american international group, inc. · aig’s quarterly report on form 10- q for the quarter ended...

American International Group, Inc.Second Quarter 2013 ResultsConference Call Presentation

August 2, 2013

2

Cautionary Statement Regarding Projections and Other Information About Future EventsThis 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 constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. These projections, goals, assumptions and statements are not historical facts but instead represent only AIG’s belief regarding future events, many of which, by their nature, are inherently uncertain and outside AIG’s control. These projections, goals,assumptions and statements include statements preceded by, followed by or including words such as “believe,” “anticipate,” “expect,” “intend,” “plan,” “view,” “target” or “estimate”. It is possible that AIG’s actual results and financial condition will differ, possibly materially, from the results and financial condition indicated in these projections, goals, assumptions and statements. Factors that could cause AIG’s actual results to differ, possibly materially, from those in the specific projections, goals, assumptions and statements include: changes in market conditions; the occurrence of catastrophic events, both natural and man-made; significant legal proceedings; the timing and applicable requirements of any new regulatory framework to which AIG is subject as a savings and loan holding company, as a systemically important financial institution, and as a global systemically important insurer; concentrations in AIG’s investment portfolios; actions by credit rating agencies; judgments concerning casualty insurance underwriting and insurance liabilities; judgments concerning the recognition of deferred tax assets; and such other factors discussed in Part I, Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (MD&A) and Part II, Item 1A. Risk Factors in AIG’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2013, in Part I, Item 2. MD&A in AIG’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2013, and in Part II, Item 7. MD&A and Part I, Item 1A. Risk Factors in AIG’s Annual Report on Form 10-K for the year ended December 31, 2012.

AIG is not under any obligation (and expressly disclaims any obligation) to update or alter any projections, goals, assumptions or other statements, whether written or oral, that may be made from time to time, whether as a result of new information, future events or otherwise. This document and the remarks made orally may also contain certain non-GAAP financial measures. The reconciliation of such measures to the most comparable GAAP measures in accordance with Regulation G is included in the Second Quarter 2013 Financial Supplement available in the Investor Information section of AIG's corporate website, www.aig.com.

http://www.aig.com/

3

Second Quarter 2013 Key ThemesHighlights: Noteworthy Items

Capital Management & Liquidity

Declared cash dividend of $0.10/share; share repurchase authorization of $1 billion, both in Aug. 2013

Reduced debt by $931 million through calls and tenders

$1.3 billion of dividends and loan repayments

As of August 1, 2013, the closing of the ILFC transaction has not occurred

AIG Property Casualty

Accident year loss ratio, as adjusted, of 61.9 continues to improve

Positive rate change in 2Q13, with Global Commercial rates up 3.8% (+7.3% in U.S.)

NPW growth of 4.0% from 2Q12 excluding foreign exchange and timing of reinsurance agreements

CAT losses total $316 million

Net unfavorable development of $154 million, including $142 million from Storm Sandy

Mortgage Guaranty

Earnings reflect new business growth (half of net premiums earned in 2Q13 was from business written after 2008)

Growth in new insurance written (up 63% from 2Q12) with consistently high quality risks

Delinquency ratio declined 80 bps from 1Q13 to 7.1%

AIG Life and Retirement

Strong variable annuity sales of $2.2 billion and retail mutual fund sales growth drove positive net flows; fixed annuity sales increased late in the quarter

AUM increased 10% from the year ago period resulting in higher fee income

Ongoing active crediting rate management continued to enhance profitability

Earnings benefited from higher net investment income

4

Second Quarter

($ in millions, except per share amounts) 2012 2013Inc.

(Dec.)

Revenues $16,221 $17,315 7%

Net income attributable to AIG 2,332 2,731 17%

After-tax operating income attributable to AIG $1,678 $1,655 (1%)

Diluted earnings per common share:

Income from continuing operations $1.23 $1.82 48%

Income from discontinued operations $0.10 $0.02 (80%)

After-tax operating income attributable to AIG $0.96 $1.12 17%

Book value per common share $60.58 $66.02 9%

Book value per common share - Ex. AOCI $55.30 $61.25 11%

ROE – After-tax operating income(1) 7.0% 7.4%

Financial Highlights

1) Computed as Annualized After-tax operating income divided by Average AIG Shareholders' equity, excluding AOCI.

