UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
________________
FORM 10-Q
|
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
|
For the quarterly period ended March 31, 2015 |
Commission File Number 1-8787 |
|
American International Group, Inc. (Exact name of registrant as specified in its charter) |
|
Delaware |
13-2592361 |
|
(State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) |
|
|
|
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175 Water Street, New York, New York |
10038 |
|
(Address of principal executive offices) |
(Zip Code) |
Registrant’s telephone number, including area code: (212) 770-7000
________________
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☑ No ☐
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☑ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
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Large accelerated filer ☑ |
Accelerated filer ☐ |
Non-accelerated filer ☐ |
Smaller reporting company ☐ |
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(Do not check if a smaller reporting company) |
|
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☑
As of April 29, 2015, there were 1,333,395,436 shares outstanding of the registrant’s common stock.
AMERICAN INTERNATIONAL GROUP, INC.
QUARTERLY REPORT ON FORM 10-Q FOR THE QUARTERLY PERIOD ENDED
March 31, 2015
Table of Contents
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FORM 10-Q |
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Item Number |
Description |
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PART I — FINANCIAL INFORMATION |
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Management’s Discussion and Analysis of Financial Condition and Results of |
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· Cautionary Statement Regarding Forward-Looking Information |
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· Glossary |
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· Acronyms |
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PART II — OTHER INFORMATION |
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SIGNATURES |
171 |
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PART I – FINANCIAL INFORMATION
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Item 1. Financial Statements
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American International Group, Inc.
CONDENSED Consolidated Balance Sheets (unaudited)
|
|
March 31, |
December 31, |
||
|
(in millions, except for share data) |
|
2015 |
|
2014 |
|
Assets: |
|
|
|
|
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Investments: |
|
|
|
|
|
Fixed maturity securities: |
|
|
|
|
|
Bonds available for sale, at fair value (amortized cost: 2015 - $242,114; 2014 - $243,307) |
$ |
260,822 |
$ |
259,859 |
|
Other bond securities, at fair value (See Note 6) |
|
19,013 |
|
19,712 |
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Equity Securities: |
|
|
|
|
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Common and preferred stock available for sale, at fair value (cost: 2015 - $1,683; 2014 - $1,930) |
|
3,766 |
|
4,395 |
|
Other common and preferred stock, at fair value (See Note 6) |
|
1,100 |
|
1,049 |
|
Mortgage and other loans receivable, net of allowance (portion measured at fair value: 2015 - $6; 2014 - $6) |
|
25,313 |
|
24,990 |
|
Other invested assets (portion measured at fair value: 2015 - $9,196; 2014 - $9,394) |
|
34,838 |
|
34,518 |
|
Short-term investments (portion measured at fair value: 2015 - $1,208; 2014 - $1,684) |
|
11,961 |
|
11,243 |
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Total investments |
|
356,813 |
|
355,766 |
|
|
|
|
|
|
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Cash |
|
1,823 |
|
1,758 |
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Accrued investment income |
|
2,726 |
|
2,712 |
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Premiums and other receivables, net of allowance |
|
13,450 |
|
12,031 |
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Reinsurance assets, net of allowance |
|
22,208 |
|
21,959 |
|
Deferred income taxes |
|
18,010 |
|
19,339 |
|
Deferred policy acquisition costs |
|
9,708 |
|
9,827 |
|
Derivative assets, at fair value |
|
1,621 |
|
1,604 |
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Other assets, including restricted cash of $2,072 in 2015 and $2,025 in 2014 |
|
12,203 |
|
10,549 |
|
Separate account assets, at fair value |
|
82,139 |
|
80,036 |
|
Total assets |
$ |
520,701 |
$ |
515,581 |
|
Liabilities: |
|
|
|
|
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Liability for unpaid losses and loss adjustment expenses |
$ |
74,490 |
$ |
77,260 |
|
Unearned premiums |
|
22,437 |
|
21,324 |
|
Future policy benefits for life and accident and health insurance contracts |
|
43,244 |
|
42,749 |
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Policyholder contract deposits (portion measured at fair value: 2015 - $1,882; 2014 - $1,561) |
|
124,935 |
|
124,613 |
|
Other policyholder funds (portion measured at fair value: 2015 - $8; 2014 - $8) |
|
4,415 |
|
4,669 |
|
Derivative liabilities, at fair value |
|
2,651 |
|
2,273 |
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Other liabilities (portion measured at fair value: 2015 - $178; 2014 - $350) |
|
26,024 |
|
24,168 |
|
Long-term debt (portion measured at fair value: 2015 - $4,844; 2014 - $5,466) |
|
31,999 |
|
31,217 |
|
Separate account liabilities |
|
82,139 |
|
80,036 |
|
Total liabilities |
|
412,334 |
|
408,309 |
|
Contingencies, commitments and guarantees (see Note 10) |
|
|
|
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|
|
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|
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AIG shareholders’ equity: |
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|
|
|
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Common stock, $2.50 par value; 5,000,000,000 shares authorized; shares issued: 2015 - 1,906,671,492 and |
|
|
|
|
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2014 - 1,906,671,492 |
|
4,766 |
|
4,766 |
|
Treasury stock, at cost; 2015 - 559,593,905 shares; 2014 - 530,744,521 shares |
|
(20,820) |
|
(19,218) |
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Additional paid-in capital |
|
81,303 |
|
80,958 |
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Retained earnings |
|
32,073 |
|
29,775 |
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Accumulated other comprehensive income |
|
10,657 |
|
10,617 |
|
Total AIG shareholders’ equity |
|
107,979 |
|
106,898 |
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Non-redeemable noncontrolling interests |
|
388 |
|
374 |
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Total equity |
|
108,367 |
|
107,272 |
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Total liabilities and equity |
$ |
520,701 |
$ |
515,581 |
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See accompanying Notes to Condensed Consolidated Financial Statements. |
||||
American International Group, Inc.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (unaudited)
|
Three Months Ended March 31, |
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(dollars in millions, except per share data) |
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2015 |
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2014 |
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Revenues: |
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Premiums |
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|
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$ |
8,822 |
|
$ |
9,075 |
|
Policy fees |
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677 |
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631 |
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Net investment income |
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3,838 |
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4,196 |
