American International Group, Inc. New · NYSE:AIG
American International Group, Inc. New — American International Group — Q4 2016 Earnings Presentation
51 slides from American International Group, Inc. New's earnings presentation, Feb 15, 2017
Slide 1: Conference Call Presentation Fourth Quarter 2016
© Conference Call Presentation Fourth Quarter 2016 FEBRUARY 15, 2017
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
Slide 3: Introduction
Introduction Accomplishments for 2016 Reinsurance and Adverse Development Cover (ADC) Outlook for 2017 3
Slide 4: 2016 Accomplishments
2016 Accomplishments Reduced Achieved 10% 1, or $1.1 billion, reduction in Operating GOE1 in 2016, surpassing targeted 6% reduction. Operating GOE 2016 actions resulted in $1.3 billion of annual run-rate savings. Total capital return of $13.1 billion in 2016. Additional $1.2 billion of share r
Slide 5: Priorities For 2017
Priorities For 2017 Core Normalized ROE target revised to 9.5% to reflect impact of ADC transaction. Continue expense management to appropriately size fixed-cost base to expected revenues and Expenses improve operating leverage. Reaffirm goal to return $25 billion of capital to shareholders, sub
Slide 6: Adverse Development Cover
Adverse Development Cover Losses above the attachment point are shared 80%/20% between BRK and AIG1 In 2017 and forward, the maximum losses over the current reserves before the ADC limit is exhausted is $9B (the difference between the $25B Reinsured Layer and $16B carried nominal reserve above A
Slide 7: Transformation of Reserve Risk
Transformation of Reserve Risk ADC fundamentally transforms AIG’s reserve risk profile by economically eliminating 80% of the reserve risk from some of the most volatile components of our Commercial reserves up to the limit specified in the ADC Agreement1. Year-End 2016 ADC Non-ADC Covered Reserves
Slide 8: 4Q16 Prior Year Reserve Development
4Q16 Prior Year Reserve Development By Lines of Business1 ($ B) Lines Subject to ADC 0.4 -0.8 0.4 5.6 0.4 5.2 5.2 0.4 4.8 0.4 0.8 1.1 1.8 U.S . Primary U.S . Exce ss U.S . Primary U.S . U.S . U.S . Int'l Liabi lity Comme rci al Leg acy AIG Reserve Pre -tax Income Workers' Casualty Gen eral Liabi lit
Slide 9: Drivers of Prior Year Development
Drivers of Prior Year Development 2016 Reserve Study Results Significant increase in actual claims vs. actuarial estimates. Severity trends in U.S. Auto, Medical Malpractice and Excess Casualty impacting most recent accident years. Loss development factors updated for Primary Workers’ Compensa
Slide 10: Consolidated Operating Financial Highlights
Consolidated Operating Financial Highlights ($ in millions, except per share amounts) 4Q15 4Q16 FY'15 FY'16 Pre-tax operating income (loss): Commercial Insurance Liability and Financial Lines ($2,479) ($4,981) ($661) ($2,649) Property and Special Risks 53 (42) 1,226 (86) Total Commercial Insurance (
Slide 11: 2016 Financial Targets
2016 Financial Targets FY 2016 Objective FY 2016 Comments Target Reduce 6% Reduction 10% 1 Exceeded target by ~$400 million Operating GOE (~$700mm) ($1.1B) C a te g o r y 1 GOE discipline, capital management actions and Consolidated 8.4 – 8.9% 7.5% improved Personal Insurance underwriting Increa
Slide 12: Maintaining Discipline and Focus on Expenses
Maintaining Discipline and Focus on Expenses ($ in millions) General Operating Expenses, Operating Basis – FY’15 vs FY’16 $11,141 $123 $724 $9,952 $342 10% 2015 1 2015 FX Staff Prof Fees, T&E 2016 As reported & GOE of Reductions & and Other As reported 2 1,2 Advisor Group Benefit Rationalization GO
Slide 13: Parent Liquidity
Parent Liquidity Changes in Parent Liquidity ($B) $0.5 $2.2 $0.7 $8.6 $8.4 Includes: Lif e = $1.0B ($3.3) ($0.3) UGC = $0.3B1 Unencumbered Unencumbered Tax Pmts = ($0.6B) Securities Securities $4.5 $6.2 Cash & Cash & S/T Inv. S/T Inv. $2.4 $4.0 Balance at Insurance Cash Proceeds Legacy Share Interes
