ 3,056,286 $ 2,624,288 16.5 %
AMERICAN INTERNATIONAL GROUP, INC. FINANCIAL HIGHLIGHTS* (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) NINE MONTHS ENDED SEPTEMBER 30, THREE MONTHS ENDED SEPTEMBER 30, 2004 2003 CHANGE 2004 2003 CHANGE ------------ ------------ -------- ------------ ----------- -------- PER SHARE - DILUTED: NET INCOME $ 3.05 $ 2.50 22.0 % $ 0.95 $ 0.89 6.7 % REALIZED CAPITAL GAINS (LOSSES), NET OF TAX (0.07) (0.34) - (0.02) (0.09) - CUMULATIVE EFFECT OF AN ACCOUNTING CHANGE, NET OF TAX (c) (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 3.19 2.84 12.3 0.97 0.98 (1.0) CATASTROPHE LOSSES, NET OF TAX (0.19) (0.02) - (0.19) (0.02) - NET INCOME, EXCLUDING REALIZED CAPITAL GAINS (LOSSES), CUMULATIVE EFFECT OF AN ACCOUNTING CHANGE AND CATASTROPHE LOSSES, NET OF TAX $ 3.38 $ 2.86 18.2 % $ 1.16 $ 1.00 16.0 % AVERAGE DILUTED COMMON SHARES OUTSTANDING 2,630,030 2,627,740 2,628,330 2,627,557 * Including reconciliation in accordance with Regulation G. (a) 2003 is restated to conform to 2004 presentation. (b) Includes the results of certain AIG managed private equity and real estate funds consolidated effective December 31, 2003 pursuant to FIN46R, "Consolidation of Variable Interest Entities". For the third quarter and nine months 2004, operating income includes $116 million and $147 million, respectively, of third-party limited partner earnings offset in Minority Interest Expense. (c) 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) NINE MONTHS ENDED SEPTEMBER 30, THREE MONTHS ENDED SEPTEMBER 30, 2004 2003 CHANGE 2004 2003 CHANGE ------------ ------------ --------- ------------ ------------ -------- GENERAL INSURANCE: Domestic Brokerage Group $ 2,144,495 $ 2,017,553 6.3 % $ 524,953 $ 630,050 (16.7) % Personal Lines 250,134 172,913 44.7 72,668 74,861 (2.9) Mortgage Guaranty 296,226 319,167 (7.2) 94,706 100,590 (5.8) Transatlantic Holdings 174,015 276,509 (37.1) (47,116) 100,683 - Foreign General (a) 1,120,135 1,135,522 (1.4) 248,976 407,187 (38.9) Intercompany Adjustments 355 5,152 - 118 1,718 - Realized Capital Gains (Losses) 18,854 (330,725) - (39,436) (74,748) - LIFE INSURANCE & RETIREMENT SERVICES (b): Domestic Life Insurance 671,597 595,679 12.7 231,060 205,437 12.5 Home Service 300,164 298,622 0.5 92,068 96,455 (4.5) Group Life/Health 71,418 87,910 (18.8) 26,636 29,938 (11.0) Payout Annuities (c) 105,617 95,550 10.5 34,937 34,873 0.2 Retirement Services Group Retirement Products 805,818 675,491 19.3 271,563 230,250 17.9 Individual Fixed Annuities 662,826 491,778 34.8 211,904 159,393 32.9 Individual Variable Annuities 132,209 36,543 261.8 52,074 23,435 122.2 Individual Annuities - Runoff (d) 138,191 161,985 (14.7) 41,953 56,679 (26.0) Intercompany Adjustments (277) (215) - (102) (88) - Realized Capital Gains (Losses) (170,414) (326,942) - (17,804) (123,908) - Foreign Life Insurance 2,298,186 2,046,056 12.3 796,396 700,729 13.7 Personal Accident & Health 851,012 608,349 39.9 299,977 211,212 42.0 Group Products 198,195 149,554 32.5 61,892 54,729 13.1 Retirement Services Individual Fixed Annuities 180,525 79,188 128.0 73,109 30,122 142.7 Individual Variable Annuities 6,379 (412) - 3,500 26 - Intercompany Adjustments (13,458) (10,438) - (4,923) (4,267) - Realized Capital Gains (Losses) 64,091 (329,576) - (7,482) 299 - FINANCIAL SERVICES: Aircraft Finance 546,877 548,357 (0.3) 204,282 190,472 7.3 Capital Markets 663,835 728,663 (8.9) 247,729 240,642 2.9 Consumer Finance 579,408 488,553 18.6 203,914 173,592 17.5 Other (e) (2,383) (3,856) - (399) 3,640 - ASSET MANAGEMENT (b): Guaranteed Investment Contracts Domestic 446,284 360,579 23.8 131,787 122,256 7.8 Foreign 31,121 32,091 (3.0) 10,634 12,412 (14.3) Institutional Asset Management (f)(g) 337,926 141,689 138.5 194,477 53,793 261.5 Brokerage Services and Mutual Funds 53,366 43,737 22.0 16,160 19,687 (17.9) Other Realized Capital Gains (Losses) (b) (161,014) (360,517) - 20,321 (160,988) - Other Income (Deductions) - net (164,038) (376,699) - (93,147) (97,674) - INCOME BEFORE INCOME TAXES, MINORITY INTEREST AND CUMULATIVE EFFECT OF AN ACCOUNTING CHANGE 12,637,675 9,857,810 28.2 3,957,385 3,503,487 13.0 INCOME BEFORE INCOME TAXES, MINORITY INTEREST, REALIZED CAPITAL GAINS (LOSSES) AND CUMULATIVE EFFECT OF AN ACCOUNTING CHANGE $ 12,886,158 $ 11,205,570 15.0 % $ 4,001,786 $ 3,862,832 3.6 % (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) Includes AIG Global Investment Group and certain smaller asset management operations. (g) Includes the results of certain AIG managed private equity and real estate funds consolidated effective December 31, 2003 pursuant to FIN46R, "Consolidation of Variable Interest Entities". For the third quarter and nine months
2004, operating income includes $116 million and $147 million, respectively, of third-party limited partner earnings offset in Minority Interest Expense.