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Net realized capital gains (losses): |
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Total other-than-temporary impairments on available for sale securities |
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(87) |
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(50) |
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Portion of other-than-temporary impairments on available for sale |
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fixed maturity securities recognized in Other comprehensive income |
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(10) |
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(4) |
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Net other-than-temporary impairments on available for sale |
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securities recognized in net income |
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(97) |
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(54) |
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Other realized capital gains (losses) |
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1,438 |
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(98) |
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Total net realized capital gains (losses) |
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1,341 |
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(152) |
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Aircraft leasing revenue |
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- |
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1,113 |
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Other income |
|
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1,297 |
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|
1,300 |
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Total revenues |
|
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|
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|
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15,975 |
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16,163 |
|
Benefits, losses and expenses: |
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Policyholder benefits and losses incurred |
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6,551 |
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6,797 |
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Interest credited to policyholder account balances |
|
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|
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|
|
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|
935 |
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|
955 |
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Amortization of deferred policy acquisition costs |
|
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|
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1,350 |
|
|
1,305 |
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General operating and other expenses |
|
|
|
|
|
|
|
|
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2,949 |
|
|
3,024 |
|
Interest expense |
|
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|
|
|
|
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|
|
|
340 |
|
|
479 |
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Aircraft leasing expenses |
|
|
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|
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- |
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1,096 |
|
Loss on extinguishment of debt |
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68 |
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238 |
|
Net (gain) loss on sale of properties and divested businesses |
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6 |
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(4) |
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Total benefits, losses and expenses |
|
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|
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|
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|
|
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12,199 |
|
|
13,890 |
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Income from continuing operations before income tax expense |
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3,776 |
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|
2,273 |
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Income tax expense |
|
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|
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1,300 |
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|
614 |
|
Income from continuing operations |
|
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2,476 |
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|
1,659 |
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Income (loss) from discontinued operations, net of income tax expense |
|
|
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1 |
|
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(47) |
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Net income |
|
|
|
|
|
|
|
|
|
|
2,477 |
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|
1,612 |
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Less: |
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|
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|
|
|
|
|
|
|
|
|
|
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Net income from continuing operations attributable to |
|
|
|
|
|
|
|
|
|
|
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noncontrolling interests |
|
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|
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|
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9 |
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3 |
|
Net income attributable to AIG |
|
|
|
|
|
|
|
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|
$ |
2,468 |
|
$ |
1,609 |
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Income per common share attributable to AIG: |
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|
|
|
|
|
|
|
|
|
|
|
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Basic: |
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|
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|
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|
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|
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Income from continuing operations |
|
|
|
|
|
|
|
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|
$ |
1.81 |
|
$ |
1.13 |
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Loss from discontinued operations |
|
|
|
|
|
|
|
|
|
$ |
- |
|
$ |
(0.03) |
|
Net income attributable to AIG |
|
|
|
|
|
|
|
|
|
$ |
1.81 |
|
$ |
1.10 |
|
Diluted: |
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|
|
|
|
|
|
|
|
|
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|
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Income from continuing operations |
|
|
|
|
|
|
|
|
|
$ |
1.78 |
|
$ |
1.12 |
|
Loss from discontinued operations |
|
|
|
|
|
|
|
|
|
$ |
- |
|
$ |
(0.03) |
|
Net income attributable to AIG |
|
|
|
|
|
|
|
|
|
$ |
1.78 |
|
$ |
1.09 |
|
Weighted average shares outstanding: |
|
|
|
|
|
|
|
|
|
|
|
|
|
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Basic |
|
|
|
|
|
|
|
|
|
|
1,365,951,690 |
|
|
1,459,249,393 |
|
Diluted |
|
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|
|
|
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|
|
|
1,386,263,549 |
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|
1,472,510,813 |
|
Dividends declared per common share |
|
|
|
|
|
|
|
|
|
$ |
0.125 |
|
$ |
0.125 |
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See accompanying Notes to Condensed Consolidated Financial Statements. |
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|||
American International Group, Inc.
