AIG Reports Record 2004 Net Income of $11.05 Billion -$4.19 Per Share-, an Increase of 19.1 Percent over 2003.NEW YORK -- American International Group, Inc. (AIG): --Net Income Excluding Realized Capital Gains and Losses and Cumulative Effect of Accounting Changes Increased 12.1 Percent to $11.46 Billion ($4.35 Per Share); --Net Income Excluding Realized Capital Gains and Losses, Cumulative Effect of Accounting Changes, Catastrophe Losses and Settlement Charge Increased 18.8 Percent to $12.19 Billion ($4.63 Per Share) American International Group, Inc. (AIG) today reported that its net income for the full year 2004 increased 19.1 percent to a record $11.05 billion or $4.19 per share, compared to $9.27 billion or $3.52 per share in 2003. Net income excluding realized capital gains (losses) and cumulative effect of accounting changes was $11.46 billion or $4.35 per share, compared to $10.22 billion or $3.88 per share in 2003. Full year 2004 after-tax net catastrophe losses from hurricanes, typhoons, earthquake and tsunamis were $682.7 million or $0.26 per share, compared to after-tax net catastrophe losses of $46.2 million or $0.02 per share in 2003. Full year and fourth quarter 2004 catastrophe losses include an additional $126.9 million, or $0.05 per share, in net after-tax catastrophe losses in connection with late reported losses from the third quarter hurricanes and typhoons. The additional charge is a result of the magnitude of damage from a rapid succession of storms and the shortages in labor and materials required for an efficient and timely rebuilding effort in Florida and other areas impacted by the storms. Fourth quarter and full year 2004 catastrophe losses also include a net after-tax charge of $43.6 million, or $0.02 per share, from the South Asian earthquake and tsunamis. The final settlement with the Securities and Exchange Commission, the United States Department of Justice and the United States 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 resulted in an after-tax charge of $53.0 million or $0.02 per share for the full year of 2004. Net income for 2004 excluding realized capital gains (losses), cumulative effect of accounting changes, catastrophe losses and the settlement charge increased 18.8 percent to $12.19 billion or $4.63 per share, compared to $10.26 billion or $3.90 per share in 2003.
TWELVE MONTHS
(in millions, except per share amounts) (unaudited)
Per Share*
----------
2004 2003 Change 2004 2003 Change
---- ---- ------ ---- ---- ------
Net income $11,047.8 $9,274.2 19.1% $4.19 $3.52 19.0%
Realized capital
gains (losses),
net of tax (226.4) (950.9) - (0.09) (0.36) -
Cumulative effect
of accounting
changes, net of
tax** (181.4) 8.8 - (0.07) - -
Net income,
excluding
realized capital
gains (losses)
and cumulative
effect of
accounting
changes, net of
tax 11,455.7 10,216.3 12.1 4.35 3.88 12.1
Catastrophe
losses, net of
tax (682.7) (46.2) - (0.26) (0.02) -
Settlement
charge, net of
tax (53.0) - - (0.02) - -
Net income,
excluding
realized
capital gains
(losses),
cumulative
effect of
accounting
changes,
catastrophe
losses and
settlement
charge, net of
tax $12,191.4 $10,262.5 18.8% $4.63 $3.90 18.7%
Average shares
outstanding 2,637.3 2,637.3
* Reflects 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." The impact on net
income was $0.01 per share for the years 2004 and 2003.
** Represents the cumulative effect of accounting changes, net of tax,
related to SOP 03-1 "Accounting and Reporting by Insurance
Enterprises for Certain Nontraditional Long-Duration Contracts and
for Separate Accounts" in 2004 and FIN46R "Consolidation of
Variable Interest Entities" in 2003.
Net income for the fourth quarter of 2004 rose 11.5 percent to $3.02 billion or $1.15 per share, compared to $2.71 billion or $1.03 per share in the fourth quarter of 2003. For the fourth quarter 2004, net income excluding realized capital gains (losses) and the cumulative effect of an accounting change increased 11.6 percent to $3.07 billion or $1.17 per share, compared to $2.75 billion or $1.05 per share in the same period of 2003. Fourth quarter 2004 after-tax net catastrophe losses were $170.5 million or $0.07 per share, compared to no catastrophe losses incurred in the same period of 2003. The above mentioned settlement resulted in a fourth quarter 2004 after-tax charge of $53.0 million or $0.02 per share. For the fourth quarter of 2004, net income excluding realized capital gains (losses), the cumulative effect of an accounting change, catastrophe losses and the settlement charge increased 19.7 percent to $3.29 billion or $1.26 per share, compared to $2.75 billion or $1.05 per share in the same period of 2003.
FOURTH QUARTER
(in millions, except per share amounts) (unaudited)
Per Share*
----------
2004 2003 Change 2004 2003 Change
---- ---- ------ ---- ---- ------
Net income $3,017.5 $2,707.3 11.5% $1.15 $1.03 11.7%
Realized capital
gains (losses),
net of tax (52.9) (53.1) - (0.02) (0.02) -
Cumulative effect
of an accounting
change, net of
tax** - 8.8 - - - -
Net income,
excluding
realized capital
gains (losses)
and cumulative
effect of an
accounting
change, net of
tax 3,070.4 2,751.6 11.6 1.17 1.05 11.4
Catastrophe
losses, net of
tax (170.5) - - (0.07) - -
Settlement
charge, net of
tax (53.0) - - (0.02) - -
Net income,
excluding
realized
capital gains
(losses),
cumulative
effect of an
accounting
change,
catastrophe
losses and
settlement
charge, net of
tax $3,293.8 $2,751.6 19.7% $1.26 $1.05 20.0%
Average shares
outstanding 2,632.0 2,636.4
* Reflects 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." The impact on net
income was $0.01 per share for the years 2004 and 2003.
** Represents the cumulative effect of an accounting change, net of
tax, related to FIN46R "Consolidation of Variable Interest
Entities" in 2003.
Income before income taxes, minority interest and cumulative effect of accounting changes for the full year 2004 was $17.25 billion, a 24.0 percent increase over $13.91 billion in 2003. Income before income taxes, minority interest and cumulative effect of an accounting change for the fourth quarter of 2004 was $4.61 billion, a 13.9 percent increase over $4.05 billion in the same period of 2003. The following chart provides a summary of the realized capital (gains) losses, catastrophe losses and settlement charge included in these results:
TWELVE MONTHS FOURTH QUARTER
(in millions) (unaudited)
2004 2003 Change 2004 2003 Change
---- ---- ------ ---- ---- ------
Income before
income taxes,
minority
interest and
cumulative
effect of
accounting
changes $17,250.0 $13,908.3 24.0% $4,612.3 $4,050.5 13.9%
Realized capital
(gains) losses 317.3 1,433.1 68.8 85.3
Catastrophe
Losses:
Domestic
Brokerage Group 526.6 47.5 120.8 -
Personal Lines 24.7 5.0 - -
Transatlantic
Holdings, Inc.
(a) 215.0 3.5 50.0 -
Foreign General 217.3 16.5 77.0 -
Life (Home
Service) (b) 4.7 - - -
Minority owned
companies - AIG
share:
Allied World
Assurance
Holdings,
Ltd 39.4 - - -
IPC
Holdings,
Ltd. 39.4 - 15.0 -
Fuji Fire &
Marine
Insurance
Company
Limited 17.4 - 7.4 -
------------------- -------------------
Total Catastrophe
Losses 1,084.5 72.5 270.2 -
Settlement charge 38.5 - 38.5 -
Income before
income taxes,
minority
interest,
cumulative
effect of
accounting
changes,
realized capital
(gains) losses,
catastrophe
losses and
settlement
charge $18,690.3 $15,413.9 21.3% $4,989.8 $4,135.8 20.6%
(a) AIG's share is $129.0 million in 2004 and $2.1 million in 2003 and
$30.0 million in the fourth quarter 2004.
(b) Relates to minor property-casualty subsidiaries currently in
runoff.
