10-QPeriod: Q1 FY2017

AMERICAN INTERNATIONAL GROUP, INC. Quarterly Report for Q1 Ended Mar 31, 2017

Filed May 4, 2017For Securities:AIG

Summary

American International Group, Inc. (AIG) reported a significant turnaround in its financial performance for the first quarter of 2017, with net income attributable to AIG reaching $1.185 billion ($1.18 per diluted share), a substantial improvement from a net loss of $183 million ($0.16 per diluted share) in the prior year's quarter. This rebound was largely driven by a significant increase in net investment income and a reduction in general operating and other expenses. The company also saw a considerable decrease in net realized capital losses. Operationally, Commercial Insurance's pre-tax operating income increased due to higher net investment income and lower general operating expenses, though this was partially offset by lower net premiums written and an increase in the combined ratio. Consumer Insurance also showed strong growth in pre-tax operating income, benefiting from higher net investment income and improved operational efficiencies. The Legacy Portfolio shifted from a loss to a significant pre-tax operating income, primarily due to fair value gains on certain investments. The company continued its strategy of capital return to shareholders, repurchasing $3.6 billion of common stock and paying a $0.32 per share dividend.

Financial Highlights

36 data points
Beta

Revenue

$12.63B

Net Income

$1.19B

9.4% Net Margin

EPS (Diluted)

$1.18

Total Assets

$500.16B

Cash & Equivalents

$1.92B

Free Cash Flow

-$10.34B

Financial Statements
Beta
Revenue$12.63B
SG&A Expenses$2.44B
Operating Income$1.19B
Interest Expense$298.00M
Net Income$1.19B
EPS (Basic)$1.21
EPS (Diluted)$1.18
Shares Outstanding (Basic)980.78M
Shares Outstanding (Diluted)1.01B

Key Highlights

  • 1Net income attributable to AIG significantly improved to $1.185 billion in Q1 2017, compared to a net loss of $183 million in Q1 2016.
  • 2Diluted earnings per share increased to $1.18 in Q1 2017 from a loss of $0.16 in Q1 2016.
  • 3Net investment income increased by 22% to $3.686 billion, driven by higher income from alternative investments.
  • 4General operating and other expenses decreased by 19% to $2.443 billion, reflecting cost-saving initiatives and business divestitures.
  • 5Commercial Insurance's pre-tax operating income increased by 28% to $849 million, driven by higher net investment income and lower expenses, despite a decrease in net premiums written.
  • 6Consumer Insurance's pre-tax operating income increased by 49% to $1.048 billion, benefiting from higher net investment income and improved operational efficiency.
  • 7The company repurchased $3.6 billion of its common stock and paid a cash dividend of $0.32 per share in Q1 2017.

Frequently Asked Questions

The primary drivers for AIG's improved financial performance in Q1 2017 were a significant increase in net investment income, a substantial reduction in general operating and other expenses, and a considerable decrease in net realized capital losses compared to the prior year quarter. Improved income from insurance operations, higher alternative investment income, and gains from the Legacy Portfolio also contributed.

The Commercial Insurance segment reported a pre-tax operating income of $849 million, an increase of 28% from $662 million in Q1 2016. This improvement was mainly due to higher net investment income and lower general operating expenses. However, net premiums written decreased by 17% due to portfolio optimization and challenging market conditions, and the combined ratio increased to 102.2% from 97.7%.

AIG's primary focus is on growth in intrinsic value. For 2017, key priorities include improving return on equity, providing innovative solutions, continuing to reduce general operating expenses, and improving the profitability of Commercial Insurance. The company actively returns capital to shareholders through dividends and share repurchases, having returned $17.0 billion since January 1, 2016, through March 31, 2017.

Net investment income increased by 22% to $3.686 billion in Q1 2017. This was largely driven by higher income from alternative investments, particularly hedge funds, due to improved equity market performance. However, blended investment yields on new investments were lower than those on investments that matured or were sold.