51 slides from American International Group, Inc. New's earnings presentation, Nov 17, 2015
Slide 1: Investor Presentation Third Quarter 2015
American International Group, Inc. Investor Presentation Third Quarter 2015 November 17, 2015 Exhibit 99.1
Slide 2: Cautionary Statement Regarding Forward Looking Information
Cautionary Statement Regarding Forward Looking Information 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 statements that may constit
Slide 3: AIG's Four Key Priorities
Narrow Our Focus Focus on AIG’s core operations in complex commercial insurance, retirement and savings products and differentiated niches of expertise, including longevity Over 50 asset sales and divestitures for proceeds in excess of $90bn since 2008 AerCap, Springleaf, PICC and Central America op
Slide 4: Focused Performance Measured by Key Financial Targets
Focused Performance Measured by Key Financial Targets Objective Annual Target Through 2017 Sustainable Operating Efficiency Gains 3–5% Reduction in Net Expenses1 Improving ROE ~50+ bps Increase in Normalized ROE, ex. AOCI and DTA 2016 Target – 8.4% Growing BVPS 10+% Growth in BVPS Ex. AOCI and DTA a
Slide 5: AIG Today: Total Operating Revenue of $43.4 Billion for 9M'15
Total Operating Revenue of $43.4 Billion for 9M'15 Note: Percentages computed based on total AIG operating revenues. Includes results of AIG Parent, Runoff insurance lines, AIG Life Holdings (a non-operating holding company) and consolidation, eliminations and other adjustments. A Diverse Customer-F
Slide 6: Managing Capital Wisely
Managing Capital Wisely Book Value Per Share (Ex. AOCI & DTA) CAGR = 13% Enhancing our operating model to efficiently deploy our human and technology resources, and investing in our infrastructure to ensure AIG’s market leadership in a world of constant technological and market innovation. Completed
Slide 7: AIG's ROE and Key Drivers to Achieve 2016 Goal
AIG's ROE and Key Drivers to Achieve 2016 Goal Goal to improve ROE by 50 bps each year ROE deterioration primarily driven by: Narrowing improvements in commercial underwriting results Lower level of AerCap earnings Key drivers to 2016 ROE goal include: GOE reductions Improved underwriting results Ca
Slide 8: Non-GAAP Reconciliation – Normalized ROE, Ex. AOCI & DTA
Non-GAAP Reconciliation – Normalized ROE, Ex. AOCI & DTA 9M’14 9M’15 ($ in Millions) Pre-tax After-tax ROE Pre-tax After-tax ROE As reported $7,834 $5,259 8.9% $6,243 $4,275 7.1% Adjustments to arrive at Normalized ROE, ex. AOCI & DTA: Catastrophe losses below expectations (503) (327) (0.5%) (669) (
Slide 9: Targeting 3-5% of Annual Reduction Through 2017
Targeting 3-5% of Annual Reduction Through 2017 General Operating Expenses, Operating Basis AIG manages expenses on a gross basis – before allocation to loss adjustment expenses, other acquisition expenses and investment and other expenses – as it provides a more meaningful indication of our operati
Slide 10: Executing On Plan To Reduce Net Expenses By $1.0B - $1.5B By 2017
Executing On Plan To Reduce Net Expenses By $1.0B - $1.5B By 2017 Actions Simplify AIG Structure: Simplify organizational structure, consolidate activities, move back office activities to lower cost locations and shared service centers, and de-layer to realize cost savings and operational efficienci
Slide 11: 2015 Expense Reduction Actions To Date
2015 Expense Reduction Actions To Date AIG Has Taken Action In 2015 That Will Generate Expense Savings Operational Efficiency Business Rationalization Expense Reductions Froze the pension plan Initiated global operating location optimization strategy Consolidated policy offerings in Japan Aligned di
Slide 12: AIG Consolidated Operating Financial Highlights
1) Includes consolidations and eliminations. 2012 includes pre-tax gains of approximately $5.0 billion on AIA and Maiden Lane III interests. AIG Consolidated Operating Financial Highlights Full Year Nine Months ($ in Millions, Except per Share Amounts) 2012 2013 2014 2015 Operating revenues $65,379
Slide 13: AIG Consolidated Balance Sheet Selected Highlights
Represents Life Insurance Companies’ future policy benefits and policyholder contract deposits, and excludes separate accounts. Represents U.S. tax attributes related to net operating loss carryforwards and foreign tax credits. AIG Consolidated Balance Sheet Selected Highlights ($ in Millions) Dec.
