American International Group, Inc. New · NYSE:AIG
American International Group, Inc. New — American International Group — Q2 2020 Earnings Presentation
38 slides from American International Group, Inc. New's earnings presentation, Aug 3, 2020
Slide 1: Second Quarter 2020 Financial Results Presentation
Second Quarter 2020 Financial Results Presentation August 3, 2020
Slide 2: Forward-looking statements
This document and the remarks made within this presentation may include, and officers and representatives of American Interna tio nal Group, Inc. (AIG) may from time to time make and discuss, projections, goals, assumptions and statements that may constitute “forward - looking statements” within the
Slide 3: Highlights
* Refers to financial measure not calculated in accordance with generally accepted accounting principles (Non - GAAP); definitions and abbreviations of Non - GAAP measures and reconciliations to their closest GAAP measures can be found in this presentation under the heading Glossary of N on - GAAP F
Slide 4: Fortitude Sale Completed & Formation of Syndicate 2019
* Refers to financial measure not calculated in accordance with generally accepted accounting principles (Non - GAAP); definitions and abbreviations of Non - GAAP measures and reconciliations to their closest GAAP measures can be found in this presentation under the heading Glossary of N on - GAAP F
Slide 5: Key Takeaways: Adjusted Pre-tax Income by Segment
* Refers to financial measure not calculated in accordance with generally accepted accounting principles (Non - GAAP); definitions and abbreviations of Non - GAAP measures and reconciliations to their closest GAAP measures can be found in this presentation under the heading Glossary of Non - GAAP Fi
Slide 6: 2Q19 and 2Q20 noteworthy items
2Q19 and 2Q20 noteworthy items 1) Computed using a U.S. statutory tax rate of 21%. 2) Computed using weighted average diluted shares on an operating basis, which is provided on page 6 of the 2Q20 Financial Suppl eme nt. 3) Includes General Insurance and Legacy General Insurance Runoff. 4) The annual
Slide 7: Capital and financial position
1) Includes AIG notes, bonds, loans and mortgages payable, AIG Life Holdings, Inc. (AIGLH) notes and bonds payable and junior su bor dinated debt, and Validus notes and bonds payable. 2) June 30, 2020 AOCI is computed as GAAP AOCI of $9.2B excluding $4.2B of cumulative unrealized gains and losses re
Slide 8: Changes in AIG Parent Liquidity
$5.1 12.9 $11.3 $7.7 $2.4 $3.0 $4.5 AIG Parent Liquidity Balance at 3/31/2020 Insurance Company Distributions Debt Issuances Sale of Fortitude Credit Facility Repayment Capital Contributions Related to Sale of Fortitude IRS Tax Prepayment Common & Preferred Dividends Interest Paid on Parent Debt Oth
Slide 9: Investment portfolio credit quality continues to be strong
Investment portfolio credit quality continues to be strong with limited impact on ratings in 2Q20; AIG’s corporate debt portfolio is well diversified by asset class and industry sector Note: Amounts shown for segments are before consolidations and eliminations. NAIC Designation June 30, 2020 – $263.
Slide 10: Invested Assets & Gross Investment Income, APTI Basis
$3,014 $3,265 $396 $553 $2,025 $1,997 $593 $715 ($170) $423 ($56) $60 ($46) $193 ($68) $170 $463 $257 $280 $107 $136 $156 $47 ($6) 2Q20 2Q19 2Q20 2Q19 2Q20 2Q19 2Q20 2Q19 Interest & dividends Alternative investments All other NII of $3.4B ($3.2B APTI basis 1 ); Gross Investment Income, APTI basis 1
Slide 11: Continued execution of AIG 200
Continued execution of AIG 200, a global, multi - year initiative to achieve transformational change and $1B of GOE savings General Insurance 1 The Standard Commercial Underwriting Platform will modernize global underwriting capabilities by simplifying processes and tools to create a contemporary da
Slide 12: General Insurance: Calendar year underwriting results
61.3% 61.5% 22.2% 20.0% 12.6% 13.4% - 0.9% - 0.8% 2.6% 11.9% 2Q19 2Q20 AYLR, As Adj. Acq. Ratio GOE Ratio PYD Ratio CAT Ratio 61.3% 61.5% 34.8% 33.4% 96.1% 94.9% 2Q19 Change in Personal Insurance business mix AYLR U/W Actions Expense Ratio 2Q20 AYLR, As Adj. Expense Ratio Note: Calendar year combine
Slide 13: General Insurance: North America Commercial Lines and Personal Insurance