Highlights of Consolidated 2004 results include:
2004 2003 Change
---- ---- ------
Consolidated (unaudited)
------------
Revenues (a)
Full Year $98.61 billion* $81.30 billion 21.3%
Fourth Quarter $25.76 billion* $22.18 billion 16.1%
Net Income
Full Year $11.05 billion* $9.27 billion 19.1%
Fourth Quarter $3.02 billion* $2.71 billion 11.5%
Adjusted Net Income (b)
Full Year $11.46 billion* $10.22 billion 12.1%
Fourth Quarter $3.07 billion* $2.75 billion 11.6%
Adjusted Net Income,
excluding catastrophe
losses and settlement
charge
Full Year $12.19 billion* $10.26 billion 18.8%
Fourth Quarter $3.29 billion* $2.75 billion 19.7%
Shareholders' Equity
At December 31 $83 billion* $71 billion 16.3%
Retained Earnings
At December 31 $71 billion* $61 billion 16.9%
Return on Equity (c)
At December 31, as presented 16.5% 17.2%
Excluding catastrophe losses
and settlement charge 17.5% 17.3%
Consolidated Assets
At December 31 $800 billion* $678 billion 18.0%
Insurance Cash Flow (d)
Full Year $58.79 billion* $46.90 billion 25.4%
Fourth Quarter $14.25 billion $14.55 billion (2.1%)
* Indicates a record.
(a) Represents the sum of General Insurance net premiums earned, GAAP
Life Insurance & Retirement Services premiums, net investment
income, Financial Services interest, lease and finance charges,
Asset Management advisory and management fees, net investment
income with respect to Guaranteed Investment Contracts (GICs) and
realized capital gains (losses).
(b) Excludes realized capital gains (losses) and cumulative effect of
accounting changes, net of tax.
(c) See reconciliation to GAAP ROE in the supplementary earnings data.
(d) 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.
Commenting on these results, AIG Chairman M. R. Greenberg said, "AIG earned record net income in 2004, even after accounting for the unprecedented devastation from the hurricanes, typhoons, earthquake and tsunamis in the second half of the year, which affected the entire industry. In addition, AIG took a charge of $53.0 million after-tax in the fourth quarter in connection with the previously reported settlement reached concerning the Brightpoint and PNC transactions and related matters. The amount of this charge reflects the fact that part of the total cost of the settlement was borne by the AIG Financial Products Corp. incentive compensation pool. "The diversification of AIG - with its four principal business segments, multiple profit centers and broad geographic presence throughout the world - was an especially valuable strength for AIG in 2004. When one or more businesses does not meet our expectations for reasons such as catastrophe losses, market changes or other issues, we have several other profit centers that perform at or above expectations that can enable us to meet our overall objectives. Our ability to absorb $682.7 million in catastrophe losses, tackle challenging regulatory issues and navigate through a volatile global economic and political environment and still achieve record net income is a testament to the diversity and strength of our franchise. This diversification, coupled with our unsurpassed capital base, is also a pillar of financial security for our customers. "AIG has also taken several steps in response to the regulatory issues that we faced in 2004. We are implementing the settlements of the Brightpoint and PNC transactions. In addition, AIG has been continuing to cooperate with state attorneys general and insurance departments in connection with their investigations of certain practices of brokers and insurers. Approximately 40 outside attorneys have assisted us in our internal review, and they have examined in excess of 850,000 emails and 30,000 documents. Based on all of the information we have today, we continue to believe that the issue that has been the primary focus of the New York Attorney General's investigation of AIG is confined to one broker relationship and one unit, the Excess Casualty Division of American Home Assurance Company. "We will continue to do whatever it takes to assure that every one of our 92,000 employees upholds the highest ethical standards. AIG has formed a Complex Structured Finance Transaction Committee comprised of senior executives from the businesses and from the finance, legal and claims functions to review certain proposed transactions. Since April, AIG Financial Products Corp. has also had its own Transaction Review Committee. "In order to provide the highest standards of risk management throughout the organization, we brought together our credit, market and operational risk management capabilities into one Enterprise Risk Management department, which is led by a senior executive who brings nearly 30 years of experience to the function. "Also, we have augmented on a worldwide basis, in several different languages, our ethics education program to reinforce the standards set forth in our Code of Conduct. We have enhanced the role of the Chief Compliance Officer, who has the support of 250 compliance officers around the world. Employees have a Compliance Help Line they can contact that is accessible in more than 70 languages. "Although we are giving these issues our full attention, they have not distracted us from managing our businesses, serving our customers and performing for our shareholders."
GENERAL INSURANCE
-----------------
Twelve Months Ended Three Months Ended
December 31, December 31,
(in millions) (unaudited)
2004 2003 Change 2004 2003 Change
---- ---- ------ ---- ---- ------
General
Insurance
Operations*:
Net Premiums
Written $41,902.1 $35,211.8 19.0 % $10,578.9 $9,159.2 15.5 %
Underwriting
Profit 1,871.3 2,220.8 (15.7) 504.4 551.2 (8.5)
Net Investment
Income 3,559.2 3,021.6 17.8 940.7 764.4 23.1
Operating
Income before
Realized
Capital
Gains
(Losses) 5,430.5 5,242.4 3.6 1,445.2 1,315.6 9.9
Operating
Income,
excluding
Realized
Capital
Gains
(Losses)
and
Catastrophe
Losses 6,414.1 5,314.9 20.7 1,693.0 1,315.6 28.7
Cash Flow $ 14,191 $ 13,631 4.1 % $ 3,841 $ 4,136 (7.1)%
----------------------------------------------------------------------
Combined
Ratio 95.02 92.43 94.25 91.39
Combined
Ratio,
excluding
Catastrophe
Losses 92.53 92.20 91.87 91.39
----------------------------------------------------------------------
* Reconciliation in accordance with Regulation G provided in Financial
Highlights and Supplementary Earnings Data.
General Insurance had a solid year and quarter in the U.S. and around the world, in spite of record levels of catastrophe losses. The full year 2004 combined ratio of 95.02, including 2.49 points of catastrophe losses, demonstrates the strength of our underwriting discipline. Worldwide General Insurance net investment income increased 17.8 percent for the full year 2004, and fourth quarter 2004 net investment income increased 23.1 percent. Strong cash flow as well as very strong partnership income contributed to this growth. General Insurance cash flow totaled a record $14.19 billion in 2004. At December 31, 2004, General Insurance net loss and loss adjustment reserves totaled $46.26 billion, an increase of $9.61 billion and $2.44 billion in the full year and fourth quarter, respectively. In the United States, the Domestic Brokerage Group did well even after accounting for the four hurricanes. Lexington, the largest excess and surplus lines carrier and a major underwriter of property insurance, was significantly impacted by catastrophe losses. Domestic property-casualty rates are generally satisfactory at this time, although in some classes of business, including property, D&O and energy, rates should be firmer. The AIG companies will maintain our standards, however, and not follow rates down to levels considered unacceptable. HSB Group, the leader in equipment breakdown insurance, had another year of record premiums and record underwriting results. Domestic Personal Lines, including the Private Client Group, had solid underwriting results and strong premium growth in 2004. AIG United Guaranty Corporation achieved record premiums in 2004, excellent underwriting results that are substantially better than the overall mortgage guaranty insurance industry and continued expansion of its international operations. Transatlantic Holdings, Inc., which was substantially impacted by record catastrophes in the U.S. and around the world, had operating income of $259.8 million in 2004 compared to $379.6 million last year. Underlying results were strong, as operating income excluding catastrophe losses increased 23.9 percent. Foreign General Insurance, one of AIG's crown jewels, had excellent results in 2004, and performed well in every region around the world. Despite sustaining $217.3 million in catastrophe losses, Foreign General produced $841.5 million in underwriting income, achieved a combined ratio of 88.78 and generated net investment income of $647.5 million. These results are a testament to Foreign General's extensive geographic network, diverse product mix, underwriting skill and broad distribution, which are unmatched in the industry.
LIFE INSURANCE & RETIREMENT SERVICES
------------------------------------
Twelve Months Ended Three Months Ended
December 31, December 31,
(in millions) (unaudited)
2004 2003 (a) Change 2004 2003 (a) Change
---- -------- ------ ---- -------- ------
Life Insurance
& Retirement
Services
Operations*:
GAAP Premiums $28,396.8 $23,491.5 20.9 % $ 7,295.4 $ 6,507.4 12.1 %
Premiums,
Deposits and
Other
Considerations 66,911.3 53,106.8 26.0 16,314.8 16,128.2 1.2
Net Investment
Income 15,793.3 13,574.1 16.3 4,151.2 3,628.7 14.4
Operating
Income before
Realized
Capital Gains
(Losses) $ 8,686.0 $ 7,281.4 19.3 % $ 2,277.6 $ 1,965.7 15.9 %
------------------------------------------ ---------------------------
* Reconciliation in accordance with Regulation G provided in
Financial Highlights and Supplementary Earnings Data.
(a) Restated to conform to 2004 presentation.
