American International Group, Inc. First Quarter 2014 Results - PowerPoint PPT Presentation

American International Group, Inc. First Quarter 2014 Results Conference Call Presentation May 6, 2014

Cautionary Statement Regarding Projections and Other Information About Future Events 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 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 non-bank 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) in AIG’s Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2014 and in Part I, Item 1A. Risk Factors and Part II, Item 7. MD&A in AIG’s Annual Report on Form 10-K for the fiscal year ended December 31, 2013. 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 First Quarter 2014 Financial Supplement available in the Investor Information section of AIG's corporate website, www.aig.com, as well as in this presentation. 2

First Quarter 2014 Key Themes Highlights: Noteworthy Items  Repurchased approximately 17.4 million shares of AIG common stock at a total cost of approximately $867 million  $1.7 billion of cash dividends from AIG Life and Retirement Capital Management,  Reduced DIB debt by $2.2 billion through redemptions and repurchases using cash allocated to the DIB Liquidity & Other  We further reduced DIB debt in May through a redemption of $750 million aggregate principal amount of our 3.000% Notes due 2015 using cash allocated to the DIB  Accident year loss ratio, as adjusted, of 63.2 was unchanged from 1Q13 reflecting continued improvement in Commercial underwriting, offset by 2.3 points from severe losses, which were 1.6 points higher than 1Q13  Continued positive rate change in 1Q14, with Global Commercial rates up 1.9% (+4.4% in North America)  Net premiums written grew 3% from 1Q13, excluding the effects of foreign exchange AIG Property Casualty  Catastrophe losses of $262 million  Net prior year adverse development of $162 million  Net reserve discount benefit of $105 million is primarily associated with the merger of internal pooling arrangements  New insurance written (NIW) of $7.6 billion (1) in 1Q14 reflects lower refinancing volume  Mortgage Guaranty 62% of net premiums earned in 1Q14 were from new business written after 2008  Delinquency ratio declined 60 bps from 4Q13 to 5.3%  Premiums and deposits of $7.1 billion driven by continued strong sales of retail investment products  Positive net flows and account balance growth resulted in greater fee income and contributed to the 9% increase in AUM from the year-ago period AIG Life and Retirement  Ongoing management actions continue to enhance spread income and increase profitability in interest sensitive businesses  Net investment income benefited from strong returns on alternative investments 1) Domestic First-lien only. 3

Financial Highlights First Quarter Inc. ($ in millions, except per share amounts) 2013 2014 (Dec.) Revenues $16,962 $16,112 (5%) 2,206 1,609 Net income attributable to AIG (27%) Diluted earnings per common share $1.49 $1.09 (27%) ROE, Ex. AOCI (1) 10.2% 6.8% After-tax operating income attributable to AIG $1,982 $1,781 (10%) $1.34 $1.21 After-tax operating income attributable to AIG per common share (10%) ROE – After-tax operating income (2) 9.2% 7.5% Book value per common share $67.41 $71.77 6% Book value per common share - Ex. AOCI $59.39 $65.49 10% 1) Computed as Annualized Net income (loss) attributable to AIG divided by Average AIG Shareholders' equity, excluding AOCI. 2) Computed as Annualized After-tax operating income divided by Average AIG Shareholders' equity, excluding AOCI. 4

After-tax Operating Income First Quarter ($ in millions, except per share amounts) 2013 2014 Insurance operations: AIG Property Casualty $1,557 $1,159 AIG Life and Retirement 1,394 1,417 Mortgage Guaranty 41 76 Total Insurance Operations 2,992 2,652 Other operations: Direct Investment book 329 440 Global Capital Markets 227 29 Interest expense (397) (325) Corporate expenses, net (261) (243) Other (29) 53 Pre-tax operating income 2,861 2,606 Income tax expense (854) (827) Noncontrolling interest, excluding net realized capital (gains) losses (25) 2 After-tax operating income attributable to AIG $1,982 $1,781 After-tax operating income per diluted common share $1.34 $1.21 5

Strong Capital Position Capital Structure Book Value Per Share ($ in billions, except per share data) $80.0 $125.6 $122.3 $71.77 $0.6 $68.62 $0.6 $15.7 $70.0 $15.7 $6.28 $4.34 $5.5 Non-redeemable $5.5 $60.0 noncontrolling interests $50.0 (1) Financial Debt AOCI $40.0 $103.8 BVPS, $100.5 $65.49 $64.28 $30.0 ex AOCI Hybrids $20.0 Common Equity $10.0 $0.0 Dec. 31, 2013 Mar. 31, 2014 Dec. 31, 2013 Mar. 31, 2014 Dec. 31, Mar. 31, Leverage Ratios: 2013 2014 Financial Debt + Hybrids / 17.3% 16.9% Capitalization Financial Debt / Capitalization 12.8% 12.5% 1) Includes AIG notes, bonds, loans and mortgages payable, and AIGLH notes and bonds payable and junior subordinated debt. 6

Financial Flexibility – A Source of Strength Parent Cash, Short-Term Investments & Insurance Company Distributions Unencumbered Securities ($ in millions) ($ in billions) $13.1 $5,000 $11.2 $4,274 $3.0 $90 $4,000 $3.0 $1,322 Unencumbered Fixed Maturity $3,000 Securities $1,933 Cash & Short-term $2,000 $10.2 $1,653 Investments $1,337 * $8.2 $2,862 $1,217 $545 $1,000 $792 $716 $0 2Q13 3Q13 4Q13 1Q14 Dec. 31, Mar. 31, 2013 2014 AIG Property Casualty AIG Life and Retirement UGC * Includes $222 million of non-cash distributions.  AIG Life and Retirement distributions in 1Q14 included approximately $316 million of legal settlement proceeds received.  AIG Parent cash, short-term investments and unencumbered fixed maturity securities of $11.2 billion includes $4.4 billion allocated toward future maturities of liabilities and contingent liquidity stress needs of the Direct Investment book and Global Capital Markets as of March 31, 2014.  AIG Parent also maintains aggregate available capacity of $4.4 billion under its syndicated credit facility and its contingent liquidity facility.  Tax sharing payments from subsidiaries amounted to $289 million in 1Q14. 7

AIG Property Casualty – Financial Results Global Combined Ratios ($ in millions) 1Q13 1Q14 Calendar Year Accident Year, Net premiums written $8,437 $8,334 as adjusted (1) 120 101.2 97.3 97.2 97.3 100 Net premiums earned 8,558 8,230 14.2 14.3 14.3 14.2 80 19.9 19.7 19.7 19.9 Underwriting income (loss) 232 (97) 60 40 67.1 63.3 63.2 63.2 Net investment income 1,325 1,256 20 0 Pre-tax operating income $1,557 $1,159 1Q13 1Q14 1Q13 1Q14 Loss Ratio Acquisition Ratio GOE Ratio  Net premiums written, excluding the effects of foreign exchange, grew 3% from 1Q13 reflecting growth of new business, rate increases and changes in the reinsurance program. Net premiums written on an as-reported basis declined 1% from 1Q13.  The accident year loss ratio, as adjusted, was flat compared to 1Q13, reflecting a 1.6 point impact from higher severe losses, which more than offset underlying underwriting improvement in Commercial Insurance. 1) Both the accident year combined ratio, as adjusted, and accident year loss ratio, as adjusted, exclude catastrophe losses and related reinstatement premiums, prior year development, net of premium adjustments, and the impact of reserve discounting. 8