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AMERICAN INTERNATIONAL GROUP, INC. Annual Report, Year Ended Dec 31, 1996

Filing Date
Filed March 28, 1997
Period End
December 31, 1996
Security
AIG
In the record · 2016–202610-K1210-Q328-K214

AIG filed 12 annual reports (10-K), 32 quarterly reports (10-Q) and 214 current reports (8-K) between 2016 and 2026.

  1. Material agreement8-K · Jun ’17Jun ’17
  2. Material agreement8-K · Nov ’19Nov ’19
  3. Leadership change8-K · Dec ’21Dec ’21
  4. Leadership change8-K · Nov ’25Nov ’25

01—Abstract

Summary

Summary of the 10-K filed March 28, 1997. Cited figures are marked; the original filing is the authoritative source.

American International Group's 1996 Form 10-K shows a company at a high point of scale and profitability.

Revenues rose 9.0% to $28.2 billiona and net income grew 15.4% to $2.90 billion, or $6.15 per share, versus $2.51 billion ($5.30) in 1995. Total assets reached $148.4 billion and capital funds $22.0 billion, up roughly 11% and 11% respectively. Life insurance was the largest profit engine, with operating income of $1.32 billion (up 21.4%), 92.4% of it from overseas operations, mainly in Asia and Japan.

General insurance operating income rose 9.0% to $2.15 billionb, with a 96.9% combined ratio (underwriting profit of $399 million) and a 3.1-point underwriting margin, well ahead of the industry's estimated 105.5%. The main risks are concentrated in the financial services segment and in long-tail reserves. Financial services (ILFC aircraft leasing, AIGFP derivatives, AIGTG trading) produced $524 million of operating income, but it carries $43.9 billion in identifiable assets and $35.3 billion in liabilities, and derivative notional amounts reached $210.7 billion for AIGFP swaps alone.

AIG states that it does not guarantee ILFC's borrowings, but it does guarantee AIGFP's debt and AICCO's commercial paper support. Asbestos and environmental reserves are a known watch item: gross reserves rose to $2.30 billionc and management acknowledges that further emergence could have a material adverse impact. General insurance reserve development was favorable overall, with a $280 million redundancy on 1995 reserves, though asbestos and environmental development was adverse in several earlier years.

Ownership is also concentrated, with Starr-affiliated entities controlling about 29% of voting stock. For investors, the filing describes a diversified, highly profitable insurer and financial services group with strong capital, growing dividends ($0.37d per share, up from $0.32), and active share repurchases ($492.5 million in 1996). The principal questions going forward are whether the overseas life franchise can keep growing, whether the financial services derivatives book stays well managed, and whether long-tail casualty reserves remain adequate.

02—Key points

Key Highlights

  1. Revenues rose 9.0% to $28.2 billion and net income grew 15.4% to $2.90 billion ($6.15 per share), up from $2.51 billion ($5.30) in 1995.
  2. Life insurance operating income increased 21.4% to $1.32 billion, with 92.4% generated overseas, principally in Asia and Japan; premium income grew 11.7% to $8.98 billion.
  3. General insurance produced a 96.9% combined ratio and $398.9 million of adjusted underwriting profit, versus an estimated industry combined ratio of 105.5%.
  4. Financial services operating income rose 25.4% to $524 million, but the segment carries $43.9 billion in identifiable assets and large derivative exposures (AIGFP swap notional of $210.7 billion).
  5. Total assets reached $148.4 billion and capital funds $22.0 billion; the company repurchased $492.5 million of stock and raised its dividend to $0.37 per share from $0.32.
  6. Asbestos and environmental reserves rose to $2.30 billion gross ($742.9 million net), and management warns that further claim emergence could have a material adverse impact on future results.
  7. Starr-affiliated entities control roughly 29% of voting stock, and six AIG directors also serve on Starr and SICO boards.

03—Questions

Frequently Asked Questions

  1. How did AIG perform financially in 1996?

    AIG's revenues grew 9.0% to $28.2 billion and net income rose 15.4% to $2.90 billion, or $6.15 per share. Return growth was driven mainly by life insurance operating income (up 21.4%) and general insurance operating income (up 9.0%), while financial services operating income also rose 25.4%.

  2. What are the main sources of AIG's profits?

    Life insurance is the largest contributor, with operating income of $1.32 billion, about 33% of income before taxes, and 92.4% of that comes from foreign operations. General insurance contributed $2.15 billion (about 54% of pre-tax income), supported by a 96.9% combined ratio and $398.9 million of underwriting profit. Financial services added $524 million (about 13%).

  3. What risks should investors be aware of?

    Key risks include asbestos and environmental claims, where emergence beyond current reserves could materially affect results. Financial services carries significant derivative and market exposure through AIGFP and AIGTG, and ILFC has large aircraft purchase commitments of $13.3 billion. Foreign operations also face political, currency-repatriation, and regulatory risks, and about 38% of consolidated assets are located abroad.

  4. Is AIG's debt exposure a concern?

    Total borrowings were $23.52 billion, but $20.10 billion of that is either not guaranteed by AIG (such as ILFC's debt) or is matched against guaranteed investment agreements or AIGFP assets. AIG's own remaining borrowings were $3.42 billion. Management says liquidity is sufficient, citing about $9.57 billion in operating cash flow in 1996.

  5. How is AIG returning capital to shareholders?

    AIG paid cash dividends of $0.37 per share in 1996, up from $0.32, totaling $174.1 million. It also repurchased 5.4 million shares for $492.5 million during the year, a notable step up from the $17.6 million spent in 1995.

04—Continue

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