Summary

• American International Group, Inc. (AIG) is a leading global insurance organization.
• The company provides a wide range of property casualty insurance, life insurance, retirement solutions and other financial services to customers in approximately 70 countries and jurisdictions.
• In the year 2022 AIG separated Life and Retirement Business and sold Fortitude Holdings.

American International Group, Inc. (NYSE: AIG, LSE: 0OAL) is a leading global insurance organization. The company provide a wide range of property casualty insurance, life insurance, retirement solutions and other financial services to customers in approximately 70 countries and jurisdictions.

Recent Developments

AIG and Stone Point to Form High Net Worth MGA Private Client Select (PCS)¹

July 3, 2023; American International Group, Inc. announced that its definitive agreement with funds managed by Stone Point Capital LLC (Stone Point) to form an independent Managing General Agency (MGA) specializing in the High Net Worth and Ultra High Net Worth markets called Private Client Select Insurance Services (PCS) has successfully closed.

AIG and Stone Point’s plans to form PCS and move AIG’s Private Client Group (PCG) business to this new independent platform were first announced in February 2023.

AIG to Sell Validus Re to RenaissanceRe²

May 22, 2023; American International Group (NYSE: AIG) today announced that it has entered into a definitive agreement to sell Validus Re, including AlphaCat and the Talbot Treaty reinsurance business, to RenaissanceRe Holdings Ltd. (NYSE: RNR) (“RenaissanceRe”) for $2.985 billion, consisting of $2.735 billion in cash and $250 million in RenaissanceRe common shares. In addition, AIG will receive all capital in excess of $2.1 billion of shareholders’ equity of Validus Re and achieve future capital synergies of approximately $400 million from the recapture of reserves as a result of transferring the Validus Re balance sheet to RenaissanceRe, which together, as of December 31, 2022, was over $1.5 billion. The total estimated transaction value is expected to exceed $4.5 billion.

AIG will retain Talbot Underwriting and Western World, which were purchased as part of its 2018 acquisition of Validus Holdings Ltd. and which currently represent approximately $1.6 billion of AIG’s total gross premiums written. On May 2, 2023, AIG announced that it reached an agreement to sell Crop Risk Services, also purchased as part of the 2018 acquisition of Validus Holdings Ltd. in 2018, to American Financial Group, Inc. for $240 million; this transaction is expected to close in the third quarter of 2023.

The sale of Validus Re is expected to close in the fourth quarter of 2023, subject to regulatory approvals and other customary closing conditions. Following the closing, AIG expects to make significant investments in RenaissanceRe’s DaVinci Reinsurance and Fontana Re managed funds through AIG’s Investment portfolio.

Separation of Life and Retirement Business

On September 19, 2022, AIG closed on the initial public offering (IPO) of 80 million shares of Corebridge Financial, Inc. (Corebridge) common stock at a public offering price of $21.00 per share, representing 12.4 percent of Corebridge's common stock. Corebridge is the holding company for AIG’s Life and Retirement business. The aggregate gross proceeds of the offering to AIG, before deducting underwriting discounts and commissions and other expenses payable by AIG, were approximately $1.7 billion. After consideration of underwriting discounts, commissions and other related expenses payable by AIG, AIG recorded $608 million as an increase in AIG’s shareholder’s equity.

Sale of Fortitude Holdings

On June 2, 2020, the company completed the sale of a majority of the interests in Fortitude Group Holdings, LLC (Fortitude Holdings) to Carlyle FRL, L.P. (Carlyle FRL), an investment fund advised by an affiliate of The Carlyle Group Inc. (Carlyle), and T&D United Capital Co., Ltd. (T&D), a subsidiary of T&D Holdings, Inc., under the terms of a membership interest purchase agreement entered into on November 25, 2019 by and among AIG, Fortitude Holdings, Carlyle FRL, Carlyle, T&D and T&D Holdings, Inc. (the Majority Interest Fortitude Sale). As a result of completion of the Majority Interest Fortitude Sale, AIG received $2.2 billion of proceeds and recorded a total after-tax reduction to total AIG shareholders’ equity of $4.3 billion related to the sale of the majority interest in and deconsolidation of Fortitude Holdings in the second quarter of 2020.

