American International Group, Inc. — 2023 Form 10-K Summary
Reporting period: Fiscal year ended December 31, 2023. The filing is an annual Form 10-K, not a standalone fourth-quarter report, although it includes fourth-quarter and full-year disclosures.
Business context
AIG is a global insurance organization operating in approximately 190 countries and jurisdictions. Its principal segments are General Insurance, Life and Retirement, and Other Operations. General Insurance includes North America and International operations; Life and Retirement includes Individual Retirement, Group Retirement, Life Insurance and Institutional Markets.
Management characterized 2023 as a year of improved underwriting performance, portfolio repositioning, capital returns and continued separation of the Life and Retirement business through AIG’s ownership in Corebridge Financial.
Key financial metrics
| Metric | 2023 | 2022 | Change |
|---|---|---|---|
| Total revenues | $46.8 billion | $54.5 billion | Down 14% |
| Income from continuing operations | $3.9 billion | $11.3 billion | Down 66% |
| Net income attributable to AIG common shareholders | $3.6 billion | $10.2 billion | Down 65% |
| Diluted earnings per common share | $4.98 | $12.94 | Down 61% |
| Adjusted pre-tax income | $7.4 billion | $5.8 billion | Up 28% |
| Adjusted after-tax income per diluted share | $6.79 | $5.12 | Up 33% |
| Return on common equity | 8.6% | 20.7% | Down 12.1 points |
| Adjusted return on common equity | 9.0% | 7.1% | Up 1.9 points |
| Total AIG shareholders’ equity | $45.4 billion | $41.0 billion | Up 11% |
| Adjusted book value per common share | $76.65 | $75.90 | Up 1% |
The decline in GAAP earnings was driven primarily by a $9.5 billion year-over-year reduction in gains on the Fortitude Re funds-withheld embedded derivative and a $2.4 billion reduction in other net realized gains. These effects were partly offset by higher investment income, stronger General Insurance underwriting and a $643 million net gain on divestitures and other items.
Segment performance and margins
- General Insurance: Adjusted pre-tax income was $5.4 billion, up 21%. Underwriting income was $2.3 billion, up 15%. Net premiums written increased 5% to $26.7 billion. The combined ratio improved to 90.6 from 91.9, while the adjusted accident-year combined ratio improved to 87.7 from 88.7.
- North America General Insurance: Underwriting income rose to $1.2 billion from $648 million, and the combined ratio improved to 89.8 from 94.6.
- International General Insurance: Underwriting income declined 18% to $1.1 billion, primarily because of unfavorable prior-year reserve development, despite an adjusted accident-year combined ratio improvement to 87.5 from 88.2.
- Life and Retirement: Adjusted pre-tax income increased 15% to $3.8 billion. Higher investment income and stronger Individual Retirement results offset pressure in Life Insurance and Group Retirement.
- Other Operations: Adjusted pre-tax loss improved to $1.8 billion from $1.9 billion, although lower alternative investment and consolidated investment-entity income remained a drag.
Cash flow, liquidity, debt and capital
- Net cash provided by operating activities was $6.2 billion, compared with $4.1 billion in 2022.
- Net cash used in investing activities was $7.0 billion, primarily reflecting investment purchases and changes in short-term investments.
- AIG Parent liquidity sources were approximately $12.1 billion at December 31, 2023, including cash, short-term investments and a $4.5 billion revolving credit facility. The full $4.5 billion facility remained available.
- Short-term and long-term debt declined to $19.8 billion from $21.3 billion. Debt of consolidated investment entities declined to $2.6 billion from $5.9 billion and is generally non-recourse to AIG.
- AIG Parent received $3.4 billion of dividends from General Insurance companies and $1.1 billion from Corebridge during 2023.
- AIG repurchased approximately 51 million common shares for $3.0 billion and paid approximately $997 million of common dividends. The common dividend was increased to $0.36 per share for the second through fourth quarters.
- Insurance subsidiaries exceeded applicable minimum statutory capital and surplus requirements, and U.S. domestic insurance subsidiaries exceeded required RBC levels. Approximately $29.2 billion of statutory capital and surplus was restricted from transfer to AIG Parent without regulatory approval.
Material changes versus the prior comparable period
- General Insurance underwriting materially improved, led by North America, favorable rate actions, portfolio management, lower catastrophe losses and better accident-year loss performance.
- Investment income increased to $14.6 billion from $11.8 billion, benefiting from higher interest rates and improved yields on fixed-income investments. Alternative investment income was weaker.
- Net realized gains changed to a $4.6 billion loss from a $7.1 billion gain, largely because of Fortitude Re embedded-derivative volatility and lower derivative and hedge gains.