Net income in 2Q13 includes a deferred tax valuation allowance release of $752 million and litigation settlement income of $257 million, net of tax.

5

After-tax Operating Income

Second Quarter

($ in millions, except per share amounts) 2012 2013

Insurance operations

AIG Property Casualty $936 $1,085

AIG Life and Retirement 933 1,151

Mortgage Guaranty (reported in Other) 43 73

Total Insurance Operations 1,912 2,309

Direct Investment book 434 591

Global Capital Markets (25) 175

Change in fair value of AIA (including realized gain) (493) -

Change in fair value of Maiden Lane III 1,306 -

Interest expense (392) (353)

Corporate expenses (224) (253)

Other (54) (1)

Pre-tax operating income attributable to AIG 2,464 2,468

Income tax expense (779) (786)

Other noncontrolling interest (7) (27)

After-tax operating income attributable to AIG $1,678 $1,655

After-tax operating income per diluted common share $0.96 $1.12

Improved insurance operating results and strong investment returns drive results.

6

$57.87 $61.25

$8.51 $4.77

$0.0

$10.0

$20.0

$30.0

$40.0

$50.0

$60.0

$70.0

Dec. 31, 2012 June 30, 2013

AOCI

BVPS, ex AOCI$98.0 $97.5

$9.4 $6.5

$16.1 $14.6

$0.7 $0.7

Dec. 31, 2012 June 30, 2013

Non-redeemable noncontrolling interests

Financial Debt

Hybrids

Common Equity

Strong Capital Position

Book Value Per ShareCapital Structure

$66.38

1) Includes AIG Loans, Mortgages, Notes and Bonds Payable, AIGLH Notes and Bonds Payable, and Liabilities connected to the trust preferred stock.

(1)

($ in billions, except per share data)

$124.1

Leverage Ratios: 2012 2013

Financial Debt + Hybrids / Capitalization 20.5% 17.7%

Financial Debt / Capitalization 12.9% 12.3%

$66.02$119.2

Outstanding borrowings reflect $2.9 billion notional amount of hybrid calls and tenders year-to-date.

7

$75

$902$792

$440

$1,349

$545

$0

$400

$800

$1,200

$1,600

3Q12 4Q12 1Q13 2Q13

AIG Property Casualty AIG Life and Retirement

$12.6

$8.1

$2.9

Dec. 31, 2012

June 30, 2013

Unencumbered Fixed Maturity Securities

Cash & Short-term Investments

Financial Flexibility – A Source of StrengthParent Cash, Short-Term Investments &

Unencumbered SecuritiesInsurance Company Distributions

($ in millions) ($ in billions)

$1,342

Year-to-date insurance company distributions of $2.7 billion. Annual distributions expected to be $4 – 5 billion.

Parent cash, short-term investments and unencumbered securities of $11.0 billion includes $5.4 billion allocated toward future maturities of liabilities and contingent liquidity stress needs of the Direct Investment book and Global Capital Markets as of June 30, 2013.

AIG Parent also maintains available capacity of $3.6 billion under its syndicated credit facility and contingent liquidity facility.

$11.0$1,337

8

AIG Property Casualty – Financial Results

Global Combined Ratios

Calendar Year Accident Year, as adjusted(1)

1) The combined ratio, as adjusted, and loss ratio, as adjusted, exclude catastrophe losses and related reinstatement premiums, prior year development, net of premium adjustments and the impact of reserve discounting.

($ in millions) 2Q12 2Q13

Net premiums written $9,095 $9,263

Net premiums earned 8,820 8,347

Underwriting income (loss) (217) (225)

Net investment income 1,153 1,310

Operating income $936 $1,085

Net premiums written grew 2% reflecting growth of new business and rate increases, the timing of the recognition of ceded premiums written under excess of loss reinsurance agreements, partially offset by the negative effect of foreign exchange, which was largely driven by the strengthening of the U.S. dollar against the Japanese Yen. NPW growth was 4.0% excluding the excess of loss andforeign exchange effects.

The accident year loss ratio, as adjusted, continued to improve, as a result of the shift to higher value business, enhanced risk selection, loss mitigation initiatives and improved pricing.

Net investment income benefited from the strong performance of alternative investments and gains on fair value option securities.

Operating results demonstrate continued execution of strategic initiatives.

