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): March 16, 2006
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 March 16, 2006, American International Group, Inc. issued a press
release announcing that it had filed with the Securities and Exchange Commission
its Annual Report on Form 10-K for the period ended December 31, 2005 and an
amended Annual Report on Form 10-K/A for the period ended December 31, 2004.
A copy of the press release is attached as Exhibit 99.1 to this Current
Report on Form 8-K and is incorporated by reference herein.
Section 9 - Financial Statements and Exhibits
Item 9.01 Financial Statements and Exhibits.
(d) Exhibits.
Exhibit 99.1 Press release of American International Group, Inc.
dated March 16, 2006.
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: March 16, 2006 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 March 16, 2006.
Exhibit 99.1
NEWS (AIG Logo)
Contact: Charlene Hamrah (Investment Community)
(212) 770-7074
Joe Norton (News Media)
(212) 770-3144
AIG FILES 2005 ANNUAL REPORT ON FORM 10-K
AND 2004 FORM 10-K/A
NEW YORK, NY, March 16, 2006 - American International Group, Inc. (AIG)
announced today that it has filed its Annual Report on Form 10-K for the year
ended December 31, 2005 with the Securities and Exchange Commission.
Net income for the full year 2005 was $10.48 billion or $3.99 per
diluted share, compared to $9.84 billion or $3.73 per diluted share in the full
year 2004. Fourth quarter 2005 net income was $444 million or $0.17 per diluted
share, compared to $1.61 billion or $0.62 per diluted share in the fourth
quarter of 2004. At December 31, 2005, consolidated assets were $853.37 billion
and shareholders' equity was $86.32 billion.
Full year and fourth quarter 2005 results include a $1.15 billion
after-tax charge resulting from the previously announced settlements with the
United States Department of Justice, the Securities and Exchange Commission, the
Office of the New York Attorney General and the New York State Department of
Insurance in connection with the accounting, financial reporting and insurance
brokerage practices of AIG and its subsidiaries, as well as claims relating to
the underpayment of certain workers compensation premium taxes and other
assessments.
In addition, full year and fourth quarter 2005 results include a $1.19
billion after-tax charge related to an increase of approximately $1.82 billion
to AIG's net reserve for losses and loss expenses. The reserve increase followed
the completion of an independent, comprehensive review of the loss reserves of
AIG's principal property-casualty insurance operations conducted by Milliman,
Inc. and AIG's own actuarial analysis.
Full year 2005 results include after-tax net catastrophe related losses
of $2.11 billion. Fourth quarter 2005 results include approximately $390 million
after-tax net losses arising from Hurricane Wilma, including net reinstatement
premium costs, as well as approximately $150 million after-tax net losses
relating to adverse development from third quarter 2005 catastrophe events,
primarily Hurricane Katrina. Full year and fourth quarter 2004 results include
after-tax net catastrophe related losses of $729 million and $217 million,
respectively.
Additionally, AIG today filed its 2004 Annual Report on Form 10-K/A
restating its consolidated financial statements for the years ended December 31,
2004, 2003 and 2002, along with affected Selected Consolidated Financial Data
for 2001 and 2000 and quarterly financial information for 2004 and 2003. As
previously announced, the restatement addresses the correction of certain
errors, the preponderance of which were identified during the ongoing
remediation of previously disclosed material weaknesses in internal control. The
restatement also includes adjustments in addition to those previously announced,
principally relating to remediation efforts with respect to reconciliation of
certain balance sheet accounts in the Domestic Brokerage Group.