AMERICAN INTERNATIONAL GROUP, INC. OPERATING INCOME EXCLUDING CATASTROPHE LOSSES (IN THOUSANDS) NINE MONTHS ENDED SEPTEMBER 30, THREE MONTHS ENDED SEPTEMBER 30, ------------------------------- -------------------------------- 2004 2003 CHANGE 2004 2003 CHANGE ---- ---- ------ ---- ---- ------ GENERAL INSURANCE: Domestic Brokerage Group $ 2,550,295 $ 2,065,053 23.5% $ 930,753 $ 677,550 37.4% Personal Lines 274,834 177,913 54.5 97,368 79,861 21.9 Mortgage Guaranty 296,226 319,167 (7.2) 94,706 100,590 (5.8) Transatlantic Holdings 339,015 280,009 21.1 117,884 104,183 13.2 Foreign General (a) 1,260,435 1,152,022 9.4 389,276 423,687 (8.1) Intercompany Adjustments 355 5,152 -- 118 1,718 -- Realized Capital Gains (Losses) 18,854 (330,725) -- (39,436) (74,748) -- LIFE INSURANCE & RETIREMENT SERVICES (b): Domestic Life Insurance 671,597 595,679 12.7 231,060 205,437 12.5 Home Service 304,853 298,622 2.1 96,757 96,455 0.3 Group Life/Health 71,418 87,910 (18.8) 26,636 29,938 (11.0) Payout Annuities (c) 105,617 95,550 10.5 34,937 34,873 0.2 Retirement Services Group Retirement Products 805,818 675,491 19.3 271,563 230,250 17.9 Individual Fixed Annuities 662,826 491,778 34.8 211,904 159,393 32.9 Individual Variable Annuities 132,209 36,543 261.8 52,074 23,435 122.2 Individual Annuities - Runoff(d) 138,191 161,985 (14.7) 41,953 56,679 (26.0) Intercompany Adjustments (277) (215) -- (102) (88) -- Realized Capital Gains (Losses) (170,414) (326,942) -- (17,804) (123,908) -- Foreign Life Insurance 2,298,186 2,046,056 12.3 796,396 700,729 13.7 Personal Accident & Health 851,012 608,349 39.9 299,977 211,212 42.0 Group Products 198,195 149,554 32.5 61,892 54,729 13.1 Retirement Services Individual Fixed Annuities 180,525 79,188 128.0 73,109 30,122 142.7 Individual Variable Annuities 6,379 (412) -- 3,500 26 -- Intercompany Adjustments (13,458) (10,438) -- (4,923) (4,267) -- Realized Capital Gains (Losses) 64,091 (329,576) -- (7,482) 299 -- FINANCIAL SERVICES: Aircraft Finance 546,877 548,357 (0.3) 204,282 190,472 7.3 Capital Markets 663,835 728,663 (8.9) 247,729 240,642 2.9 Consumer Finance 579,408 488,553 18.6 203,914 173,592 17.5 Other (e) (2,383) (3,856) -- (399) 3,640 -- ASSET MANAGEMENT (b): Guaranteed Investment Contracts Domestic 446,284 360,579 23.8 131,787 122,256 7.8 Foreign 31,121 32,091 (3.0) 10,634 12,412 (14.3) Institutional Asset Management (f)(g) 337,926 141,689 138.5 194,477 53,793 261.5 Brokerage Services and Mutual Funds 53,366 43,737 22.0 16,160 19,687 (17.9) Other Realized Capital Gains (Losses) (b) (161,014) (360,517) -- 20,321 (160,988) -- Other Income (Deductions) - net (90,250) (376,699) -- (19,359) (97,674) -- INCOME BEFORE INCOME TAXES, MINORITY INTEREST AND CUMULATIVE EFFECT OF AN ACCOUNTING CHANGE 13,451,952 9,930,310 35.5 4,771,662 3,575,987 33.4 INCOME BEFORE INCOME TAXES, MINORITY INTEREST, REALIZED CAPITAL GAINS (LOSSES) AND CUMULATIVE EFFECT OF AN ACCOUNTING CHANGE $ 13,700,435 $ 11,278,070 21.5% $ 4,816,063 $ 3,935,332 22.4% (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) Includes AIG Global Investment Group and certain smaller asset management operations. (g) Includes the results of certain AIG managed private equity and real estate funds consolidated effective December 31, 2003 pursuant to FIN46R, "Consolidation of Variable Interest Entities". For the third quarter and nine months 2004, operating income includes $116 million and $147 million, respectively, of third-party limited partner earnings offset in Minority Interest Expense.
