NEW YORK–(BUSINESS WIRE)–Nov. 3, 2014– American International Group, Inc.(NYSE:AIG) today reported net income of $2.2 billion for the quarter ended September 30, 2014, up slightly from the prior-year quarter. After-tax operating income was $1.7 billion for the third quarter of 2014, up from $1.4 billion in the prior-year quarter.
Diluted earnings per share were $1.52 for the third quarter of 2014, compared to $1.46 for the third quarter of 2013. After-tax operating income per diluted share increased to $1.21 for the third quarter of 2014, from $0.96 in the prior-year quarter.
“I am excited to lead AIG forward and further build on our capabilities to serve all our stakeholders,†said AIG President and Chief Executive Officer Peter Hancock. “Our new management structure brings together a team that has the skill set, experience, and commitment to execute on our strategies and serve our customers around the world. Together, we remain disciplined in our approach to balancing growth, profitability, and risk and focused on maintaining the strength of our industry-leading balance sheet.
“The solid third quarter results were driven by consistent performance across our businesses,†Mr. Hancock said. “While no one quarter is a trend, our risk-adjusted return focus could be seen in various metrics including improved accident year loss ratios, modest net spread compression, and continued capital management. In the quarter and through early October, we repurchased $1.5 billion of AIG Common Stock and completed over $4.0 billion in liability management, excluding DIB activities. As a result of our strong capital position and a positive outlook for our businesses, the Board has authorized additional share repurchases of $1.5 billion.â€
Capital and Liquidity
- AIG shareholders’ equity totaled $108.6 billion at September 30, 2014
- Book value per share of $77.35 grew 15 percent from September 30, 2013; book value per share excluding accumulated other comprehensive income (AOCI) and deferred tax assets (DTA) grew 15 percent to $58.11 over the same period
- Repurchased 24.8 million shares of AIG Common Stock in the third quarter of 2014, including 1.7 million shares received in July 2014 upon the settlement of an accelerated share repurchase agreement executed in the second quarter of 2014 and including the initial delivery of approximately 8.8 million shares pursuant to a $692 millionaccelerated share repurchase agreement executed in September 2014, which settled inOctober 2014 with the delivery to AIG of approximately 3.9 million additional shares
- Tax sharing payments to AIG Parent from insurance businesses amounted to $314 million in the third quarter of 2014 and $1.1 billion year-to-date
- During the third quarter of 2014, AIG issued $1.0 billion of 2.300% Notes due 2019 and $1.5 billion of 4.500% Notes due 2044. In October 2014, AIG issued an additional$750 million of 4.500% Notes due 2044
- During the third quarter of 2014, AIG repurchased, in tender offers, certain high coupon hybrid and senior notes issued or guaranteed by AIG Parent, for an aggregate purchase price of $2.5 billion; in October 2014, AIG repurchased $1.6 billion aggregate principal amount of 8.175% hybrid notes
- During the third quarter of 2014, AIG reduced Direct Investment book (DIB) debt by approximately $2.0 billion through a redemption of $790 million aggregate principal amount of its 4.875% Notes due 2016 and a redemption of $1.25 billion aggregate principal amount of its 3.800% Notes due 2017, in each case, using cash allocated to the DIB. In October 2014, AIG further reduced DIB debt through a redemption of approximately $2.0 billion aggregate principal amount of its 8.250% Notes due 2018 and the repurchase of approximately $405 million aggregate principal amount of its 5.450% Medium-Term Notes, in each case, using cash allocated to the DIB
- AIG Parent liquidity sources were $17.1 billion at September 30, 2014, including $12.6 billion of cash, short-term investments, and unencumbered fixed maturity securities, down from $18.5 billion at June 30, 2014
All operating segment comparisons that follow are to the third quarter of 2013 unless otherwise noted.
AIG Property Casualty’s pre-tax operating income increased by two percent to $1.1 billion. Higher net investment income, improved loss experience in Consumer Insurance, a lowerCommercial Insurance current accident year loss ratio, as adjusted, and reduced severe losses were partially offset by higher net adverse prior year loss reserve development and higher catastrophe losses. As part of AIG’s continued focus on capital management, AIG Property Casualty distributed $800 million in dividends in the form of cash and fixed maturity securities to AIG Parent during the third quarter of 2014.
The third quarter 2014 combined ratio was 102.0, a 0.4 point increase from the prior-year quarter. Catastrophe losses were $284 million, compared to $222 million in the third quarter of 2013. Net adverse prior year loss reserve development was $227 million, primarily in the primary Casualty business, compared to net adverse prior year loss reserve development of$70 million for the third quarter of 2013. These increases were partially offset by a $23 milliondecrease in Commercial Insurance severe losses to $188 million. The third quarter 2014 acquisition ratio decreased 0.3 points to 19.4 due to a reduction in expense related to personnel engaged in sales support activities. The general operating expense ratio increased 0.3 points to 14.9, primarily due to an increase in technology-related expenses, partially offset by reductions in employee-related and other operating expenses.
The third quarter 2014 accident year loss ratio, as adjusted, was 61.3, a decrease of 2.4 points from the prior-year quarter attributable to improved accident year loss experience inConsumer Insurance and Financial Lines in Commercial Insurance, and lower severe losses. The increase in net investment income was driven by higher returns on alternative investments, which was partially offset by the effects of lower reinvestment yields compared to interest rates on matured or sold investments, and lower income on investments accounted for under the fair value option.
Excluding the effects of foreign exchange and additional premiums on loss-sensitive business, third quarter 2014 net premiums written increased three percent from the same period in the prior year, with Commercial Insurance and Consumer Insurance third quarter 2014 net premiums written growing three percent and two percent, respectively. Commercial Insurancecontinues to benefit from new business growth in Property and Financial Lines. Consumer Insurance continues to benefit from growth in AIG Fuji Life and in personal property in Japanand the U.S., partially offset by declines in the U.S. warranty business and in certain classes of Accident & Health business, due to maintaining underwriting discipline.
