10-QPeriod: Q2 FY2013

AMERICAN INTERNATIONAL GROUP, INC. Quarterly Report for Q2 Ended Jun 30, 2013

Filed August 5, 2013For Securities:AIG

Summary

American International Group, Inc. (AIG) reported a strong second quarter in 2013, with net income attributable to AIG increasing by 17% year-over-year to $2.73 billion. This growth was driven by improved operating performance across its core segments, particularly AIG Property Casualty and AIG Life and Retirement, which saw significant increases in pre-tax income. The company also made substantial progress on its strategic priorities, including reducing debt by $5.6 billion, which is expected to lower annual interest expenses by approximately $213 million. AIG Property Casualty demonstrated improved underwriting results with a lower accident year combined ratio, as adjusted, attributed to strategic initiatives, pricing improvements, and better risk selection. AIG Life and Retirement benefited from strong sales in retirement income solutions and improved investment income from alternative investments. The company also announced a cash dividend and a share repurchase program, signaling confidence in its financial health and commitment to returning capital to shareholders. However, AIG continues to manage legacy issues, including ongoing litigation and the eventual sale of its stake in International Lease Finance Corporation (ILFC).

Financial Highlights

27 data points
Beta

Revenue

$18.43B

Net Income

$2.73B

14.8% Net Margin

EPS (Diluted)

$1.84

Total Assets

$537.44B

Cash & Equivalents

$1.76B

Free Cash Flow

$1.82B

Financial Statements
Beta
Revenue$18.43B
SG&A Expenses$2.25B
Operating Income$4.85B
Interest Expense$535.00M
Net Income$2.73B
EPS (Basic)$1.85
EPS (Diluted)$1.84
Shares Outstanding (Basic)1.48B
Shares Outstanding (Diluted)1.48B

Key Highlights

  • 1Net income attributable to AIG increased by 17% to $2.73 billion for the second quarter of 2013.
  • 2AIG Property Casualty's operating income rose significantly, with an improved accident year combined ratio as adjusted, indicating stronger underwriting performance.
  • 3AIG Life and Retirement saw substantial pre-tax income growth, driven by higher investment income and strong sales in retirement solutions.
  • 4The company reduced its total debt by $5.6 billion in the first half of 2013, expecting an annual interest expense savings of $213 million.
  • 5AIG announced a $0.10 per share cash dividend and authorized a $1.0 billion share repurchase program, signaling financial strength and capital return plans.
  • 6The sale of International Lease Finance Corporation (ILFC) remains a key priority, with a 90% stake sale agreed upon, though closing is pending.
  • 7Effective tax rate for continuing operations was 13.4% for the quarter, impacted by tax-exempt interest income and valuation allowance releases.

Frequently Asked Questions

AIG Property Casualty showed improved operating income and a better accident year combined ratio, reflecting strategic initiatives and pricing discipline. AIG Life and Retirement also reported increased operating income, driven by higher investment income and robust sales in retirement income solutions.

AIG reduced its debt by approximately $5.6 billion through redemptions and cash tender offers for various debentures and capital securities. This is expected to result in approximately $213 million in annual interest expense savings.

AIG has agreed to sell up to 90% of its stake in International Lease Finance Corporation (ILFC). The closing of the transaction is pending, with AIG continuing to consider other options including a public offering.

Net investment income decreased year-over-year, primarily due to the absence of significant gains recognized in 2012 from the sale of investments like AIA and ML III. However, alternative investments performed strongly, contributing to improved income in the insurance operations. The available-for-sale portfolio experienced net unrealized losses due to rising interest rates.