AMERICAN INTERNATIONAL GROUP, INC. SUPPLEMENTARY EARNINGS DATA* (IN THOUSANDS) NINE MONTHS ENDED SEPTEMBER 30, THREE MONTHS ENDED SEPTEMBER 30, ------------------------------- -------------------------------- 2004 2003 CHANGE 2004 2003 CHANGE ---- ---- ------ ---- ---- ------ GENERAL INSURANCE OPERATIONS: NET PREMIUMS WRITTEN Domestic Brokerage Group $17,546,457 $ 14,733,497 19.1% $ 6,185,893 $ 5,130,155 20.6% Personal Lines 3,288,360 2,703,786 21.6 1,091,397 919,174 18.7 Mortgage Guaranty 452,647 390,012 16.1 162,838 148,525 9.6 Transatlantic Holdings 2,822,052 2,472,186 14.2 987,385 901,255 9.6 Foreign General (a) 7,213,667 5,753,108 25.4 2,302,339 1,866,346 23.4 ----------- ------------ ------------ ----------- TOTAL 31,323,183 26,052,589 20.2 10,729,852 8,965,455 19.7 OPERATING INCOME (LOSS) Domestic Brokerage Group (b) 2,144,495 2,017,553 6.3 524,953 630,050 (16.7) Personal Lines (b) 250,134 172,913 44.7 72,668 74,861 (2.9) Mortgage Guaranty 296,226 319,167 (7.2) 94,706 100,590 (5.8) Transatlantic Holdings (b) 174,015 276,509 (37.1) (47,116) 100,683 -- Foreign General (a)(b)(c) 1,120,135 1,135,522 (1.4) 248,976 407,187 (38.9) Intercompany Adjustments 355 5,152 -- 118 1,718 -- ----------- ------------ ------------ ----------- TOTAL BEFORE REALIZED CAPITAL GAINS (LOSSES) 3,985,360 3,926,816 1.5 894,305 1,315,089 (32.0) Realized Capital Gains (Losses) 18,854 (330,725) -- (39,436) (74,748) -- OPERATING INCOME $ 4,004,214 $ 3,596,091 11.3% $ 854,869 $ 1,240,341 (31.1)% ----------- ------------ ------ ------------ ----------- ------ COMBINED RATIO: Domestic Brokerage Group 97.71 94.66 101.76 94.78 Personal Lines 96.28 97.90 97.69 97.20 Mortgage Guaranty 51.56 46.57 56.02 57.58 Transatlantic Holdings 101.70 96.59 113.01 96.16 Foreign General (a) 88.72 87.81 92.95 88.31 TOTAL 95.30 92.81 99.89 93.05 ----------- ------------ ------ ------------ ----------- ------ OPERATING INCOME EXCLUDING CATASTROPHE LOSSES: Domestic Brokerage Group (b) $ 2,550,295 $ 2,065,053 23.5% $ 930,753 $ 677,550 37.4% Personal Lines (b) 274,834 177,913 54.5 97,368 79,861 21.9 Mortgage Guaranty 296,226 319,167 (7.2) 94,706 100,590 (5.8) Transatlantic Holdings (b) 339,015 280,009 21.1 117,884 104,183 13.2 Foreign General (a)(b)(c) 1,260,435 1,152,022 9.4 389,276 423,687 (8.1) Intercompany Adjustments 355 5,152 -- 118 1,718 -- ----------- ------------ ------------ ----------- TOTAL BEFORE REALIZED CAPITAL GAINS (LOSSES) AND CATASTROPHE LOSSES $ 4,721,160 $ 3,999,316 18.0% $ 1,630,105 $ 1,387,589 17.5% ----------- ------------ ------ ------------ ----------- ------ COMBINED RATIO EXCLUDING CATASTROPHE LOSSES: Domestic Brokerage Group 95.22 94.29 94.95 93.74 Personal Lines 95.50 97.71 95.41 96.66 Mortgage Guaranty 51.56 46.57 56.02 57.58 Transatlantic Holdings 95.66 96.44 95.47 95.76 Foreign General (a) 86.56 87.49 86.61 87.39 TOTAL 92.77 92.50 92.76 92.17 * Including reconciliation in accordance with Regulation G. (a) Foreign General insurance excludes the foreign operations of Transatlantic Holdings, Inc. (b) Pretax catastrophe losses for the third quarter and nine months 2004 by segment were: Domestic Brokerage Group $405.8 million, Personal Lines $24.7 million, Transatlantic Holdings $165.0 million and Foreign General $140.3 million. Pretax catastrophe losses for the third quarter and nine months 2003 by segment were: Domestic Brokerage Group $47.5 million, Personal Lines $5.0 million, Transatlantic Holdings $3.5 million and Foreign General $16.5 million. (c) Operating income reflects lower net investment income due to timing of private equity and partnership distributions. Excluding catastrophe losses, third quarter and nine months 2004 underwriting profit rose 23.4% and 27.4%, respectively, compared to the same periods in 2003.