General Insurance: Higher North America Commercial Lines CYCR from CATs; On an AY, as adjusted, basis North America Commercial Lines improved; Personal Insurance results reflect the formation of Lloyd’s Syndicate 2019 and COVID - 19 impact on Travel business Key Takeaways: North America Commercial L
Slide 14: General Insurance: International Commercial Lines and Personal Insurance
General Insurance: Increase to International CYCR; International AY, as adjusted, improved due to premium rate increases, underwriting actions and portfolio optimization Key Takeaways: International Commercial Lines and Personal Insurance Underwriting Results ▪ Net premiums written decreased 2% (1%
Slide 15: Life and Retirement results
Life and Retirement: 2Q20 results recovered sharply from 1Q20 due to capital market improvements; APTI decreased from 2Q19 due to private equity losses, continued spread compression and elevated mortality from the impact of COVID - 19 Adjusted Pre - Tax Income ($M) Adjusted Return on Common Equity P
Slide 16: Life and Retirement: Individual Retirement
2Q19 2Q20 ($0.3) ($1.5) $90.0 $98.8 $48.1 $47.9 $13.2 $8.1 $151.3 $154.8 2Q19 2Q20 General Accounts Separate Accounts Retail Mutual Funds Life and Retirement: Individual Retirement 2Q20 reflects equity market recovery; overall annuity sales were lower due to pricing discipline and broad industry sal
Slide 17: Life and Retirement: Group Retirement
$49.2 $51.3 $36.2 $35.3 $20.4 $21.0 $105.8 $107.6 2Q19 2Q20 General Accounts Separate Accounts Mutual Funds Life and Retirement: Group Retirement 2Q20 results reflect equity market recovery, offset by lower base investment spreads Base Net Investment Spread Assets Under Administration (AUA - $B) Net
Slide 18: Life and Retirement: Life Insurance
Life and Retirement: Life Insurance impacted by adverse mortality primarily from COVID - 19 1) Includes other income primarily related to commission and profit sharing revenues received by Laya Healthcare from the distri but ion of insurance products. New Business Sales ($M) By Product By Geography
Slide 19: Life and Retirement: Institutional Markets
3.1 3.4 5.2 7.6 5.0 5.0 0.9 0.6 6.8 6.9 $21.0 $23.4 2Q19 2Q20 Life and Retirement: Institutional Markets closed two reinsurance transactions, driving an increase in premiums and deposits; higher APTI reflects business growth and strong investment results Premiums and Deposits ($M) GAAP Reserves by L
Slide 20: Other Operations
Other Operations Key Takeaways: ▪ Corporate (Parent and Service Companies) APTL increased primarily as 2Q19 benefited from Other Income of $62M, related to available for sale securities, as well as increased interest expense related to $4.1B of notes issued by AIG Parent during the quarter ▪ Consoli
Slide 21: Legacy Portfolio
Legacy Portfolio Key Takeaways ▪ Legacy APTI increased primarily due to an increase in NII even though 2Q20 includes two months of Fortitude income compared to three months in 2Q19; Legacy APTI for 2Q19 and the first two months of 2Q20 are reduced in AATI for AIG due to Carlyle’s 19.9% minority inte
Slide 22: 2Q20 Impacts Related to Fortitude Accounting
2Q20 Impacts Related to Fortitude Accounting June 2020 (Post - closing) 1 ▪ 1 month of embedded derivative activity is reflected in AIG GAAP results Other balance sheet changes related to Fortitude Re: ▪ Investments and other assets includes funds withheld assets (FWA) of $41.5B ▪ Reinsurance assets
Slide 23: Fortitude sale: balance sheet and income statement treatment
On June 2, 2020, AIG completed the sale of a majority interest in Fortitude; AIG’s GAAP balance sheet and income statement will continue to include investments retained as collateral by the AIG ceding companies as part of the funds withheld reinsurance arrangement; the difference in carrying value a
Slide 24: Changes to Measures
Changes to Non - GAAP Measures AIG has updated its Non - GAAP measures to adjust for the FWA, as the associated earnings are passed through to Fortitude Re Adjusted Pre - tax Income ▪ Updated APTI NII to exclude NII on Fortitude Re FWA; AIG has updated its Non - GAAP measures to remove the impacts a
Slide 25: Changes to Measures (continued)
Changes to Non - GAAP Measures (continued) Adjusted After - tax Income ▪ Updated to exclude NII on Fortitude Re FWA ▪ Change in presentation of RCGL – RCGL continues to be excluded from APTI, but the Fortitude Re FWA and embedded derivative are identified separately Adjusted Book Value per Share ▪ U
Slide 26: Glossary of Financial Measures and Reconciliations
