AIG Files Second Quarter 2005 Quarterly Report on Form 10-Q and Reports Second Quarter 2005 Net Income of $3.99 Billion.NEW YORK New York, state, United States New York, Middle Atlantic state of the United States. It is bordered by Vermont, Massachusetts, Connecticut, and the Atlantic Ocean (E), New Jersey and Pennsylvania (S), Lakes Erie and Ontario and the Canadian province of -- American International Group
American International Group, Inc. (AIG) (NYSE: AIG; TYO: 8685 ) is a major American insurance corporation based in New York City. , Inc. (AIG AIG addressee indicator group (US DoD) AIG American International Group, Inc AiG Answers in Genesis (religious group in defense of Scripture) AIG Artificial Intelligence Group AIG Australian Industry Group ) announced today that it has filed its Quarterly Report on Form 10-Q Form 10-Q See 10-Q. for the period ending June June: see month. 30, 2005 with the Securities and Exchange Commission. Additionally, AIG filed a Form 10-Q/A restating the second quarter and the first six months of 2004 and 2003. Second quarter 2005 net income was $3.99 billion or $1.53 per diluted di·lute tr.v. di·lut·ed, di·lut·ing, di·lutes 1. To make thinner or less concentrated by adding a liquid such as water. 2. To lessen the force, strength, purity, or brilliance of, especially by admixture. share, compared to $2.65 billion or $1.01 per diluted share in the second quarter of 2004. At June 30, 2005, shareholders' equity Shareholders' Equity A firms' total assets minus its total liabilities. Equivalently, it is share capital plus retained earnings minus treasury shares. Shareholders' equity is the amount by which a company is financed through common and preferred shares. was $88.88 billion and consolidated assets were $828.64 billion. Net income for the first six months of 2005 was $7.68 billion or $2.93 per diluted share, compared to $5.21 billion or $1.98 per diluted share in the first six months of 2004.
SECOND QUARTER
(in millions, except per share amounts)
Per Diluted Share (a)
2005 2004 Change 2005 2004 Change
------- ------- ------- ------- ------- -------
Net income $ 3,992 $ 2,650 50.6% $1.53 $ 1.01 51.5%
Realized capital
gains (losses), net
of tax (b) 185 (129) - 0.07 (0.05) -
FAS 133 gains
(losses), excluding
realized capital
gains (losses),
net of tax (c) 825 (120) - 0.32 (0.04) -
Adjusted net
income (d) 2,982 2,899 2.9 1.14 1.10 3.6
Cumulative effect of
the ILFC correction,
net of tax (e) (333) - - (0.13) - -
Adjusted net income
excluding the
cumulative effect
of the ILFC
correction $ 3,315 $ 2,899 14.3% $1.27 $1.10 15.5%
Average shares
outstanding 2,623 2,640
SIX MONTHS
(in millions, except per share amounts)
Per Diluted Share (a)
2005 2004 Change 2005 2004 Change
------- ------- ------- ------- ------- -------
Net income $ 7,676 $ 5,206 47.4% $2.93 $1.98 48.0%
Realized capital
gains (losses),
net of tax (b) 232 (46) - 0.09 (0.02) -
FAS 133 gains
(losses), excluding
realized capital
gains (losses),
net of tax (c) 1,275 (159) - 0.49 (0.05) -
Cumulative effect of
an accounting
change, net of
tax (f) - (144) - - (0.06) -
Adjusted net
income (d) 6,169 5,555 11.1 2.35 2.11 11.4
Cumulative effect of
the ILFC correction,
net of tax (e) (333) - - (0.13) - -
Adjusted net income
excluding the
cumulative effect
of the ILFC
correction $ 6,502 $ 5,555 17.0% $2.48 $2.11 17.5%
Average shares
outstanding 2,623 2,641
----------------------------------------------------------------------
(a) Assumes conversion of contingently convertible bonds due to the
adoption of EITF Issue No. 04-8 "Accounting Issues Related to
Certain Features of Contingently Convertible Debt and the Effect
on Diluted Earnings per Share" of $2 million and $5 million, net
of tax, for the second quarter and six months 2005, respectively,
compared to $3 million and $6 million, net of tax, for the second
quarter and six months 2004, respectively.