SUPPLEMENTARY EARNINGS DATA - PAGE 2 NINE MONTHS ENDED SEPTEMBER 30, THREE MONTHS ENDED SEPTEMBER 30, ------------------------------- -------------------------------- 2004 2003 CHANGE 2004 2003 CHANGE ---- ---- ------ ---- ---- ------ GENERAL INSURANCE OPERATIONS: Losses and Loss Expenses Paid (a) $ 14,804,950 $ 12,883,057 14.9% $ 5,221,897 $ 4,492,735 16.2% Change in Loss and Loss Expense Reserve (b) 7,171,751 4,350,660 64.8 3,038,962 1,612,699 88.4 ------------- ------------- ------------- ------------- Losses and Loss Expenses Incurred 21,976,701 17,233,717 27.5 8,260,859 6,105,434 35.3 Net Loss and Loss Expense Reserve 43,818,839 35,091,537 24.9 UNDERWRITING PROFIT 1,366,889 1,669,578 (18.1) 25,314 573,192 (95.6) UNDERWRITING PROFIT EXCLUDING CATASTROPHE LOSSES $ 2,102,689 $ 1,742,078 20.7% $ 761,114 $ 645,692 17.9% FOREIGN EXCHANGE IMPACT ON GROWTH OF NET PREMIUMS WRITTEN WORLDWIDE Growth in Original Currency 17.9% 18.0% Foreign Exchange Impact 2.3 1.7 Growth as Reported in U.S.$ 20.2 19.7 FOREIGN GENERAL (c) Growth in Original Currency 16.3 16.8 Foreign Exchange Impact 9.1 6.6 Growth as Reported in U.S.$ 25.4% 23.4% (a) The paid loss ratios for the three months ended September 30, 2004 and 2003 were 50.58 and 54.20, respectively. The paid loss ratios for the nine months ended September 30, 2004 and 2003 were 50.96 and 55.22, respectively. Additionally, 2004 paid losses were impacted by the inclusion of GE personal lines business, which was acquired at the end of August 2003. (b) Excluding catastrophe losses the change in loss and loss expense reserve for the third quarter and nine months 2004 is $2.30 billion and $6.44 billion, respectively. (c) Foreign General insurance excludes the foreign operations of Transatlantic Holdings, Inc.
SUPPLEMENTARY EARNINGS DATA - PAGE 3 NINE MONTHS ENDED SEPTEMBER 30, THREE MONTHS ENDED SEPTEMBER 30, 2004 2003(a) CHANGE 2004 2003 (a) CHANGE ---- ------- ------ ---- -------- ------ LIFE INSURANCE & RETIREMENT SERVICES OPERATIONS: GAAP PREMIUMS DOMESTIC Life Insurance $ 1,406,979 $ 1,314,112 7.1 % $ 501,196 $ 476,331 5.2% Home Service 611,866 625,160 (2.1) 201,802 207,198 (2.6) Group Life/Health 858,509 764,441 12.3 303,630 252,557 20.2 Payout Annuities (b) 1,126,019 1,008,417 11.7 372,099 291,040 27.9 Retirement Services Group Retirement Products 231,118 179,934 28.4 76,680 66,773 14.8 Individual Fixed Annuities 42,672 35,221 21.2 15,130 15,286 (1.0) Individual Variable Annuities 300,073 239,624 25.2 100,748 86,632 16.3 Individual Annuities - Runoff(c) 58,570 61,212 (4.3) 18,970 21,644 (12.4) ------ ------ ------ ------ TOTAL 4,635,806 4,228,121 9.6 1,590,255 1,417,461 12.2 FOREIGN Life Insurance 11,134,903 9,436,567 18.0 3,540,875 3,052,480 16.0 Personal Accident & Health 3,171,509 2,186,005 45.1 1,084,220 746,818 45.2 Group Products (d) 1,831,621 944,799 93.9 1,028,667 311,770 229.9 Retirement Services Individual Fixed Annuities 282,340 174,020 62.2 105,866 43,025 146.1 Individual Variable Annuities 45,271 14,555 211.0 16,596 6,655 149.4 ------ ------ ------ ----- TOTAL 16,465,644 12,755,946 29.1 5,776,224 4,160,748 38.8 TOTAL GAAP PREMIUMS 21,101,450 16,984,067 24.2 7,366,479 5,578,209 32.1 ---------- ---------- --------- --------- PREMIUMS, DEPOSITS AND OTHER