Slide 14: Legacy
Legacy ($ in billions) Legacy Monetization – Progress to date Legacy is managed in three sub-segments: Legacy Investments, Legacy Life Insurance Run-off Lines, and Legacy Property and YE'15 $2.1B Casualty Run-off Lines. FY'16 Legacy Investments decreased as a result of significant Legacy $3.9B 1
Slide 15: Deferred Tax Assets
Deferred Tax Assets Diversified operating platform allows for utilization of valuable tax attributes As of 12/31/15 As of 12/31/16 Gross Deferred Gross Deferred ($ in billions) Type Utilization/Expiration Attributes Tax Asset Attributes Tax Asset Utilize against Non-Life Companies and up to Net Op
Slide 16: Book Value Per Share Growth
Book Value Per Share Growth 3% $77.88 $75.41 $1.22 $0.32 $2.12 $3.25 $14.03 $14.84 $14.11 $10.70 7% $44.83 $47.87 12/31/2015 12/31/2016 Adjusted BVPS - Core BVPS (ex AOCI) - Legacy DTA AOCI Dividend Growth 16
Slide 17: Revised Core Normalized ROE Target
Revised Core Normalized ROE Target FY’16 Normalized ROE FY’17 Targeted Core Normalized Return On Equity Core: Liability and Financial Lines 8.8% Property and Special Risks (0.2)% 0.9% Total Commercial 6.0% 10.0% Individual Retirement 11.6% (0.9%) 9.5% Group Retirement 11.6% (0.5%) Life Insurance 1.7
Slide 18: Commercial Insurance
© Commercial Insurance Robert S. Schimek Executive Vice President & Chief Executive Officer of Commercial
Slide 19: Commercial Insurance – 2016 Highlights
Commercial Insurance – 2016 Highlights Commercial Insurance made transformational changes during 2016. U.S. Casualty Swiss Re Quota Share Strategic Use of Berkshire Adverse Development Cover (ADC) Reinsurance AIG Property CAT Attachment Point Reduced from $3.0B to $1.5B Property XOL Enhanced
Slide 20: Commercial Insurance AYLR, As Adjusted, Trend
Commercial Insurance AYLR, As Adjusted, Trend Accident Year Loss Ratio, As Adjusted 1 AY LR adjusted as of 4Q'16 AY LR adjusted as of 4Q'15 78.0% 77.1% 75% 72.2% 71.2% 70.8% 69.7% 70.1% 66.7% 67.3% 67.0% 65% 2 64.7% ~62% 3 ~61% 3 ~59% 55% 2011 2012 2013 2014 2015 2016 Q4'17 Exit Run Rate 1) Amounts
Slide 21: Commercial Insurance – Portfolio Optimization Strategy
Commercial Insurance – Portfolio Optimization Strategy ($B) NPW Change AY Loss Ratio, Prior Year FY15 NPW 1 from FY15 to FY162 as adjusted Development FY15 Set $ 4Q’164 $ % FY20153 FY2016 $ 1 Grow 3.1 (0.1) -4.7% 41% 51% 0.0 93% of Total Total 34% Decline Commercial 2a Maintain 7.3 (0.2) -3.3% 61% 6
Slide 22: Commercial Insurance – Select Metrics
Commercial Insurance – Select Metrics Normalized ROE Accident Year Combined Ratio, As Adjusted ~9% 100.8% 8% 95.8% Expense 6% Ratio 30.0% 29.1% Accident Year Loss Ratio 70.8% 1 66.7% Impact of 2016 Reserve 6.1% 3.9% Strengthening FY'15 FY'16 FY'17 Target FY'15 FY'16 Normalized ATOI ($B) Attributed E
Slide 23: Commercial Insurance – Liability and Financial Lines
Commercial Insurance – Liability and Financial Lines ($ in millions) 4Q15 4Q16 FY’15 FY’16 Net premiums written $2,808 $2,160 $12,570 $9,379 4Q and Full Year Drivers: Net premiums earned 2,980 2,400 11,866 10,570 Lower Normalized ROE driven by increase in current accident year Underwriting loss (3
Slide 24: Commercial Insurance – Property and Special Risks
Commercial Insurance – Property and Special Risks ($ in millions) 4Q15 4Q16 FY’15 FY’16 Net premiums written $1,831 $1,542 $8,046 $7,549 4Q and Full Year Drivers: Net premiums earned 1,951 1,792 7,849 7,530 Decrease in Normalized ROE mainly driven by higher attritional Underwriting income (loss) (
Slide 25: Consumer Insurance
© Consumer Insurance Kevin Hogan Executive Vice President & Chief Executive Officer of Consumer
Slide 26: Consumer Insurance – Full Year 2016 Highlights
Consumer Insurance – Full Year 2016 Highlights Consumer Insurance Normalized ROE expanded 190 bps in 2016; actions taken in each module and key geographic area to create value in 2016. Disciplined pricing and product feature actions with focus on value over volume. Top five sales ranking across