CONDENSED Consolidated Statements of Comprehensive Income (unaudited)
|
Three Months Ended March 31, |
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(in millions) |
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2015 |
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|
2014 |
|
Net income |
|
|
$ |
2,477 |
|
$ |
1,612 |
|
Other comprehensive income, net of tax |
|
|
|
|
|
|
|
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Change in unrealized appreciation (depreciation) of fixed maturity investments on |
|
|
|
|
|
|
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which other-than-temporary credit impairments were taken |
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(72) |
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|
89 |
|
Change in unrealized appreciation of all other investments |
|
|
|
539 |
|
|
2,785 |
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Change in foreign currency translation adjustments |
|
|
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(459) |
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|
(158) |
|
Change in retirement plan liabilities adjustment |
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|
29 |
|
|
9 |
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Other comprehensive income |
|
|
|
37 |
|
|
2,725 |
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Comprehensive income |
|
|
|
2,514 |
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|
4,337 |
|
Comprehensive income attributable to noncontrolling interests |
|
|
|
6 |
|
|
3 |
|
Comprehensive income attributable to AIG |
|
|
$ |
2,508 |
|
$ |
4,334 |
|
|
|
|
|
|
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See accompanying Notes to Condensed Consolidated Financial Statements. |
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American International Group, Inc.
CONDENSED CONSOLIDATED Statement of Equity (unaudited)
|
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Non- |
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Accumulated |
|
Total AIG |
|
redeemable |
|
|
|
|
|
|
|
|
|
Additional |
|
|
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Other |
|
Share- |
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Non- |
|
|
|
|
|
Common |
|
Treasury |
|
Paid-in |
|
Retained |
Comprehensive |
|
holders' |
|
controlling |
|
Total |
|
|
(in millions) |
|
Stock |
|
Stock |
|
Capital |
|
Earnings |
|
Income |
|
Equity |
|
Interests |
|
Equity |
|
Three Months Ended March 31, 2015 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, beginning of year |
$ |
4,766 |
$ |
(19,218) |
$ |
80,958 |
$ |
29,775 |
$ |
10,617 |
$ |
106,898 |
$ |
374 |
$ |
107,272 |
|
Purchase of common stock |
|
- |
|
(1,602) |
|
- |
|
- |
|
- |
|
(1,602) |
|
- |
|
(1,602) |
|
Net income attributable to AIG or other |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
noncontrolling interests |
|
- |
|
- |
|
- |
|
2,468 |
|
- |
|
2,468 |
|
9 |
|
2,477 |
|
Dividends |
|
- |
|
- |
|
- |
|
(170) |
|
- |
|
(170) |
|
- |
|
(170) |
|
Other comprehensive income (loss) |
|
- |
|
- |
|
- |
|
- |
|
40 |
|
40 |
|
(3) |
|
37 |
|
Net increase due to deconsolidation |
|
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
7 |
|
7 |
|
Contributions from noncontrolling interests |
|
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
1 |
|
1 |
|
Distributions to noncontrolling interests |
|
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
(4) |
|
(4) |
|
Other |
|
- |
|
- |
|
345 |
|
- |
|
- |
|
345 |
|
4 |
|
349 |
|
Balance, end of period |
$ |
4,766 |
$ |
(20,820) |
$ |
81,303 |
$ |
32,073 |
$ |
10,657 |
$ |
107,979 |
$ |
388 |
$ |
108,367 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31, 2014 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, beginning of year |
$ |
4,766 |
$ |
(14,520) |
$ |
80,899 |
$ |
22,965 |
$ |
6,360 |
$ |
100,470 |
$ |
611 |
$ |
101,081 |
|
Purchase of common stock |
|
- |
|
(867) |
|
- |
|
- |
|
- |
|
(867) |
|
- |
|
(867) |
|
Net income attributable to AIG or other |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
noncontrolling interests |
|
- |
|
- |
|
- |
|
1,609 |
|
- |
|
1,609 |
|
3 |
|
1,612 |
|
Dividends |
|
- |
|
- |
|
- |
|
(182) |
|
- |
|
(182) |
|
- |
|
(182) |
|
Other comprehensive income (loss) |
|
- |
|
- |
|
- |
|
- |
|
2,725 |
|
2,725 |
|
- |
|
2,725 |
|
Net decrease due to consolidation |
|
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
(34) |
|
(34) |
|
Contributions from noncontrolling interests |
|
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
5 |
|
5 |
|
Distributions to noncontrolling interests |
|
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
(22) |
|
(22) |
|
Other |
|
- |
|
1 |
|
76 |
|
1 |
|
- |
|
78 |
|
(3) |
|
75 |
|
Balance, end of period |
$ |
4,766 |
$ |
(15,386) |
$ |
80,975 |
$ |
24,393 |
$ |
9,085 |
$ |
103,833 |
$ |
560 |
$ |
104,393 |
See accompanying Notes to Condensed Consolidated Financial Statements.
