American International Group, Inc. New · NYSE:AIG
American International Group, Inc. New — American International Group — Investor Presentation (May 2016)
35 slides from American International Group, Inc. New's investor presentation, May 13, 2016
Slide 1: Investor Presentation May 13, 2016
Investor Presentation May 13, 2016 EXHIBIT 99.1
Slide 2: Cautionary Statement Regarding Forward Looking Information and Other Matters
Cautionary Statement Regarding Forward Looking Information and Other Matters This document and the remarks made within this presentation may include, and officers and representatives of American International Group, Inc. (AIG) may from time to time make, projections, goals, assumptions and statement
Slide 3: Vision for AIG
Vision for AIG “Today, AIG announces steps to narrow its focus, improve its financial performance, and return capital to shareholders. While we take these steps to maximize shareholder value, we continue to think holistically about all of our stakeholders. Importantly, we are committed to being our
Slide 4: AIG Announces Actions to Create a Leaner, More Profitable and Focused Insurer
AIG Announces Actions to Create a Leaner, More Profitable and Focused Insurer 2016-2017 Board Approved Actions Return at least $25 bn of capital to shareholders Pursue an active divestiture program, including initially the 19.9% IPO of UGC as first step towards full separation and sale of AIG Adviso
Slide 5: Clear and Achievable Financial Targets
Clear and Achievable Financial Targets Operating Portfolio Legacy Portfolio (1) Consolidated ~$14 bn $23 bn 10.3 - 10.7% 9.3 - 9.7% ~9% 8.4 - 8.9% (2) (2) Notes: (1) Legacy Portfolio assets may evolve over time. (2) Normalized operating ROE excluding AOCI & DTA, a non-GAAP financial measure. Operati
Slide 6: Progress On Financial Targets
Progress On Financial Targets Objective FY 2016 Target 1Q16 Selected Actions Reduce Operating Expenses ~$700mm; 6% Reduction in Net GOE Decline of $140 million, or 5% YoY on a constant dollar basis Primarily driven by staff reductions and benefits rationalization Increase Normalized ROE 8.4 - 8.9% I
Slide 7: Return Significant Capital to Our Shareholders in 2016-2017
Return Significant Capital to Our Shareholders in 2016-2017 Projected Sources for 2016-2017 Capital Return Goal ($ bn) Return at least $25 bn of capital to shareholders through dividends and share repurchases Capital return goal can be achieved notwithstanding strengthening of reserves in 4Q’15 (3)
Slide 8: General Operating Expense Reductions
General Operating Expense Reductions Targeting $1.6B of Gross GOE Reductions or $1.4B of Net GOE Reductions by 2017 from GOE of $11.1B for full year 2015 1Q15 vs. 1Q16 ($ in Millions) ê5% Recorded an additional restructuring charge of $188 million in 1Q16, which is largely related to actions previou
Slide 9: Organizational Transparency
Organizational Transparency Operating Portfolio Legacy Portfolio (1) Objectives Value-maximization and capital release from monetizing or running off non-strategic assets Operating ROE improvement across modular, focused business units Notes: (1) Legacy Portfolio assets may evolve over time. (2) Cou
Slide 10: Divestitures – No Sacred Cows
UGC – filed S-1 for up to 19.9% in March 2016 as a first step towards full separation AIG Advisor Group – completed sale to Lightyear Capital and PSP Investments in May 2016 Divestitures – No Sacred Cows Announced Divestitures Does the business help us... Meet or exceed the cost of capital? Create d
Slide 11: Continued Improvement in Commercial Insurance Accident Year Loss Ratio
Continued Improvement in Commercial Insurance Accident Year Loss Ratio Total Commercial Accident Year Loss Ratio Adjusted For Prior Year Development AY LR adjusted for Prior Year Development (4Q’15)
Slide 12: Commercial Insurance – Property Casualty Loss Ratio Dispersion
Commercial Insurance – Property Casualty 1Q16 vs. FY 2015 Accident Year Loss Ratio Dispersion1 The comparison is based on the same product set definition as FY15.