(b) Includes a $58 million loss, net of tax, attributable to FAS 133
"Accounting for Derivative Instruments and Hedging Activities", in
the second quarter 2005 and no effect for the six months 2005,
compared to a loss of $2 million and $54 million, net of tax, in
the second quarter and six months 2004, respectively.
(c) Includes the unrealized gain (loss) attributable to economic
hedges not qualifying for hedge accounting treatment under FAS
133, including the related foreign exchange gains and losses.
(d) Excludes realized capital gains (losses) which includes pricing
net investment gains, cumulative effect of an accounting change
and FAS 133, net of tax.
(e) Represents the cumulative effect of the correction of an error
relating to certain manufacturers' payments to ILFC.
(f) Represents the cumulative effect of an accounting change, net of
tax, related to SOP 03-1 "Accounting and Reporting by Insurance
Enterprises for Certain Nontraditional Long-Duration Contracts and
for Separate Accounts".
Commenting on second quarter earnings, AIG President and Chief Executive Officer Martin J. Sullivan Martin J. Sullivan (born 1955 in Essex, England), is President and Chief Executive Officer of American International Group, Inc. Educated at the Sydney Russell School in Dagenham, Essex, in January 2007, he donated £50,000 to the school saying: said, "In a quarter where the company devoted significant time and attention to its internal review, our operations stayed focused on their customers and business, achieving good results. Market conditions and other trends evident in the first quarter largely continued through the second quarter. Worldwide General Insurance, Foreign Life Insurance & Retirement Services and Consumer Finance were among our best performing businesses. A flat yield curve Flat Yield Curve A chart that shows that the yields of bonds with short maturities are equal to the yields of bonds with longer maturities. affected our spread businesses, and transaction volume in Domestic Life Insurance & Retirement Services and Capital Markets was lower as a result of regulatory and related issues. Our second quarter results were also adversely affected by the recording of a charge for the cumulative effect of the correction of an error relating to relating to relate prep → concernant relating to relate prep → bezüglich +gen, mit Bezug auf +acc certain manufacturers' payments made for the benefit of ILFC ILFC International Lease Finance Corporation ILFC International Lunar Finance Commission (TV show: Space: 1999) . These factors were offset, however, by solid underwriting Underwriting 1. The process by which investment bankers raise investment capital from investors on behalf of corporations and governments that are issuing securities (both equity and debt). 2. The process of issuing insurance policies. results and strong investment returns throughout our businesses. "General Insurance operating income Operating Income The profit realized from a business' own operations. Notes: This would not include income from things such as investments in other firms. Also referred to as operating profit or recurring profit. before realized capital gains (losses) increased 20.5 percent compared to the second quarter of 2004. The combined ratio was 92.04. Premium growth of 4.2 percent reflects the underwriting discipline that we are maintaining in an environment that has been characterized char·ac·ter·ize tr.v. character·ized, character·iz·ing, character·iz·es 1. To describe the qualities or peculiarities of: characterized the warden as ruthless. 2. by softer pricing in the domestic and international markets. Terms and conditions continue to be largely unchanged. The Domestic Brokerage Group had a combined ratio of 96.05, and the Foreign General combined ratio was an excellent 82.04. Domestic Personal Lines had premium growth of 7.5 percent and a combined ratio of 95.92. Mortgage Guaranty As a verb, to agree to be responsible for the payment of another's debt or the performance of another's duty, liability, or obligation if that person does not perform as he or she is legally obligated to do; to assume the responsibility of a guarantor; to warrant. had premium growth of 6.6 percent and a delinquency delinquency Criminal behaviour carried out by a juvenile. Young males make up the bulk of the delinquent population (about 80% in the U.S.) in all countries in which the behaviour is reported. ratio that continues to run well below the industry average. General Insurance cash flow was $2.71 billion and $6.21 billion in the second quarter and first six months of 2005, respectively. Pretax