Slide 14: Strong Capital Position: Credit Ratings and Capital Structure
Credit Ratings Capital Structure ($ in Billions) Includes AIG notes, bonds, loans and mortgages payable, and AIG Life Holdings, Inc. (AIGLH) notes and bonds payable and junior subordinated debt. The inclusion of RBC measures is intended solely for the information of investors and is not intended for
Slide 15: Financial Flexibility – Multiple Sources of Liquidity
AIG Parent Liquidity ($ in Billions) Insurance Company Distributions1 ($ in Millions) Includes distributions of both cash and fixed maturity securities and excludes other non-cash dividends. Includes $2.8 billion of dividends that were paid in 2015 but declared in 4Q14. Financial Flexibility – Multi
Slide 16: Enhanced Debt Maturity Profile
Enhanced Debt Maturity Profile As of 12/31/2012 – Total Notional Amount: $25.5 Billion / Weighted Average Coupon: 6.35% Liability Management Actions Have Improved Maturity Profile and Reduced Weighted Average Coupon to Below 5.0% As of 10/31/2015 – Total Notional Amount: $19.3 Billion / Weighted Ave
Slide 17: Utilization of Valuable Tax Attributes
Diversified Operating Platform Allows For Utilization of Valuable Tax Attributes Deferred Tax Assets As of 12/31/13 As of 12/31/14 ($ in Billions) Type Gross Attributes Deferred Tax Asset Gross Attributes Deferred Tax Asset Utilization/Expiration Net Operating Loss Carryforwards Non-Life & Life $35.
Slide 18: Non-Life Insurance Companies – Invested Assets
Non-Life Insurance Companies – Invested Assets Total Portfolio Composition Bond Portfolio – $90.5 Billion – by Agency Credit Rating Total Cash & Invested Assets as of September 30, 2015 – $116.6 Billion1 Corporate debt Non-U.S. Governments U.S. Governments States, municipalities, and political subdi
Slide 19: Life Insurance Companies – Invested Assets
Life Insurance Companies – Invested Assets Total Portfolio Composition Bond Portfolio – $160.8 Billion Total Cash & Invested Assets as of September 30, 2015 – $201.7 Billion1 Corporate debt RMBS CMBS CDO/ ABS Other invested assets Loans Cash and short-term investments Non-U.S. Governments U.S. Gover
Slide 20: Commercial Insurance
Commercial Insurance AIG
Slide 21: Commercial Insurance – Strategy
Commercial Insurance – Strategy Customer Strategic Growth Underwriting Excellence Claims Excellence Operational Effectiveness Capital Efficiency Investment Strategy Aspire to be our customers’ most valued insurer by offering innovative products, excellent service and access to an extensive global ne
Slide 22: Commercial Insurance – Diversified Products and Services
Commercial Insurance – Diversified Products and Services General Liability Commercial Automobile Liability Workers’ Compensation Excess Casualty Crisis Management Risk Management Other Customized Structured Programs for Large Corporate and Multinational Customers Global Property covers exposures to
Slide 23: Commercial Insurance – A Market Leader
As measured by full year 2014 net premiums written. Refer to AIG 2014 10-K for further information. According to the 2015 RIMS Benchmark Survey, based on both policy counts and premiums. According to the 2014 Flaspöhler Survey. According to Inside Mortgage Finance as measured by new insurance writte
Slide 24: Commercial Insurance – Property Casualty Financial Highlights
Commercial Insurance – Property Casualty Financial Highlights Full Year Nine Months ($ in Millions) 2012 2013 2014 2015 Net premiums written $20,348 $20,880 $21,020 $15,832 Net premiums earned 20,848 20,677 20,885 15,038 Underwriting income (loss) (2,270) (336) (50) 65 Net investment income 3,951 4,
Slide 25: Meaningful Remediation of Casualty Lines and Growth Outside of the U.S.