American International Group, Inc.
CONDENSED Consolidated Statements of Cash Flows (unaudited)
|
Three Months Ended March 31, |
|
|
|
|
|
(in millions) |
|
2015 |
|
2014 |
|
Cash flows from operating activities: |
|
|
|
|
|
Net income |
$ |
2,477 |
$ |
1,612 |
|
(Income) loss from discontinued operations |
|
(1) |
|
47 |
|
Adjustments to reconcile net income to net cash provided by operating activities: |
|
|
|
|
|
Noncash revenues, expenses, gains and losses included in income: |
|
|
|
|
|
Net gains on sales of securities available for sale and other assets |
|
(974) |
|
(246) |
|
Net (gain) loss on sale of divested businesses |
|
6 |
|
(4) |
|
Net losses on extinguishment of debt |
|
68 |
|
238 |
|
Unrealized losses in earnings - net |
|
457 |
|
585 |
|
Equity in income from equity method investments, net of dividends or distributions |
|
(362) |
|
(441) |
|
Depreciation and other amortization |
|
1,226 |
|
1,121 |
|
Impairments of assets |
|
212 |
|
138 |
|
Changes in operating assets and liabilities: |
|
|
|
|
|
Insurance reserves |
|
(295) |
|
1,495 |
|
Premiums and other receivables and payables - net |
|
(572) |
|
(701) |
|
Reinsurance assets and funds held under reinsurance treaties |
|
(272) |
|
(1,532) |
|
Capitalization of deferred policy acquisition costs |
|
(1,439) |
|
(1,462) |
|
Current and deferred income taxes - net |
|
1,161 |
|
450 |
|
Other, net |
|
(1,304) |
|
(537) |
|
Total adjustments |
|
(2,088) |
|
(896) |
|
Net cash provided by operating activities |
|
388 |
|
763 |
|
Cash flows from investing activities: |
|
|
|
|
|
Proceeds from (payments for) |
|
|
|
|
|
Sales or distribution of: |
|
|
|
|
|
Available for sale investments |
|
6,189 |
|
6,365 |
|
Other securities |
|
1,094 |
|
1,725 |
|
Sales or distributions of other invested assets (including flight equipment) |
|
1,648 |
|
1,041 |
|
Maturities of fixed maturity securities available for sale |
|
5,251 |
|
5,347 |
|
Principal payments received on and sales of mortgage and other loans receivable |
|
1,047 |
|
765 |
|
Purchases of: |
|
|
|
|
|
Available for sale investments |
|
(9,844) |
|
(11,592) |
|
Other securities |
|
(476) |
|
(181) |
|
Purchases of other invested assets (including flight equipment) |
|
(1,132) |
|
(1,218) |
|
Mortgage and other loans receivable |
|
(1,657) |
|
(1,307) |
|
Net change in restricted cash |
|
(47) |
|
(667) |
|
Net change in short-term investments |
|
(804) |
|
3,588 |
|
Other, net |
|
(955) |
|
(83) |
|
Net cash provided by investing activities |
|
314 |
|
3,783 |
|
Cash flows from financing activities: |
|
|
|
|
|
Proceeds from (payments for) |
|
|
|
|
|
Policyholder contract deposits |
|
3,713 |
|
4,008 |
|
Policyholder contract withdrawals |
|
(3,533) |
|
(3,548) |
|
Issuance of long-term debt |
|
2,585 |
|
1,583 |
|
Repayments of long-term debt |
|
(1,893) |
|
(3,281) |
|
Purchase of Common Stock |
|
(1,398) |
|
(867) |
|
Dividends paid |
|
(170) |
|
(182) |
|
Other, net |
|
92 |
|
(2,002) |
|
Net cash used in financing activities |
|
(604) |
|
(4,289) |
|
Effect of exchange rate changes on cash |
|
(33) |
|
(11) |
|
Net increase in cash |
|
65 |
|
246 |
|
Cash at beginning of year |
|
1,758 |
|
2,241 |
|
Change in cash of businesses held-for-sale |
|
- |
|
3 |
|
Cash at end of period |
$ |
1,823 |
$ |
2,490 |
|
Supplementary Disclosure of Condensed Consolidated Cash Flow Information |
|
|
|
|
|
Cash paid during the period for: |
|
|
|
|
|
Interest |
$ |
307 |
$ |
840 |
|
Taxes |
$ |
140 |
$ |
165 |
|
Non-cash investing/financing activities: |
|
|
|
|
|
Interest credited to policyholder contract deposits included in financing activities |
$ |
937 |
$ |
1,052 |
|
See accompanying Notes to Condensed Consolidated Financial Statements. |
|
|
|
|
Item 1 / NOTE 1. BASIS OF PRESENTATION
NOTES TO CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS (unaudited)
|
|
American International Group, Inc. (AIG) is a leading global insurance organization serving customers in more than 100 countries and jurisdictions. AIG companies serve commercial, institutional and individual customers through one of the most extensive worldwide property‑casualty networks of any insurer. In addition, AIG companies are leading providers of life insurance and retirement services in the United States. AIG Common Stock, par value $2.50 per share, (AIG Common Stock) is listed on the New York Stock Exchange (NYSE: AIG) and the Tokyo Stock Exchange. Unless the context indicates otherwise, the terms “AIG,” “we,” “us” or “our” mean American International Group, Inc. and its consolidated subsidiaries and the term “AIG Parent” means American International Group, Inc. and not any of its consolidated subsidiaries.
