What was AIG's overall financial performance in 2006?

In 2006, AIG reported total revenues of $113.2 billion and net income of $14.0 billion, a significant improvement from 2005, driven by strong performance in its insurance segments and the absence of major catastrophe losses.

How did AIG's different business segments perform?

The General Insurance segment saw a substantial increase in operating income to $10.4 billion due to improved underwriting and fewer catastrophe losses. The Life Insurance & Retirement Services segment also performed well, with operating income rising to $10.0 billion. However, the Financial Services segment's operating income declined to $0.5 billion, largely due to accounting issues with hedging activities.

What were the key internal control issues reported, and what progress has been made?

AIG identified material weaknesses in internal controls over financial reporting related to balance sheet reconciliations, accounting for derivative transactions, and income tax accounting. While the company successfully remediated the weaknesses in balance sheet reconciliations and derivative accounting by the end of 2006, the income tax accounting weakness was still undergoing remediation, with a target completion by year-end 2007.

What is AIG's outlook for dividends and share repurchases?

In February 2007, AIG's Board of Directors adopted a new dividend policy to increase common stock dividends by approximately 20 percent annually. While no shares were repurchased under the existing authorization in 2006, the Board authorized an additional $8 billion for share repurchases in February 2007.

AIG 10-K FY2006 Annual Report — Revenue, Net Income, EPS

01—Abstract

Summary

Summary of the 10-K filed March 1, 2007. Cited figures are marked; the original filing is the authoritative source.

In fiscal year 2006, American International Group, Inc. (AIG) demonstrated significant financial recovery and growth, particularly in its General Insurance and Life Insurance & Retirement Services segments.

The company reported total revenues of $113.2 billion^a and a net income of $14.0 billion, a substantial increase from the previous year, driven by improved underwriting results and robust investment income. Notably, General Insurance operating income saw a significant jump to $10.4 billion, largely due to the absence of major catastrophe losses experienced in 2005 and improved underwriting performance across its divisions. AIG's Financial Services segment experienced a decrease in operating income, primarily impacted by the unfavorable accounting treatment of certain hedging activities.

The company continued its strategic expansion, with foreign operations contributing significantly to the Life Insurance & Retirement Services segment. Despite facing ongoing regulatory scrutiny and a material weakness in internal controls related to income tax accounting, AIG made progress in remediating other control weaknesses and affirmed its commitment to improving financial reporting practices. The company's strong capital position and diversified business model position it well for continued operations, although investors should remain aware of the ongoing legal and regulatory matters.

02—Key points

Key Highlights

Total revenues reached $113.2 billion in 2006, an increase from $108.9 billion in 2005.
Net income grew significantly to $14.0 billion in 2006, compared to $10.5 billion in 2005.
General Insurance operating income improved substantially to $10.4 billion in 2006, compared to $2.3 billion in 2005, benefiting from the absence of catastrophe losses and better underwriting results.
Life Insurance & Retirement Services operating income increased to $10.0 billion in 2006, up from $8.9 billion in 2005, with foreign operations being a key contributor.
Financial Services operating income decreased to $0.5 billion in 2006, down from $4.3 billion in 2005, primarily due to adverse accounting treatment of hedging activities.
AIG continued to address material weaknesses in internal controls, successfully remediating issues related to balance sheet reconciliations and derivative accounting, while ongoing remediation efforts persisted for income tax accounting.
The company declared dividends per common share increased to $0.65 in 2006 from $0.63 in 2005, reflecting a positive outlook on profitability.

03—Questions

Frequently Asked Questions

What was AIG's overall financial performance in 2006?
In 2006, AIG reported total revenues of $113.2 billion and net income of $14.0 billion, a significant improvement from 2005, driven by strong performance in its insurance segments and the absence of major catastrophe losses.
How did AIG's different business segments perform?
The General Insurance segment saw a substantial increase in operating income to $10.4 billion due to improved underwriting and fewer catastrophe losses. The Life Insurance & Retirement Services segment also performed well, with operating income rising to $10.0 billion. However, the Financial Services segment's operating income declined to $0.5 billion, largely due to accounting issues with hedging activities.
What were the key internal control issues reported, and what progress has been made?
AIG identified material weaknesses in internal controls over financial reporting related to balance sheet reconciliations, accounting for derivative transactions, and income tax accounting. While the company successfully remediated the weaknesses in balance sheet reconciliations and derivative accounting by the end of 2006, the income tax accounting weakness was still undergoing remediation, with a target completion by year-end 2007.
What is AIG's outlook for dividends and share repurchases?
In February 2007, AIG's Board of Directors adopted a new dividend policy to increase common stock dividends by approximately 20 percent annually. While no shares were repurchased under the existing authorization in 2006, the Board authorized an additional $8 billion for share repurchases in February 2007.

04—Continue

← View all 10-K filings