10-QPeriod: Q2 FY2018

AMERICAN INTERNATIONAL GROUP, INC. Quarterly Report for Q2 Ended Jun 30, 2018

Filed August 3, 2018For Securities:AIG

Summary

AMERICAN INTERNATIONAL GROUP, INC. (AIG) reported its second quarter 2018 financial results, showing a decrease in net income attributable to AIG to $937 million, down from $1.13 billion in the prior year's second quarter. This decline was primarily driven by lower investment returns on alternative investments and a decrease in income from securities with an elected fair value option due to widening credit spreads and rising interest rates. Higher general and other operating expenses also contributed to the decrease. Partially offsetting these factors were lower policyholder benefits and losses incurred, driven by favorable prior year loss reserve development, and improved net realized capital gains compared to losses in the prior year. For the six months ended June 30, 2018, net income attributable to AIG decreased to $1.875 billion from $2.315 billion in the prior year. The company also announced significant strategic developments, including the completion of its acquisition of Validus Holdings, Ltd. for approximately $5.5 billion in cash, which is expected to strengthen its General Insurance business. Additionally, AIG is progressing with its legacy portfolio restructuring, including a partial sale of its interest in DSA Re to The Carlyle Group L.P. From an investor's perspective, the company is navigating a challenging market environment characterized by low interest rates and increasing competition, which impacts annuity sales and profitability. AIG is focused on underwriting excellence, expense management, and strategic capital allocation to drive sustainable, profitable growth.

Financial Highlights

35 data points
Beta

Revenue

$11.63B

Net Income

$937.00M

8.1% Net Margin

EPS (Diluted)

$1.02

Total Assets

$496.83B

Cash & Equivalents

$2.13B

Free Cash Flow

$598.00M

Financial Statements
Beta
Revenue$11.63B
SG&A Expenses$2.32B
Operating Income$1.88B
Interest Expense$299.00M
Net Income$937.00M
EPS (Basic)$1.04
EPS (Diluted)$1.02
Shares Outstanding (Basic)903.22M
Shares Outstanding (Diluted)916.57M

Key Highlights

  • 1Net income attributable to AIG decreased 17% year-over-year to $937 million ($1.02 diluted EPS) for Q2 2018.
  • 2Six-month net income attributable to AIG decreased 19% year-over-year to $1.875 billion ($2.04 diluted EPS).
  • 3Total revenues declined 7% to $11.63 billion in Q2 2018 and 7% to $23.34 billion for the six months ended June 30, 2018.
  • 4General Insurance segment Adjusted Pre-Tax Income decreased 46% to $568 million in Q2 2018.
  • 5Life and Retirement segment Adjusted Pre-Tax Income decreased 3% to $962 million in Q2 2018.
  • 6AIG completed the acquisition of Validus Holdings, Ltd. for $5.5 billion in cash on July 18, 2018.
  • 7The company repurchased approximately 12 million shares of common stock for $646 million in the first six months of 2018.

Frequently Asked Questions

The decrease in net income was primarily driven by lower investment returns on alternative investments, a decline in income from securities with an elected fair value option due to widening credit spreads and rising interest rates, and higher general and other operating expenses. These factors were partially offset by favorable prior year loss reserve development and improved net realized capital gains compared to the prior year quarter.

AIG completed the acquisition of Validus Holdings, Ltd. for approximately $5.5 billion in cash on July 18, 2018, aiming to strengthen its General Insurance business. Additionally, AIG is divesting a minority interest (19.9%) in DSA Re, its legacy run-off entity, to The Carlyle Group L.P., marking a step in its legacy portfolio restructuring.

The General Insurance segment's Adjusted Pre-Tax Income decreased significantly (46%) due to lower investment returns, higher losses and loss adjustment expenses, and increased operating expenses. The Life and Retirement segment saw a slight decrease (3%) in Adjusted Pre-Tax Income, impacted by lower investment returns and higher policyholder benefits, partially offset by higher fees and asset growth.

AIG faces challenges from a sustained low interest rate environment, which pressures annuity sales and profitability, and increased competition. The company is focusing on disciplined underwriting, expense management, and strategic product development to navigate these conditions and maintain profitability.