Meaningful Remediation of Casualty Lines and Growth Outside of the U.S. Commercial Insurance – Property Casualty Product Mix & Geography Shift Property Casualty Full Year 2010 NPW – $20.2 Billion Property Casualty 9M'15 NPW – $15.8 Billion Product Geography Casualty Property Specialty Financial line
Slide 26: Business Mix Shift Away from Long-Tail Casualty Lines
Business Mix Shift Away from Long-Tail Casualty Lines and Accelerated Commutation of Legacy Portfolios (Especially 2004 and Prior) Are Expected to Also Reduce Reserve Variability Reserves – Non-Life Insurance Companies Total Net Reserves $61.5 Billion at September 30, 2015 Business mix shift to shor
Slide 27: Commercial Insurance – Mortgage Guaranty
Strong growth in operating earnings reflects lower delinquency rates, higher cure rates, and new business growth. Volume and quality of new business remain strong despite competitive pressures. Average FICO of new insurance written in 3Q15 was 752. Average loan-to-value of new insurance written in 3
Slide 28: Mortgage Guaranty – Credit Quality of Loans
Mortgage Guaranty’s Risk Quality Index (RQI) is a proprietary model that uses over a dozen variables to estimate the potential for a mortgage to default. RQI is the key driver in Mortgage Guaranty’s risk-based pricing plan, Performance Premium. Primary delinquency rate has returned to a pre-crisis l
Slide 29: Commercial Insurance – Institutional Markets Financial Highlights
($ in Millions) Commercial Insurance – Institutional Markets Financial Highlights Reserves & Stable Value Wraps Assets Under Management Full Year Nine Months 2012 2013 2014 2015 Premiums and deposits $774 $991 $3,797 $985 Premiums 458 610 432 854 Policy fees 102 113 187 148 Net investment income 2,0
Slide 30: Consumer Insurance
Consumer Insurance AIG
Slide 31: Consumer Insurance – Strategy
Consumer Insurance – Strategy Customer Information-Driven Strategy Focused Growth Operational Effectiveness Profitability and Capital Management Investment Strategy Aspire to be our customers’ most valued insurer. Through our unique franchise, which brings together a broad portfolio of retirement, l
Slide 32: Consumer Insurance – Market Maturity Model
Focused Growth Consumer Insurance – Market Maturity Model Early Stage Market Advanced Stage Market Product Channel Customer Segment Personal Accident Travel Warranty Auto & Home Life Health Retirement Micro Insurance Broad Market/ Wholesaling Career Agency, IFAs Public Agencies Financial Services Sp
Slide 33: Consumer Insurance – Leading Market Positions
Based on LIMRA rankings for respective periods. As of 2Q15. Source – Non-Life Insurance Statistics, AIG internal analysis (includes Medical products sold by Non-Life Insurance Companies) as of 4Q14. Source – General Insurance Rating Organization of Japan as of 4Q14. Consumer Insurance – Leading Mark
Slide 34: Consumer Insurance Operations Continue to Be Recognized for Excellence Globally
Consumer Insurance Operations Continue to Be Recognized for Excellence Globally Consumer Insurance – Leading Businesses Market Tools – U.S. 2015 Achievement in Customer Excellence for Life Insurance (ACE Award for 8th Consecutive Year) DALBAR – U.S. 2014 Annuity Service Excellence Award (8th Consecu
Slide 35: Consumer Insurance – Overview
1)Premiums and deposits include net premiums written for the Personal Insurance operating segment and premiums and deposits for the Retirement and Life operating segments. Retirement premiums and deposits exclude activity related to closed blocks of fixed and variable annuities. Consumer Insurance –
Slide 36: Consumer Insurance – Retirement Financial Highlights
1) Excludes activity related to closed blocks of fixed and variable annuities. Consumer Insurance – Retirement Financial Highlights Full Year Nine Months ($ in Millions) 2012 2013 2014 2015 Premiums and deposits1 $16,048 $23,729 $24,023 $18,204 Premiums 120 188 287 127 Policy fees 743 861 1,010 802
Slide 37: Consumer Insurance – Retirement – Base Yields and Spreads