Slide 13: Commercial Insurance – Operating Actions
Client Focus Refine our focus on client segmentation Successful execution in these areas and other AIG-wide initiatives expected to produce the following benefits by 2017: ~+$1.2 bn PTOI Accident year loss ratio (1) improvement of 6 points Portfolio “Exits” Exit or remediate targeted sub-segments of
Slide 14: Consumer Insurance – Operating Actions
Actions to sharpen Consumer focus will improve profitability Leverage Successes Japan Reinsurance Expand on successes in High Net Worth and Service businesses Reduce Footprint Successful execution in these areas and other AIG-wide initiatives expected to produce the following benefit by 2017: ~+$0.8
Slide 15: Reserves – Non-Life Insurance Companies
Reserves – Non-Life Insurance Companies Business mix shift to shorter-tail lines expected to reduce net reserves Reduction in outstanding loss reserves for long-tail reserve segments expected to reduce reserve variability Note: Allocation by accident year for illustration purposes only and subject t
Slide 16: Reserve Strengthening Details
AIG continues to broaden and enhance methods and assumptions to better inform the Company’s best estimate for reserves with the objective of mitigating the degree of volatility around the selected best estimate. Of the $3.6 billion reserve strengthening: 35% is attributable to accident years 2004 an
Slide 17: Reduced Exposure in Long-Tailed U.S. Casualty
Reduced exposure in long-tailed U.S. Casualty will assist in reducing reserve estimation volatility. U.S. Casualty Actions Related to Prior Year Development AIG has taken significant actions to mitigate U.S. Casualty exposures since 2011, and in 2016 AIG has aggressively accelerated the pace of reme
Slide 18: Deferred Tax Assets
Deferred Tax Assets As of 12/31/14 As of 12/31/15 ($ in Billions) Type Gross Attributes Deferred Tax Asset Gross Attributes Deferred Tax Asset Utilization/Expiration Net Operating Loss Carryforwards Non-Life & Life $29.4 $10.3 $32.6 $11.4 Utilize against Non-Life Insurance Companies, Corporate & Oth
Slide 19: Impact of Potential Separation on DTA
Impact of Potential Separation on DTA A separation of AIG’s life business would impair the value of AIG’s tax attribute DTAs Without Life income, FTCs generally cannot be used as credits since NOLs must be used first Without Life income, NOL usage would slow down, reducing the value of the tax attri
Slide 20: AIG's Risk Profile
AIG’s Risk Profile Total Assets ($ bn) Total Gross Notional Derivatives ($ bn) (1) Leverage Ratio (x) (2) VA Assets / Total Equity (3) Source: Company filings. Notes: Figures are as of December 31, 2015. (1) Calculated as sum of the gross notional amounts of derivative assets and liabilities. AIG da
Slide 21: Strong Capital Position
21 ($ in Billions, Except per Share Amounts) Book Value Per Common Share $75.10 (0.7%) $78.28 +4.2% Ratios: Dec. 31, 2015 March 31, 2016 Hybrids / Total capital 1.2% 0.8% Financial debt / Total capital 16.3% 18.6% Total debt / Total capital 17.5% 19.4% Capital Structure 1 $109.4 $110.5 Year-end Dome
Slide 22: Parent Liquidity
Parent Liquidity On January 25, 2016, approximately $2.9B of capital was contributed to Non-Life Insurance Companies as a result of the 4Q15 reserve strengthening. Changes in Parent Liquidity Cash & S/T Inv. $3.5 Unencumbered Securities $5.7 $9.2 1 Unencumbered Securities $4.1 Cash & S/T Inv. $3.0 $
Slide 23: Book Value Per Share
Book Value Per Share Book Value Per Share Growth in 1Q16 Impacted by Market Volatility Includes negative market volatility on investments, including private equity, hedge funds, ABS CDO securities, derivatives, and holdings in PICC. $59.26 $1.13 ($0.48) $0.21 ($0.80) $59.05 Book Value Per Common Sha