Worldwide Life Insurance & Retirement Services results were very good overall. AIG's Foreign Life Insurance & Retirement Services operations continued to have outstanding results, with record operating income and strong premium growth in both the full year and fourth quarter. AIG's Domestic Life Insurance business had mixed results, while the Domestic Retirement Services business was excellent. The Foreign Life business in Asia achieved - as it has historically - excellent growth and profitability. Japan and China had particularly strong growth and Southeast Asia overall performed satisfactorily. In China, where AIG has a 57 percent market share of the total 2004 premiums written by foreign insurers, first year life insurance premiums increased 36.6 percent in 2004 over the prior year. In addition, we had very good results in Greece, Central Europe and Russia. The Foreign Retirement Services business continues its strong growth as we have built upon our success in Japan and Korea by expanding our extensive distribution network and leveraging our product expertise to introduce annuity products in new markets. In January, AIG Star Life Insurance Co., Ltd. entered into an agreement with the Bank of Tokyo Mitsubishi, one of Japan's largest banks, to market a multi-currency fixed annuity. Domestic Life Insurance results from term life, universal life and structured settlement products were strong. However, AGLA AGLA - Arlington Gay and Lesbian Alliance (Virginia), the home services business, lagged our objectives. We are redesigning the company from the ground up, diversifying product offerings, enhancing the capabilities and quality of the sales force and broadening the markets served beyond those historically serviced by AGLA. We expect these steps will begin to show positive results toward the second half of 2005. In the meantime the company generates strong cash flow. Domestic Group Life performance also was weak in 2004, as we discussed in previous quarters. Restructuring efforts in this business are focused on new product introductions, cross selling and other growth strategies. Results should begin to be evident later in 2005. Domestic Retirement Services had outstanding profitability in each of its three principal businesses-group retirement products, individual fixed annuities Fixed annuities Contracts in which an insurance company or issuing financial institution pays a fixed dollar amount of money per period. and individual variable annuities. AIG VALIC, the group
retirement business, broke the billion dollar mark in operating income.
Annuity and mutual fund deposits were $6.50 billion in 2004 and general
and separate account reserves were $56.12 billion at year end, both of
which increased approximately 10 percent.The individual fixed annuity business, primarily AIG Annuity, had record operating income in 2004. Rising short-term interest rates in the latter part of 2004 and aggressive competitor pricing contributed to the difficult sales and net flow comparisons, but we have developed strategies to deal with the changing environment. The company will remain disciplined in pricing and return requirements. AIG SunAmerica Retirement Markets, the individual variable annuity business, reported record operating income and sales in 2004. Equity market gains, along with the strong increase in sales and net flows, resulted in a significant improvement in variable annuity fee income when compared to 2003. The decrease in fourth quarter sales followed declining equity markets in the third quarter and the first half of the fourth quarter. We are continuing to increase the size of the wholesale organization as a measure to improve sales.
FINANCIAL SERVICES
------------------
Twelve Months Ended Three Months Ended
December 31, December 31,
(in millions) (unaudited)
2004 2003 Change 2004 2003 Change
---- ---- ------ ---- ---- ------
Financial Services
Operations:
Revenues $7,684.0 $7,565.5 1.6 % $1,916.0 $2,069.8 (7.4)%
Operating
Income $2,379.0 $2,464.2 (3.5)% $ 591.2 $ 702.5 (15.8)%
-------------------------------------------- -------------------------
Financial Services overall had a difficult year in 2004. Of the three major components, Consumer Finance, both domestically and internationally, did very well with good top and bottom line growth. International Lease Finance Corporation (ILFC) had 2004 operating income of $739.4 million, an increase of 1.6 percent over 2003. Excluding the impact of the securitization of approximately $2 billion in aircraft in late 2003 and early 2004, operating income would have increased approximately 6.4 percent in 2004 and 9.2 percent in the fourth quarter 2004. The commercial aviation market showed good momentum in the fourth quarter, as ILFC continued to see net improvements in lease margins and an increasing level of interest from traditional buyers, third party investors and debt providers for the purchase of aircraft from ILFC's extensive lease portfolio. The outlook for 2005 is positive. Capital Markets earned $857.5 million in 2004, and although very profitable overall, these results lagged the prior year. At AIG Financial Products Corp. (AIGFP), the regulatory issue which resulted in the settlement charge had a negative impact on results. However, with the settlement completed, AIGFP is focused on its 2005 business opportunities and should do well going forward.
ASSET MANAGEMENT
----------------
Twelve Months Ended Three Months Ended
December 31, December 31,
(in millions) (unaudited)
2004 2003 (a) Change 2004 2003 (a) Change
---- -------- ------ ---- -------- ------
Asset Management
Operations:
Revenues $4,043.6 $3,349.1 20.7 %$1,116.7 $ 890.7 25.4 %
Operating
Income $1,175.9 $ 817.5 43.8 %$ 307.2 $ 239.4 28.3 %
----------------------------------------------------------------------
(a) Restated to conform to 2004 presentation.
Asset Management operating income was $1.18 billion in 2004, compared to $817.5 million last year. Institutional Asset Management results in 2004 include $195 million in third party limited partner earnings from certain AIG managed private equity and real estate funds, now required to be consolidated under FIN46R. Assets under management increased to over $53 billion at year end. From a virtual start up in 1996, AIG now ranks among the top six institutional asset managers in the world. Guaranteed Investment Contracts (GICs) contributed $636.3 million to operating income in 2004 compared to $546.8 million in 2003. GICs will continue to be sold on an opportunistic basis, and we are implementing a new institutional and retail sales program that should enable us to achieve enhanced rates of return from this business. In the Other Income/Deductions - net category, AIG reported a loss of $104.1 million in 2004 compared to a loss of $464.0 million a year earlier. The underlying improvement continues to be primarily attributable to increased income related to SunAmerica partnership investments. 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 retirement services, financial 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 in the U.S. on the New York Stock Exchange and ArcaEx, 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. EST. The call will be broadcast live on the Internet at: www.aigwebcast.com The call will be archived at the same URL through Wednesday, February 23, 2005. 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 September 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. 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), catastrophe losses and the settlement charge. 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. Capital gains can be a terrible financial shock to individuals who bought a house or business many years ago for the going price and now find it is highly valued, greatly due to inflation. 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 a 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 twelve months and fourth quarter 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. AIG presents net income and operating income excluding the charge incurred with respect to the final settlement with the Securities and Exchange Commission, the United States Department of Justice and the United States 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, because AIG considers such charge an unusual and non-recurring item.
American International Group, Inc.