Base Net Investment Spreads1 1) Annualized return on base portfolio. 2) Excludes the amortization of sales inducement assets. Consumer Insurance – Retirement – Base Yields and Spreads Base Yields1 The trend in base yields reflects the reinvestment of cash flows at yields lower than the overall portf
Slide 38: Retirement – Variable Annuities
Individual variable annuities represented 18% of total reserves at September 30, 2015 for AIG’s U.S. Life Insurance Companies. AIG significantly improved its industry ranking since 2009; remaining growth opportunity in variable annuities due to market share of only 7.4%. Disciplined pricing and de-r
Slide 39: Consumer Insurance – Life Financial Highlights
Other income primarily relates to commission and profit sharing revenues received by Laya Healthcare from the distribution of insurance products. Decline in pre-tax operating income in 2014 primarily reflected a $104 million addition to reserves for IBNR death claims, an $87 million increase related
Slide 40: Consumer Insurance – Personal Insurance Financial Highlights
Consumer Insurance – Personal Insurance Financial Highlights Net Premiums Written 9M'15 – $8.9 Billion Combined Ratios Full Year Nine Months ($ in Millions) 2012 2013 2014 2015 Net premiums written $13,302 $12,700 $12,412 $8,861 Net premiums earned 13,103 12,377 11,970 8,424 Underwriting income (los
Slide 41: Appendix
Appendix AIG
Slide 42: Successfully Focusing AIG
Sept 2008 United States provides capital to AIG; launches restructuring program Aug 2009 Bob Benmosche becomes AIG CEO Oct 2010 AIG prices sale of shares in AIA in $20.5B IPO Nov 2010 AIG completes sale of ALICO to MetLife Feb 2011 AIG completes sale of Star and Edison Co.’s to Prudential Dec 2012 U
Slide 43: 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 our insurance competitors. When we use t
Slide 44: 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 income and loss is derived by reducing net premiums e
Slide 45: 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 46: Non-GAAP Reconciliation – Operating Revenues and General Operating Expenses
Non-GAAP Reconciliation – Operating Revenues and General Operating Expenses Full Year Nine Months Total Operating Revenues (In Millions) 2012 2013 2014 2015 Total operating revenues $65,379 $61,524 $61,001 $43,404 Reconciling Items: Changes in fair values of fixed maturity securities designated to l
Slide 47: Non-GAAP Reconciliation – Premiums and Deposits
Non-GAAP Reconciliation – Premiums and Deposits Retirement Full Year Nine Months 2012 2013 2014 2015 Premiums and Deposits1 $16,048 $23,729 $24,023 $18,204 Deposits (16,203) (23,690) (23,903) (18,079) Other 275 149 167 2 Premiums $120 $188 $287 $127 Life 2012 2013 2014 2015 Premiums and Deposits $4,
Slide 48: Non-GAAP Reconciliation – Pre-tax and After-tax Operating Income
Non-GAAP Reconciliation – Pre-tax and After-tax Operating Income Full Year Nine Months Pre-tax and After-tax Operating Income (In Millions, Except Per Share Data) 2012 2013 2014 2015 Pre-tax income from continuing operations $2,891 $9,368 $10,501 $6,213 Adjustments to arrive at Pre-tax operating inc
Slide 49: Non-GAAP Reconciliation – Book Value Per Share and Return On Equity
Non-GAAP Reconciliation – Book Value Per Share and Return On Equity Book Value Per Common Share ($ in Millions, Except Per Share Data) Dec. 31, 2011 Dec. 31, 2012 Dec. 31, 2013 Dec. 31, 2014 Sept. 30, 2015 Total AIG shareholders’ equity (a) $101,538 $98,002 $100,470 $106,898 $98,999 Less: Accumulate
Slide 50: Non-GAAP Reconciliation – Accident Year Combined Ratio, as Adjusted
Full Year Nine Months Property Casualty Accident Year Combined Ratio, As Adjusted 2012 2013 2014 2015 Loss ratio 80.5 71.9 71.6 70.8 Catastrophe losses and reinstatement premiums (10.9) (3.4) (2.9) (2.5) Prior year development net of premium adjustments (1.2) (1.5) (2.8) (3.1) Net reserve discount b
Slide 51: Bring on tomorrow
Bring on tomorrow the United States,