CONSIDERATIONS (e) DOMESTIC Life Insurance 2,136,998 2,001,279 6.8 761,474 700,791 8.7 Home Service 729,976 731,748 (0.2) 240,171 247,189 (2.8) Group Life/Health 848,052 772,121 9.8 305,625 264,286 15.6 Payout Annuities 1,637,463 1,285,634 27.4 517,938 413,658 25.2 Retirement Services Group Retirement Products 4,141,837 4,004,615 3.4 1,450,316 1,504,783 (3.6) Individual Fixed Annuities 7,965,803 8,184,894 (2.7) 2,347,659 3,267,439 (28.1) Individual Variable Annuities 3,256,985 2,485,438 31.0 916,373 915,906 0.1 Individual Annuities - Runoff 194,048 275,229 (29.5) 56,771 83,559 (32.1) ------- ------- ------ ------ TOTAL 20,911,162 19,740,958 5.9 6,596,327 7,397,611 (10.8) FOREIGN Life Insurance 13,653,845 10,934,430 24.9 4,331,513 3,639,050 19.0 Personal Accident & Health 3,204,417 2,186,288 46.6 1,082,720 745,084 45.3 Group Products (d) 2,707,106 1,547,272 75.0 1,292,898 464,445 178.4 Retirement Services Individual Fixed Annuities 8,892,027 1,665,722 433.8 3,527,922 915,536 285.3 Individual Variable Annuities 1,227,917 903,940 35.8 415,775 323,803 28.4 --------- ------- ------- ------- TOTAL 29,685,312 17,237,652 72.2 10,650,828 6,087,918 75.0 TOTAL PREMIUMS, DEPOSITS AND OTHER CONSIDERATIONS $ 50,596,474 $ 36,978,610 36.8 % $ 17,247,155 $13,485,529 27.9% (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) Third quarter and nine months 2004 include approximately $640 million of premium from a reinsurance transaction involving terminal funding business. This single premium amount is offset by a similar amount of benefits incurred. (e) Premiums, deposits and other considerations represent aggregate business activity during the respective periods presented on a non-GAAP basis.
SUPPLEMENTARY EARNINGS DATA - PAGE 4 NINE MONTHS ENDED SEPTEMBER 30, THREE MONTHS ENDED SEPTEMBER 30, 2004 2003 (a) CHANGE 2004 2003 (a) CHANGE ---- -------- ------ ---- -------- ------ LIFE INSURANCE & RETIREMENT SERVICES OPERATIONS: NET INVESTMENT INCOME DOMESTIC Life Insurance $ 1,093,782 $ 965,940 13.2 % $ 361,935 $ 348,041 4.0% Home Service 528,442 510,721 3.5 177,106 171,406 3.3 Group Life/Health 92,610 87,240 6.2 31,360 30,417 3.1 Payout Annuities 599,870 510,526 17.5 199,539 190,532 4.7 Retirement Services Group Retirement Products 1,617,303 1,521,965 6.3 550,772 523,289 5.3 Individual Fixed Annuities 2,266,743 1,837,075 23.4 772,046 643,176 20.0 Individual Variable Annuities 179,631 172,265 4.3 57,856 63,982 (9.6) Individual Annuities - Runoff 807,064 971,515 (16.9) 262,547 279,697 (6.1) Intercompany Adjustments (277) (215) - (102) (88) - ---- ---- ---- --- TOTAL 7,185,168 6,577,032 9.2 2,413,059 2,250,452 7.2 FOREIGN Life Insurance 3,248,316 2,779,462 16.9 1,066,520 895,565 19.1 Personal Accident & Health 133,221 118,478 12.4 46,406 42,067 10.3 Group Products 311,121 248,538 25.2 108,329 79,434 36.4 Retirement Services Individual Fixed Annuities 700,230 230,910 203.2 254,831 81,304 213.4 Individual Variable Annuities 77,477 1,428 - (12,675) 353 - Intercompany Adjustments (13,458) (10,438) - (4,923) (4,267) - ------- ------- ------ ------ TOTAL 4,456,907 3,368,378 32.3 1,458,488 1,094,456 33.3 TOTAL NET INVESTMENT INCOME $ 11,642,075 $ 9,945,410 17.1 % $ 3,871,547 $ 3,344,908 15.7% (a) Restated to conform to 2004 presentation.