68.9 68.0 64.8 61.9

19.6 20.0 19.6 20.0

13.9 14.6 13.9 14.6

0

20

40

60

80

100

120

2Q12 2Q13 2Q12 2Q13Loss Ratio Acquisition Ratio GOE Ratio

102.4 98.3102.696.5

9

$2,181 $2,110

$1,447 $1,770 $864 $882

$1,076 $1,114

$0

$2,000

$4,000

$6,000

2Q12 2Q13

Casualty Property Specialty Financial lines

70.7 72.6 67.3 62.2

17.2 16.3 17.2 16.3

11.4 12.8 11.4 12.8

0

20

40

60

80

100

120

2Q12 2Q13 2Q12 2Q13

Loss Ratio Acquisition Ratio GOE Ratio

Commercial Insurance – Underwriting Results


99.3

Combined Ratios

Commercial results reflect business mix shift, enhanced risk selection, and price increases.

95.9

Accident Year Loss Ratio, as adjusted(1)

73.7 76.970.3 67.3 70.8 66.4 65.4 62.2

404550556065707580

3Q11 4Q11 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13

Net Premiums Written($ in millions)

$5,568 $5,876

Commercial Insurance continued to focus on growing higher value, profitable lines of business and geographies.

Commercial Insurance rates increased +3.8% (+7.3% for the U.S.), led by U.S. Casualty at +9.4% and U.S. Property at +5.7%.

Commercial NPW grew 5.5% from 2Q12. Excluding the timing of the recognition of ceded premiums written under excess of loss reinsurance agreements and foreign exchange effects, Commercial NPW grew 3.6%.

101.791.3


10

$1,696 $1,645

$1,832 $1,745

$0

$1,000

$2,000

$3,000

$4,000

2Q12 2Q13Accident & Health Personal Lines

Consumer Insurance – Underwriting Results

Combined Ratios

Consumer continues to implement global growth strategies across multiple distribution channels.

Accident Year Loss Ratio, as adjusted(1)

59.2 58.9 59.1 60.2

23.5 25.9 23.5 25.915.0 15.3 15.0 15.3

0

20

40

60

80

100

120

2Q12 2Q13 2Q12 2Q13Loss Ratio Acquisition Ratio GOE Ratio

58.9 57.7 58.4 59.1 57.7 58.0 58.8 60.2

40

45

50

55

60

65

3Q11 4Q11 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13


97.7 97.6

Net Premiums Written($ in millions)

$3,528 $3,390

Consumer NPW grew 4.7% from 2Q12 excluding foreign exchange and the excess of loss reinsurance change and declined 3.9% on a reported basis.

Direct Marketing NPW grew 5% from 2Q12 and represented 16% of total Consumer NPW in 2Q13.

The accident year loss ratio, as adjusted, in 2Q13 includes higher losses associated with a warranty retail program of 1.5 pts, which was largely offset by a decrease in amounts owed under a profit sharing arrangement for the same program.

100.1 101.4


11

AAA22%AA

30%

A26%

BBB12%

BB2%

B2%

<B6%

AIG Property Casualty – Investments

Total Portfolio Composition

1) Includes income/loss from mutual funds, investment real estate, life settlement contracts and mark-to-market gains and losses, net of investment expenses.2) Includes intercompany invested assets that are eliminated in consolidation.

Bond Portfolio - $102.1 billion - by Agency Credit Rating

Returns driven by strong alternative investment income and gains on fair value option securities.

Total Cash & Invested Assets as of June 30, 2013 - $125.9 billion(2)

Net investment income:($ in millions) 2012 2013 Inc./(Dec.)

Interest and dividends $ 991 $ 939 (5%)

Alternative investments 110 240 118%

Other, net(1) 52 131 152%

Net investment income $ 1,153 $ 1,310 14%

3.68%Yield 4.11%

Second Quarter

States, municipalities, and political subdivisions

20%

U.S. Governments2%

Non-U.S. governments

16%

Corporate debt26%

RMBS10%

CMBS2%

CDO/ABS5% Equities

3% Other invested assets10%

Loans1%

Cash and short-term investments

5%

12

Mortgage Guaranty – Improving Trends

10.3%

9.6%

8.8%

7.9%

7.1%

6%

7%

8%

9%

10%

11%

2Q12 3Q12 4Q12 1Q13 2Q13

Primary Delinquency (DQ) Ratio (%)(2)

(in 000s) 2Q12 3Q12 4Q12 1Q13 2Q13

DQ Count(2) 71 67 63 57 53

Growth in New insurance written with high quality risk.