TWELVE MONTHS
(in millions, except per share data)
PER DILUTED SHARE(a)
-----------------------------
2005 2004 2005 2004
(Restated) Change (Restated) Change
- -----------------------------------------------------------------------------------------------------------------
Net income $10,477 $ 9,839 6.5% $3.99 $3.73 7.0%
Realized capital gains (losses),
including pricing gains
(losses), net of tax 201 85 -- 0.07 0.03 --
FAS 133 gains (losses),
excluding realized capital
gains (losses), net of tax (b) 1,530 315 -- 0.59 0.12 --
Cumulative effect of an
accounting change, net of tax (c) -- (144) -- -- (0.06) --
Adjusted net income (d) 8,746 9,583 (8.7)% 3.33 3.64 (8.5)%
Effect of settlement charge,
net of tax (e) 1,147 53 -- 0.44 0.02 --
Effect of General Insurance
reserve charge, net of tax (f) 1,186 553 -- 0.45 0.21 --
Effect of catastrophe related
losses, net of tax $ 2,109 $ 729 -- $0.80 $0.27 --
Average shares outstanding 2,627 2,637
2
FOURTH QUARTER
(in millions, except per share data)
PER DILUTED SHARE(a)
-----------------------------
2005 2004 2005 2004
(Restated) Change (Restated) Change
- -----------------------------------------------------------------------------------------------------------------
Net income $ 444 $ 1,612 (72.5)% $ 0.17 $ 0.62 (72.6)%
Realized capital gains
(losses), including pricing gains
(losses), net of tax 182 123 -- 0.07 0.05 --
FAS 133 gains (losses),
excluding realized capital
gains (losses), net of tax (b) (114) (240) -- (0.04) (0.09) --
Adjusted net income (d) 376 1,729 (78.3)% 0.14 0.66 (78.8)%
Effect of settlement charge,
net of tax (e) 1,147 53 -- 0.44 0.02 --
Effect of General Insurance
reserve charge, net of tax (f) 1,186 553 -- 0.45 0.21 --
Effect of catastrophe related
losses, net of tax $ 540 $ 217 -- $ 0.20 $ 0.08 --
Average shares outstanding 2,626 2,632
(a) Assumes conversion of contingently convertible bonds due to the adoption of
EITF Issue No. 04-8 "Accounting Issues Related to Certain Features of
Contingently Convertible Debt and the Effect on Diluted Earnings per Share"
of $3 million and $11 million, net of tax, for both the fourth quarter and
twelve months 2005 and 2004, respectively.
(b) Includes the effect of hedging activities that do not qualify for hedge
accounting treatment under FAS 133, including the related foreign exchange
gains and losses.
(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".
(d) Excludes realized capital gains (losses) which includes pricing net
investment gains, cumulative effect of an accounting change and FAS 133,
net of tax.
(e) Full year and fourth quarter 2004 includes the after-tax charge related to
a settlement with the SEC, DOJ and the U.S. Attorney for the Southern
District of Indiana with respect to issues arising from certain
transactions with Brightpoint, Inc., the PNC Financial Services Group, Inc.
and related matters.
(f) Full year and fourth quarter 2004 includes an after-tax charge related to
an increase of $850 million to net loss reserves reflecting a change in
estimates for asbestos and environmental exposures.
Commenting on full year and fourth quarter 2005 results, AIG President
and CEO Martin J. Sullivan said, "In what was a most challenging year for the
company, AIG demonstrated its true resilience by generating net income of $10.48
billion for the full year and $444 million for the fourth quarter, after taking
charges to settle legal and regulatory issues, increasing general insurance loss
reserves and sustaining record catastrophe losses, all while initiating
significant change throughout the organization. These results are a testament to
AIG's diversified portfolio of market-leading businesses and the commitment of
our 97,000 employees who, throughout this challenging year, remained focused on
executing the strategies we have in place.
3
"AIG is financially strong, and our major business units remain focused
on our strategic objectives. Our tradition of entrepreneurship and innovation
will enable AIG to continue to perform successfully, enter new markets, develop
new products and meet our clients' needs. There is every reason for us to be
optimistic about our future. AIG today is a better company for all that we have
been through.
"The settlement with Federal and New York authorities reached in
February was an important step forward in resolving the legal and regulatory
issues facing AIG and will allow us to focus intently on our business going
forward."
General Insurance reported a fourth quarter 2005 operating loss before
realized capital gains of $1.16 billion and a combined ratio of 121.39. These
results include catastrophe losses ($775 million), the general insurance loss
reserve charge ($1.824 billion) and adjustments to Domestic Brokerage Group
balance sheet accounts ($291 million). The effect of these three items on the
fourth quarter combined ratio was 28.10 points. General insurance cash flow
remains strong at $2.65 billion and $12.03 billion for the fourth quarter and
full year 2005, respectively.
Domestic Brokerage Group net premiums written in the fourth quarter of
2005 reflect generally improving renewal retention rates, higher property rates
and increased submission activity in the aftermath of the hurricanes and a
modest decline in rates in some of the casualty classes. Personal Lines premium
growth was driven by strong performance by Agency Auto and the Private Client
Group, which offset a sharp decline in the assigned risk market. United Guaranty
experienced increased new business production, improved persistency and growth
in its international operations in the fourth quarter of 2005. Foreign General
experienced solid premium growth in most regions, particularly in its personal
accident, energy and personal lines portfolios, but was affected by softening
commercial market conditions in the United Kingdom.
Life Insurance & Retirement Services fourth quarter 2005 operating
income before realized capital gains (losses) and including pricing net
investment gains increased 19.8 percent to $2.33 billion.