SUPPLEMENTARY EARNINGS DATA - PAGE 5 NINE MONTHS ENDED SEPTEMBER 30, THREE MONTHS ENDED SEPTEMBER 30, 2004 2003 (a) CHANGE 2004 2003 (a) CHANGE ---- -------- ------ ---- -------- ------ LIFE INSURANCE & RETIREMENT SERVICES OPERATIONS: OPERATING INCOME DOMESTIC Life Insurance $ 671,597 $ 595,679 12.7 % $ 231,060 $ 205,437 12.5% Home Service (b) 300,164 298,622 0.5 92,068 96,455 (4.5) Group Life/Health 71,418 87,910 (18.8) 26,636 29,938 (11.0) Payout Annuities 105,617 95,550 10.5 34,937 34,873 0.2 Retirement Services Group Retirement Products 805,818 675,491 19.3 271,563 230,250 17.9 Individual Fixed Annuities 662,826 491,778 34.8 211,904 159,393 32.9 Individual Variable Annuities 132,209 36,543 261.8 52,074 23,435 122.2 Individual Annuities - Runoff 138,191 161,985 (14.7) 41,953 56,679 (26.0) Intercompany Adjustments (277) (215) - (102) (88) - ---- ---- ---- --- TOTAL DOMESTIC BEFORE REALIZED CAPITAL GAINS (LOSSES) 2,887,563 2,443,343 18.2 962,093 836,372 15.0 Realized Capital Gains (Losses) (170,414) (326,942) - (17,804) (123,908) - -------- -------- ------- -------- DOMESTIC OPERATING INCOME 2,717,149 2,116,401 28.4 944,289 712,464 32.5 FOREIGN Life Insurance 2,298,186 2,046,056 12.3 796,396 700,729 13.7 Personal Accident & Health 851,012 608,349 39.9 299,977 211,212 42.0 Group Products 198,195 149,554 32.5 61,892 54,729 13.1 Retirement Services Individual Fixed Annuities 180,525 79,188 128.0 73,109 30,122 142.7 Individual Variable Annuities 6,379 (412) - 3,500 26 - Intercompany Adjustments (13,458) (10,438) - (4,923) (4,267) - ------- ------- ------ ------ TOTAL FOREIGN BEFORE REALIZED CAPITAL GAINS (LOSSES) 3,520,839 2,872,297 22.6 1,229,951 992,551 23.9 Realized Capital Gains (Losses) 64,091 (329,576) - (7,482) 299 - ------ -------- ------ --- FOREIGN OPERATING INCOME 3,584,930 2,542,721 41.0 1,222,469 992,850 23.1 WORLDWIDE LIFE INSURANCE & RETIREMENT SERVICES BEFORE REALIZED CAPITAL GAINS (LOSSES) 6,408,402 5,315,640 20.6 2,192,044 1,828,923 19.9 Realized Capital Gains (Losses) (106,323) (656,518) - (25,286) (123,609) - -------- -------- ------- -------- WORLDWIDE OPERATING INCOME $ 6,302,079 $ 4,659,122 35.3 % $ 2,166,758 $ 1,705,314 27.1% (a) Restated to conform to 2004 presentation. (b) Third quarter and nine months 2004 include $4.7 million of catastrophe losses relating to minor property-casualty subsidiaries currently in run-off.
SUPPLEMENTARY EARNINGS DATA - PAGE 6 NINE MONTHS ENDED SEPTEMBER 30, THREE MONTHS ENDED SEPTEMBER 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 $ 352,653 $ 257,140 37.1% $ 118,113 $ 86,470 36.6% Institutional Markets 24,941 58,140 (57.1) 4,681 21,400 (78.1) ------ ------ ----- ------ Total Periodic Sales 377,594 315,280 19.8 122,794 107,870 13.8 Unscheduled & Single Deposits 301,941 292,000 3.4 81,461 122,660 (33.6) Life Insurance Reserves 19,947,986 18,910,064 5.5 HOME SERVICE Product Sales Life/Accident & Health(b) 83,936 83,449 0.6 25,240 28,899 (12.7) Fixed Annuity 82,477 90,433 (8.8) 26,779 31,433 (14.8) Total Insurance Reserves 7,145,737 7,011,640 1.9 GROUP LIFE/HEALTH Annualized Earned Premium 1,259,600 1,235,143 2.0 PAYOUT ANNUITIES Insurance Reserves 10,741,500 9,215,714 16.6 GROUP RETIREMENT PRODUCTS Deposits(c) 4,930,205 4,357,237 13.1 1,774,610 1,627,976 9.0 NET FLOWS Group Retirement Products (c) 1,678,045 2,508,621 (33.1) 884,424 955,084 (7.4) Individual Fixed Annuities 6,184,979 7,003,561 (11.7) 1,699,809 2,838,099 (40.1) Individual Variable Annuities 1,341,821 857,134 56.5 260,921 361,988 (27.9) Individual Annuities - Runoff (946,985) (812,092) - (343,110) (228,792) - -------- -------- -------- -------- TOTAL $ 8,257,860 $ 9,557,224 (13.6)% $ 2,502,044 $ 3,926,379 (36.3)% SURRENDER RATES Group Retirement Products (c) 8.5%(d) 5.6% 6.9% 5.8% Individual Fixed Annuities 5.7% 5.0% 5.9% 5.0% Individual Variable Annuities 10.4% 10.8% 10.7% 10.3% GENERAL