10-QPeriod: Q1 FY2020

AMERICAN INTERNATIONAL GROUP, INC. Quarterly Report for Q1 Ended Mar 31, 2020

Filed May 5, 2020For Securities:AIG

Summary

American International Group, Inc. (AIG) reported its first quarter 2020 financial results on May 5, 2020. The company experienced a significant increase in net income attributable to common shareholders, driven primarily by a substantial swing from net realized capital losses in the prior year's quarter to net realized capital gains in Q1 2020. This was also supported by a lower net loss reserve discount charge. However, the company faced headwinds from lower investment returns, particularly impacted by declines in equity markets and widening credit spreads due to the COVID-19 pandemic, as well as increased catastrophe losses primarily related to the pandemic's impact and higher amortization of deferred policy acquisition costs. The company's General Insurance segment saw a decrease in adjusted pre-tax income, impacted by lower net investment income and higher catastrophe losses, though North America benefited from improved underwriting results and expense discipline. The Life and Retirement segment also experienced a decline in adjusted pre-tax income due to market volatility affecting variable annuity products and lower investment yields. Other Operations reported a higher adjusted pre-tax loss, while the Legacy Portfolio's adjusted pre-tax income turned into a loss, largely due to reduced investment earnings from legacy investments. AIG's balance sheet reflected a decrease in total assets and total equity compared to year-end 2019. The company's liquidity remained robust, with significant available capacity under its credit facilities, although it did draw down $1.3 billion from its revolving credit facility during the quarter. The company continued its capital return strategy, paying dividends and repurchasing shares.

Financial Highlights

36 data points
Beta

Revenue

$14.44B

Net Income

$1.75B

12.1% Net Margin

EPS (Diluted)

$1.98

Total Assets

$510.48B

Cash & Equivalents

$2.74B

Free Cash Flow

-$586.00M

Financial Statements
Beta
Revenue$14.44B
SG&A Expenses$2.15B
Operating Income$1.74B
Interest Expense$355.00M
Net Income$1.75B
EPS (Basic)$1.99
EPS (Diluted)$1.98
Shares Outstanding (Basic)874.21M
Shares Outstanding (Diluted)878.87M

Key Highlights

  • 1Net income attributable to AIG common shareholders increased by 166% to $1.74 billion in Q1 2020 compared to $654 million in Q1 2019.
  • 2Total revenues increased by 16% to $14.44 billion in Q1 2020, driven by a substantial increase in net realized capital gains (losses) from a loss of $446 million in Q1 2019 to a gain of $3.52 billion in Q1 2020.
  • 3Net investment income decreased by 35% to $2.51 billion in Q1 2020, reflecting negative impacts from market volatility and widening credit spreads due to COVID-19.
  • 4General Insurance adjusted pre-tax income decreased by 60% to $501 million, primarily due to higher catastrophe losses and lower net investment income.
  • 5Life and Retirement adjusted pre-tax income decreased by 38% to $574 million, driven by increased amortization of deferred policy acquisition costs and lower investment yields impacting annuity products.
  • 6AIG Parent's liquidity sources totaled $10.7 billion as of March 31, 2020, including $3.2 billion available under its credit facility, after drawing $1.3 billion during the quarter.
  • 7The company repurchased approximately 12 million shares of common stock for $500 million during the first quarter of 2020.

Frequently Asked Questions

AIG reported a net income attributable to AIG common shareholders of $1.742 billion for the first quarter of 2020, a significant increase from $654 million in the same period of 2019. This increase was largely driven by higher net realized capital gains and a lower net loss reserve discount charge, partially offset by lower investment income and higher catastrophe losses.

The COVID-19 pandemic had a multifaceted impact. It contributed to lower investment returns due to market volatility and widening credit spreads, and increased catastrophe losses, particularly in the General Insurance segment. Higher amortization of deferred policy acquisition costs and reserves were also noted in the Life and Retirement segment due to weaker equity market performance. The company stated that the full impact is evolving and uncertain.

The company continued to work towards closing the sale of a controlling financial interest in Fortitude Holdings, subject to regulatory approvals and closing conditions. Upon closing, AIG would retain a 3.5% ownership interest. The company anticipates closing the transaction in mid-2020.

AIG maintained robust liquidity, with total liquidity sources of approximately $10.7 billion as of March 31, 2020. This included $3.2 billion available under its committed, revolving syndicated credit facility. During the quarter, AIG Parent borrowed $1.3 billion under this facility to enhance its liquidity. The company also received $397 million in dividends and loan repayments from subsidiaries and $459 million in tax sharing payments.