Glossary of Non - GAAP Financial Measures and Non - GAAP Reconciliations 26
Slide 27: Glossary of Financial Measures
Glossary of Non - GAAP Financial Measures Throughout this presentation, we present our financial condition and results of operations in the way we believe will be most me aningful and representative of our business results. Some of the measurements we use are “Non - GAAP financial measures” under Se
Slide 28: Glossary of Financial Measures
Glossary of Non - GAAP Financial Measures ▪ Book Value per Common Share, Excluding Accumulated Other Comprehensive Income (AOCI) adjusted for the cumulative unrealized g ain s and losses related to Fortitude Re’s Funds Withheld Assets and Book Value per Common Share, Excluding AOCI adjusted for the
Slide 29: Glossary of Financial Measures
Glossary of Non - GAAP Financial Measures ▪ Adjusted Revenues exclude Net realized capital gains (losses), income from non - operating litigation settlements (included in Other income for GAA P purposes) and changes in fair value of securities used to hedge guaranteed living benefits (included in Ne
Slide 30: Reconciliations: Adjusted Pre-tax and After-tax Income - Consolidated
Non - GAAP Reconciliations Adjusted Pre - tax and After - tax Income - Consolidated (in millions) Quarterly 2Q19 2Q20 Pre - tax income (loss) from continuing operations $ 1,837 $ (9,661) Adjustments to arrive at Adjusted pre - tax income (loss) Changes in fair value of securities used to hedge guara
Slide 31: Reconciliations: Adjusted Pre-tax and After-tax Income - Consolidated
Non - GAAP Reconciliations Adjusted Pre - tax and After - tax Income - Consolidated (a) Includes the write - down of net operating loss deferred tax assets in certain foreign jurisdictions, which is offset by valua tion allowance release. ( b ) Represents activity subsequent to the deconsolidation o
Slide 32: Reconciliations: Book Value Per Common Share
Non - GAAP Reconciliations Book Value Per Common Share (in millions, except per common share data) As of June 30, December 31, Book Value Per Common Share 2019 2020 2019 Total AIG shareholders' equity $ 64,539 $ 62,234 $ 65,675 Less: Preferred equity 485 485 485 Total AIG common shareholders' equity
Slide 33: Reconciliations: Return on Common Equity
Non - GAAP Reconciliations Return on Common Equity (in millions) Quarterly Return On Common Equity Computations 2Q19 2Q20 Actual or Annualized net income (loss) attributable to AIG common shareholders (a) $ 4,408 $ (31,744) Actual or Annualized adjusted after - tax income attributable to AIG common
Slide 34: Reconciliations: Return on Common Equity by segment
Non - GAAP Reconciliations Return on Common Equity Life and Retirement (in millions) Quarterly 2Q19 2Q20 Adjusted pre - tax income $ 1,049 $ 881 Interest expense on attributed financial debt 44 71 Adjusted pre - tax income including attributed interest expense 1,005 810 Income tax expense 201 160 Ad
Slide 35: Reconciliations: Accident Year Loss and Combined Ratios
Non - GAAP Reconciliations Accident Year Loss Ratio, as adjusted, and Accident Year Combined Ratio, as adjusted General Insurance - North America Quarterly 2Q19 2Q20 Loss ratio 69.2 87.9 Catastrophe losses and reinstatement premiums (5.0) (19.6) Prior year development 1.7 1.2 Accident year loss rati
Slide 36: Reconciliations: Accident Year Loss and Combined Ratios
Non - GAAP Reconciliations Accident Year Loss Ratio, as adjusted, and Accident Year Combined Ratio, as adjusted General Insurance - International - Commercial Lines Quarterly 2Q19 2Q20 Loss ratio 61.5 66.3 Catastrophe losses and reinstatement premiums (0.3) (11.3) Prior year development 0.4 2.4 Acci
Slide 37: Reconciliations: Net Premiums Written and Net Investment Income
Non - GAAP Reconciliations Net Premiums Written – Change in Constant Dollar Reconciliation of Net Investment Income North America - International - General Insurance Commercial Lines International Commercial Lines Foreign exchange effect on worldwide premiums: 2Q20 2Q20 2Q20 Change in net premiums w
Slide 38: Reconciliations: Premiums
Non - GAAP Reconciliations Premiums (in millions) Six Months Ended Quarterly June 30, Individual Retirement: 2Q19 2Q20 2019 2020 Premiums $ 16 $ 38 $ 27 $ 79 Deposits 3,852 1,759 8,027 4,837 Other (3) (3) (3) (6) Premiums and deposits $ 3,865 $ 1,794 $ 8,051 $ 4,910 Individual Retirement (Fixed Annu
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