$3.2

$8.6

$14.0

$0.0

$4.0

$8.0

$12.0

$16.0

2Q11 2Q12 2Q13

New Insurance Written (NIW)(1)

($ in billions)

Vintage Year(2)Average

FICO Score LTV Ratio

2Q11 757 91

2Q12 759 91

2Q13 755 92

Operating income of $73 million included a positive contribution from commutations, settlements and related reserve releases totaling $49 million.

1) New insurance written – original principal balance of loans (First-lien). Includes $162 million, $50 million and $79 million of NIW from International business in 2Q13, 2Q12 and 2Q11, respectively

2) Domestic First-lien only.

13

12%

24%12%

3%

30%

18%1%

Life Insurance and A&H

Fixed Annuities

Retirement Income

Solutions

Retail Mutual Funds

Group Retirement

Institutional Markets

Group Benefits

AIG Life and Retirement – Financial Results

Strong 2Q13 operating results were driven by robust sales of variable annuities, solid growth in fee income, effective spread management, and higher alternative investment income.

Net investment income in 2Q13 included a fair value loss of $84 million in the PICC Group investment ($53 million loss for the first six months of 2013).

Assets Under Management

Results reflect strong sales, active spread management and higher investment income.

($ in millions) 2Q12 2Q13

Premiums and deposits $5,434 $6,765

Premiums 632 649

Policy fees 567 623

Net investment income 2,521 2,637

Advisory fee and other income 312 419

Total revenues(1) 4,032 4,328

Benefits and expenses 3,099 3,177

Operating income $933 $1,151

1) Excluding net realized capital gains (losses).

AUM of $293.7 billion at June 30, 2013 increased 10% from the year-ago period driven by strong sales generated by our realigned distribution system, equity market performance and Institutional business asset gathering strategies.

Net inflows in 2Q13 of $417 million improved substantially from the prior quarter and year-ago quarter due to variable annuity and retail mutual fund sales.

Despite positive net flows in the quarter, AUM declined slightly from 1Q13 due to increases in interest rates and the resulting impact on general account asset values.

14

AIG Life and Retirement – Retail & Institutional Results

$265 $295

$123 $172

$0

$150

$300

$450

$600

2Q12 2Q13

Group Retirement Institutional Markets

Retail operating income benefited from increased fee income from growth in account values, continued active spread managementon interest rate-sensitive business and higher income on alternative investments.

Institutional operating income was driven by active spread management and higher investment income.

Retail Operating Income* Institutional Operating Income*

$224 $196

$251 $343

$50

$130

$0

$175

$350

$525

$700

2Q12 2Q13

Life Insurance and A&H Fixed Annuities Ret. Inc. Solutions

$535

$670

($ in millions)

$398

$481

($ in millions)

* Operating income is not separately presented for brokerage services and retail mutual funds included in the Retail operating segment and group benefits included in the Institutional operating segment.

15

AIG Life and Retirement – Investments

1) Includes income/loss from mutual funds, real estate, equity method investments and mark-to-market gains and losses, net of investment expenses.2) Includes the investment return on surplus other than alternative investment or yield enhancement activities. Quarterly results are annualized.3) Represents the base yields and the incremental effect to base yield on investments in hedge funds, private equity funds, gains on Maiden Lane II (in 2012)

and income from calls and prepayment fees. Quarterly results are annualized.4) Includes intercompany invested assets that are eliminated in consolidation.

Total Portfolio Composition Bond Portfolio - $157.3 billion - by Agency Credit Rating

Total Cash & Invested Assets as of June 30, 2013 - $196.8 billion(4)

AAA12%

AA10%

A24%

BBB41%

BB4%

B2%

<B7%

Net investment income:($ in millions) 2012 2013 Inc./(Dec.)