pre·tax adj. Existing before tax deductions: pretax income. pretax adj [profit] → vor (Abzug der) Steuern third quarter 2005 losses arising from hurricanes Emily EMILY Early Money Is Like Yeast EMILY Electronic Membrane-Information Library EMILY Every Moment I Love You and Dennis are estimated to be $40 million. "In the Life Insurance & Retirement Services business, operating income before realized capital gains (losses) and including pricing net investment gains increased 13.1 percent in the second quarter of 2005 compared to a year ago. Our overseas operations were the strongest contributors to these results. In addition to excellent business performance, foreign life results were favorably fa·vor·a·ble adj. 1. Advantageous; helpful: favorable winds. 2. Encouraging; propitious: a favorable diagnosis. 3. affected by the weaker U.S. dollar. "Foreign Life Insurance & Retirement Services operating income before realized capital gains (losses) and including pricing net investment gains increased 18.8 percent. Japan had strong first year premium growth of 31.8 percent in the second quarter, driven by strong life insurance sales at all three of our companies. Total foreign annuity annuity: see insurance. annuity Payment made at a fixed interval. A common example is the payment received by retirees from their pension plan. There are two main classes of annuities: annuities certain and contingent annuities. production rose 43.3 percent. We are successfully leveraging the annuity product knowledge we have developed in Japan and Korea into other markets where we have a strong local presence. "Domestic Life Insurance & Retirement Services operating income before realized capital gains (losses) increased 5.1 percent in the second quarter of 2005. Domestic Life Insurance had mixed results. Following the filing of our 2004 Form 10-K Form 10-K A report required by the SEC from exchange-listed companies that provides for annual disclosure of certain financial information. Form 10-K See 10-K. , the advisor-driven brokerage and affluent market platforms experienced good recurring re·cur intr.v. re·curred, re·cur·ring, re·curs 1. To happen, come up, or show up again or repeatedly. 2. To return to one's attention or memory. 3. To return in thought or discourse. premiums in the last month of the quarter. Payout pay·out n. 1. The act or an instance of paying out. 2. A percentage of corporate earnings that is paid as dividends to shareholders. annuity sales were negatively affected by the tight spread environment, although margins remain adequate as a result of our pricing discipline. The Domestic Retirement Services business continued to be affected by challenging market conditions. The second quarter sales environment for individual variable annuities Variable annuities Investment contracts whose issuer pays a periodic amount linked to the investment performance of an underlying portfolio. was affected by lackluster lack·lus·ter adj. Lacking brightness, luster, or vitality; dull. See Synonyms at dull. Adj. 1. lackluster - lacking brilliance or vitality; "a dull lackluster life"; "a lusterless performance" domestic equity markets, while the flattening
The flattening, ellipticity, or oblateness of an oblate spheroid is the "squashing" of the spheroid's pole, down towards its equator. yield curve and competitive fixed income alternatives adversely affected fixed annuity Fixed Annuity An insurance contract in which the insurance company makes fixed dollar payments to the annuitant for the term of the contract, usually until the annuitant dies. The insurance company guarantees both earnings and principal. sales. "Financial Services The examples and perspective in this article or section may not represent a worldwide view of the subject. Please [ improve this article] or discuss the issue on the talk page. operating income, before the effect of FAS 133 and the cumulative effect of the ILFC correction, declined 2.9 percent compared to the second quarter of 2004. Weak Capital Markets results were somewhat offset by excellent results in our global Consumer Finance business. ILFC continues to benefit from improving lease (Scots Law) an extended lease to induce the tenant to make improvements on the premises. See also: Improving rates and residual values Residual value Usually refers to the value of a lessor's property at the time the lease expires. residual value The price at which a fixed asset is expected to be sold at the end of its useful life. and the demand for the modern, fuel-efficient aircraft they provide. The Capital Markets business was adversely affected by difficult market conditions and customer uncertainty during much of the quarter surrounding sur·round tr.v. sur·round·ed, sur·round·ing, sur·rounds 1. To extend on all sides of simultaneously; encircle. 