Financial Highlights*
(in thousands, except per share amounts) (unaudited)
Three Months Ended December 31,
2004 2003 Change
------------ ------------ --------
General Insurance Operations:
Net Premiums Written $ 10,578,872 $ 9,159,196 15.5 %
Net Premiums Earned 10,406,215 8,403,206 23.8
Underwriting Profit 504,442 551,195 (8.5)
Net Investment Income 940,743 764,363 23.1
Income before Realized Capital
Gains (Losses) 1,445,185 1,315,558 9.9
Realized Capital Gains (Losses) 12,702 158,264 -
Operating Income 1,457,887 1,473,822 (1.1)
Operating Income, excluding
Realized Capital Gains
(Losses) and
Catastrophe Losses $ 1,692,985 $ 1,315,558 28.7 %
----------------------------------------------------------------------
Loss Ratio 73.93 71.83
Expense Ratio 20.32 19.56
Combined Ratio 94.25 91.39
Combined Ratio, excluding
Catastrophe Losses 91.87 91.39
----------------------------------------------------------------------
Life Insurance & Retirement Services
Operations (a):
GAAP Premiums $ 7,295,395 $ 6,507,399 12.1 %
Net Investment Income 4,151,240 3,628,711 14.4
Income before Realized Capital
Gains (Losses) 2,277,564 1,965,711 15.9
Realized Capital Gains (Losses) 96,413 (45,200) -
Operating Income 2,373,977 1,920,511 23.6
Financial Services Operating Income 591,221 702,452 (15.8)
Asset Management
Operating Income (a)(b) 307,198 239,435 28.3
Other Realized Capital
Gains (Losses) (a) (177,920) (198,410) -
Other Income (Deductions) - net 59,948 (87,312) -
Income before Income Taxes, Minority
Interest and Cumulative Effect of
Accounting Changes 4,612,311 4,050,498 13.9
Income Taxes 1,436,282 1,259,459 -
Income before Minority Interest
and Cumulative Effect of
Accounting Changes 3,176,029 2,791,039 13.8
Minority Interest, after-tax -
Income before Realized Capital
Gains (Losses) (151,034) (94,666) -
Realized Capital Gains (Losses) (7,531) 2,153 -
Income before Cumulative Effect of
Accounting Changes 3,017,464 2,698,526 11.8
Cumulative Effect of Accounting
Changes, net of tax (c) 0 8,778 -
Net Income $ 3,017,464 $ 2,707,304 11.5 %
Twelve Months Ended December 31,
2004 2003 Change
------------ ------------ --------
General Insurance Operations:
Net Premiums Written $ 41,902,055 $ 35,211,785 19.0 %
Net Premiums Earned 39,455,092 31,734,307 24.3
Underwriting Profit 1,871,331 2,220,773 (15.7)
Net Investment Income 3,559,214 3,021,601 17.8
Income before Realized Capital
Gains (Losses) 5,430,545 5,242,374 3.6
Realized Capital Gains (Losses) 31,556 (172,461) -
Operating Income 5,462,101 5,069,913 7.7
Operating Income, excluding
Realized Capital Gains
(Losses) and
Catastrophe Losses $ 6,414,145 $ 5,314,874 20.7 %
----------------------------------------------------------------------
Loss Ratio 75.20 73.33
Expense Ratio 19.82 19.10
Combined Ratio 95.02 92.43
Combined Ratio, excluding
Catastrophe Losses 92.53 92.20
----------------------------------------------------------------------
Life Insurance & Retirement Services
Operations (a):
GAAP Premiums $ 28,396,845 $ 23,491,466 20.9 %
Net Investment Income 15,793,315 13,574,121 16.3
Income before Realized Capital
Gains (Losses) 8,685,966 7,281,351 19.3
Realized Capital Gains (Losses) (9,910) (701,718) -
Operating Income 8,676,056 6,579,633 31.9
Financial Services Operating Income 2,378,958 2,464,169 (3.5)
Asset Management
Operating Income (a)(b) 1,175,895 817,531 43.8
Other Realized Capital
Gains (Losses) (a) (338,934) (558,927) -
Other Income (Deductions) - net (104,090) (464,011) -
Income before Income Taxes, Minority
Interest and Cumulative Effect of
Accounting Changes 17,249,986 13,908,308 24.0
Income Taxes 5,472,691 4,263,947 -
Income before Minority Interest
and Cumulative Effect of
Accounting Changes 11,777,295 9,644,361 22.1
Minority Interest, after-tax -
Income before Realized Capital
Gains (Losses) (532,882) (378,494) -
Realized Capital Gains (Losses) (15,152) (440) -
Income before Cumulative Effect of
Accounting Changes 11,229,261 9,265,427 21.2
Cumulative Effect of Accounting
Changes, net of tax (c) (181,431) 8,778 -
Net Income $ 11,047,830 $ 9,274,205 19.1 %
Three Months Ended December 31,
2004 2003 Change
------------ ------------ --------
Net Income $ 3,017,464 $ 2,707,304 11.5 %
Realized Capital Gains (Losses),
net of tax (52,917) (53,088) -
Cumulative Effect of Accounting
Changes, net of tax (c) 0 8,778 -
Net Income, excluding Realized
Capital Gains (Losses) and
Cumulative Effect of Accounting
Changes, net of tax 3,070,381 2,751,614 11.6
Catastrophe Losses, net of tax (170,470) 0 -
Settlement Charge, net of tax (52,997) 0 -
Net Income, excluding Realized
Capital Gains (Losses), Cumulative
Effect of Accounting Changes,
Catastrophe Losses and Settlement
Charge, net of tax $ 3,293,848 $ 2,751,614 19.7 %
Per Share - Diluted (d):
Net Income $ 1.15 $ 1.03 11.7 %
Realized Capital Gains (Losses),
net of tax (0.02) (0.02) -
Cumulative Effect of Accounting
Changes, net of tax (c) 0.00 0.00 -
Net Income, excluding Realized
Capital Gains (Losses) and
Cumulative Effect of Accounting
Changes, net of tax 1.17 1.05 11.4
Catastrophe Losses, net of tax (0.07) 0.00 -
Settlement Charge, net of tax (0.02) 0.00 -
Net Income, excluding Realized
Capital Gains (Losses), Cumulative
Effect of Accounting Changes,
Catastrophe Losses and Settlement
Charge, net of tax $ 1.26 $ 1.05 20.0 %
Average Diluted Common
Shares Outstanding (d) 2,632,049 2,636,437
Twelve Months Ended December 31,
2004 2003 Change
------------ ------------ --------
Net Income $ 11,047,830 $ 9,274,205 19.1 %
Realized Capital Gains (Losses),
net of tax (226,439) (950,923) -
Cumulative Effect of Accounting
Changes, net of tax (c) (181,431) 8,778 -
Net Income, excluding Realized
Capital Gains (Losses) and
Cumulative Effect of Accounting
Changes, net of tax 11,455,700 10,216,350 12.1
Catastrophe Losses, net of tax (682,676) (46,215) -
Settlement Charge, net of tax (52,997) 0 -
Net Income, excluding Realized
Capital Gains (Losses), Cumulative
Effect of Accounting Changes,
Catastrophe Losses and Settlement
Charge, net of tax $ 12,191,373 $ 10,262,565 18.8 %
Per Share - Diluted (d):
Net Income $ 4.19 $ 3.52 19.0 %
Realized Capital Gains (Losses),
net of tax (0.09) (0.36) -
Cumulative Effect of Accounting
Changes, net of tax (c) (0.07) 0.00 -
Net Income, excluding Realized
Capital Gains (Losses) and
Cumulative Effect of Accounting
Changes, net of tax 4.35 3.88 12.1
Catastrophe Losses, net of tax (0.26) (0.02) -
Settlement Charge, net of tax (0.02) 0.00 -
Net Income, excluding Realized
Capital Gains (Losses), Cumulative
Effect of Accounting Changes,
Catastrophe Losses and Settlement
Charge, net of tax $ 4.63 $ 3.90 18.7 %
Average Diluted Common
Shares Outstanding (d) 2,637,290 2,637,280
* 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 fourth quarter and twelve months 2004, operating income
includes $48 million and $195 million, respectively, of
third-party limited partner earnings offset in Minority Interest
Expense.
(c) Represents the cumulative effect of accounting changes, net of
tax, related to SOP 03-1 "Accounting and Reporting by Insurance
Enterprises for Certain Nontraditional Long-Duration Contracts and
for Separate Accounts" in 2004 and FIN46R "Consolidation of
Variable Interest Entities" in 2003.
(d) Reflects 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." The impact on net
income was $0.01 per share for the years 2004 and 2003.
American International Group, Inc.