- Net unrealized gains on investments were $8.5 billion in 2023, compared with $47.7 billion of net unrealized losses in 2022, primarily reflecting narrower credit spreads.
- General Insurance loss reserves declined to $70.4 billion from $75.2 billion, while net loss reserves declined to $40.1 billion from $43.1 billion.
- AIG adopted the long-duration targeted improvements standard, or LDTI, with a transition date of January 1, 2021. The adoption reduced beginning total equity by $1.3 billion, increased beginning retained earnings by $933 million and reduced beginning AOCI by $2.2 billion.
- AIG sold Validus Re for approximately $3.3 billion in cash, including a pre-closing dividend, and sold Crop Risk Services for gross proceeds of $234 million. Corebridge sold Laya Healthcare for $731 million and continued the planned sale of AIG Life.
- AIG sold 159.75 million Corebridge shares in secondary offerings for approximately $2.9 billion of gross proceeds. AIG’s ownership of Corebridge declined to 52.2% at year-end.
Guidance, outlook, commentary and unusual items
The filing does not provide a specific quantitative 2024 earnings or revenue guidance range. Management’s outlook emphasizes profitable growth in General Insurance, continued underwriting discipline, expense and operating-model simplification, investment in technology, management of annuity spreads and guarantees, and continued monetization of AIG’s Corebridge stake.
- Higher interest rates improved new-money yields and Life and Retirement investment spreads, but also increased surrender activity, particularly in fixed annuities and Group Retirement products.
- Inflation, social inflation, labor and supply-chain disruptions and catastrophe activity remain important drivers of claims costs and reserve adequacy.
- Fortitude Re-related accounting creates significant GAAP earnings volatility. Approximately $30.6 billion of AIG reserves were ceded to Fortitude Re at year-end, and the related balances were fully collateralized under the disclosed arrangements.
- Catastrophe modeling estimated worldwide all-peril net probable maximum loss at $2.8 billion for a 1-in-250-year event. Actual results may differ materially from modeled estimates.
- AIG reported no material cybersecurity incidents during the reporting period and concluded that disclosure controls and internal control over financial reporting were effective.
- AIG announced the redemption of all Series A preferred stock on March 15, 2024. The filing also disclosed approximately $706 million of common-stock repurchases from January 1 through February 8, 2024.
Principal risks and contingencies
- Insurance reserve estimates may prove inadequate, particularly for long-tail casualty, financial lines, asbestos, environmental and mass-tort exposures.
- Catastrophes, climate-related events, pandemics, geopolitical conflicts, sanctions and social inflation may increase claims, impair assets or reduce reinsurance availability.
- Interest-rate, credit-spread, equity-market and policyholder-behavior changes can materially affect investment values, annuity guarantees, surrender activity, hedging results and GAAP earnings.
- Commercial real estate, mortgage, structured-security and other investment concentrations may produce credit losses or liquidity pressure.
- AIG depends on dividends and other payments from regulated subsidiaries; regulatory restrictions may limit upstream liquidity.
- Fortitude Re or other reinsurers may fail to perform, although AIG reported substantial collateral supporting reinsurance recoverables.
- Completion, timing and economics of the remaining Corebridge separation and AIG’s eventual sale of its remaining Corebridge stake are uncertain.
- Legal, regulatory, tax, cybersecurity, technology, third-party service-provider and distribution risks may increase expenses or constrain operations.
- AIG reported $14.1 billion of net deferred tax assets after valuation allowance and approximately $22.0 billion of U.S. federal net operating loss carryforwards; realization depends on future taxable income and tax-law limitations.
Most important facts for investors to verify
- Reconcile GAAP earnings with adjusted pre-tax income and assess the recurring versus non-recurring effects of Fortitude Re, hedging, divestitures, tax items and LDTI.
- Review General Insurance reserve development, accident-year loss trends, catastrophe losses and sensitivity of long-tail reserves to inflation and loss-development assumptions.
- Monitor fixed-annuity and Group Retirement surrender rates, net flows, guarantee liabilities and the effect of interest-rate changes on spreads.
- Evaluate the quality, concentration, liquidity and unrealized-loss profile of AIG’s fixed-income, commercial mortgage and alternative investment portfolios.
- Confirm AIG Parent liquidity, debt maturities, credit ratings, collateral requirements and restrictions on dividends from insurance subsidiaries.
- Track the timing, valuation and tax consequences of further Corebridge share sales and the planned AIG Life transaction.
- Review legal proceedings, tax examinations, deferred tax asset realizability, Fortitude Re collateral and potential reinsurance counterparty exposure.