2. To enclose or confine on all sides so as to bar escape or outside communication. n. the negative ratings actions and the ongoing investigations. American General Finance has continued its strong receivables Receivables An asset designation applicable to all debts, unsettled transactions or other monetary obligations owed to a company by its debtors or customers. Receivables are recorded by a company's accountants and reported on the balance sheet, and they and include all debts owed growth, while maintaining its emphasis on controlling operating expenses Operating expenses The amount paid for asset maintenance or the cost of doing business, excluding depreciation. Earnings are distributed after operating expenses are deducted. and adhering ADHERING. Cleaving to, or joining; as, adhering to the enemies of the United States. 2. The constitution of the United States, art. 3, s 3, defines treason against the United States, to consist only in levying war against them or in adhering to their enemies, to strict underwriting guidelines guidelines, n.pl a set of standards, criteria, or specifications to be used or followed in the performance of certain tasks. , which is reflected in its improving net charge off and delinquency ratios. Robust receivables growth in the Poland consumer finance business and the Taiwan and Hong Kong Hong Kong (hŏng kŏng), Mandarin Xianggang, special administrative region of China, formerly a British crown colony (2005 est. pop. 6,899,000), land area 422 sq mi (1,092 sq km), adjacent to Guangdong prov. credit card businesses contributed to the strong performance in the overseas operations. "Asset Management operating income increased by 10.0 percent in the second quarter, or 8.4 percent excluding the effect of FIN fin, organ of locomotion characteristic of fish and consisting of thin tissue supported by cartilaginous or bony rays. In some fish, e.g., the eel, a single fin extends from the back, around the tail, and along the ventral surface. 46R, compared to second quarter 2004. Third party assets under management Assets Under Management (AUM) is a term used by financial services companies in the mutual fund and money management or investment management business to gauge how much money they are managing. increased to over $61 billion from $55 billion at March 31, 2005. Significant new mandates for its International Small Cap Equity, European European emanating from or pertaining to Europe. European bat lyssavirus see lyssavirus. European beech tree fagussylvaticus. European blastomycosis see cryptococcosis. Government Bond, and High Yield strategies resulted in new assets for the Institutional Asset Management business. The increase in Domestic Guaranteed Investment Contract Guaranteed investment contract (GIC) A pure investment product in which a life company agrees, for a single premium, to pay at a maturity date the principal amount of a predetermined annual crediting (interest) rate over the life of the investment. (GIC GIC See: Guaranteed Investment Contract GIC See guaranteed investment contract (GIC). ) operating income was primarily due to an increase in partnership income over the prior year. The sharp decline in second quarter GIC deposits reflects the delay in the launch of AIG's previously announced matched investment program. "In conclusion, AIG performed well and demonstrated great resilience resilience (r  ·zilˑ·yens),n in the second quarter of 2005. Our strong global presence, diverse product range and the discipline and dedication of our employees around the world were instrumental in achieving these results." Additional supplementary financial data is available in the Investor Information section of www.aigcorporate.com. A conference call for the investment community will be held tomorrow, Wednesday, August 10, 2005 at 8:30 a.m. EDT EDT abbr. Eastern Daylight Time EDT Eastern Daylight Time EDT n abbr (US) (= Eastern Daylight Time) → hora de verano de Nueva York EDT . The call will be broadcast live on the Internet Internet Publicly accessible computer network connecting many smaller networks from around the world. It grew out of a U.S. Defense Department program called ARPANET (Advanced Research Projects Agency Network), established in 1969 with connections between computers at the at www.aigwebcast.com. A replay will be archived at the same URL URL in full Uniform Resource Locator Address of a resource on the Internet. The resource can be any type of