Operating Income
(in thousands) (unaudited)
Three Months Ended December 31,
2004 2003 Change
------------ ------------ -------
General Insurance:
Domestic Brokerage Group $ 806,217 $ 710,534 13.5 %
Personal Lines 101,165 79,582 27.1
Mortgage Guaranty 83,119 87,380 (4.9)
Transatlantic Holdings 85,775 103,082 (16.8)
Foreign General (a) 368,790 333,262 10.7
Intercompany Adjustments 119 1,718 -
Realized Capital Gains (Losses) 12,702 158,264 -
Life Insurance & Retirement Services (b):
Domestic
Life Insurance 226,408 211,889 6.9
Home Service 90,073 101,504 (11.3)
Group Life/Health 26,006 32,047 (18.9)
Payout Annuities (c) 34,727 30,406 14.2
Retirement Services
Group Retirement Products 282,079 226,227 24.7
Individual Fixed Annuities 265,490 216,382 22.7
Individual Variable
Annuities 41,114 29,708 38.4
Individual Annuities -
Runoff (d) 33,329 47,707 (30.1)
Intercompany Adjustments (101) (87) -
Realized Capital Gains (Losses) (118,960) (92,616) -
Foreign
Life Insurance 835,562 733,693 13.9
Personal Accident & Health 305,325 243,553 25.4
Group Products 53,956 52,577 2.6
Retirement Services
Individual Fixed Annuities 81,732 43,111 89.6
Individual Variable
Annuities 6,788 1,261 438.3
Intercompany Adjustments (4,924) (4,267) -
Realized Capital Gains (Losses) 215,373 47,416 -
Financial Services:
Aircraft Finance 192,533 179,599 7.2
Capital Markets 193,645 357,231 (45.8)
Consumer Finance 207,724 160,311 29.6
Other (e) (2,681) 5,311 -
Asset Management (b):
Guaranteed Investment Contracts
Domestic 146,496 144,872 1.1
Foreign 12,398 9,277 33.6
Institutional Asset
Management (f)(g) 132,105 69,266 90.7
Brokerage Services and
Mutual Funds 16,199 16,020 1.1
Other Realized Capital
Gains (Losses) (b) (177,920) (198,410) -
Other Income (Deductions) - net 59,948 (87,312) -
Income before Income Taxes, Minority
Interest and Cumulative Effect
of Accounting Changes 4,612,311 4,050,498 13.9
Income before Income Taxes, Minority
Interest, Realized Capital Gains
(Losses) and Cumulative Effect
of Accounting Changes $ 4,681,116 $ 4,135,844 13.2 %
Twelve Months Ended December 31,
2004 2003 Change
------------ ------------ -------
General Insurance:
Domestic Brokerage Group $ 2,950,712 $ 2,728,087 8.2 %
Personal Lines 351,299 252,495 39.1
Mortgage Guaranty 379,345 406,547 (6.7)
Transatlantic Holdings 259,790 379,591 (31.6)
Foreign General (a) 1,488,925 1,468,784 1.4
Intercompany Adjustments 474 6,870 -
Realized Capital Gains (Losses) 31,556 (172,461) -
Life Insurance & Retirement Services (b):
Domestic
Life Insurance 898,005 807,568 11.2
Home Service 390,237 400,126 (2.5)
Group Life/Health 97,424 119,957 (18.8)
Payout Annuities (c) 140,344 125,956 11.4
Retirement Services
Group Retirement Products 1,087,897 901,718 20.6
Individual Fixed Annuities 928,316 708,160 31.1
Individual Variable
Annuities 173,323 66,251 161.6
Individual Annuities -
Runoff (d) 171,520 209,692 (18.2)
Intercompany Adjustments (378) (302) -
Realized Capital Gains (Losses) (289,374) (419,558) -
Foreign
Life Insurance 3,133,748 2,779,749 12.7
Personal Accident & Health 1,156,337 851,902 35.7
Group Products 252,151 202,131 24.7
Retirement Services
Individual Fixed Annuities 262,257 122,299 114.4
Individual Variable
Annuities 13,167 849 -
Intercompany Adjustments (18,382) (14,705) -
Realized Capital Gains (Losses) 279,464 (282,160) -
Financial Services:
Aircraft Finance 739,410 727,956 1.6
Capital Markets 857,480 1,085,894 (21.0)
Consumer Finance 787,132 648,864 21.3
Other (e) (5,064) 1,455 -
Asset Management (b):
Guaranteed Investment Contracts
Domestic 592,780 505,451 17.3
Foreign 43,519 41,368 5.2
Institutional Asset
Management (f)(g) 470,031 210,955 122.8
Brokerage Services and
Mutual Funds 69,565 59,757 16.4
Other Realized Capital
Gains (Losses) (b) (338,934) (558,927) -
Other Income (Deductions) - net (104,090) (464,011) -
Income before Income Taxes, Minority
Interest and Cumulative Effect
of Accounting Changes 17,249,986 13,908,308 24.0
Income before Income Taxes, Minority
Interest, Realized Capital Gains
(Losses) and Cumulative Effect
of Accounting Changes $ 17,567,274 $ 15,341,414 14.5 %
(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 fourth quarter and twelve months 2004, operating income
includes $48 million and $195 million, respectively, of third-
party limited partner earnings offset in Minority Interest
Expense.
American International Group, Inc.
Supplementary Earnings Data*
(in thousands) (unaudited)
Three Months Ended December 31,
2004 2003 Change
------------ ------------ -------
General Insurance Operations:
Net Premiums Written
Domestic Brokerage Group $ 6,205,755 $ 5,327,656 16.5 %
Personal Lines 1,039,453 1,002,322 3.7
Mortgage Guaranty 154,600 141,546 9.2
Transatlantic Holdings 927,222 868,891 6.7
Foreign General (a) 2,251,842 1,818,781 23.8
------------ ------------
Total 10,578,872 9,159,196 15.5
Operating Income
Domestic Brokerage Group(b) 806,217 710,534 13.5
Personal Lines(b) 101,165 79,582 27.1
Mortgage Guaranty 83,119 87,380 (4.9)
Transatlantic Holdings(b) 85,775 103,082 (16.8)
Foreign General (a)(b)(c) 368,790 333,262 10.7
Intercompany Adjustments 119 1,718 -
------------ ------------
Total before Realized
Capital Gains 1,445,185 1,315,558 9.9
Realized Capital Gains (Losses) 12,702 158,264 -
Operating Income $ 1,457,887 $ 1,473,822 (1.1)%
-------------------------------------------------------------------
Combined Ratio:
Domestic Brokerage Group 95.73 93.53
Personal Lines 95.87 96.03
Mortgage Guaranty 63.27 54.57
Transatlantic Holdings 100.69 96.03
Foreign General (a) 89.45 86.91
Total 94.25 91.39
-------------------------------------------------------------------
Operating Income Excluding Catastrophe Losses:
Domestic Brokerage Group(b) $ 927,017 $ 710,534 30.5 %
Personal Lines(b) 101,165 79,582 27.1
Mortgage Guaranty 83,119 87,380 (4.9)
Transatlantic Holdings(b) 135,775 103,082 31.7
Foreign General (a)(b)(c) 445,790 333,262 33.8
Intercompany Adjustments 119 1,718 -
------------ ------------
Total before Realized
Capital Gains (Losses) and
Catastrophe Losses $ 1,692,985 $ 1,315,558 28.7 %
-------------------------------------------------------------------
Combined Ratio Excluding Catastrophe Losses:
Domestic Brokerage Group 93.71 93.53
Personal Lines 95.87 96.03
Mortgage Guaranty 63.27 54.57
Transatlantic Holdings 95.32 96.03
Foreign General (a) 86.05 86.91
Total 91.87 91.39
Twelve Months Ended December 31,
2004 2003 Change
------------ ------------ -------
General Insurance Operations:
Net Premiums Written
Domestic Brokerage Group $ 23,752,212 $ 20,061,153 18.4 %
Personal Lines 4,327,813 3,706,108 16.8
Mortgage Guaranty 607,247 531,558 14.2
Transatlantic Holdings 3,749,274 3,341,077 12.2
Foreign General (a) 9,465,509 7,571,889 25.0
------------ ------------
Total 41,902,055 35,211,785 19.0
Operating Income
Domestic Brokerage Group(b) 2,950,712 2,728,087 8.2
Personal Lines(b) 351,299 252,495 39.1
Mortgage Guaranty 379,345 406,547 (6.7)
Transatlantic Holdings(b) 259,790 379,591 (31.6)
Foreign General (a)(b)(c) 1,488,925 1,468,784 1.4
Intercompany Adjustments 474 6,870 -
------------ ------------
Total before Realized
Capital Gains 5,430,545 5,242,374 3.6
Realized Capital Gains(Losses) 31,556 (172,461) -
Operating Income $ 5,462,101 $ 5,069,913 7.7 %
-------------------------------------------------------------------
Combined Ratio:
Domestic Brokerage Group 97.18 94.38
Personal Lines 96.17 97.38
Mortgage Guaranty 54.60 48.67
Transatlantic Holdings 101.46 96.46
Foreign General (a) 88.78 87.49
Total 95.02 92.43
-------------------------------------------------------------------
Operating Income Excluding Catastrophe Losses:
Domestic Brokerage Group(b) $ 3,477,312 $ 2,775,587 25.3 %
Personal Lines(b) 375,999 257,495 46.0
Mortgage Guaranty 379,345 406,547 (6.7)
Transatlantic Holdings(b) 474,790 383,091 23.9
Foreign General (a)(b)(c) 1,706,225 1,485,284 14.9
Intercompany Adjustments 474 6,870 -
------------ ------------
Total before Realized
Capital Gains (Losses) and
Catastrophe Losses $ 6,414,145 $ 5,314,874 20.7 %
-------------------------------------------------------------------
Combined Ratio Excluding Catastrophe Losses:
Domestic Brokerage Group 94.81 94.10
Personal Lines 95.59 97.25
Mortgage Guaranty 54.60 48.67
Transatlantic Holdings 95.59 96.35
Foreign General (a) 86.30 87.26
Total 92.53 92.20
* 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 fourth quarter 2004 by
segment were: Domestic Brokerage Group $120.8 million,
Transatlantic Holdings $50.0 million and Foreign General
$77.0 million. Pretax catastrophe losses for the twelve
months 2004 by segment were: Domestic Brokerage Group
$526.6 million, Personal Lines $24.7 million,
Transatlantic Holdings $215.0 million and Foreign General
$217.3 million. Pretax catastrophe losses for the fourth
quarter 2003 were $0. Pretax catastrophe losses for the
twelve 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, fourth quarter and twelve
months 2004 underwriting profit rose 50.1% and 32.8%,
respectively, compared to the same periods in 2003.