Slide 24: Improvement in Normalized Return On Equity
Improvement in Normalized Return On Equity Active Capital Management, Underwriting Improvement and Expense Management Drives ROE Expansion Largely driven by share & warrant repurchases and dividends. 1Q16 operating effective tax rate includes the impact of the favorable resolution of certain tax aud
Slide 25: Enhanced Debt Maturity Profile
As of 12/31/2012 – Total Notional Amount: $25.5 Billion / Weighted Average Coupon: 6.35% As of 5/10/2016 – Total Notional Amount: $22.2 Billion / Weighted Average Coupon: 4.64% ($ in Millions) ($ in Millions) 1 1 1 2 Remaining callable hybrid notes are reflected at their expected call dates. The 6.4
Slide 26: Glossary of Non-GAAP Financial Measures and Non-GAAP Reconciliations
Glossary of Non-GAAP Financial Measures and Non-GAAP Reconciliations
Slide 27: Glossary of Non-GAAP Financial Measures
Glossary of Non-GAAP Financial Measures We use the following operating performance measures because we believe they enhance the understanding of the underlying profitability of continuing operations and trends of our business segments. We believe they also allow for more meaningful comparisons with
Slide 28: Glossary of Non-GAAP Financial Measures (continued)
Glossary of Non-GAAP Financial Measures (continued) Pre-tax operating income: includes both underwriting income and loss and net investment income, but excludes net realized capital gains and losses, other income and expense — net, and non-operating litigation reserves and settlements. Underwriting
Slide 29: Glossary of Non-GAAP Financial Measures (continued)
Glossary of Non-GAAP Financial Measures (continued) Pre-tax operating income and loss is derived by excluding the following items from pre-tax income and loss: loss on extinguishment of debt net realized capital gains and losses changes in benefit reserves and DAC, VOBA and SIA related to net realiz
Slide 30: Non-GAAP Reconciliations
Non-GAAP Reconciliations Notes: (1) Represents U.S. tax attributes related to net operating loss carryforwards and foreign tax credits. (2) Represents transfer of the equity associated with discontinued/run-off businesses (primarily Life Insurance Companies run-off portfolios and pre-2012 structured
Slide 31: Non-GAAP Reconciliations – Pre-tax and After-tax Operating Income
Non-GAAP Reconciliations – Pre-tax and After-tax Operating Income
Slide 32: Non-GAAP Reconciliations – ROE
Non-GAAP Reconciliations – ROE – Net Income (Loss) and ROE – After-tax Operating Income 32
Slide 33: Non-GAAP Reconciliation – Book Value Per Common Share and Normalized ROE
Non-GAAP Reconciliation – Book Value Per Common Share and Normalized Return On Equity, Ex. AOCI & DTA1 Book Value Per Common Share ($ in Millions, Except Per Share Data) Dec. 31, 2015 March 31, 2016 Total AIG shareholders’ equity (a) $89,658 $88,518 Less: Accumulated other comprehensive income (AOCI
Slide 34: Non-GAAP Reconciliation – Impact of Market Volatility on Book Value Per Common Share
Non-GAAP Reconciliation – Impact of Market Volatility on Book Value Per Common Share Reconciliation of Market Volatility & Net Realized Capital Losses to Net Income ($ in millions, except per share amounts) Pre-tax income After-tax income (a) BVPS 1 Impact (a) ÷ (b) Market volatility on investments:
Slide 35: Non-GAAP Reconciliation – Accident Year Combined Ratio, as Adjusted
Non-GAAP Reconciliation – Accident Year Combined Ratio, as Adjusted
American International Group — Investor Presentation (May 2016) on 6ix