Slide 27: Consumer Insurance – Individual Retirement
Consumer Insurance – Individual Retirement ($ in millions) 4Q15 4Q16 FY’15 FY’16 Premiums, deposits and net flows – DOL Fiduciary Rule-related uncertainty adversely impacted industry Variable Annuity sales. Fixed Premiums and deposits $5,109 $3,078 $18,376 $16,062 Annuity sales were lower due to t
Slide 28: Consumer Insurance – Group Retirement
Consumer Insurance – Group Retirement ($ in millions) 4Q15 4Q16 FY’15 FY’16 Premiums and deposits $1,944 $2,056 $6,920 $7,570 For the year, investments to upgrade group plan administration record- Premiums 6 6 22 27 keeping capabilities and digital functionality contributed to significantly Policy
Slide 29: Consumer Insurance – Life Insurance
Consumer Insurance – Life Insurance ($ in millions) 4Q15 4Q16 FY’15 FY’16 Premiums and deposits $879 $911 $3,370 $3,519 Premiums 315 339 1,311 1,407 Premium and deposit growth from international activities. Policy fees 343 340 1,379 1,319 Net investment income 248 263 1,034 1,035 Reserve increas
Slide 30: Consumer Insurance – Personal Insurance
Consumer Insurance – Personal Insurance ($ in millions) 4Q15 4Q16 FY’15 FY’16 Net premiums written $2,729 $2,810 $11,583 $11,465 Net premiums earned 2,745 2,882 11,150 11,418 Significant performance improvement reflects: Underwriting income (88) 89 (257) 400 Effective execution of strategic and po
Slide 31: Q&A and Closing Remarks
AIG]. Q&A and Closing Remarks
Slide 32: Appendix
Tell wees | 7 potas + - Appendix >
Slide 33: Core Normalized ROE Expansion
Core Normalized ROE Expansion Core Normalized Return On Attributed Equity 1.2% 1.0% (0.4%) 7.8% 7.2% (0.8%) (0.4%) FY'15 Capital Operating Alternative Increase in Other FY'16 Improvement 1 Asset Commercial Returns 2016 loss picks 1) Primarily driven by reduced GOE, operating basis. 33
Slide 34: Adjusted Book Value Per Common Share, Incl. Dividend Growth
Adjusted Book Value Per Common Share, Incl. Dividend Growth Adjusted Book Value Per Common Share, Incl. Dividend Growth $1.66 $0.08 $0.59 $3.60 ($1.05) $59.79 $59.26 ($3.86) ($0.49) December 31, Core Legacy Non-operating Utilization of Accretive Reserve Dividends & December 31, 2015 earnings earning
Slide 35: Glossary of Non-GAAP Financial Measures and Non-GAAP Reconciliations
© Glossary of Non-GAAP Financial Measures and Non-GAAP Reconciliations
Slide 36: Glossary of Non-GAAP Financial Measures
Glossary of Non-GAAP Financial Measures Glossary of Non-GAAP We use certain of our operating performance m easures, as discussed beginning in the next paragraph below, to define our forward-looking financial targets. Our financial targets are provided based on management’s estimates. The most direct
Slide 37: Glossary of Non-GAAP Financial Measures
Glossary of Non-GAAP Financial Measures Glossary of Non-GAAP After-tax Operating Income Attributable to Core and Legacy Portfolio is derived by subtracting attributed interest expense and income tax expense from pre-tax operating income. Attributed debt and the related interest expense is calculat
Slide 38: Glossary of Non-GAAP Financial Measures
Glossary of Non-GAAP Financial Measures Glossary of Non-GAAP After-tax Operating Income Attributable to AIG (ATOI) is derived by excluding the tax effected PTOI adjustments described above and the follow ing tax items from net income attributable to AIG: – deferred income tax valuation allow ance
Slide 39: Non-GAAP Reconciliations
Non-GAAP Reconciliations Book Value Per Share and Return on Equity (in millions, e xce pt pe r share data) Twe lve Months Ende d Q uarte rly De ce mbe r 31, Book Value Pe r Share 4Q 16 4Q 15 2016 2015 T otal AIG shareholders' equity (a) $ 76,300 $ 89,658 $ 76,300 $ 89,658 Less: Accumulated other com
Slide 40: Non-GAAP Reconciliations