Three Months Ended December 31,
2004 2003 Change
------------ ------------ -------
General Insurance Operations:
Losses and Loss Expenses Paid
(a) $ 5,251,348 $ 4,480,244 17.2 %
Change in Loss and
Loss Expense Reserve 2,442,305 1,555,551 57.0
------------ ------------
Losses and Loss Expenses
Incurred 7,693,653 6,035,795 27.5
Underwriting Profit 504,442 551,195 (8.5)
Underwriting Profit Excluding
Catastrophe Losses $ 752,242 $ 551,195 36.5 %
-------------------------------------------------------------------
Foreign Exchange Impact on Growth
of Net Premiums Written
Worldwide
Growth in Original Currency 14.2 %
Foreign Exchange Impact 1.3
Growth as Reported in U.S.$ 15.5
Foreign General (b)
Growth in Original Currency 19.2
Foreign Exchange Impact 4.6
Growth as Reported in U.S.$ 23.8 %
Twelve Months Ended December 31,
2004 2003 Change
------------ ------------ -------
General Insurance Operations:
Losses and Loss Expenses Paid
(a) $ 20,056,298 $ 17,363,301 15.5 %
Change in Loss and
Loss Expense Reserve 9,614,056 5,906,211 62.8
------------ ------------
Losses and Loss Expenses
Incurred 29,670,354 23,269,512 27.5
Net Loss and Loss Expense
Reserve 46,261,144 36,647,088 26.2
Underwriting Profit 1,871,331 2,220,773 (15.7)
Underwriting Profit Excluding
Catastrophe Losses $ 2,854,931 $ 2,293,273 24.5 %
-------------------------------------------------------------------
Foreign Exchange Impact on Growth
of Net Premiums Written
Worldwide
Growth in Original Currency 16.9 %
Foreign Exchange Impact 2.1
Growth as Reported in U.S.$ 19.0
Foreign General (b)
Growth in Original Currency 17.0
Foreign Exchange Impact 8.0
Growth as Reported in U.S.$ 25.0 %
(a) The paid loss ratios for the three months ended December 31, 2004
and 2003 were 50.46 and 53.32, respectively. The paid loss ratios
for the twelve months ended December 31, 2004 and 2003 were 50.83
and 54.72, 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) Foreign General insurance excludes the foreign operations of
Transatlantic Holdings, Inc.
Three Months Ended December 31,
2004 2003 (a) Change
------------ ------------ -------
Life Insurance & Retirement Services
Operations:
GAAP Premiums
Domestic
Life Insurance $ 474,413 $ 433,842 9.4 %
Home Service 199,936 209,052 (4.4)
Group Life/Health 269,582 281,751 (4.3)
Payout Annuities (b) 358,295 263,706 35.9
Retirement Services
Group Retirement Products 81,833 70,475 16.1
Individual Fixed Annuities 15,810 17,712 (10.7)
Individual Variable
Annuities 107,370 91,171 17.8
Individual Annuities -
Runoff (c) 21,774 24,228 (10.1)
------------ ------------
Total 1,529,013 1,391,937 9.8
Foreign
Life Insurance 4,112,802 3,765,837 9.2
Personal Accident & Health 1,130,717 940,244 20.3
Group Products (d) 387,201 322,110 20.2
Retirement Services
Individual Fixed Annuities 113,020 80,463 40.5
Individual Variable
Annuities 22,642 6,808 232.6
------------ ------------
Total 5,766,382 5,115,462 12.7
Total GAAP Premiums 7,295,395 6,507,399 12.1
-------------------------------------------------------------------
Premiums, Deposits and Other
Considerations (e)
Domestic
Life Insurance 697,992 692,696 0.8
Home Service 234,913 253,655 (7.4)
Group Life/Health 269,582 288,133 (6.4)
Payout Annuities 534,556 465,139 14.9
Retirement Services
Group Retirement Products 1,413,244 1,355,189 4.3
Individual Fixed Annuities 1,981,406 3,198,907 (38.1)
Individual Variable
Annuities 869,336 926,735 (6.2)
Individual Annuities -
Runoff 58,328 74,533 (21.7)
------------ ------------
Total 6,059,357 7,254,987 (16.5)
Foreign
Life Insurance 5,022,857 4,419,672 13.6
Personal Accident & Health 1,124,718 927,082 21.3
Group Products (d) 617,219 499,801 23.5
Retirement Services
Individual Fixed Annuities 3,089,070 2,710,278 14.0
Individual Variable
Annuities 401,559 316,397 26.9
------------ ------------
Total 10,255,423 8,873,230 15.6
Total Premiums, Deposits and
Other Considerations $ 16,314,780 $ 16,128,217 1.2 %
Twelve Months Ended December 31,
2004 2003 (a) Change
------------ ------------ -------
Life Insurance & Retirement Services Operations:
GAAP Premiums
Domestic
Life Insurance $ 1,881,392 $ 1,747,954 7.6 %
Home Service 811,802 834,212 (2.7)
Group Life/Health 1,128,091 1,046,192 7.8
Payout Annuities (b) 1,484,314 1,272,123 16.7
Retirement Services
Group Retirement Products 312,951 250,409 25.0
Individual Fixed Annuities 58,482 52,933 10.5
Individual Variable
Annuities 407,443 330,795 23.2
Individual Annuities -
Runoff (c) 80,344 85,440 (6.0)
------------ ------------
Total 6,164,819 5,620,058 9.7
Foreign
Life Insurance 15,247,705 13,202,404 15.5
Personal Accident & Health 4,302,226 3,126,249 37.6
Group Products (d) 2,218,822 1,266,909 75.1
Retirement Services
Individual Fixed Annuities 395,360 254,483 55.4
Individual Variable
Annuities 67,913 21,363 217.9
------------ ------------
Total 22,232,026 17,871,408 24.4
Total GAAP Premiums 28,396,845 23,491,466 20.9
-------------------------------------------------------------------
Premiums, Deposits and Other
Considerations (e)
Domestic
Life Insurance 2,834,990 2,693,975 5.2
Home Service 964,889 985,403 (2.1)
Group Life/Health 1,117,634 1,060,254 5.4
Payout Annuities 2,172,019 1,750,773 24.1
Retirement Services
Group Retirement Products 5,555,081 5,359,804 3.6
Individual Fixed Annuities 9,947,209 11,383,801 (12.6)
Individual Variable
Annuities 4,126,321 3,412,173 20.9
Individual Annuities -
Runoff 252,376 349,762 (27.8)
------------ ------------
Total 26,970,519 26,995,945 (0.1)
Foreign
Life Insurance 18,676,702 15,354,102 21.6
Personal Accident & Health 4,329,135 3,113,370 39.0
Group Products (d) 3,324,325 2,047,073 62.4
Retirement Services
Individual Fixed Annuities 11,981,097 4,376,000 173.8
Individual Variable
Annuities 1,629,476 1,220,337 33.5
------------ ------------
Total 39,940,735 26,110,882 53.0
Total Premiums, Deposits and
Other Considerations $ 66,911,254 $ 53,106,827 26.0 %
(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) Twelve 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.
Three Months Ended December 31,
2004 2003 (a) Change
------------ ------------ -------
Life Insurance & Retirement Services Operations:
Net Investment Income
Domestic
Life Insurance $ 364,590 $ 392,446 (7.1)%
Home Service 157,826 179,079 (11.9)
Group Life/Health 30,533 34,279 (10.9)
Payout Annuities 200,861 188,102 6.8
Retirement Services
Group Retirement Products 573,113 532,869 7.6
Individual Fixed Annuities 833,227 729,716 14.2
Individual Variable
Annuities 59,197 66,612 (11.1)
Individual Annuities -
Runoff 269,051 295,055 (8.8)
Intercompany Adjustments (101) (87) -
------------ ------------
Total 2,488,297 2,418,071 2.9
Foreign
Life Insurance 1,083,948 920,631 17.7
Personal Accident & Health 45,295 44,166 2.6
Group Products 122,118 89,463 36.5
Retirement Services
Individual Fixed Annuities 350,547 158,210 121.6
Individual Variable
Annuities 65,959 2,437 -
Intercompany Adjustments (4,924) (4,267) -
------------ ------------
Total 1,662,943 1,210,640 37.4
Total Net Investment Income $ 4,151,240 $ 3,628,711 14.4 %
Twelve Months Ended December 31,
2004 2003 (a) Change
------------ ------------ -------
Life Insurance & Retirement Services Operations:
Net Investment Income
Domestic
Life Insurance $ 1,458,372 $ 1,358,386 7.4 %
Home Service 686,268 689,800 (0.5)
Group Life/Health 123,143 121,519 1.3
Payout Annuities 800,731 698,628 14.6
Retirement Services
Group Retirement Products 2,190,416 2,054,834 6.6
Individual Fixed Annuities 3,099,970 2,566,791 20.8
Individual Variable
Annuities 238,828 238,877 -
Individual Annuities -
Runoff 1,076,115 1,266,570 (15.0)
Intercompany Adjustments (378) (302) -
------------ ------------
Total 9,673,465 8,995,103 7.5
Foreign
Life Insurance 4,332,264 3,700,093 17.1
Personal Accident & Health 178,516 162,644 9.8
Group Products 433,239 338,001 28.2
Retirement Services
Individual Fixed Annuities 1,050,777 389,120 170.0
Individual Variable
Annuities 143,436 3,865 -
Intercompany Adjustments (18,382) (14,705) -
------------ ------------
Total 6,119,850 4,579,018 33.6
Total Net Investment Income $ 15,793,315 $ 13,574,121 16.3 %
(a) Restated to conform to 2004 presentation.
