10-KPeriod: FY2002

AMERICAN INTERNATIONAL GROUP, INC. Annual Report, Year Ended Dec 31, 2002

Filed March 31, 2003For Securities:AIG

Summary

AMERICAN INTERNATIONAL GROUP, INC. (AIG) filed its 10-K for the fiscal year ended December 31, 2002, on March 31, 2003. The company reported revenues of $67.5 billion, a 9.3% increase from 2001, primarily driven by growth in its general insurance segment. However, significant realized capital losses of $2.44 billion and a substantial $2.8 billion loss reserve charge in the general insurance segment impacted profitability, leading to a reported net income of $5.52 billion, a modest increase from the prior year. The company's diverse operations include general insurance, life insurance, financial services, and retirement savings & asset management. AIG's financial services segment, particularly its aircraft leasing division (ILFC), showed resilience despite challenges in the airline industry, benefiting from a significant portion of its revenue derived from foreign carriers. The life insurance segment experienced growth, driven by strong international performance, while the retirement savings and asset management segment faced headwinds due to volatile equity markets. Management emphasized that adjusted operating income, excluding unusual items like the loss reserve charge and realized capital losses, demonstrated stronger underlying business performance, with an adjusted growth of 12.5% in income before taxes. The company highlighted its strong capital position and liquidity, supported by significant invested assets across its global operations.

Key Highlights

  • 1Total revenues grew by 9.3% to $67.5 billion in 2002, driven by an increase in general insurance net premiums earned.
  • 2Net income was $5.52 billion, a slight increase from $5.36 billion in 2001, but significantly impacted by a $2.8 billion loss reserve charge in the general insurance segment and $2.44 billion in realized capital losses.
  • 3The General Insurance segment's operating income saw a significant decrease of 76.6% due to the loss reserve charge and increased realized capital losses, though adjusted operating income (excluding these items) showed a 15.4% increase.
  • 4The Life Insurance segment's operating income grew by 5.4% to $4.93 billion, with adjusted operating income showing an 18.2% increase when excluding realized capital losses and World Trade Center (WTC) losses.
  • 5Financial Services operating income increased by 9.9% to $2.19 billion, reflecting growth across its key operations, including aircraft leasing (ILFC).
  • 6Retirement Savings & Asset Management operating income decreased by 6.6% to $1.02 billion, primarily due to the impact of weak equity markets on variable annuity businesses.
  • 7AIG's total assets grew to $561.2 billion, with invested assets comprising a significant portion at $432.4 billion.

Frequently Asked Questions

AIG's revenue growth in 2002 was primarily driven by an increase in net premiums earned from its general insurance operations. Total revenues increased by 9.3% to $67.5 billion compared to $61.8 billion in 2001.

AIG's reported net income was impacted by several significant items. These included a $2.8 billion loss reserve charge in the general insurance segment, substantial realized capital losses totaling $2.44 billion, and $900 million in World Trade Center (WTC) losses recorded in 2001. Excluding these unusual items, AIG's adjusted net income showed a more robust increase.

The General Insurance segment's operating income was significantly down due to the loss reserve charge and realized capital losses, although adjusted performance was positive. The Life Insurance segment saw growth in operating income, boosted by international operations. The Financial Services segment, including aircraft leasing, also performed well. However, the Retirement Savings & Asset Management segment experienced a decline in operating income due to market volatility affecting equity markets.

As of December 31, 2002, AIG reported total assets of $561.2 billion and total capital funds of $59.1 billion. The company's liquidity is considered strong, with consolidated invested assets totaling $432.4 billion and net cash provided from operating activities amounting to $18.7 billion in 2002. Management expressed confidence in its ability to meet foreseeable cash requirements through liquid assets, operating cash flow, and access to capital markets.