Financial Highlights

First Quarter 2023 Results

May 4, 2023; American International Group, Inc.  reported financial results for the first quarter ended March 31, 2023.³

General Insurance delivered underwriting income of $502 million, representing the strongest first quarter underwriting results; Commercial Lines net premiums written (NPW) grew 6% year-over-year or 11% on a constant dollar basis and adjusted for the International lag elimination.

General Insurance combined ratio of 91.9% improved 1.0 point from the prior year quarter and adjusted accident year combined ratio* (AYCR) of 88.7% improved 0.8 point from the prior year quarter, marking the fifth consecutive year of margin improvement.

Life and Retirement reported a strong quarter with continued sales momentum and a 60-basis point improvement in base investment yield year-over-year.

Net income per diluted common share was $0.03, compared to $5.04 in the prior year quarter, and adjusted after-tax income attributable to AIG common shareholders* (AATI) per diluted common share was $1.63, an increase of 9% compared to $1.49 in the prior year quarter.

AIG repurchased $603 million of common stock in the first quarter and paid $241 million of dividends.

The AIG Board of Directors declared a cash dividend of $0.36 per share on AIG common stock, a 12.5% increase from prior quarterly dividends, commencing with the second quarter dividend, payable on June 30, 2023.

General Insurance adjusted pre-tax income (APTI) increased $37 million to $1.2 billion from the prior year quarter as a result of better underwriting results with 1.0 point of combined ratio improvement, and higher investment income on fixed maturity securities and loans, partially offset by lower alternative investment income.

Life and Retirement APTI decreased $48 million to $886 million from the prior year quarter, due to lower alternative investment income and lower fee income, partially offset by higher base portfolio income and improved mortality experience.

Net income attributable to AIG common shareholders was $23 million, or $0.03 per diluted common share, compared to $4.2 billion, or $5.04 per diluted common share, in the prior year quarter.

AATI was $1.21 billion, or $1.63 per diluted common share, compared to $1.49 per diluted common share, in the prior year quarter, primarily driven by a 10% reduction in weighted average diluted shares outstanding as well as better underwriting results and higher net investment income.

Return on common equity (ROCE) and adjusted ROCE* were 0.2% and 8.7%, respectively, on an annualized basis. Adjusted ROCE for General Insurance was 11.6% and for Life and Retirement 10.7%, both on an annualized basis.

As of March 31, 2023, book value per common share was $58.87, an increase of 7% compared to $55.15 at December 31, 2022. Adjusted book value per common share* was $75.87, in line with $75.90 at December 31, 2022.

For the first quarter of 2023, pre-tax loss from continuing operations was $231 million, compared to pre-tax income of $5.7 billion in the prior year quarter. Net income attributable to AIG common shareholders was $23 million, or $0.03 per diluted common share, compared to $4.2 billion, or $5.04 per diluted common share, in the prior year quarter. The decline was mostly due to net realized losses on Fortitude Re funds withheld embedded derivative as well as net realized losses excluding Fortitude Re funds withheld assets and embedded derivative, and lower alternative investment income, partially offset by higher General Insurance underwriting income and investment income on the fixed maturity securities and loan portfolios. These pre-tax movements were partially offset by a lower income tax expense as well as a higher net loss attributable to noncontrolling interest due to noncontrolling interest losses on Corebridge in 2023 compared to gains in 2022 and the 12.4% public floating interest from the initial public offering (IPO).

AATI was $1.21 billion, or $1.63 per diluted common share, for the first quarter of 2023 compared to $1.23 billion, or $1.49 per diluted common share, in the prior year quarter. The decrease in AATI was driven by lower alternative investment income, partially offset by higher General Insurance underwriting results and net investment income on the fixed maturity securities and loan portfolios.