file stored on a server, such as a Web page, a text file, a graphics file, or an application program. through Friday, August 19, 2005. Additionally, AIG's 2005 Annual Meeting of Shareholders scheduled for Thursday, August 11, at 10:00 a.m. EDT will be broadcast live on the Internet at www.aigwebcast.com. This press release contains forward-looking statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. . Please refer to the AIG Quarterly Report on Form 10-Q for the period ended June 30, 2005 and AIG's past and future filings and reports filed with the Securities and Exchange Commission for a description of the business environment in which AIG operates and the important factors that may affect its business. AIG is not under any obligation to (and expressly disclaims any such obligation to) update or alter its forward-looking statements whether as a result of new information, future events or otherwise. American International Group, Inc. (AIG), world leaders For a list of heads of state, see . World leaders is a MMORPG. The game involves creating a state, joining an alliance and going into war. It is mostly played by players from Israel, China, USA, Britain, Brazil and Saudi-Arabia. 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 An individual or company who, through a contractual agreement, undertakes to compensate specified losses, liability, or damages incurred by another individual. An insurer is frequently an insurance company and is also known as an underwriter. . 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 New York Stock Exchange (NYSE) World's largest marketplace for securities. The exchange began as an informal meeting of 24 men in 1792 on what is now Wall Street in New York City. and ArcaEx ArcaEx See Archipelago. , as well as the stock exchanges in London, Paris, Switzerland and Tokyo. 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 GAAP See: Generally Accepted Accounting Principles GAAP See generally accepted accounting principles (GAAP). figures in accordance Accordance is Bible Study Software for Macintosh developed by OakTree Software, Inc.[] As well as a standalone program, it is the base software packaged by Zondervan in their Bible Study suites for Macintosh. with Regulation G are included within the relevant tables or in the Second Quarter 2005 Supplementary Financial Data available in the Investor Information section of AIG's corporate website, www.aigcorporate.com. Throughout this press release, AIG presents its operations in the way it believes will be most meaningful and useful, as well as most transparent, to the investing public and others who use AIG's financial information in evaluating the performance of AIG. That presentation includes the use of certain non-GAAP measures. In addition to the GAAP presentations, in some cases, revenues, net income, operating income and related rates In differential calculus, related rates problems involve finding the rate at which a quantity is changing by relating that quantity to other quantities whose rates of change are known. The rate of change is usually with respect to time. of performance are shown exclusive of realized capital gains (losses), cumulative effect of an accounting change in 2004, the effect of FIN46R, the effect of FAS 133 and the cumulative effect of the ILFC correction. Although the investment of premiums to generate investment income (or loss) and realized capital gains or losses capital gains or losses n. particularly when calculating the tax liability of an individual or business, this is the difference between the original cost plus the cost of capital improvements, excluding maintenance, called "basis" and the sales price. 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 Underwriting profit is a term used in the insurance industry. It consists of the earned premium remaining after losses have been paid and administrative expenses have been deducted. It does not include any investment income earned on held premiums. , and it evaluates the performance of and manages its operations on that basis. Providing only a GAAP presentation of net income and operating income makes it much more difficult for users of AIG's financial information to evaluate AIG's success or failure in its basic business, that of insurance underwriting, and may, in AIG's opinion, lead to incorrect or misleading assumptions and conclusions. The equity analysts who follow AIG exclude the realized capital transactions in their analyses for the same reason, and consistently request that AIG provide the non-GAAP information. Life and retirement services production (premiums, deposits and other considerations), gross premiums written When a non-life insurance company closes a contract to provide insurance against loss, the revenues (premiums) expected to be received over the life of the contract are called gross premiums written. , net premiums written and combined ratios are presented in accordance with accounting principles prescribed pre·scribe v. pre·scribed, pre·scrib·ing, pre·scribes v.tr. 1. To set down as a rule or guide; enjoin. See Synonyms at dictate. 