10-QPeriod: Q3 FY2018

AMERICAN INTERNATIONAL GROUP, INC. Quarterly Report for Q3 Ended Sep 30, 2018

Filed November 2, 2018For Securities:AIG

Summary

American International Group, Inc. (AIG) reported a net loss attributable to AIG of $(1.26 billion) for the third quarter of 2018, a significant improvement from the $(1.74 billion) net loss in the same period of 2017. This improvement was primarily driven by lower policyholder benefits and losses incurred, largely due to a substantial reduction in catastrophe losses and favorable prior year loss reserve development compared to the previous year. Additionally, net realized capital losses were reduced. However, the quarter was impacted by a net unfavorable adjustment from actuarial assumption updates and higher general operating expenses, partly due to the acquisition of Validus Holdings, Ltd. The company also saw a decline in investment income, particularly from alternative investments and securities with elected fair value options. Despite these headwinds, AIG's core businesses are showing signs of recovery, with the General Insurance segment reporting improved underwriting results year-over-year. Key financial highlights include a decrease in the consolidated combined ratio to 124.4% from 157.1% in the prior year's quarter, indicating improved underwriting performance. The company also repurchased shares and declared dividends, demonstrating a commitment to returning capital to shareholders, although total assets and equity saw fluctuations driven by business activities and market conditions.

Financial Highlights

36 data points
Beta

Revenue

$11.49B

Net Income

-$1.26B

-11.0% Net Margin

EPS (Diluted)

$-1.41

Total Assets

$504.86B

Cash & Equivalents

$2.74B

Free Cash Flow

$302.00M

Financial Statements
Beta
Revenue$11.49B
SG&A Expenses$2.33B
Operating Income$656.00M
Interest Expense$326.00M
Net Income-$1.26B
EPS (Basic)$-1.41
EPS (Diluted)$-1.41
Shares Outstanding (Basic)895.24M
Shares Outstanding (Diluted)895.24M

Key Highlights

  • 1Net loss attributable to AIG improved to $(1.26 billion) in Q3 2018 from $(1.74 billion) in Q3 2017.
  • 2General Insurance segment saw improved underwriting results, with the consolidated combined ratio decreasing to 124.4% from 157.1%.
  • 3The company completed the acquisition of Validus Holdings, Ltd. for $5.5 billion in cash, strengthening its General Insurance business.
  • 4Policyholder benefits and losses incurred decreased significantly due to lower catastrophe losses and favorable prior year loss reserve development.
  • 5Net investment income saw a slight decrease, impacted by lower hedge fund performance and changes in valuation for certain securities.
  • 6Total AIG shareholders' equity decreased to $58.6 billion from $65.2 billion at the end of 2017.
  • 7AIG paid $0.32 per share in dividends for the quarter and continued its share repurchase program.

Frequently Asked Questions

AIG reported a net loss attributable to AIG of $(1.26 billion), or $(1.41) per diluted common share, for the third quarter of 2018.

The improvement in net loss was primarily driven by significantly lower catastrophe losses, favorable prior year loss reserve development, and reduced net realized capital losses. However, this was partially offset by unfavorable actuarial assumption updates and higher general operating expenses, including those related to the Validus acquisition.

The acquisition of Validus Holdings, Ltd. for $5.5 billion in cash, completed on July 18, 2018, is expected to strengthen AIG's global General Insurance business by expanding its product portfolio and distribution channels.

Net investment income saw a slight decrease primarily due to lower hedge fund performance, a decline in income from securities with elected fair value options due to widening credit spreads and rising interest rates, and losses on fair value option equities. This was partially offset by higher commercial mortgage loan prepayment income and growth in some investment portfolios.