Total consolidated net investment income for the first quarter of 2023 was $3.5 billion, an increase of 9% from $3.2 billion in the prior year quarter, benefiting from $618 million of improvement in interest and dividends as a result of higher yields on the fixed maturity securities and loan portfolios, partially offset by lower alternative investment income. Total net investment income on an APTI basis* was $3.1 billion, an increase of $77 million from the prior year quarter.

As of March 31, 2023, AIG’s total invested assets, excluding Fortitude Re funds withheld assets, was $285.2 billion. The Commercial Mortgage Loan (CML) balance was 12% of total invested assets with weighted average loan-to-value ratio of 59% and weighted average debt service coverage ratio of 1.9x. The largest property type of CML portfolio is multifamily housing. Office loans account for 3% of total invested assets with concentration in major metropolitan areas, and 79% are Class A properties.

On January 1, 2023, AIG adopted the new accounting standard for Targeted Improvements to the Accounting for Long-Duration Contracts (the standard or LDTI), with a transition date of January 1, 2021. AIG adopted the standard using the modified retrospective transition method relating to liabilities for traditional and limited payment contracts and deferred policy acquisition costs. AIG also adopted the standard in relation to market risk benefits on a full retrospective basis. The previously reported 2021 and 2022 financial results have been recast for LDTI related changes. This resulted in a cumulative increase in AIG common shareholders' equity of $1.0 billion from $39.5 billion, as originally reported, to $40.5 billion at December 31, 2022, and an increase in AIG adjusted common shareholders’ equity* of $1.5 billion or 2.8% from $54.2 billion to $55.7 billion, as recast.

Book value per common share was $58.87 as of March 31, 2023, an increase of 7% from December 31, 2022 and a decrease of 16% from March 31, 2022. The year-over-year decrease was driven by the increase in accumulated other comprehensive loss (AOCI) as a result of higher interest rates. Adjusted book value per common share was $75.87, in line with December 31, 2022 and an increase of 4% from March 31, 2022, primarily due to share repurchases in the past twelve months. Adjusted tangible book value per common share* was $69.37, a decrease of 0.1% from December 31, 2022 and an increase of 4% from March 31, 2022.

For the first quarter of 2023, AIG repurchased $603 million of common stock or approximately 11 million shares, paid $241 million of common and preferred dividends, issued $750 million of senior unsecured notes, and ended the quarter with parent liquidity of $3.9 billion. AIG’s ratio of total debt and preferred stock to total capital at March 31, 2023 was 32.8%, down from 33.6% at December 31, 2022, primarily driven by AOCI mark-to-market adjustments for certain investment portfolios, partially offset by the March debt issuance. Excluding AOCI, the total debt and preferred stock to total capital ratio was 26.3% at March 31, 2023.

The AIG Board of Directors declared a quarterly cash dividend on AIG common stock of $0.36 per share, a 12.5% increase from the prior dividend paid in March 2023 of $0.32 per share. The dividend is payable on June 30, 2023 to stockholders of record at the close of business on June 16, 2023.

Company Overview

American International Group, Inc. (AIG) is a leading global insurance organization. The company provide a wide range of property casualty insurance, life insurance, retirement solutions and other financial services to customers in approximately 70 countries and jurisdictions. These diverse offerings include products and services that help businesses and individuals protect their assets, manage risks and provide for retirement security.⁴

The company earn revenues primarily from insurance premiums, policy fees and income from investments. The company's expenses consist of policyholder benefits and losses incurred, interest credited to policyholders, commissions and other costs of selling and servicing its products, interest expense and general operating expenses.

On December 31, 2022, the company had approximately 26,200 employees based in approximately 50 countries, of which 34 percent are located in North America, 43 percent are in the Asia Pacific region and the remaining 23 percent are in the European, Middle East and Africa (EMEA) region and Latin America.

Business Segments

AIG reports the results of its businesses through three segments – General Insurance, Life and Retirement and Other Operations. General Insurance consists of two operating segments – North America and International. Life and Retirement consists of four operating segments – Individual Retirement, Group Retirement, Life Insurance and Institutional Markets. Other Operations is primarily comprised of corporate, its institutional asset management business and consolidation and eliminations.