These unaudited Condensed Consolidated Financial Statements do not include all disclosures that are normally included in annual financial statements prepared in accordance with accounting principles generally accepted in the United States (GAAP) and should be read in conjunction with the audited Consolidated Financial Statements and the related notes included in our Annual Report on Form 10-K for the year ended December 31, 2014 (2014 Annual Report). The condensed consolidated financial information as of December 31, 2014 included herein has been derived from audited Consolidated Financial Statements in the 2014 Annual Report.
Certain of our foreign subsidiaries included in the Condensed Consolidated Financial Statements report on different fiscal-period bases. The effect on our condensed consolidated financial condition and results of operations of all material events occurring at these subsidiaries through the date of each of the periods presented in these Condensed Consolidated Financial Statements has been recorded. In the opinion of management, these Condensed Consolidated Financial statements contain normal recurring adjustments, including eliminations of material intercompany accounts and transactions, necessary for a fair statement of the results presented herein.
Interim period operating results may not be indicative of the operating results for a full year. We evaluated the need to recognize or disclose events that occurred subsequent to March 31, 2015 and prior to the issuance of these Condensed Consolidated Financial Statements.
|
|
On May 14, 2014, we completed the sale of 100 percent of the common stock of International Lease Finance Corporation (ILFC) to AerCap Ireland Limited, a wholly owned subsidiary of AerCap Holdings N.V. (AerCap), in exchange for total consideration of approximately $7.6 billion, including cash and 97.6 million newly issued AerCap common shares (the AerCap Transaction). The total value of the consideration was based in part on AerCap’s closing price per share of $47.01 on May 13, 2014. ILFC’s results of operations are reflected in Aircraft leasing revenue and Aircraft leasing expenses in the Condensed Consolidated Statements of Income through the date of the completion of the sale.
Item 1 / NOTE 1. BASIS OF PRESENTATION
NOTES TO CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS (unaudited)
Use of Estimates
|
|
The preparation of financial statements in accordance with GAAP requires the application of accounting policies that often involve a significant degree of judgment. Accounting policies that we believe are most dependent on the application of estimates and assumptions are considered our critical accounting estimates and are related to the determination of:
· income tax assets and liabilities, including recoverability of our net deferred tax asset and the predictability of future tax operating profitability of the character necessary to realize the net deferred tax asset;
· liability for unpaid losses and loss adjustment expenses;
· reinsurance assets;
· valuation of future policy benefit liabilities and timing and extent of loss recognition;
· valuation of liabilities for guaranteed benefit features of variable annuity products;
· estimated gross profits to value deferred acquisition costs for investment‑oriented products;
· impairment charges, including other‑than‑temporary impairments on available for sale securities, impairments on investments in life settlements and goodwill impairment;
· liability for legal contingencies; and
· fair value measurements of certain financial assets and liabilities.
These accounting estimates require the use of assumptions about matters, some of which are highly uncertain at the time of estimation. To the extent actual experience differs from the assumptions used, our consolidated financial condition, results of operations and cash flows could be materially affected.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
|
|
Accounting Standards Adopted During 2015
|
|
Reclassification of Residential Real Estate Collateralized Consumer Mortgage Loans upon Foreclosure
|
|
In January 2014, the Financial Accounting Standards Board (FASB) issued an accounting standard that clarifies that a creditor is considered to have received physical possession of residential real estate property collateralizing a consumer mortgage loan, so that the loan is derecognized and the real estate property is recognized, when either (i) the creditor obtains legal title to the residential real estate property upon completion of a foreclosure or (ii) the borrower conveys all interest in the residential real estate property to the creditor to satisfy the loan through completion of a deed in lieu of foreclosure or through a similar legal agreement.
We adopted the standard on its required effective date of January 1, 2015. The adoption of this standard had no material effect on our consolidated financial condition, results of operations or cash flows.
Item 1 / NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
NOTES TO CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS (unaudited)
Reporting Discontinued Operations
|
|
In April 2014, the FASB issued an accounting standard that changes the requirements for presenting a component or group of components of an entity as a discontinued operation and requires new disclosures. Under the standard, the disposal of a component or group of components of an entity should be reported as a discontinued operation if the disposal represents a
strategic shift that has (or will have) a major effect on an entity’s operations and financial results. Disposals of equity method investments, or those reported as held-for-sale, must be presented as a discontinued operation if they meet the new definition. The standard also requires entities to provide disclosures about the disposal of an individually significant component of an entity that does not qualify for discontinued operations presentation.