2. To order the use of (a medicine or other treatment). or permitted by insurance regulatory authorities Noun 1. regulatory authority - a governmental agency that regulates businesses in the public interest regulatory agency administrative body, administrative unit - a unit with administrative responsibilities 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 millions, except per share amounts)
Three Months Ended
June 30,
2005 2004(a) Change
General Insurance Operations: ------- ------- -------
Net Premiums Written $10,640 $10,207 4.2 %
Net Premiums Earned 10,234 9,377 9.1
Underwriting Profit 698 616 13.3
Net Investment Income 1,039 825 25.9
Income before Realized Capital
Gains (Losses) 1,737 1,441 20.5
Realized Capital Gains (Losses) 138 3 -
Operating Income $ 1,875 $ 1,444 29.8 %
----------------------------------------------------------------------
Loss Ratio 69.84 73.39
Expense Ratio 22.20 19.99
Combined Ratio 92.04 93.38
----------------------------------------------------------------------
Life Insurance & Retirement
Services Operations:
GAAP Premiums $ 7,307 $ 6,819 7.2 %
Net Investment Income 4,159 3,666 13.4
Pricing Net Investment Gains (b) 100 67 49.3
Income before Realized Capital
Gains (Losses) 2,350 2,078 13.1
Realized Capital Gains
(Losses) (b) 212 220 -
Operating Income 2,562 2,298 11.5
Financial Services Operations:
Operating Income excluding FAS 133
and the Cumulative Effect of the
ILFC Correction 576 593 (2.9)
FAS 133(c) 1,000 (584) -
Cumulative Effect of the
ILFC Correction (d) (516) - -
Operating Income 1,060 9 -
Asset Management Operating Income (e) 475 432 10.0
Other Realized Capital Gains
(Losses) (205) (431) -
Other Income (Deductions) - net 28 221 -
Income before Income Taxes, Minority
Interest and Cumulative Effect of
an Accounting Change 5,795 3,973 45.9
Income Taxes 1,674 1,218 -
Income before Minority Interest
and Cumulative Effect of an
Accounting Change 4,121 2,755 49.6
Minority Interest, after-tax :
Income before Realized Capital
Gains (Losses) (127) (104) -
Realized Capital Gains (Losses) (2) (1) -
Income before Cumulative Effect of
an Accounting Change 3,992 2,650 50.6
Cumulative Effect of an Accounting
Change, net of tax (f) - - -
Net Income $ 3,992 $ 2,650 50.6 %
Six Months Ended June 30,
2005 2004(a) Change
General Insurance Operations: ------- ------- -------
Net Premiums Written $21,433 $20,242 5.9 %
Net Premiums Earned 20,372 18,470 10.3
Underwriting Profit 1,270 1,075 18.1
Net Investment Income 2,072 1,622 27.7
Income before Realized Capital
Gains (Losses) 3,342 2,697 23.9
Realized Capital Gains (Losses) 230 188 -
Operating Income $ 3,572 $ 2,885 23.8 %
Loss Ratio 70.78 73.58
Expense Ratio 21.94 20.53
Combined Ratio 92.72 94.11
Life Insurance & Retirement
Services Operations:
GAAP Premiums $14,851 $13,708 8.3 %
Net Investment Income 8,418 7,444 13.1
Pricing Net Investment Gains (b) 181 145 24.8
Income before Realized Capital
Gains (Losses) 4,637 4,085 13.5
Realized Capital Gains (Losses)(b) 148 (2) -
Operating Income 4,785 4,083 17.2
Financial Services Operations:
Operating Income excluding FAS 133
and the Cumulative Effect of
the ILFC Correction 1,155 1,081 6.8
FAS 133(c) 1,464 (527) -
Cumulative Effect of the
ILFC Correction (d) (516) - -
Operating Income 2,103 554 279.6
Asset Management
Operating Income (e) 1,001 785 27.5
Other Realized Capital Gains (Losses) (226) (357) -
Other Income (Deductions) - net 3 (38) -
Income before Income Taxes, Minority
Interest and Cumulative Effect of
an Accounting Change 11,238 7,912 42.0
Income Taxes 3,287 2,387 -
Income before Minority Interest
and Cumulative Effect of an
Accounting Change 7,951 5,525 43.9
Minority Interest, after-tax :
Income before Realized Capital
Gains (Losses) (265) (170) -
Realized Capital Gains (Losses) (10) (5) -
Income before Cumulative Effect of
an Accounting Change 7,676 5,350 43.5
Cumulative Effect of an Accounting
Change, net of tax (f) - (144) -
Net Income $ 7,676 $ 5,206 47.4 %
Three Months Ended
June 30,
2005 2004(a) Change
------- ------- -------
Net Income $ 3,992 $ 2,650 50.6 %
Realized Capital Gains (Losses),
net of tax (g) 185 (129) -
FAS 133 Gains (Losses), excluding
