How profitable was AIG in 1999 and how did that compare with 1998?

AIG reported 1999 net income of $5.06 billion, up 18.1% from $4.28 billion in 1998. Diluted EPS rose to $3.23 from $2.75. Part of the increase reflects the full-year consolidation of Transatlantic and 21st Century, which were added in the third quarter of 1998, while 1998 figures were restated for the SunAmerica pooling merger.

What drives AIG's earnings mix?

Life insurance contributed $2.86 billion of operating income, general insurance $3.48 billion, financial services $1.08 billion, and asset management $314 million. Operating income before taxes was $7.51 billion. Overseas operations are a major source of the life business, and general insurance earnings are increasingly supported by investment income, which reached $2.52 billion.

What are the main risks flagged in the filing?

Key risks include asbestos and environmental claims, where courts continue to broaden policy coverage and reserve estimates are subject to a greater margin of error. The filing also highlights foreign-market risks such as currency restrictions, nationalization, and political instability, since about 32% of consolidated assets are abroad. Financial services derivatives and trading activities carry market and counterparty credit risk, and ILFC faces aircraft lease and purchase commitments of about $16.4 billion.

How leveraged is AIG and how much of its debt is recourse to the parent?

Total borrowings were $32.98 billion at year-end 1999. Of that, $29.65 billion was either not guaranteed by AIG or matched against guaranteed investment agreements or matched notes, leaving about $3.33 billion of remaining AIG borrowings. Capital funds were $33.3 billion, so AIG's parent-level leverage appeared modest, though the filing notes that roughly 65% of consolidated capital funds were restricted from immediate transfer to the parent.

Did AIG change its shareholder returns or capital activity in 1999?

Cash dividends per share rose to $0.19 from $0.17, and AIG paid a 25% common stock dividend in July 1999. It repurchased about 931,000 shares before the split and about 11.6 million shares after, and it intends to keep buying shares in the open market for general corporate purposes and employee benefit obligations.

AIG 10-K FY1999 Annual Report — Revenue, Net Income, EPS

01—Abstract

Summary

Summary of the 10-K filed March 30, 2000. Cited figures are marked; the original filing is the authoritative source.

American International Group's 1999 Form 10-K shows a company at a high point of growth and profitability.

Net income rose 18.1% to $5.06 billion^a (diluted EPS $3.23, up from $2.75), on revenues of $40.66 billion (up 13.9%) and total assets of $268.2 billion (up 14.8%). The 1999 results were lifted by the full-year consolidation of Transatlantic and 21st Century and by the January 1, 1999 pooling merger with SunAmerica, which is why the prior-year figures were restated. Capital funds reached $33.3 billion, up $3.2 billion, though unrealized investment appreciation fell $1.65 billion as US interest rates rose.

The core insurance franchise remained disciplined. General insurance posted a 96.3% combined ratio and $669 million^b of adjusted underwriting profit, while the domestic statutory combined ratio improved to 97.7%. Life insurance is the largest profit engine, with $2.86 billion of operating income, roughly 66% of it from overseas operations, and foreign operations supply about 92% of life premium income.

Loss reserves were strengthened for asbestos and environmental claims, and the reserve development table shows cumulative redundancies in recent years, though the filing flags that asbestos and environmental exposure remains uncertain. Investors should weigh the growing financial services exposure and balance-sheet leverage. Financial services and asset management carry about $62.5 billion^c of invested assets, including derivatives and trading positions run by AIGFP and AIGTG, and total borrowings are $33.0 billion, of which $29.7 billion is non-recourse or matched.

ILFC's aircraft commitments are large, at roughly $16.4 billion^d for 331 aircraft, and about 32% of consolidated assets sit in foreign countries. Overall, the filing describes a well-capitalized, highly profitable insurer whose earnings depend on continued international life growth and on the performance of its trading and leasing businesses.

02—Key points

Key Highlights

Net income of $5.06 billion in 1999, up 18.1% from $4.28 billion in 1998; diluted EPS of $3.23 versus $2.75.
Revenues of $40.66 billion, up 13.9%, with total assets of $268.2 billion and capital funds of $33.3 billion.
General insurance combined ratio of 96.3% and adjusted underwriting profit of $669 million; net premiums written rose 11.2% to $16.2 billion.
Life insurance operating income of $2.86 billion, with foreign operations producing 92.1% of life premium income and 66.0% of life operating income.
Total borrowings of $33.0 billion, of which $29.7 billion is either non-recourse to AIG or matched to GIA and notes payable; remaining AIG-level borrowings were $3.3 billion.
Asbestos and environmental reserves of $891 million net ($2.61 billion gross), with the filing describing ongoing legal uncertainty in these claims.
Dividend increased to $0.19 per share in 1999 from $0.17 in 1998, and the company completed a 25% stock dividend in July 1999.

03—Questions

Frequently Asked Questions

How profitable was AIG in 1999 and how did that compare with 1998?
AIG reported 1999 net income of $5.06 billion, up 18.1% from $4.28 billion in 1998. Diluted EPS rose to $3.23 from $2.75. Part of the increase reflects the full-year consolidation of Transatlantic and 21st Century, which were added in the third quarter of 1998, while 1998 figures were restated for the SunAmerica pooling merger.
What drives AIG's earnings mix?
Life insurance contributed $2.86 billion of operating income, general insurance $3.48 billion, financial services $1.08 billion, and asset management $314 million. Operating income before taxes was $7.51 billion. Overseas operations are a major source of the life business, and general insurance earnings are increasingly supported by investment income, which reached $2.52 billion.
What are the main risks flagged in the filing?
Key risks include asbestos and environmental claims, where courts continue to broaden policy coverage and reserve estimates are subject to a greater margin of error. The filing also highlights foreign-market risks such as currency restrictions, nationalization, and political instability, since about 32% of consolidated assets are abroad. Financial services derivatives and trading activities carry market and counterparty credit risk, and ILFC faces aircraft lease and purchase commitments of about $16.4 billion.
How leveraged is AIG and how much of its debt is recourse to the parent?
Total borrowings were $32.98 billion at year-end 1999. Of that, $29.65 billion was either not guaranteed by AIG or matched against guaranteed investment agreements or matched notes, leaving about $3.33 billion of remaining AIG borrowings. Capital funds were $33.3 billion, so AIG's parent-level leverage appeared modest, though the filing notes that roughly 65% of consolidated capital funds were restricted from immediate transfer to the parent.
Did AIG change its shareholder returns or capital activity in 1999?
Cash dividends per share rose to $0.19 from $0.17, and AIG paid a 25% common stock dividend in July 1999. It repurchased about 931,000 shares before the split and about 11.6 million shares after, and it intends to keep buying shares in the open market for general corporate purposes and employee benefit obligations.

04—Continue

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