American International Group, Inc. New · NYSE:AIG

American International Group, Inc. New — American International Group — Q2 2016 Earnings Presentation

33 slides from American International Group, Inc. New's earnings presentation, Aug 3, 2016

1. Slide 1: Conference Call Presentation Second Quarter 2016

   American International Group, Inc. Conference Call Presentation Second Quarter 2016 August 3, 2016

2. Slide 2: Cautionary Statement Regarding Forward Looking Information

   Cautionary Statement Regarding Forward Looking Information 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 constit

3. Slide 3: Progress On Financial Targets

   Progress On Financial Targets FY 2016 YTD Objective Selected 2Q Actions Target June 30, 2016 Reduce 6% Reduction 11%1  The expense decline in 2Q16 reflected our actions to reduce GOE, (~$700mm) ($637mm) employee-related expenses and professional fees Operating Basis Increase  Normalized ROE benefi

4. Slide 4: AIG Consolidated Operating Financial Highlights

   AIG Consolidated Operating Financial Highlights ($ in Millions, Except per Share Amounts) 2Q15 2Q16 Inc. / (Dec.) Operating revenues $15,635 $13,569 (13%) Pre-tax operating income (loss): Commercial Insurance: Property Casualty 1,192 791 (34%) Mortgage Guaranty 157 187 19% Institutional Markets 151

5. Slide 5: Reducing Exposure to Market Sensitive Assets

   Reducing Exposure to Market Sensitive Assets Market Sensitive Assets as a % Annualized Return on Market Sensitive Assets of Total Invested Assets* 10.8% 10.7% 11.0% 10.8% 14.1% 9.4% 9.2% 8.9% 10.5% 10.2% 8.0% 7.1% 8.1% 7.4% 4.3% (0.5%) (2.4%) (12.5%) 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 2Q14

6. Slide 6: Impact of Low Interest Rate Environment

   Impact of Low Interest Rate Environment Business Impacted Considerations for Inforce ALM Key Actions for New Business  Assets generally longer than liabilities so limited Long-tail Casualty  Continued focus on pricing, risk selection and rate impact Variable Annuities  Interest rate risk on livin

7. Slide 7: Improvement in General Operating Expenses, Operating Basis

   Improvement in General Operating Expenses, Operating Basis ($ in Millions) 1H’15 vs. 1H’16 11% $5,726 $5,668 $58 $31 $5,031 $356 $250 1H'15 FX Impact 1H'15 Revalued Sale of Staff Reductions & Professional 1H'16 Advisor Group Benefit Fees & Other Rationalization  GOE, operating basis, reductions in

8. Slide 8: Normalized Return On Equity Expansion

   Normalized Return On Equity Expansion Underwriting Improvement, Expense Management and Active Capital Management Drives Normalized ROE Expansion Normalized Return On Equity 1.2% 8.8% 1.6% (0.4%) (0.3%) 6.7% 2Q15 Operating Capital 2 Alternative Other, net 2Q16 1 Improvement Assets 1)Primarily represe

9. Slide 9: Book Value Per Share, Ex. AOCI & DTA, Including Dividend Growth

   Book Value Per Share, Ex. AOCI & DTA, Including Dividend Growth Growth of 5% in 2Q16 (4% in 1H’16) Book Value Per Common Share, ex. AOCI & DTA, including Dividend Growth $1.07 $0.18 $61.78 $0.70 ($0.08) ($0.12) $0.98 $59.05 March 31, Operating Non-operating Utilization of Accretive Warrant Dividends

10. Slide 10: Strong Capital Position

    Strong Capital Position Capital Structure ($ in Billions) Capital Return ($ in Millions) 2Q16 1H’16 $112.2 Share repurchases $2,762 $6,248 $109.4 $1.3 $0.9 Warrant repurchases 90 263 $17.9 $20.8 Dividends paid 350 713 Total $3,202 $7,224 $90.2 $90.5 Risk Based Capital Ratios2 Domestic Life Domestic