In Foreign Life & Retirement Services, strong growth in accident and
health and group products was offset somewhat by slower life insurance sales as
sales shifted from traditional life insurance to investment oriented products.
Foreign fixed annuity sales slowed due to the interest rate environment and the
depreciating yen, while variable annuity results were aided by a stronger
Japanese equity market and increased production in the UK/Ireland region.
In the Domestic Life Insurance & Retirement Services segment, life
insurance continued to demonstrate solid growth, with periodic retail sales
increasing 17.1 percent and 14.8 percent for the quarter and the year,
respectively. The individual fixed annuity business continues to be adversely
affected by the interest rate environment; however, individual variable annuity
deposits have been aided by the well-received new guaranteed minimum withdrawal
benefit feature introduced late in the fourth quarter.
4
Fourth quarter 2005 Financial Services operating income before the
effect of FAS 133 was $553 million, a decline of 14.9 percent compared to fourth
quarter 2004. International Lease Finance Corporation continued to see
improvements in lease rates and an increase in demand for its modern fuel
efficient aircraft, offset by higher interest rates and other leasing related
reserves. Results from Capital Markets operations were adversely affected by the
reduction in volume of its investor based structured notes business due to AIG's
inability to fully access the capital markets. These trends continued into the
first quarter of 2006. Consumer Finance receivable growth continued to be strong
in the United States, Argentina and Poland. However, operating income growth
moderated as rising U.S. interest rates increased funding costs and slowed real
estate refinancing opportunities. In Taiwan, the credit card business increased
its loan loss provision.
Asset Management results in the fourth quarter 2005, before the effect
of FIN46R and FAS 133, totaled $477 million compared to $480 million in fourth
quarter 2004. This included growth in institutional assets under management and
the associated fee revenue, as well as gains on real estate investments and
private equity partnership fees, offset by the run-off of the existing
Guaranteed Investment Contract portfolio and the delay in initiating AIG's
matched investment program.
# # #
ADDITIONAL SUPPLEMENTARY FINANCIAL DATA IS AVAILABLE IN THE INVESTOR
INFORMATION SECTION OF WWW.AIGCORPORATE.COM.
A conference call for the investment community will be held tomorrow,
Friday, March 17, 2006 at 8:30 a.m. EST. The call will be broadcast live on the
Internet at www.aigwebcast.com. A replay will be archived at the same URL
through Friday, March 31, 2006.
# # #
It should be noted that the remarks made in this press release or on the
conference call may contain projections concerning financial information and
statements concerning future economic performance and events, plans and
objectives relating to management, operations, products and services, and
assumptions underlying these projections and statements. Please refer to AIG's
Annual Report on Form 10-K for the period ended December 31, 2005 and AIG's past
and future filings with the Securities and Exchange Commission for a description
of the business environment in which AIG operates and the factors that may
affect its business. AIG is not under any obligation (and expressly disclaims
any such obligation) to update or alter its projections and other statements
whether as a result of new information, future events or otherwise.
# # #
5
American International Group, Inc. (AIG), world leaders in insurance and
financial services, is the leading international insurance organization with
operations in more than 130 countries and jurisdictions. AIG companies serve
commercial, institutional and individual customers through the most extensive
worldwide property-casualty and life insurance networks of any insurer. In
addition, AIG companies are leading providers of retirement services, financial
services and asset management around the world. AIG's common stock is listed in
the U.S. on the New York Stock Exchange, as well as the stock exchanges in
London, Paris, Switzerland and Tokyo.
# # #
6
COMMENT ON REGULATION G
This press release, including the financial highlights, includes certain
non-GAAP financial measures. The reconciliations of such measures to the most
comparable GAAP figures in accordance with Regulation G are included within the
relevant tables or in the Fourth Quarter 2005 Supplementary Financial Data
available in the Investor Information section of AIG's corporate website,
www.aigcorporate.com.
Throughout this press release, AIG presents its operations in the way it
believes will be most meaningful and useful, as well as most transparent, to the
investing public and others who use AIG's financial information in evaluating
the performance of AIG. That presentation includes the use of certain non-GAAP
measures. In addition to the GAAP presentations, in some cases, revenues, net
income, operating income and related rates of performance are shown exclusive of
realized capital gains (losses), cumulative effect of an accounting change in
2004, the effect of FIN46R, the effect of FAS 133 and the effect of the
catastrophe related losses, settlement charges and the general insurance reserve
charge.
Although the investment of premiums to generate investment income (or
loss) and realized capital gains or losses is an integral part of both life and
general insurance operations, the determination to realize capital gains or
losses is independent of the insurance underwriting process. Moreover, under
applicable GAAP accounting requirements, losses can be recorded as the result of
other than temporary declines in value without actual realization. In sum,
investment income and realized capital gains or losses for any particular period
are not indicative of business performance for such period.
