10-QPeriod: Q2 FY2010

AMERICAN INTERNATIONAL GROUP, INC. Quarterly Report for Q2 Ended Jun 30, 2010

Filed August 6, 2010For Securities:AIG

Summary

In the second quarter of 2010, American International Group, Inc. (AIG) demonstrated a recovery in its core insurance operations, with income from continuing operations before income taxes significantly increasing to $1.6 billion from $171 million in the prior year's second quarter. This improvement was driven by a strong performance in General Insurance, particularly its Commercial Insurance segment, and a notable recovery in the Mortgage Guaranty business. However, discontinued operations, primarily impacted by a substantial goodwill impairment related to ALICO, resulted in a net loss of $2.1 billion for the quarter. AIG continued its strategic asset disposition plan, progressing with the sale of ALICO and seeking an IPO for AIA, crucial steps towards repaying its obligations to the U.S. government and stabilizing its financial position. The company's liquidity remained a key focus, with ongoing efforts to manage debt and subsidiary funding, supported by remaining credit facilities from the FRBNY and the Department of the Treasury.

Financial Highlights

27 data points
Beta

Revenue

$18.31B

Net Income

-$2.66B

-14.5% Net Margin

Total Assets

$850.53B

Cash & Equivalents

$2.84B

Free Cash Flow

$6.58B

Financial Statements
Beta
Revenue$18.31B
SG&A Expenses$1.70B
Operating Income$1.42B
Interest Expense$1.73B
Net Income-$2.66B
Shares Outstanding (Basic)135.81M
Shares Outstanding (Diluted)135.81M

Key Highlights

  • 1AIG reported a significant increase in income from continuing operations before income taxes to $1.6 billion for Q2 2010, a substantial improvement from $171 million in Q2 2009.
  • 2General Insurance segment's pre-tax income rose to $1.01 billion, driven by improved underwriting results and investment income, particularly in Commercial Insurance.
  • 3Mortgage Guaranty business showed a strong turnaround, reporting pre-tax income of $245 million in Q2 2010, a significant improvement from a $488 million loss in Q2 2009, attributed to lower delinquencies and improved cure rates.
  • 4AIG continued its divestiture strategy, with progress on the sale of ALICO and plans for an AIA IPO, aiming to strengthen its capital structure and repay government obligations.
  • 5The company recorded a net loss of $2.1 billion in Q2 2010, primarily due to a $3.3 billion goodwill impairment charge related to ALICO within discontinued operations.
  • 6AIG maintained adequate liquidity for at least the next twelve months, with substantial remaining borrowing capacity under its FRBNY Credit Facility and Department of the Treasury Commitment.
  • 7The company is actively managing the wind-down of AIG Financial Products (AIGFP), reducing its derivatives portfolio, particularly super senior credit default swap contracts.

Frequently Asked Questions

AIG reported a net loss of $2.115 billion for the second quarter of 2010. This was largely driven by discontinued operations, which included a significant goodwill impairment charge of $3.3 billion related to ALICO. However, income from continuing operations before income tax expense was $1.603 billion, a substantial improvement compared to $171 million in the prior year quarter, indicating a healthier core business.

AIG is actively progressing with its asset disposition plan. Key milestones in the quarter included the definitive agreement for the sale of ALICO to MetLife, valued at approximately $15.5 billion. Additionally, AIG announced plans to conduct an initial public offering (IPO) for AIA. Proceeds from these strategic transactions are intended to help repay outstanding debt under the FRBNY Credit Facility and strengthen AIG's capital structure.

The General Insurance segment (Chartis) showed strong pre-tax income of $1.01 billion, up from $977 million in Q2 2009, driven by improved underwriting results and investment income. The Domestic Life Insurance & Retirement Services segment reported a pre-tax income of $88 million, down from $200 million in Q2 2009, impacted by higher net realized capital losses, while Foreign Life Insurance & Retirement Services significantly improved its pre-tax income to $840 million from $223 million in Q2 2009. The Financial Services segment reported a pre-tax loss of $31 million, down from $124 million income in Q2 2009, largely due to increased expenses in Aircraft Leasing and losses in Capital Markets.

AIG reported adequate liquidity to meet its obligations for at least the next twelve months. At June 30, 2010, the remaining available borrowing under the FRBNY Credit Facility was $13.3 billion, and the remaining available amount under the Department of the Treasury Commitment was $22.3 billion. The company continues to manage its reliance on these facilities through asset dispositions and operational cash flows.