11. Slide 11: Parent Liquidity

    Parent Liquidity ($ in Billions) Changes in Parent Liquidity Targeted Range $6-8B $0.8 $0.5 $2.81 $7.1 $6.7 Unencumbered Includes: ($3.2) Non-Life = ~$1.0B ($0.9) ($0.4) Unencumbered Securities $4.1 Life = ~$0.7B Securities Tax Pmts = ~$1.1B $4.7 Cash & S/T Cash & S/T Inv. $3.0 Inv. $2.0 Balance at

12. Slide 12: Commercial Insurance

    Commercial Insurance AlG

13. Slide 13: Commercial Insurance – Property Casualty Financial Highlights

    Commercial Insurance – Property Casualty Financial Highlights ($ in Millions) 2Q15 2Q16  The accident year loss ratio, as adjusted, improved by 4.2 pts YoY reflecting our strategic actions and lower severe losses. Net premiums written  The underwriting loss in 2Q16 was primarily driven by higher $

14. Slide 14: Accident Year Loss Ratio

    Continued Improvement in Commercial Insurance Property Casualty Accident Year Loss Ratio, As Adjusted Commercial Insurance Property Casualty Accident Year Loss Ratio, As Adjusted, (Adjusted For 2012-2015 Prior Year Development) 80% 76.9% 75% Accident Year Loss Ratio 70.0% 70% 1H16 67.9% AY LR as 67.

15. Slide 15: Commercial Insurance – Property Casualty Accident Year Loss Ratio, As Adjusted, Dispersion

    Commercial Insurance – Property Casualty Accident Year Loss Ratio, As Adjusted, Dispersion1 2015 Accident Year Loss Ratio, As Adjusted REMEDIATE 91% MAINTAIN AND IMPROVE FY15 AYLR Product Set 3 66% GROW FY15 AYLR 41% FY15 AYLR Product Set 2 Product Set 1 0 Net Premiums Earned ($BN) ~$20 Period Produ

16. Slide 16: Consumer Insurance

    Consumer Insurance AlG

17. Slide 17: Consumer Insurance – Retirement Financial Highlights

    Consumer Insurance – Retirement Financial Highlights ($ in Millions) 2Q15 2Q16  Increases in premiums and deposits and in net flows were primarily due Premiums and deposits1 $6,070 $6,431 to higher sales in Fixed Annuities, Retail Mutual Funds and Group Retirement. Lower surrenders in Group Retirem

18. Slide 18: Consumer Insurance – Retirement – Base Yields and Spreads

    Consumer Insurance – Retirement – Base Yields and Spreads Base Yields1 5.15% 5.08% 4.99% 4.98% 4.92% 4.95% 4.98% 4.95% 4.87% 4.90% 4.90% 4.80% 4.75% 2Q15 3Q15 4Q15 1Q16 2Q16 Cost of Funds2 3.50% 2.94% 2.98% 2.95% 2.94% 2.90% 3.00% 2.50% 2.77% 2.79% 2.79% 2.78% 2.76% 2.00% 2Q15 3Q15 4Q15 1Q16 2Q16 Ba

19. Slide 19: Consumer Insurance – Life Financial Highlights

    Consumer Insurance – Life Financial Highlights ($ in Millions) 2Q15 2Q16 Premiums and deposits $1,249 $1,317  Life premiums and deposits increased 5% YoY, both Premiums 702 762 excluding the effect of FX and on a reported basis, primarily due to growth in International Life and Health. Policy fees

20. Slide 20: Consumer Insurance – Personal Insurance Financial Highlights

    Consumer Insurance – Personal Insurance Financial Highlights ($ in Millions) 2Q15 2Q16 Net premiums written  Improvement in underwriting income reflects: $2,930 $2,922 – Strategic actions to reduce expenses, including Net premiums earned 2,806 2,862 refocused direct marketing activities; – Increase

21. Slide 21: Q&A

    Q&A AlG

22. Slide 22: Appendix

    Appendix AlG

23. Slide 23: Commercial Insurance – Mortgage Guaranty Financial Highlights

    Commercial Insurance – Mortgage Guaranty Financial Highlights ($ in Millions) 2Q15 2Q16  Pre-tax operating income growth reflects improved loss New insurance written1 $15,190 $12,985 experience from lower new delinquencies and lower ultimate frequency as well as higher net premiums earned Net premi

