01—Abstract
Summary
Summary of the 10-K filed February 16, 2018. Cited figures are marked; the original filing is the authoritative source.
In 2017, American International Group, Inc. (AIG) demonstrated a strategic shift towards underwriting excellence and profitable growth, evidenced by organizational changes aimed at a more focused business structure comprising General Insurance and Life & Retirement.
The company reported a net loss of $6.08 billiona in 2017, primarily impacted by a $6.7 billion tax charge related to the Tax Cuts and Jobs Act of 2017. Excluding this significant tax charge, net income would have shown an increase compared to the prior year, driven by improved results in General Insurance due to lower prior year loss reserve development and the impact of the Tax Act. The Life and Retirement segment also showed growth.
AIG also advanced its strategy to de-risk its legacy portfolio through significant reinsurance transactions in early 2018, consolidating the bulk of its run-off business. Looking ahead, AIG is focused on balancing and diversifying its product mix, investing in technology and innovation, empowering underwriting talent, and managing capital efficiently. The company also announced a significant acquisition in January 2018, agreeing to purchase Validus Holdings, Ltd. for $5.6 billionb to strengthen its General Insurance business.
02—Key points
Key Highlights
- AIG completed significant organizational restructuring in Q4 2017, focusing on General Insurance and Life & Retirement.
- Reported a net loss of $6.08 billion for 2017, largely due to a $6.7 billion tax charge from the Tax Cuts and Jobs Act.
- Excluding the tax charge, net income improved due to reduced prior year loss reserve development in General Insurance and positive actuarial assumption updates in Life and Retirement.
- Announced agreement to acquire Validus Holdings, Ltd. for $5.6 billion in January 2018 to enhance the General Insurance segment.
- Completed significant reinsurance transactions in February 2018 to consolidate the majority of its legacy run-off business into DSA Reinsurance Company, Ltd.
- Continued to focus on underwriting excellence and operational efficiency through expense reduction initiatives and business divestitures.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-KFY2017filed February 16, 2018Financial Statements
FY2017 against FY2016
| Line item | FY2017FY2016 | Change |
|---|---|---|
| Revenue | $49.52B$52.37B | −5.4% |
| SG&A Expenses | $9.11B$10.99B | −17.1% |
| Operating Income | -$6.09B-$759.00M | −702.1% |
| Interest Expense | $1.17B$1.26B | −7.3% |
| Net Income | -$6.08B-$849.00M | −616.6% |
| EPS (Basic) | $-6.54$-0.78 | −738.5% |
| EPS (Diluted) | $-6.54$-0.78 | −738.5% |
| Shares Outstanding (Basic) | 930.56M1.09B | −14.7% |
| Shares Outstanding (Diluted) | 930.56M1.09B | −14.7% |
05—Questions
Frequently Asked Questions
What was the primary driver for AIG's net loss in 2017?
The primary driver for AIG's net loss of $6.08 billion in 2017 was a significant tax charge of $6.7 billion related to the Tax Cuts and Jobs Act of 2017.
How did AIG's underwriting performance change in 2017?
AIG's underwriting performance in General Insurance improved in 2017 due to a substantial decrease in unfavorable prior year loss reserve development ($1.0 billion in 2017 compared to $5.4 billion in 2016), although this was partially offset by higher catastrophe losses.
What is AIG's strategic focus for 2018?
AIG's strategic priorities for 2018 include balancing and diversifying its product mix, investing in technology and innovation, empowering underwriting talent to achieve excellence, and managing capital efficiently to drive profitable growth and shareholder value.
What significant strategic actions did AIG undertake in late 2017 / early 2018?
In late 2017, AIG finalized its organizational restructuring. In early 2018, AIG announced its agreement to acquire Validus Holdings, Ltd. and closed reinsurance transactions to consolidate its legacy run-off business.
06—Continue