$ 2,361Interest and dividends $ 2,319 (2%)Alternative investments 170 436 156%

20Call and tender income 54 170%

Other, net(1) (30) (172) N/M

$ 2,521Net investment income 2,637$ 5% Base Yield(2) 5.50% 5.35% Total Yield(3) 5.71% 5.83%

Second Quarter

States, municipalities, and political subdivisions

2%U.S. Governments

1%Non-U.S.

governments2%

Corporate debt54%

RMBS12%

CMBS4%

CDO/ABS5%

Other invested assets6%

Loans10%

Cash and short-term investments

4%

16

5.50% 5.38% 5.33% 5.30% 5.35%5.31%

5.12% 5.12% 5.10% 5.25%

5.23%5.01% 4.95% 4.85%

5.14%

4.70%4.90%5.10%5.30%5.50%5.70%

2Q12 3Q12 4Q12 1Q13 2Q13

3.13% 3.15% 3.14%

2.91% 2.89%

3.27% 3.26% 3.26%3.10% 3.06%

2.60%2.80%3.00%3.20%3.40%

2Q12 3Q12 4Q12 1Q13 2Q13

Base Yields(1)

Base Net Investment Spreads(1)

2.18%1.97% 1.98%

2.19% 2.36%

1.96%1.75% 1.69% 1.75%

2.08%

1.00%1.50%2.00%2.50%3.00%

2Q12 3Q12 4Q12 1Q13 2Q13

Total Base Yield Fixed Annuities Group Retirement

1) Includes the investment return on surplus other than alternative investment or yield enhancement activities.2) Excludes the amortization of sales inducement assets.

Cost of Funds(2)

AIG Life and Retirement – Base Yields and Spreads

Overall base yields benefited from mortgage loan prepayments and increased accretion income principally related to structured securities, which were partially offset by the impact of investment purchases made at yields lower than the weighted average yield of the existing portfolio.

Group retirement base yields also improved from 1Q13 due to an increase in allocated net investment income related to surplus assets.

Active crediting rate management actions which included lowering renewal crediting rates and maintaining disciplined new business pricing also contributed to the improvement in net spreads.

17

Q&A

18

Appendix

19

Direct Investment Book (1) Global Capital Markets (1)

Assets $25.7 $8.6

Liabilities 21.8 3.8

Net Asset Value $3.9 $4.8

Legacy Matched Assets & Liabilities

AIG Hedging & Market Derivatives(2)

Legacy AIGFP CDS Portfolio

Stable ValueWraps

Go Forward Hedging Platform

Third-Party Derivatives Notional ($ bn) -- $92

Multi-Sector

Corporate Arbitrage

$8 $24$4 $12

Weighted Average Life (Years)

-- 6.5 6.0 2.7 5.0 7.9

Strategy

Income generated through realization of intrinsic value

Assets managed to ensure liabilities can be met as they come due, even under stress scenarios

Primarily hedges of DIB assets and liabilities

Bulk of risk related to interest rates, foreign exchange and equities has been hedged

Income generated through realization of intrinsic value

Remaining credit risk viewed as attractive risk-reward

Since 4Q 2012, notional value of $10 billion has been novated to AIG Lifeand Retirement

Further novations are expected to occur over time

“Clearing house” for operating company hedging and risk management needs

Direct Investment Book and Global Capital Markets

Note: As of June 30, 2013.1) The DIB consists of a portfolio of assets and liabilities held directly by AIG Parent in the Matched Investment Program (MIP) and certain non-derivative

assets and liabilities of AIGFP. The DIB and GCM are included in AIG’s Other Operations.2) The overall hedging activity for the assets and liabilities of the DIB is executed by GCM. The value of hedges related to the non-derivative assets and

liabilities of AIGFP in the DIB is included within the assets and liabilities and operating results of GCM and is not included within the DIB operating results,assets or liabilities.

($ in billions)

20

Direct Investment Book Long-Term Debt Maturities

($ in billions)

$8.9$8.2

$6.6

$5.6 $4.4$0.4

$3.5$3.5

$3.5$3.5

$3.5

$3.5$0.3

$5.8$5.6

$5.0$4.5

$4.1

$3.9

$3.2

$1.2$1.1

$1.1

$0.8

$0.6

$0.5

$0.3

$19.4$18.4

$16.2

$14.4

$12.6

$8.3

$3.8

0%5%

16%

26%

35%

57%

80%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

$0

$5

$10

$15

$20

$25

as of 6/30/2013 2013 2014 2015 2016 2017 2018

MIP notes payable Series AIGFP matched notes and bonds payableGIAs, at fair value Notes and bonds payable, at fair value% Maturing

american international group, inc. · aig’s quarterly report on form 10- q for the quarter ended...

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