10-Q/APeriod: Q1 FY2005

AMERICAN INTERNATIONAL GROUP, INC. Quarterly Report (Amendment) for Q1 Ended Mar 31, 2005

Filed May 10, 2006For Securities:AIG

Summary

This amended filing for the first quarter of 2005 for AMERICAN INTERNATIONAL GROUP, INC. (AIG) primarily serves to restate previously issued financial information. The company underwent two significant restatements due to identified accounting errors, primarily related to internal controls over derivatives, balance sheet reconciliations, and income tax accounting. These restatements impacted the financial results and balance sheet figures for prior periods, including those presented here for the quarters ended March 31, 2005 and March 31, 2004. Despite the restatements and ongoing remediation of internal control weaknesses, AIG reported a solid increase in total revenues to $27.202 billion for the first quarter of 2005, up from $23.222 billion in the prior year's comparable period. Income before taxes, minority interest, and accounting changes also saw a substantial rise, increasing by 47% to $5.649 billion. This growth was driven by strong performance across all major segments: General Insurance, Life Insurance & Retirement Services, Financial Services, and Asset Management. The company maintained substantial shareholders' equity, reflecting its significant capital base.

Key Highlights

  • 1Total revenues increased by 17.1% to $27.202 billion for the first quarter of 2005 compared to $23.222 billion in the prior year, driven by growth in General Insurance and Life Insurance & Retirement Services.
  • 2Income before taxes, minority interest, and accounting changes increased by 47% to $5.649 billion for the first quarter of 2005 from $3.842 billion in the prior year.
  • 3The company reported net income of $3.799 billion for the first quarter of 2005, a significant increase from $2.498 billion in the first quarter of 2004.
  • 4Diluted earnings per share improved to $1.45 in the first quarter of 2005 from $0.94 in the first quarter of 2004.
  • 5Total shareholders' equity stood at $81.608 billion as of March 31, 2005, an increase from $79.673 billion at December 31, 2004.
  • 6The filing highlights two significant restatements of previously issued financial statements due to accounting errors, primarily related to derivatives, balance sheet reconciliations, and income tax accounting.
  • 7Despite the restatements, operating income showed strong growth in key segments, with General Insurance increasing to $1.642 billion, Life Insurance & Retirement Services to $2.181 billion, Financial Services to $1.045 billion, and Asset Management to $590 million.

Frequently Asked Questions

AIG restated its financial statements due to identified accounting errors. The first restatement addressed transactions and relationships from 2000-2004. The second restatement, initiated during the remediation of material weaknesses in internal controls, primarily concerned errors in accounting for derivatives (FAS 133), balance sheet account reconciliations, and income tax accounting. It also included corrections for certain payments received by ILFC from aircraft and engine manufacturers.

The restatements involved adjustments to prior periods, including the quarters ended March 31, 2005, and March 31, 2004. For instance, net income for Q1 2005 was restated to $3.799 billion, and for Q1 2004 to $2.498 billion. Diluted EPS for Q1 2005 was restated to $1.45, and for Q1 2004 to $0.94. The balance sheet figures were also adjusted to reflect the restated amounts.

AIG reported strong performance across its segments. General Insurance operating income increased to $1.642 billion. Life Insurance & Retirement Services operating income rose to $2.181 billion. Financial Services operating income surged to $1.045 billion, driven by Capital Markets and Consumer Finance. Asset Management operating income also showed robust growth, reaching $590 million.

The downgrades in AIG's credit ratings by major agencies like S&P, Moody's, and Fitch led to increased borrowing costs and impacted AIG Financial Products (AIGFP)'s competitiveness in certain markets. AIG was also required to post approximately $1.16 billion in collateral for municipal guaranteed investment agreements and financial derivatives transactions, with potential for further collateral posting if ratings declined further.