We adopted the standard on its required effective date of January 1, 2015 on a prospective basis. The adoption of this standard had no material effect on our consolidated financial condition, results of operations or cash flows.
Repurchase-to-Maturity Transactions, Repurchase Financings, and Disclosures
|
|
In June 2014, the FASB issued an accounting standard that changes the accounting for repurchase-to-maturity transactions and repurchase financing arrangements. It also requires additional disclosures about repurchase agreements and other similar transactions. The standard aligns the accounting for repurchase-to-maturity transactions and repurchase agreements executed as repurchase financings with the accounting for other typical repurchase agreements such that they all will be accounted for as secured borrowings. The standard eliminates sale accounting for repurchase-to-maturity transactions and supersedes the standard under which a transfer of a financial asset and a contemporaneous repurchase financing could be accounted for on a combined basis as a forward agreement.
We adopted the standard on its required effective date of January 1, 2015 on a prospective basis. The adoption of this standard had no material effect on our consolidated financial condition, results of operations or cash flows.
Future Application of Accounting Standards
|
|
Revenue Recognition
|
|
In May 2014, the FASB issued an accounting standard that supersedes most existing revenue recognition guidance. The standard excludes from its scope the accounting for insurance contracts, leases, financial instruments, and other agreements that are governed under other GAAP guidance, but could affect the revenue recognition for certain of our other activities.
The standard is effective for interim and annual reporting periods beginning after December 15, 2016 and may be applied retrospectively or through a cumulative effect adjustment to retained earnings at the date of adoption. Early adoption is not permitted. We plan to adopt the standard on its required effective date of January 1, 2017 and are assessing the impact of the standard on our consolidated financial condition, results of operations and cash flows.
Accounting for Share-Based Payments with Performance Targets
|
|
In June 2014, the FASB issued an accounting standard that clarifies the accounting for share-based payments when the terms of an award provide that a performance target could be achieved after the requisite service period. The standard requires that a performance target that affects vesting and that could be achieved after the requisite service period be treated as a performance condition.
Item 1 / NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
NOTES TO CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS (unaudited)
The standard is effective for interim and annual reporting periods beginning after December 15, 2015. Early adoption is permitted. The standard may be applied prospectively to all awards granted or modified after the effective date or retrospectively to all awards with performance targets that are outstanding as of the beginning of the earliest annual period presented in the financial statements and to all new or modified awards thereafter. We plan to adopt the standard on its required effective date of January 1, 2016 and do not expect the adoption of the standard to have a material effect on our consolidated financial condition, results of operations or cash flows.
Measuring the Financial Assets and the Financial Liabilities of a Consolidated Collateralized Financing Entity
|
|
In August 2014, the FASB issued an accounting standard that allows a reporting entity to measure the financial assets and financial liabilities of a qualifying consolidated collateralized financing entity using the fair value of either its financial assets or financial liabilities, whichever is more observable.
The standard is effective for interim and annual reporting periods beginning after December 15, 2015. Early adoption is permitted. The standard may be applied retrospectively to all relevant prior periods presented starting with January 1, 2010 or through a cumulative effect adjustment to retained earnings at the date of adoption. We plan to adopt the standard on its required effective date of January 1, 2016 and are assessing the impact of the standard on our consolidated financial condition, results of operations and cash flows.
Consolidation: Amendments to the Consolidation Analysis
|
|
In February 2015, the FASB issued an accounting standard that affects reporting entities that are required to evaluate whether they should consolidate certain legal entities. Specifically, the amendments modify the evaluation of whether limited partnerships and similar legal entities are variable interest entities (VIEs) or voting interest entities; eliminate the presumption that a general partner should consolidate a limited partnership; affect the consolidation analysis of reporting entities that are involved with VIEs, particularly those that have fee arrangements and related party relationships; and provide a scope exception from consolidation guidance for reporting entities with interests in legal entities that are required to comply with or operate in accordance with requirements that are similar to those in Rule 2a-7 of the Investment Company Act of 1940 for registered money market funds.
The standard is effective for interim and annual reporting periods beginning after December 15, 2015. Early adoption is permitted, including adoption in an interim period. The standard may be applied retrospectively or through a cumulative effect adjustment to retained earnings as of the beginning of the year of adoption. We plan to adopt the standard on its required effective date of January 1, 2016 and are assessing the impact of the standard on our consolidated financial condition, results of operations and cash flows.
Item 1 / NOTE 3. SEGMENT INFORMATION
NOTES TO CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS (unaudited)
3. SEGMENT INFORMATION
|
|
We report our results of operations consistent with the manner in which our chief operating decision makers review the business to assess performance and allocate resources through two reportable segments: Commercial Insurance and Consumer Insurance in addition to a Corporate and Other category. The Corporate and Other category consists of businesses and items not allocated to our reportable segments.
We evaluate performance based on revenue and pre-tax operating income (loss). Pre-tax operating income (loss) is derived by excluding certain items from net income (loss) attributable to AIG. See the table below for items excluded from pre-tax operating income (loss).