24. Slide 24: Non-GAAP Reconciliations

    Non-GAAP Reconciliations 24

25. Slide 25: Glossary of Non-GAAP Financial Measures

    Glossary of Non-GAAP Financial Measures AIG We use certain of our operating performance measures, as discussed beginning in the next paragraph below, to define our forward-looking financial targets; as described on page 3. Our financial targets are provided based on management’s estimates. The most

26. Slide 26: Glossary of Non-GAAP Financial Measures

    Glossary of Non-GAAP Financial Measures AIG  Return on Equity – After-tax Operating Income Excluding AOCI and Return on Equity – After-tax Operating Income Excluding AOCI and DTA are used to show the rate of return on shareholders’ equity. We believe these measures are useful to investors because t

27. Slide 27: Glossary of Non-GAAP Financial Measures (continued)

    Glossary of Non-GAAP Financial Measures (continued) Commercial Insurance: Institutional Markets; Consumer Insurance: Retirement and Life  Pre-tax operating income is derived by excluding the following items from pre-tax income: – changes in fair value of securities used to hedge guaranteed living b

28. Slide 28: Non-GAAP Reconciliation – Premiums and Deposits, Operating Revenues, and General Operating Expenses

    Non-GAAP Reconciliation – Premiums and Deposits, Operating Revenues, and General Operating Expenses Retirement Life Premiums and Deposits 2Q15 2Q16 2Q15 2Q16 ($ in Millions) Premiums and Deposits $6,070 $6,431 $1,249 $1,317 Deposits (6,046) (6,377) (380) (372) Other 20 (2) (167) (183) Premiums $44 $

29. Slide 29: Non-GAAP Reconciliation – Pre-tax and After-tax Operating Income

    Non-GAAP Reconciliation – Pre-tax and After-tax Operating Income 2Q15 2Q16 Reconciliations of Pre-tax and After-tax Operating Income Tax Tax ($ in millions) Pre-tax Effect After-tax Pre-tax Effect After-tax Operating income, excluding noncontrolling interests $2,868 $985 $1,883 $1,620 $503 $1,117 No

30. Slide 30: Non-GAAP Reconciliation – Book Value Per Common Share and Return On Equity

    Non-GAAP Reconciliation – Book Value Per Common Share and Return On Equity Book Value Per Common Share Dec. 31, 2015 March 31, 2016 June 30, 2016 ($ in Millions, Except Per Share Data) Total AIG shareholders’ equity (a) $89,658 $88,518 $89,946 Less: Accumulated other comprehensive income (AOCI) (2,5

31. Slide 31: Non-GAAP Reconciliation – Accident Year Combined Ratio, as Adjusted

    Non-GAAP Reconciliation – Accident Year Combined Ratio, as Adjusted Property Casualty Mortgage Guaranty Personal Insurance Accident Year Combined Ratio, As Adjusted 2Q15 1Q16 2Q16 FY 2011 FY 2012 FY 2013 FY 2014 FY 2015 1H'16 2Q15 2Q16 2Q15 2Q16 Loss ratio 70.8 68.2 75.0 84.1 80.5 71.9 71.6 86.2 71.

32. Slide 32: Non-GAAP Reconciliation – Normalized ROE, Ex. AOCI & DTA

    Non-GAAP Reconciliation – Normalized ROE, Ex. AOCI & DTA1 2Q15 2Q16 Pre-tax Tax Effect After-tax ROE Pre-tax Tax Effect After-tax ROE ROE – After-tax operating incom e (loss), ex. AOCI & DTA $2,868 $985 $1,893 9.3% $1,620 $503 $1,113 6.7% Adjustm ents to arrive at Norm alized ROE, ex. AOCI & DTA: Ca

33. Slide 33: American International Group, Inc. (AIG) is a leading global insurance organization

    American International Group, Inc. (AIG) is a leading global insurance organization. Founded in 1919, today we provide a wide range of property casualty insurance, life insurance, retirement products, mortgage insurance and other financial services to customers in more than 100 countries and jurisdi

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