Three Months Ended December 31,
2004 2003 (a) Change
------------ ------------ -------
Life Insurance & Retirement Services Operations:
Operating Income
Domestic
Life Insurance $ 226,408 $ 211,889 6.9 %
Home Service (b) 90,073 101,504 (11.3)
Group Life/Health 26,006 32,047 (18.9)
Payout Annuities 34,727 30,406 14.2
Retirement Services
Group Retirement Products 282,079 226,227 24.7
Individual Fixed Annuities 265,490 216,382 22.7
Individual Variable
Annuities 41,114 29,708 38.4
Individual Annuities -
Runoff 33,329 47,707 (30.1)
Intercompany Adjustments (101) (87) -
------------ ------------
Total Domestic before
Realized Capital
Gains (Losses) 999,125 895,783 11.5
Realized Capital
Gains (Losses) (118,960) (92,616) -
------------ ------------
Domestic Operating Income 880,165 803,167 9.6
Foreign
Life Insurance 835,562 733,693 13.9
Personal Accident & Health 305,325 243,553 25.4
Group Products 53,956 52,577 2.6
Retirement Services
Individual Fixed Annuities 81,732 43,111 89.6
Individual Variable
Annuities 6,788 1,261 438.3
Intercompany Adjustments (4,924) (4,267) -
------------ ------------
Total Foreign before
Realized Capital
Gains (Losses) 1,278,439 1,069,928 19.5
Realized Capital
Gains (Losses) 215,373 47,416 -
------------ ------------
Foreign Operating Income 1,493,812 1,117,344 33.7
Worldwide Life Insurance & Retirement
Services before Realized
Capital Gains (Losses) 2,277,564 1,965,711 15.9
Realized Capital
Gains (Losses) 96,413 (45,200) -
------------ ------------
Worldwide Operating Income $ 2,373,977 $ 1,920,511 23.6 %
Twelve Months Ended December 31,
2004 2003 (a) Change
------------ ------------ -------
Life Insurance & Retirement Services Operations:
Operating Income
Domestic
Life Insurance $ 898,005 $ 807,568 11.2 %
Home Service (b) 390,237 400,126 (2.5)
Group Life/Health 97,424 119,957 (18.8)
Payout Annuities 140,344 125,956 11.4
Retirement Services
Group Retirement Products 1,087,897 901,718 20.6
Individual Fixed Annuities 928,316 708,160 31.1
Individual Variable
Annuities 173,323 66,251 161.6
Individual Annuities -
Runoff 171,520 209,692 (18.2)
Intercompany Adjustments (378) (302) -
------------ ------------
Total Domestic before
Realized Capital
Gains (Losses) 3,886,688 3,339,126 16.4
Realized Capital
Gains (Losses) (289,374) (419,558) -
------------ ------------
Domestic Operating Income 3,597,314 2,919,568 23.2
Foreign
Life Insurance 3,133,748 2,779,749 12.7
Personal Accident & Health 1,156,337 851,902 35.7
Group Products 252,151 202,131 24.7
Retirement Services
Individual Fixed Annuities 262,257 122,299 114.4
Individual Variable
Annuities 13,167 849 -
Intercompany Adjustments (18,382) (14,705) -
------------ ------------
Total Foreign before
Realized Capital
Gains (Losses) 4,799,278 3,942,225 21.7
Realized Capital
Gains (Losses) 279,464 (282,160) -
------------ ------------
Foreign Operating Income 5,078,742 3,660,065 38.8
Worldwide Life Insurance & Retirement
Services before Realized
Capital Gains (Losses) 8,685,966 7,281,351 19.3
Realized Capital
Gains (Losses) (9,910) (701,718) -
------------ ------------
Worldwide Operating Income $ 8,676,056 $ 6,579,633 31.9 %
(a) Restated to conform to 2004 presentation.
(b) Twelve months 2004 include $4.7 million of catastrophe losses
relating to minor property-casualty subsidiaries currently
in run-off.
Three Months Ended December 31,
2004 2003 (a) Change
------------ ------------ -------
Life Insurance & Retirement Services Operations:
Domestic - Other Data
Life Insurance
Periodic Premium Sales (b):
Individual/Retail $ 128,105 $ 95,287 34.4 %
Institutional Markets 7,990 16,123 (50.4)
------------ ------------
Total Periodic Sales 136,095 111,410 22.2
Unscheduled & Single
Deposits 62,998 80,340 (21.6)
Home Service
Product Sales
Life/Accident &
Health (b) 27,379 28,361 (3.5)
Fixed Annuity 22,452 30,769 (27.0)
Group Retirement Products
Deposits (c) 1,571,365 1,560,396 0.7
Net Flows
Group Retirement Products (c) 694,000 866,075 (19.9)
Individual Fixed Annuities 1,265,907 2,660,433 (52.4)
Individual Variable Annuities 152,285 322,172 (52.7)
Individual Annuities - Runoff (359,140) (323,039) -
------------ ------------
Total $ 1,753,052 $ 3,525,641 (50.3)%
Surrender Rates
Group Retirement Products (c) 6.5% 5.7%
Individual Fixed Annuities 6.3% 5.8%
Individual Variable Annuities 11.1% 10.7%
Twelve Months Ended December 31,
2004 2003 (a) Change
------------ ------------ -------
Life Insurance & Retirement Services Operations:
Domestic - Other Data
Life Insurance
Periodic Premium Sales (b):
Individual/Retail $ 480,758 $ 352,427 36.4 %
Institutional Markets 32,931 74,263 (55.7)
------------ ------------
Total Periodic Sales 513,689 426,690 20.4
Unscheduled & Single
Deposits 364,939 372,340 (2.0)
Life Insurance Reserves 20,257,937 19,340,791 4.7
Home Service
Product Sales
Life/Accident &
Health (b) 111,315 111,810 (0.4)
Fixed Annuity 104,929 121,202 (13.4)
Total Insurance Reserves 7,172,692 7,054,836 1.7
Group Life/Health
Annualized Earned Premium 1,265,764 1,236,874 2.3
Payout Annuities
Insurance Reserves 11,135,441 9,491,380 17.3
Group Retirement Products
Deposits (c) 6,501,570 5,917,633 9.9
Net Flows
Group Retirement Products (c) 2,372,045 3,374,696 (29.7)
Individual Fixed Annuities 7,450,886 9,663,994 (22.9)
Individual Variable Annuities 1,494,106 1,179,306 26.7
Individual Annuities - Runoff (1,306,125) (1,135,131) -
------------ ------------
Total $ 10,010,912 $ 13,082,865 (23.5)%
Surrender Rates
Group Retirement Products (c) 8.0%(d) 5.6%
Individual Fixed Annuities 5.8% 5.2%
Individual Variable Annuities 10.6% 10.7%
General and Separate Account Reserves
Group Retirement Products(c)$ 56,117,590 $ 50,965,154 10.1 %
Individual Fixed Annuities 50,546,625 42,344,932 19.4
Individual Variable Annuities 26,846,255 23,642,407 13.6
Individual Annuities - Runoff 20,812,250 21,857,843 (4.8)
------------ ------------
Total $154,322,720 $138,810,336 11.2 %
(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 6.8 percent.
