Skip to content
AnalystLens

AMERICAN INTERNATIONAL GROUP, INC. Annual Report, Year Ended Dec 31, 1997

Filing Date
Filed March 30, 1998
Period End
December 31, 1997
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 30, 1998. Cited figures are marked; the original filing is the authoritative source.

American International Group (AIG) reported strong fiscal 1997 results in its 10-K filed March 30, 1998.

Consolidated revenues rose 9.5% to $30.60 billiona from $27.94 billion, and net income grew 15.0% to $3.33 billion ($4.73 diluted EPS, up from $4.08). Growth was driven by the life insurance segment (operating income up 18.7% to $1.57 billion, with about 92% of life operating income from foreign operations, especially Asia), the general insurance segment (operating income up 12.1% to $2.47 billion), and financial services (operating income up 33.9% to $701 million, led by ILFC, AIGFP and AIGTG). The general insurance combined ratio improved to 96.2% from 96.5%, though the domestic combined ratio deteriorated to 100.34% while the foreign combined ratio improved to 87.77%.

Balance sheet growth was substantial: total assets reached $164.0 billion, capital funds rose to $24.0 billionb, and book value grew with retained earnings up $2.5 billion. Cumulative translation adjustments worsened by about $685 million, reflecting the strong U.S. dollar and Asian economic stress, which weighed on capital. Total borrowings were $25.26 billion, of which roughly $22.28 billion was non-recourse or matched to GIAs and matched notes, leaving about $2.98 billion of AIG-level borrowings.

Management described liquidity as strong, citing over $6 billionc of pre-tax insurance operating cash flow. Investors should note the risks disclosed: a meaningful exposure to Asia and Japan, asbestos and environmental reserves of $787 million net (carried at adequate levels per management, but subject to significant estimation uncertainty), and a large derivatives book at AIGFP and AIGTG with notional amounts exceeding $266 billion for swaps alone. Controlling shareholders (Starr entities and SICO) held roughly 29% of voting stock, a concentration relevant to governance.

02—Key points

Key Highlights

  1. Total revenues increased 9.5% to $30.60 billion in 1997, and net income rose 15.0% to $3.33 billion, with diluted EPS of $4.73 versus $4.08 in 1996.
  2. Life insurance operating income grew 18.7% to $1.57 billion, with 92% of life operating income derived from foreign operations, principally Asia.
  3. General insurance combined ratio improved to 96.2% (from 96.5%), with the foreign combined ratio at 87.8% and the domestic combined ratio at 100.3%.
  4. Financial services operating income rose 33.9% to $701 million, driven by ILFC, AIG Financial Products and AIG Trading Group.
  5. Total assets reached $164.0 billion and capital funds $24.0 billion, though cumulative translation adjustments fell by about $685 million due to the strong dollar and Asian economic stress.
  6. Total borrowings were $25.26 billion, but roughly $22.28 billion is non-recourse or matched, leaving about $2.98 billion of AIG-level borrowing.
  7. Net asbestos and environmental reserves were $787 million, which management considers adequate, though the filing notes significant uncertainty in these claims.

03—Questions

Frequently Asked Questions

  1. How profitable was AIG in 1997 compared with 1996?

    Net income was $3.33 billion, up 15.0% from $2.90 billion, and diluted EPS was $4.73, up from $4.08. Income before taxes rose 17.1% to $4.70 billion. The effective tax rate increased to 29.1% from 27.8%.

  2. Which business segments drove the growth?

    Life insurance operating income rose 18.7% to $1.57 billion, general insurance operating income rose 12.1% to $2.47 billion, and financial services operating income rose 33.9% to $701 million. Most of the life growth came from overseas operations, particularly in Asia.

  3. What are the main risks highlighted in the filing?

    The filing highlights exposure to Asia and Japan, where the duration of investments is shorter than policy liabilities. It also notes asbestos and environmental claims whose future development is hard to estimate, and it discloses large derivative positions at AIGFP and AIGTG with substantial credit and market risk. Foreign operations also face political and currency-repatriation risk.

  4. How much debt does AIG carry, and how much is its direct obligation?

    Total borrowings were $25.26 billion at year-end 1997. About $22.28 billion was either not guaranteed by AIG or matched against GIAs and matched notes, leaving about $2.98 billion of remaining AIG-level borrowings.

  5. Is AIG's capital position strong, and are dividends rising?

    Capital funds increased to $24.0 billion. Management reported that all domestic insurance subsidiaries exceeded risk-based capital standards by considerable margins. Cash dividends per share rose to $0.28 from $0.25 (adjusted for a 50% stock dividend in July 1997), and AIG repurchased 5.7 million shares for $502 million.

04—Continue

← View all 10-K filings