Non-GAAP Reconciliations Pre-tax and After-tax Operating Income - Consolidated Twe lve Months Ende d (in millions) Q uarte rly De ce mbe r 31, 4Q 16 4Q 15 2016 2015 Pre -tax income (loss) from continuing ope rations $ (3,455) $ (2,932) $ (74) $ 3,281 Adjustme nts to arrive at Pre -tax ope rating inc
Slide 41: Non-GAAP Reconciliations
Non-GAAP Reconciliations General Operating and Other Expenses Twe lve Months Ende d (in millions) Q uarte rly De ce mbe r 31, 4Q 16 4Q 15 2016 2015 Ge ne ral ope rating and othe r e xpe nse s, GAAP basis $ 2,864 $ 3,472 $ 10,989 $ 12,686 Restructuring and other costs (206) (222) (694) (496) Other ex
Slide 42: Non-GAAP Reconciliations
Non-GAAP Reconciliations PTOI, ATOI and Normalized ATOI* Comme rcial Insurance - Liability and Financial Line s Twe lve Months Ende d (in millions) Q uarte rly De ce mbe r 31, 4Q 16 4Q 15 2016 2015 Pre -tax ope rating income (loss) $ (4,981) $ (2,479) $ (2,649) $ (661) Interest expense on attributed
Slide 43: Non-GAAP Reconciliations
Non-GAAP Reconciliations PTOI, ATOI, Normalized ATOI* Total Comme rcial Insurance Twe lve Months Ende d (in millions) Q uarte rly De ce mbe r 31, 4Q 16 4Q 15 2016 2015 Pre -tax ope rating income (loss) $ (5,023) $ (2,426) $ (2,735) $ 565 Interest expense on attributed financial debt 100 80 363 302 O
Slide 44: Non-GAAP Reconciliations
Non-GAAP Reconciliations PTOI, ATOI and Normalized ATOI* Consume r Insurance - Individual Re tire me nt Twe lve Months Ende d (in millions) Q uarte rly De ce mbe r 31, 4Q 16 4Q 15 2016 2015 Pre -tax ope rating income $ 542 $ 397 $ 2,269 $ 1,812 Interest expense on attributed financial debt - 15 37 6
Slide 45: Non-GAAP Reconciliations
Non-GAAP Reconciliations PTOI, ATOI and Normalized ATOI* Consume r Insurance - Life Insurance Twe lve Months Ende d (in millions) Q uarte rly De ce mbe r 31, 4Q 16 4Q 15 2016 2015 Pre -tax ope rating income (loss) (10) 24 (37) (51) Interest expense on attributed financial debt 6 8 31 31 O pe rating
Slide 46: Non-GAAP Reconciliations
Non-GAAP Reconciliations PTOI, ATOI and Normalized ATOI* Total Consume r Insurance Twe lve Months Ende d (in millions) Q uarte rly De ce mbe r 31, 4Q 16 4Q 15 2016 2015 Pre -tax ope rating income (loss) $ 969 $ 622 $ 3,849 $ 2,929 Interest expense on attributed financial debt 30 56 182 236 O pe rati
Slide 47: Non-GAAP Reconciliations
Non-GAAP Reconciliations PTOI, ATOI and Normalized ATOI* Total Core Twe lve Months Ende d (in millions) Q uarte rly De ce mbe r 31, 4Q 16 4Q 15 2016 2015 Pre -tax ope rating income (loss) $ (4,195) $ (1,927) $ 408 $ 2,851 Interest expense (benefit) on attributed financial debt (45) (39) (122) (214)
Slide 48: Non-GAAP Reconciliations
Non-GAAP Reconciliations Accident Year Loss Ratio, as adjusted, and Accident Year Combined Ratio, as adjusted Total Comme rcial Insurance Twe lve Months Ende d Q uarte rly De ce mbe r 31, 4Q 16 4Q 15 2016 2015 Loss ratio 211.5 133.1 104.0 84.5 Catastrophe losses and reinstatement premiums (8.1) (4.3
Slide 49: Non-GAAP Reconciliations
Non-GAAP Reconciliations Accident Year Loss Ratio, as adjusted, and Accident Year Combined Ratio, as adjusted Consume r Pe rsonal Insurance Twe lve Months Ende d Q uarte rly De ce mbe r 31, 4Q 16 4Q 15 2016 2015 Loss ratio 52.7 55.4 54.3 55.2 Catastrophe losses and reinstatement premiums (1.6) (0.3)
Slide 50: Non-GAAP Reconciliations
Non-GAAP Reconciliations Accident Year Combined Ratio, as adjusted Total Comme rcial Insurance 2011 2012 2013 2014 2015 2016 Loss ratio 84.3 81.0 70.3 69.7 84.5 104.0 Catastrophe losses and reinstatement premiums (11.9) (10.9) (3.4) (3.0) (3.0) (6.5) Prior year development net of premium adjustments
Slide 51: Non-GAAP Reconciliations
Non-GAAP Reconciliations Premiums Twe lve Months Ende d (in millions) Q uarte rly De ce mbe r 31, 4Q 16 4Q 15 2016 2015 Consume r Insurance - Individual Re tire me nt: Premiums and deposits $ 3,078 $ 5,109 $ 16,062 $ 18,376 Deposits (3,044) (5,077) (15,898) (18,238) Other - 2 (1) (3) Pre miums $ 34
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