The following tables present our operations by reportable segment:
|
|
2015 |
2014 |
||||||
|
|
|
|
|
Pre-Tax |
|
|
|
Pre-Tax |
|
Three Months Ended March 31, |
|
Total |
|
Operating |
|
Total |
|
Operating |
|
(in millions) |
|
Revenues |
|
Income (Loss) |
|
Revenues |
|
Income (Loss) |
|
Commercial Insurance |
|
|
|
|
|
|
|
|
|
Property Casualty |
$ |
5,956 |
$ |
1,170 |
$ |
6,112 |
$ |
1,116 |
|
Mortgage Guaranty |
|
264 |
|
145 |
|
248 |
|
76 |
|
Institutional Markets |
|
624 |
|
147 |
|
695 |
|
229 |
|
Total Commercial Insurance |
|
6,844 |
|
1,462 |
|
7,055 |
|
1,421 |
|
Consumer Insurance |
|
|
|
|
|
|
|
|
|
Retirement |
|
2,388 |
|
800 |
|
2,485 |
|
915 |
|
Life |
|
1,613 |
|
171 |
|
1,610 |
|
235 |
|
Personal Insurance |
|
2,862 |
|
(26) |
|
3,064 |
|
18 |
|
Total Consumer Insurance |
|
6,863 |
|
945 |
|
7,159 |
|
1,168 |
|
Corporate and Other |
|
|
|
|
|
|
|
|
|
Direct Investment book |
|
178 |
|
145 |
|
519 |
|
440 |
|
Global Capital Markets |
|
137 |
|
114 |
|
59 |
|
29 |
|
AIG Parent and Other* |
|
968 |
|
(120) |
|
523 |
|
(538) |
|
Consolidation and elimination |
|
(273) |
|
(1) |
|
(133) |
|
1 |
|
Total Corporate and Other |
|
1,010 |
|
138 |
|
968 |
|
(68) |
|
AIG Consolidation and elimination |
|
(127) |
|
(18) |
|
(82) |
|
35 |
|
Total AIG Consolidated revenues and pre-tax operating income |
$ |
14,590 |
$ |
2,527 |
$ |
15,100 |
$ |
2,556 |
|
Reconciling Items from pre-tax operating income to pre-tax income: |
|
|
|
|
|
|
|
|
|
Changes in fair values of fixed maturity securities designated to |
|
|
|
|
|
|
|
|
|
hedge living benefit liabilities, net of interest expense |
|
44 |
|
44 |
|
76 |
|
76 |
|
Changes in benefit reserves and DAC, VOBA and SIA related to |
|
|
|
|
|
|
|
|
|
net realized capital gains |
|
- |
|
(54) |
|
- |
|
7 |
|
Loss on extinguishment of debt |
|
- |
|
(68) |
|
- |
|
(238) |
|
Net realized capital gains |
|
1,341 |
|
1,341 |
|
(152) |
|
(152) |
|
Income from divested businesses |
|
(15) |
|
(21) |
|
1,113 |
|
21 |
|
Legal settlements related to legacy crisis matters |
|
15 |
|
15 |
|
26 |
|
26 |
|
Legal reserves related to legacy crisis matters |
|
- |
|
(8) |
|
- |
|
(23) |
|
Pre-tax income |
$ |
15,975 |
$ |
3,776 |
$ |
16,163 |
$ |
2,273 |
Item 1 / NOTE 4. DISCONTINUED OPERATIONS
NOTES TO CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS (unaudited)
4. DISCONTINUED OPERATIONS
|
|
|
|
In connection with the 2010 sale of American Life Insurance Company (ALICO) to MetLife, Inc. (MetLife), we recognized the following income (loss) from discontinued operations:
|
Three Months Ended March 31, |
|
|
|
|
|
|
|
(in millions) |
|
|
|
2015 |
|
2014 |
|
Revenues: |
|
|
|
|
|
|
|
Gain (loss) on sale |
|
|
$ |
1 |
$ |
(1) |
|
Gain (loss) from discontinued operations, before income tax expense |
|
|
|
1 |
|
(1) |
|
Income tax expense |
|
|
|
- |
|
46 |
|
Income (loss) from discontinued operations, net of income tax expense |
|
|
$ |
1 |
$ |
(47) |
|
|
Fair Value Measurements on a Recurring Basis
|
|
Assets and liabilities recorded at fair value in the Condensed Consolidated Balance Sheets are measured and classified in accordance with a fair value hierarchy consisting of three “levels” based on the observability of valuation inputs:
· Level 1: Fair value measurements based on quoted prices (unadjusted) in active markets that we have the ability to access for identical assets or liabilities. Market price data generally is obtained from exchange or dealer markets. We do not adjust the quoted price for such instruments.
· Level 2: Fair value measurements based on inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly. Level 2 inputs include quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, and inputs other than quoted prices that are observable for the asset or liability, such as interest rates and yield curves that are observable at commonly quoted intervals.