AND SEPARATE ACCOUNT RESERVES Group Retirement Products (c) $53,133,975 $ 47,935,048 10.8% Individual Fixed Annuities 49,056,345 39,723,444 23.5 Individual Variable Annuities 24,981,443 21,699,887 15.1 Individual Annuities - Runoff 20,903,810 21,876,106 (4.4) ---------- ---------- TOTAL $148,075,573 $ 131,234,485 12.8% (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 7 NINE MONTHS ENDED SEPTEMBER 30, THREE MONTHS ENDED SEPTEMBER 30, 2004 2003 (a) CHANGE 2004 2003 (a) CHANGE ---- -------- ------ ---- -------- ------ LIFE INSURANCE & RETIREMENT SERVICES OPERATIONS: FOREIGN - OTHER DATA FIRST YEAR PREMIUMS LIFE INSURANCE Japan $ 513,217 $ 424,797 20.8% $ 167,233 $ 145,305 15.1% China 81,891 54,584 50.0 25,976 21,057 23.4 Asia excluding Japan and China 1,164,933 1,275,497 (8.7) 361,420 381,759 (5.3) All Other Regions 174,910 142,808 22.5 51,953 51,589 0.7 ------- ------- ------ ------ TOTAL 1,934,951 1,897,686 2.0 606,582 599,710 1.1 PERSONAL ACCIDENT & HEALTH Japan 533,649 315,437 69.2 178,254 114,371 55.9 China 22,566 22,897 (1.4) 7,814 8,651 (9.7) Asia excluding Japan and China 177,295 143,484 23.6 60,159 47,163 27.6 All Other Regions 79,504 69,309 14.7 26,299 23,861 10.2 ------ ------ ------ ------ TOTAL 813,014 551,127 47.5 272,526 194,046 40.4 GROUP PRODUCTS Japan 16,614 18,514 (10.3) 4,096 6,478 (36.8) Asia excluding Japan and China 60,021 37,287 61.0 32,065 13,452 138.4 All Other Regions 484,954 407,127 19.1 148,829 105,147 41.5 ------- ------- ------- ------- TOTAL 561,589 462,928 21.3 184,990 125,077 47.9 TOTAL FIRST YEAR PREMIUMS Japan 1,063,480 758,748 40.2 349,583 266,154 31.3 China 104,457 77,481 34.8 33,790 29,708 13.7 Asia excluding Japan and China 1,402,249 1,456,268 (3.7) 453,644 442,374 2.5 All Other Regions 739,368 619,244 19.4 227,081 180,597 25.7 ------- ------- ------- ------- TOTAL 3,309,554 2,911,741 13.7 $ 1,064,098 $ 918,833 15.8% RETIREMENT SERVICES RESERVES Individual Fixed Annuities 27,120,037 7,332,977 269.8 Individual Variable Annuities $ 3,385,188 $ 1,363,115 148.3% - ----------------------------------------------------------------------------------------------------------------------- FOREIGN EXCHANGE IMPACT ON GROWTH OF: GAAP PREMIUMS WORLDWIDE Growth in Original Currency 19.7 % 28.8% Foreign Exchange Impact 4.5 3.3 Growth as Reported in U.S. $ 24.2 32.1 FOREIGN Growth in Original Currency 23.1 34.5 Foreign Exchange Impact 6.0 4.3 Growth as Reported in U.S. $ 29.1 38.8 PREMIUMS, DEPOSITS AND OTHER CONSIDERATIONS(b) WORLDWIDE Growth in Original Currency 33.9 26.1 Foreign Exchange Impact 2.9 1.8 Growth as Reported in U.S. $ 36.8 27.9 FOREIGN Growth in Original Currency 65.9 70.9 Foreign Exchange Impact 6.3 4.1 Growth as Reported in U.S. $ 72.2 % 75.0% (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 8 NINE MONTHS ENDED SEPTEMBER 30, THREE MONTHS ENDED SEPTEMBER 30, 2004 2003 CHANGE 2004 2003 CHANGE ---- ---- ------ ---- ---- ------ FINANCIAL SERVICES: REVENUES Aircraft Finance $ 2,403,703 $ 2,271,892 5.8% $ 841,270 $ 785,034 7.2% Capital Markets 1,161,021 1,242,324 (6.5) 426,424 434,229 (1.8) Consumer Finance 2,177,749 1,957,482 11.3 762,091 664,677 14.7 Other (a) 25,466 24,013 6.1 8,277 1,940 326.6 ------ ------ ----- ----- TOTAL 5,767,939 5,495,711 5.0 2,038,062 1,885,880 8.1 OPERATING INCOME Aircraft Finance 546,877 548,357 (0.3) 204,282 190,472 7.3 Capital Markets 663,835 728,663 (8.9) 247,729 240,642 2.9 Consumer Finance 579,408 488,553 18.6 203,914 173,592 17.5 Other (a) (2,383) (3,856) - (399) 3,640 - ------- ------- ----- ----- TOTAL 1,787,737 1,761,717 1.5 655,526 608,346 7.8 - ------------------------------------------------------------------------------------------------------------------------------------ ASSET MANAGEMENT (b)(c): REVENUES Guaranteed Investment Contracts Domestic 1,729,726 1,539,920 12.3 584,549 515,795 13.3 Foreign 294,391 313,910 (6.2) 97,862 101,119 (3.2) Institutional Asset Management (d) 717,511 456,315 57.2 242,741 156,399 55.2 Brokerage Services and Mutual Funds 185,268 148,281 24.9 61,957 51,242 20.9 ------- ------- ------ ------ TOTAL 2,926,896 2,458,426 19.1 987,109 824,555 19.7 OPERATING INCOME Guaranteed Investment Contracts Domestic 446,284 360,579 23.8 131,787 122,256 7.8 Foreign 31,121 32,091 (3.0) 10,634 12,412 (14.3) Institutional Asset Management (d)(e) 337,926 141,689 138.5 194,477 53,793 261.5 Brokerage Services and Mutual Funds 53,366 43,737 22.0 16,160 19,687 (17.9) ------ ------ ------ ------ TOTAL (e) 868,697 578,096 50.3 353,058 208,148 69.6 - ------------------------------------------------------------------------------------------------------------------------------------ GUARANTEED INVESTMENT CONTRACTS DEPOSITS Domestic 8,770,544 6,445,799 36.1 1,964,352 2,690,357 (27.0) Foreign 3,995,339 2,911,165 37.2 1,875,512 461,054 306.8 --------- --------- --------- ------- TOTAL 12,765,883 9,356,964 36.4 $3,839,864 $ 3,151,411 21.8% RESERVES Domestic 44,484,847 37,613,846 18.3 Foreign 8,069,313 7,163,674 12.6 --------- --------- TOTAL $52,554,160 $44,777,520 17.4% EFFECTIVE TAX RATES: Net Income 31.94% 30.48% 32.34% 30.49% Realized Capital Gains (Losses) 33.23% 33.58% 34.39% 34.04% (a) Includes other financial services companies and intercompany reclassifications. (b) 2003 is restated to conform to 2004 presentation. (c) At September 30, 2004, AIG's third party assets under management, including mutual funds and institutional accounts, totaled over $50 billion. (d) Includes AIG Global Investment Group and certain smaller asset management operations. (e) Includes the results of certain AIG managed private equity and real estate funds consolidated effective December 31, 2003 pursuant to FIN46R, "Consolidation of Variable Interest Entities". For the third quarter and nine months 2004, operating income includes $116 million and $147 million, respectively, of third-party limited partner earnings offset in Minority Interest Expense.
SUPPLEMENTARY EARNINGS DATA - PAGE 9 ADDITIONAL RECONCILIATION IN ACCORDANCE WITH REGULATION G NINE MONTHS TWELVE MONTHS ENDED ENDED SEPTEMBER 30, DECEMBER 31, 2004 2003 ---- ---- RETURN ON EQUITY RECONCILIATION Return on Equity, GAAP basis 14.3 % 14.1 % Percent Related to Reconciliation 2.1 3.1 --- --- Return on Equity, as presented (a) 16.4 17.2 Catastrophe Losses 0.7 0.1 --- --- Return on Equity, as presented excluding Catastrophe Losses 17.1 % 17.3 % (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.
NEW YORK STATE ATTORNEY GENERAL INVESTIGATION As previously disclosed, on October 14, 2004, the New York State Attorney General brought a lawsuit challenging certain insurance brokerage practices related to contingent commissions. Neither AIG nor any of its subsidiaries is a defendant in that action, although the lawsuit names several insurance companies, including AIG subsidiaries, as participants in the challenged practices, and two employees of an AIG subsidiary have pleaded guilty in connection with the Attorney General's investigation. AIG expects there will be additional investigations, and that various parties, including insureds and shareholders, will assert claims against AIG or its subsidiaries. AIG is actively investigating these matters, but the extent, timing and outcome of any related claims are uncertain. AIG cannot at this time estimate its potential costs related to these matters and accordingly, no reserve is being established in AIG's financial statements at this time. In the opinion of AIG management, AIG's ultimate liability for these matters is not likely to have a material adverse effect on AIG's consolidated financial condition, although it is possible that the effect would be material to AIG's consolidated results of operations for an individual reporting period.