Realized Capital Gains (Losses),
net of tax 825 (120) -
Cumulative Effect of an Accounting
Change, net of tax (f) - - -
Adjusted Net Income (h) 2,982 2,899 2.9
Cumulative Effect of the ILFC
Correction, net of tax (d) (333) - -
Adjusted Net Income excluding
the Cumulative Effect of the ILFC
Correction $ 3,315 $ 2,899 14.3 %
Per Share - Diluted (i):
Net Income $ 1.53 $ 1.01 51.5 %
Realized Capital Gains (Losses), net
of tax (g) 0.07 (0.05) -
FAS 133 Gains (Losses), excluding
Realized Capital Gains (Losses),
net of tax 0.32 (0.04) -
Cumulative Effect of an Accounting
Change, net of tax (f) - - -
Adjusted Net Income (h) 1.14 1.10 3.6
Cumulative Effect of the ILFC
Correction, net of tax (d) (0.13) - -
Adjusted Net Income excluding
the Cumulative Effect of the
ILFC Correction $ 1.27 $ 1.10 15.5 %
Average Diluted Common Shares
Outstanding (i) 2,623 2,640
Six Months Ended June 30,
2005 2004(a) Change
------- ------- -------
Net Income $ 7,676 $ 5,206 47.4 %
Realized Capital Gains (Losses), net
of tax (g) 232 (46) -
FAS 133 Gains (Losses), excluding
Realized Capital Gains (Losses),
net of tax 1,275 (159) -
Cumulative Effect of an Accounting
Change, net of tax (f) - (144) -
Adjusted Net Income (h) 6,169 5,555 11.1
Cumulative Effect of the ILFC
Correction, net of tax (d) (333) - -
Adjusted Net Income excluding
the Cumulative Effect of the ILFC
Correction $ 6,502 $ 5,555 17.0 %
Per Share - Diluted (i):
Net Income $ 2.93 $ 1.98 48.0 %
Realized Capital Gains (Losses), net
of tax (g) 0.09 (0.02) -
FAS 133 Gains (Losses), excluding
Realized Capital Gains (Losses),
net of tax 0.49 (0.05) -
Cumulative Effect of an Accounting
Change, net of tax (f) - (0.06) -
Adjusted Net Income (h) 2.35 2.11 11.4
Cumulative Effect of the ILFC
Correction, net of tax (d) (0.13) - -
Adjusted Net Income excluding
the Cumulative Effect of the ILFC
Correction $ 2.48 $ 2.11 17.5 %
Average Diluted Common Shares
Outstanding (i) 2,623 2,641
* Including reconciliation in accordance with Regulation G.
(a) Certain accounts have been reclassified in 2004 to conform to the
2005 presentation.
(b) For purposes of this presentation, pricing net investment gains
are segregated out of total realized capital gains (losses). They
represent certain amounts of realized capital gains where gains
are an inherent element in pricing certain life products in some
foreign countries.
(c) Includes the unrealized gain (loss) attributable to economic
hedges not qualifying for hedge accounting treatment under FAS 133
"Accounting for Derivative Instruments and Hedging Activities",
including the related foreign exchange gains and losses.
(d) Represents the cumulative effect of the correction of an error
relating to certain manufacturers' payments to ILFC.
(e) Includes the results of certain AIG managed private equity and
real estate funds that are consolidated effective December 31,
2003 pursuant to FIN46R, "Consolidation of Variable Interest
Entities". For the second quarter and six months 2005, operating
income includes $37 million and $112 million, respectively,
compared to $28 million and $32 million for the second quarter and
six months 2004, respectively, of third-party limited partner
earnings offset in Minority Interest Expense. Excluding the
effects of FIN46R, operating income increased 8.4 percent and 18.1
percent for the second quarter and six months ended June 30, 2005,
respectively.
(f) Represents the cumulative effect of an accounting change, net of
tax, related to SOP 03-1 "Accounting and Reporting by Insurance
Enterprises for Certain Nontraditional Long-Duration Contracts and
for Separate Accounts".
(g) Includes a $58 million loss, net of tax, attributable to FAS 133
"Accounting for Derivative Instruments and Hedging Activities", in
the second quarter 2005 and no effect for the six months 2005,
compared to a loss of $2 million and $54 million, net of tax, in
the second quarter and six months 2004, respectively.
(h) Adjusted net income excludes realized capital gains (losses) which
includes pricing net investment gains, cumulative effect of an
accounting change and FAS 133 "Accounting for Derivative
Instruments and Hedging Activities", net of tax.
(i) Assumes conversion of contingently convertible bonds due to the
adoption of EITF Issue No. 04-8 "Accounting Issues Related to
Certain Features of Contingently Convertible Debt and the Effect
on Diluted Earnings per Share" of $2 million and $5 million, net
of tax, for the second quarter and six months 2005, respectively,
compared to $3 million and $6 million, net of tax, for the second
quarter and six months 2004, respectively.
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