AIG believes that a major part of the discipline of a successful general
insurance company is to produce an underwriting profit, and it evaluates the
performance of and manages its operations on that basis. Providing only a GAAP
presentation of net income and operating income makes it much more difficult for
users of AIG's financial information to evaluate AIG's success or failure in its
basic business, that of insurance underwriting, and may, in AIG's opinion, lead
to a less meaningful presentation of AIG's operations. The equity analysts who
follow AIG exclude the realized capital transactions in their analyses for the
same reason, and consistently request that AIG provide the non-GAAP information.
Life and retirement services production (premiums, deposits and other
considerations), gross premiums written, net premiums written and combined
ratios are presented in accordance with accounting principles prescribed or
permitted by insurance regulatory authorities because these are standard
measures of performance used in the insurance industry and thus allow for more
meaningful comparisons with AIG's insurance competitors.
7
AMERICAN INTERNATIONAL GROUP, INC.
FINANCIAL HIGHLIGHTS*
(IN MILLIONS, EXCEPT PER SHARE DATA)
THREE MONTHS ENDED DECEMBER 31, TWELVE MONTHS ENDED DECEMBER 31,
2005 2004 (a) 2005 2004 (a)
(RESTATED) CHANGE (RESTATED) CHANGE
- ----------------------------------------------------------------------------------------------------------------------------------
GENERAL INSURANCE OPERATIONS:
Net Premiums Written $10,126 $10,078 0.5% $ 41,872 $ 40,623 3.1%
Net Premiums Earned 10,303 10,165 1.4 40,809 38,537 5.9
Underwriting Loss (2,130) (1,129) -- (2,050) (247) --
Net Investment Income 969 753 28.7% 4,031 3,196 26.1
Income before Realized Capital Gains (Losses) (1,161) (376) -- 1,981 2,949 (32.8)
Realized Capital Gains (Losses) 86 46 -- 334 228 -
OPERATING INCOME (LOSS) $(1,075) $ (330) -- $ 2,315 $ 3,177 (27.1)%
- ----------------------------------------------------------------------------------------------------------------------------------
Loss Ratio 94.43 86.52 81.09 78.78
Expense Ratio 26.96 23.54 23.60 21.52
Combined Ratio 121.39 110.06 104.69 100.30
Excluding Catastrophe Related Losses 113.86 106.93 97.63 97.56
Excluding Catastrophe Related Losses and
Reserve Charge 96.16 98.57 93.19 95.35
- ----------------------------------------------------------------------------------------------------------------------------------
LIFE INSURANCE & RETIREMENT SERVICES OPERATIONS :
GAAP Premiums $ 7,447 $ 7,025 6.0% $ 29,400 $ 28,088 4.7%
Net Investment Income 4,983 4,062 22.7 18,134 15,269 18.8
Pricing Net Investment Gains (b) 75 49 53.1 344 225 52.9
Income before Realized Capital Gains (Losses) 2,332 1,946 19.8 9,406 8,105 16.1
Realized Capital Gains (Losses) (b) (169) 290 -- (562) (182) --
OPERATING INCOME 2,163 2,236 (3.3) 8,844 7,923 11.6
FINANCIAL SERVICES OPERATIONS:
Operating Income excluding FAS 133 553 650 (14.9) 2,296 2,329 (1.4)
FAS 133 (c ) 240 (740) -- 1,980 (149) --
OPERATING INCOME (LOSS) 793 (90) -- 4,276 2,180 96.1
ASSET MANAGEMENT OPERATIONS:
Operating Income excluding FIN46R and FAS 133 477 480 (0.6) 1,843 1,617 14.0
FIN46R (d) 72 48 -- 261 195 --
FAS 133 (c ) 22 72 -- 149 313 --
OPERATING INCOME 571 600 (4.8) 2,253 2,125 6.0
Other Realized Capital Gains (Losses) 260 (266) -- 225 (227) --
Other Income (Deductions)-- net (2,396) 148 -- (2,700) (333) --
INCOME BEFORE INCOME TAXES, MINORITY INTEREST AND
CUMULATIVE EFFECT OF AN ACCOUNTING CHANGE 316 2,298 (86.2) 15,213 14,845 2.5
Income Taxes (Benefits) (279) 548 -- 4,258 4,407 --