General Insurance

General Insurance is a leading provider of insurance products and services for commercial and personal insurance customers. It includes one of the world’s most far-reaching property casualty networks. General Insurance offers a broad range of products to customers through a diversified, multichannel distribution network. Customers value General Insurance’s strong capital position, extensive risk management and claims experience and its ability to be a market leader in critical lines of the insurance business.

General Insurance includes the following major operating companies: National Union Fire Insurance Company of Pittsburgh, Pa. (National Union); American Home Assurance Company (American Home); Lexington Insurance Company (Lexington); AIG General Insurance Company, Ltd. (AIG Sonpo); AIG Asia Pacific Insurance, Pte, Ltd.; AIG Europe S.A.; American International Group UK Ltd.; Validus Reinsurance, Ltd. (Validus Re); Talbot Holdings Ltd. (Talbot); Western World Insurance Group, Inc. and Glatfelter Insurance Group (Glatfelter).

Life and Retirement

Life and Retirement is a unique franchise that brings together a broad portfolio of life insurance, retirement and institutional products offered through an extensive, multichannel distribution network. It holds long-standing, leading market positions in many of the markets it serves in the U.S. With its strong capital position, customer-focused service, breadth of product expertise and deep distribution relationships across multiple channels, Life and Retirement is well positioned to serve growing market needs.

Life and Retirement includes the following major operating companies: American General Life Insurance Company (AGL); The Variable Annuity Life Insurance Company (VALIC); The United States Life Insurance Company in the City of New York (U.S. Life); Laya Healthcare Limited and AIG Life Limited.

Other Operations

Other Operations primarily consists of income from assets held by AIG Parent and other corporate subsidiaries, deferred tax assets related to tax attributes, corporate expenses and intercompany eliminations, its institutional asset management business and results of its consolidated investment entities, General Insurance portfolios in run-off as well as the historical results of its legacy insurance lines ceded to Fortitude Reinsurance Company Ltd. (Fortitude Re).

Company History

American International Group, Inc. (AIG) was founded in 1919 by Cornelius Vander Starr, a 27-year-old American who established a general insurance agency, the American Asiatic Underwriters (AAU), in Shanghai, China.⁵

AAU quickly expanded its operations to other Asian countries, and in 1920, it established a subsidiary in the United States, American International Underwriters (AIU). AIU grew rapidly, and by the end of the 1920s, it had become one of the largest insurance companies in the United States.

In the 1930s, AIG expanded its operations to Europe, and by the end of the decade, it was operating in 27 countries. During World War II, AIG continued to operate in many countries, even those that were occupied by the Axis powers. This was made possible by the fact that AIG was owned by a consortium of American and British insurance companies, which allowed it to operate in countries where other American companies were not allowed.

After the war, AIG continued to expand its operations, and by the end of the 1950s, it was operating in over 100 countries. In the 1960s, AIG began to diversify its operations, and in addition to insurance, it began to offer a variety of financial services, such as investment banking and asset management.

In the 1980s, AIG acquired a number of other insurance companies, including Fireman's Fund Insurance Company and Transamerica Corporation. This made AIG one of the largest insurance companies in the world.

In the 1990s, AIG expanded its operations into new markets, such as China and Russia. It also continued to acquire other insurance companies, including Chartis and Ellipse.

In 2008, AIG was one of the companies that was bailed out by the U.S. government during the financial crisis. The government provided AIG with $182 billion in loans, which helped the company to avoid bankruptcy.

References

1. ^ https://aig.gcs-web.com/news-releases/news-release-details/transaction-closes-between-aig-and-stone-point-form-high-net
2. ^ https://aig.gcs-web.com/news-releases/news-release-details/aig-sell-validus-re-renaissancere
3. ^ https://aig.gcs-web.com/news-releases/news-release-details/aig-reports-first-quarter-2023-results
4. ^ https://fintel.io/doc/sec-american-international-group-inc-5272-10k-2023-february-17-19405-8500
5. ^ https://www.aig.com/home/about/history