Three Months Ended December 31,
2004 2003 (a) Change
------------ ------------ -------
Life Insurance & Retirement Services Operations:
Foreign - Other Data
First Year Premiums
Life Insurance
Japan $ 201,128 $ 177,698 13.2 %
China 33,007 29,548 11.7
Asia excluding Japan
and China 526,154 487,369 8.0
All Other Regions 55,127 60,222 (8.5)
------------ ------------
Total 815,416 754,837 8.0
Personal Accident & Health
Japan 175,497 151,341 16.0
China 7,592 8,383 (9.4)
Asia excluding Japan
and China 65,373 52,289 25.0
All Other Regions 27,205 26,313 3.4
------------ ------------
Total 275,667 238,326 15.7
Group Products
Japan 3,535 12,553 (71.8)
Asia excluding Japan
and China 20,133 10,450 92.7
All Other Regions 121,878 108,903 11.9
------------ ------------
Total 145,546 131,906 10.3
Total First Year Premiums
Japan 380,160 341,592 11.3
China 40,599 37,931 7.0
Asia excluding Japan
and China 611,660 550,108 11.2
All Other Regions 204,210 195,438 4.5
------------ ------------
Total $ 1,236,629 $ 1,125,069 9.9 %
-------------------------------------------------------------------
Foreign Exchange Impact on Growth of:
GAAP Premiums
Worldwide
Growth in Original Currency 10.6 %
Foreign Exchange Impact 1.5
Growth as Reported in U.S.$ 12.1
Foreign
Growth in Original Currency 10.8
Foreign Exchange Impact 1.9
Growth as Reported in U.S.$ 12.7
Premiums, Deposits and Other Considerations (b)
Worldwide
Growth in Original Currency 0.2
Foreign Exchange Impact 1.0
Growth as Reported in U.S.$ 1.2
Foreign
Growth in Original Currency 13.8
Foreign Exchange Impact 1.8
Growth as Reported in U.S.$ 15.6 %
Twelve Months Ended December 31,
2004 2003 (a) Change
------------ ------------ -------
Life Insurance & Retirement Services Operations:
Foreign - Other Data
First Year Premiums
Life Insurance
Japan $ 714,345 $ 602,495 18.6 %
China 114,898 84,132 36.6
Asia excluding Japan
and China 1,691,087 1,762,866 (4.1)
All Other Regions 230,037 203,030 13.3
------------ ------------
Total 2,750,367 2,652,523 3.7
Personal Accident & Health
Japan 709,146 466,778 51.9
China 30,158 31,280 (3.6)
Asia excluding Japan
and China 242,668 195,773 24.0
All Other Regions 106,709 95,622 11.6
------------ ------------
Total 1,088,681 789,453 37.9
Group Products
Japan 20,149 31,067 (35.1)
Asia excluding Japan
and China 80,154 47,737 67.9
All Other Regions 606,832 516,030 17.6
------------ ------------
Total 707,135 594,834 18.9
Total First Year Premiums
Japan 1,443,640 1,100,340 31.2
China 145,056 115,412 25.7
Asia excluding Japan
and China 2,013,909 2,006,376 0.4
All Other Regions 943,578 814,682 15.8
------------ ------------
Total 4,546,183 4,036,810 12.6
Retirement Services Reserves
Individual Fixed Annuities 31,460,468 18,522,559 69.8
Individual Variable Annuities$ 4,023,982 $ 1,753,062 129.5 %
-------------------------------------------------------------------
Foreign Exchange Impact on Growth of:
GAAP Premiums
Worldwide
Growth in Original Currency 17.3 %
Foreign Exchange Impact 3.6
Growth as Reported in U.S.$ 20.9
Foreign
Growth in Original Currency 19.6
Foreign Exchange Impact 4.8
Growth as Reported in U.S.$ 24.4
Premiums, Deposits and Other Considerations (b)
Worldwide
Growth in Original Currency 23.6
Foreign Exchange Impact 2.4
Growth as Reported in U.S.$ 26.0
Foreign
Growth in Original Currency 48.2
Foreign Exchange Impact 4.8
Growth as Reported in U.S.$ 53.0 %
(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.
Three Months Ended December 31,
2004 2003 Change
------------ ------------ -------
Financial Services:
Revenues
Aircraft Finance $ 847,149 $ 770,591 9.9 %
Capital Markets 263,405 602,988 (56.3)
Consumer Finance 800,128 684,592 16.9
Other (a) 5,347 11,643 (54.1)
------------ ------------
Total 1,916,029 2,069,814 (7.4)
Operating Income
Aircraft Finance 192,533 179,599 7.2
Capital Markets 193,645 357,231 (45.8)
Consumer Finance 207,724 160,311 29.6
Other (a) (2,681) 5,311 -
------------ ------------
Total 591,221 702,452 (15.8)
-------------------------------------------------------------------
Asset Management (b)(c):
Revenues
Guaranteed Investment Contracts
Domestic 602,908 548,516 9.9
Foreign 169,277 93,736 80.6
Institutional Asset
Management (d) 280,943 190,839 47.2
Brokerage Services and
Mutual Funds 63,529 57,624 10.2
------------ ------------
Total 1,116,657 890,715 25.4
Operating Income
Guaranteed Investment Contracts
Domestic 146,496 144,872 1.1
Foreign 12,398 9,277 33.6
Institutional Asset
Management (d)(e) 132,105 69,266 90.7
Brokerage Services and
Mutual Funds 16,199 16,020 1.1
------------ ------------
Total (e) 307,198 239,435 28.3
-------------------------------------------------------------------
Guaranteed Investment Contracts
Deposits
Domestic 1,951,596 3,218,496 (39.4)
Foreign 1,315,744 720,208 82.7
------------ ------------
Total $ 3,267,340 $ 3,938,704 (17.0)%
Effective Tax Rates:
Net Income 31.14% 31.09%
Realized Capital
Gains (Losses) 34.04% 35.28%
Twelve Months Ended December 31,
2004 2003 Change
------------ ------------ -------
Financial Services:
Revenues
Aircraft Finance $ 3,250,852 $ 3,042,483 6.8 %
Capital Markets 1,424,426 1,845,312 (22.8)
Consumer Finance 2,977,877 2,642,074 12.7
Other (a) 30,813 35,656 (13.6)
------------ ------------
Total 7,683,968 7,565,525 1.6
Operating Income
Aircraft Finance 739,410 727,956 1.6
Capital Markets 857,480 1,085,894 (21.0)
Consumer Finance 787,132 648,864 21.3
Other (a) (5,064) 1,455 -
------------ ------------
Total 2,378,958 2,464,169 (3.5)
-------------------------------------------------------------------
Asset Management (b)(c):
Revenues
Guaranteed Investment Contracts
Domestic 2,332,634 2,088,436 11.7
Foreign 463,668 407,646 13.7
Institutional Asset
Management (d) 998,454 647,154 54.3
Brokerage Services and
Mutual Funds 248,797 205,905 20.8
------------ ------------
Total 4,043,553 3,349,141 20.7
Operating Income
Guaranteed Investment Contracts
Domestic 592,780 505,451 17.3
Foreign 43,519 41,368 5.2
Institutional Asset
Management (d)(e) 470,031 210,955 122.8
Brokerage Services and
Mutual Funds 69,565 59,757 16.4
------------ ------------
Total (e) 1,175,895 817,531 43.8
-------------------------------------------------------------------
Guaranteed Investment Contracts
Deposits
Domestic 10,722,140 9,664,295 10.9
Foreign 5,311,083 3,631,373 46.3
------------ ------------
Total 16,033,223 13,295,668 20.6
Reserves
Domestic 44,841,740 38,986,819 15.0
Foreign 9,238,518 7,667,517 20.5
------------ ------------
Total $ 54,080,258 $ 46,654,336 15.9 %
Effective Tax Rates:
Net Income 31.73% 30.66%
Realized Capital
Gains (Losses) 33.41% 33.68%
(a) Includes other financial services companies and intercompany
reclassifications.
(b) 2003 is restated to conform to 2004 presentation.
(c) At December 31, 2004, AIG's third party assets under management,
including mutual funds and institutional accounts, totaled
over $53 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 fourth quarter and twelve months 2004, operating income
includes $48 million and $195 million, respectively, of
third-party limited partner earnings offset in Minority Interest
Expense.
Additional Reconciliation in Accordance with Regulation G
Twelve Months Twelve Months
Ended Ended
December 31, December 31,
2004 2003
------------ ------------
Return on Equity Reconciliation
Return on Equity, GAAP basis 14.4 % 14.1 %
Percent Related to
Reconciliation 2.1 3.1
------------ ------------
Return on Equity, as presented
(a) 16.5 17.2
Catastrophe Losses and
Settlement Charge 1.0 0.1
------------ ------------
Return on Equity, as presented
excluding Catastrophe Losses
and Settlement Charge 17.5 % 17.3 %
(a) Return on Equity, as presented is net income, before
realized capital gains (losses) and cumulative effect of
accounting changes, expressed as a percentage of average
shareholders' equity, exclusive of unrealized appreciation
(depreciation) of investments, net of tax.
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