INCOME BEFORE MINORITY INTEREST AND CUMULATIVE
EFFECT OF AN ACCOUNTING CHANGE 595 1,750 (66.0) 10,955 10,438 5.0
Minority Interest, after-tax:
Income before Realized Capital Gains (Losses) (152) (130) -- (465) (440) --
Realized Capital Gains (Losses) 1 (8) -- (13) (15) --
INCOME BEFORE CUMULATIVE EFFECT OF AN
ACCOUNTING CHANGE 444 1,612 (72.5) 10,477 9,983 4.9
Cumulative Effect of an Accounting Change,
net of tax (e) -- -- -- -- (144) --
NET INCOME $ 444 $ 1,612 (72.5)% $ 10,477 $ 9,839 6.5%
8
FINANCIAL HIGHLIGHTS
THREE MONTHS ENDED DECEMBER 31, TWELVE MONTHS ENDED DECEMBER 31,
2005 2004 (a) 2005 2004 (a)
(RESTATED) CHANGE (RESTATED) CHANGE
- ----------------------------------------------------------------------------------------------------------------------------------
NET INCOME $444 $1,612 (72.5)% $10,477 $ 9,839 6.5%
REALIZED CAPITAL GAINS (LOSSES), INCLUDING
PRICING GAINS (LOSSES), NET OF TAX 182 123 -- 201 85 --
FAS 133 GAINS (LOSSES), EXCLUDING REALIZED
CAPITAL GAINS (LOSSES), NET OF TAX (114) (240) -- 1,530 315 --
CUMULATIVE EFFECT OF AN ACCOUNTING CHANGE,
NET OF TAX (e) -- -- -- -- (144) --
ADJUSTED NET INCOME (f) 376 1,729 (78.3) 8,746 9,583 (8.7)
EFFECT OF SETTLEMENT CHARGE, NET OF TAX 1,147 53 -- 1,147 53 --
EFFECT OF GENERAL INSURANCE RESERVE CHARGE,
NET OF TAX 1,186 553 -- 1,186 553 --
EFFECT OF CATASTROPHE RELATED LOSSES,
NET OF TAX 540 217 -- 2,109 729 --
PER SHARE - DILUTED (g):
NET INCOME 0.17 0.62 (72.6) 3.99 3.73 7.0
REALIZED CAPITAL GAINS (LOSSES), INCLUDING
PRICING GAINS (LOSSES), NET OF TAX 0.07 0.05 -- 0.07 0.03 --
FAS 133 GAINS (LOSSES), EXCLUDING REALIZED
CAPITAL GAINS (LOSSES), NET OF TAX (0.04) (0.09) -- 0.59 0.12 --
CUMULATIVE EFFECT OF AN ACCOUNTING CHANGE,
NET OF TAX (e) -- -- -- -- (0.06) --
ADJUSTED NET INCOME (f) 0.14 0.66 (78.8)% 3.33 3.64 (8.5)%
EFFECT OF SETTLEMENT CHARGE, NET OF TAX 0.44 0.02 -- 0.44 0.02 --
EFFECT OF GENERAL INSURANCE RESERVE CHARGE,
NET OF TAX 0.45 0.21 -- 0.45 0.21 --
EFFECT OF CATASTROPHE RELATED LOSSES,
NET OF TAX $ 0.20 $ 0.08 -- $0.80 $0.27 --
AVERAGE DILUTED COMMON
SHARES OUTSTANDING (g) 2,626 2,632 2,627 2,637
* Including reconciliation in accordance with Regulation G.
(a) Certain accounts have been reclassified in 2004 to conform to the 2005
presentation.
(b) For purposes of this presentation, pricing net investment gains are
segregated out of total realized capital gains (losses). They represent
certain amounts of realized capital gains where gains are an inherent
element in pricing certain life products in some foreign countries.
(c) Includes the effect of hedging activities that do not qualify for hedge
accounting treatment under FAS 133 "Accounting for Derivative Instruments
and Hedging Activities", including the related foreign exchange gains and
losses.
(d) Includes the results of certain AIG managed private equity and real estate
funds that are consolidated effective December 31, 2003 pursuant to FIN46R,
"Consolidation of Variable Interest Entities".
(e) 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".
(f) Adjusted net income excludes realized capital gains (losses) which includes
pricing net investment gains, cumulative effect of an accounting change and
FAS 133 "Accounting for Derivative Instruments and Hedging Activities", net
of tax.
(g) Assumes conversion of contingently convertible bonds due to the adoption of
EITF Issue No. 04-8 "Accounting Issues Related to Certain Features of
Contingently Convertible Debt and the Effect on Diluted Earnings per Share"
of $3 million and $11 million, net of tax, for both the fourth quarter and
twelve months 2005 and 2004, respectively.
9