· Level 3: Fair value measurements based on valuation techniques that use significant inputs that are unobservable. Both observable and unobservable inputs may be used to determine the fair values of positions classified in Level 3. The circumstances for using these measurements include those in which there is little, if any, market activity for the asset or liability. Therefore, we must make certain assumptions about the inputs a hypothetical market participant would use to value that asset or liability. In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, the level in the fair value hierarchy within which the fair value measurement in its entirety falls is determined based on the lowest level input that is significant to the fair value measurement in its entirety.
Item 1 / NOTE 5. FAIR VALUE MEASUREMENTS
NOTES TO CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS (unaudited)
Assets and Liabilities Measured at Fair Value on a Recurring Basis
|
|
The following table presents information about assets and liabilities measured at fair value on a recurring basis and indicates the level of the fair value measurement based on the observability of the inputs used:
|
March 31, 2015 |
|
|
|
|
|
|
Counterparty |
Cash |
|
|||
|
(in millions) |
|
Level 1 |
|
Level 2 |
|
Level 3 |
|
Netting* |
Collateral |
|
Total |
|
|
Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Bonds available for sale: |
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. government and government sponsored entities |
$ |
65 |
$ |
2,709 |
$ |
- |
$ |
- |
$ |
- |
$ |
2,774 |
|
Obligations of states, municipalities and political subdivisions |
|
- |
|
25,579 |
|
2,256 |
|
- |
|
- |
|
27,835 |
|
Non-U.S. governments |
|
716 |
|
19,139 |
|
34 |
|
- |
|
- |
|
19,889 |
|
Corporate debt |
|
- |
|
142,315 |
|
1,827 |
|
- |
|
- |
|
144,142 |
|
RMBS |
|
- |
|
20,387 |
|
17,345 |
|
- |
|
- |
|
37,732 |
|
CMBS |
|
- |
|
10,749 |
|
2,694 |
|
- |
|
- |
|
13,443 |
|
CDO/ABS |
|
- |
|
8,554 |
|
6,453 |
|
- |
|
- |
|
15,007 |
|
Total bonds available for sale |
|
781 |
|
229,432 |
|
30,609 |
|
- |
|
- |
|
260,822 |
|
Other bond securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. government and government sponsored entities |
|
- |
|
5,483 |
|
- |
|
- |
|
- |
|
5,483 |
|
Obligations of states, municipalities and political subdivisions |
|
- |
|
76 |
|
- |
|
- |
|
- |
|
76 |
|
Non-U.S. governments |
|
- |
|
2 |
|
- |
|
- |
|
- |
|
2 |
|
Corporate debt |
|
- |
|
551 |
|
16 |
|
- |
|
- |
|
567 |
|
RMBS |
|
- |
|
888 |
|
1,288 |
|
- |
|
- |
|
2,176 |
|
CMBS |
|
- |
|
676 |
|
269 |
|
- |
|
- |
|
945 |
|
CDO/ABS |
|
- |
|
1,914 |
|
7,850 |
|
- |
|
- |
|
9,764 |
|
Total other bond securities |
|
- |
|
9,590 |
|
9,423 |
|
- |
|
- |
|
19,013 |
|
Equity securities available for sale: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock |
|
3,056 |
|
3 |
|
1 |
|
- |
|
- |
|
3,060 |
|
Preferred stock |
|
25 |
|
- |
|
- |
|
- |
|
- |
|
25 |
|
Mutual funds |
|
680 |
|
1 |
|
- |
|
- |
|
- |
|
681 |
|
Total equity securities available for sale |
|
3,761 |
|
4 |
|
1 |
|
- |
|
- |
|
3,766 |
|
Other equity securities |
|
1,076 |
|
2 |
|
22 |
|
- |
|
- |
|
1,100 |
|
Mortgage and other loans receivable |
|
- |
|
- |
|
6 |
|
- |
|
- |
|
6 |
|
Other invested assets |
|
2 |
|
4,096 |
|
5,098 |
|
- |
|
- |
|
9,196 |
|
Derivative assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate contracts |
|
1 |
|
4,806 |
|
14 |
|
- |
|
- |
|
4,821 |
|
Foreign exchange contracts |
|
- |
|
971 |
|
- |
|
- |
|
- |
|
971 |
|
Equity contracts |
|
109 |
|
7 |
|
68 |
|
- |
|
- |
|
184 |
|
Commodity contracts |
|
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
Credit contracts |
|
- |
|
- |
|
4 |
|
- |
|
- |
|
4 |
|
Other contracts |
|
- |
|
- |
|
29 |
|
- |
|
- |
|
29 |
|
Counterparty netting and cash collateral |
|
- |
|
- |
|
- |
|
(2,476) |
|
(1,912) |
|
(4,388) |
|
Total derivative assets |
|
110 |
|
5,784 |
|
115 |
|
(2,476) |
|
(1,912) |
|
1,621 |
|
Short-term investments |
|
566 |
|
642 |
|
- |
|
- |
|
- |
|
1,208 |
|
Separate account assets |
|
76,673 |
|
5,466 |
|
- |
|
- |
|
- |
||