American International Group, Inc. — Q1 2024 Form 10-Q
Reporting period: Three months ended March 31, 2024. AIG is a global insurance organization operating primarily through General Insurance, Life and Retirement, and Other Operations. Results are unaudited and should be read with the 2023 Form 10-K.
Key Financial Metrics
| Metric | Q1 2024 | Q1 2023 / Prior Period |
|---|---|---|
| Total revenues | $12.578 billion | $10.984 billion |
| Income from continuing operations | $1.600 billion | $(87) million |
| Net income attributable to AIG | $1.216 billion | $30 million |
| Net income attributable to common shareholders | $1.194 billion | $23 million |
| Diluted EPS | $1.74 | $0.03 |
| Adjusted pre-tax income | $1.941 billion | $1.643 billion |
| Adjusted after-tax income per diluted share | $1.77 | $1.63 |
| Operating cash flow | $519 million | $497 million |
| Total assets at period-end | $544.121 billion | $539.306 billion at December 31, 2023 |
| AIG shareholders’ equity | $43.385 billion | $45.351 billion at December 31, 2023 |
| Short- and long-term debt | $19.318 billion | $19.796 billion at December 31, 2023 |
Net income margin was approximately 12.7% based on consolidated net income and total revenues. Adjusted return on common equity was 9.3% annualized, compared with 8.7% in Q1 2023. Book value per common share was $64.66 and adjusted book value per common share was $77.79 at March 31, 2024.
Segment Performance
- General Insurance: Adjusted pre-tax income increased 9% to $1.358 billion. Underwriting income rose 19% to $596 million, and the combined ratio improved to 89.8% from 91.9%. Catastrophe losses declined to $106 million from $264 million.
- Life and Retirement: Adjusted pre-tax income increased 12% to $991 million, supported by higher net investment income and improved base yields. Individual Retirement income rose 17% to $622 million, while Institutional Markets income rose 33% to $112 million. Life Insurance income declined 29% to $58 million.
- Other Operations: Adjusted pre-tax loss improved to $408 million from $491 million, although the loss before consolidation and eliminations was broadly unchanged at $438 million.
Material Changes Versus the Prior Comparable Period
- Total revenues increased 15%, primarily because net investment income increased 11% to $3.904 billion and net realized losses declined to $424 million from $1.909 billion.
- Net investment income excluding Fortitude Re funds withheld assets increased 15% to $3.535 billion, reflecting higher yields on fixed maturity securities, mortgages and other loans.
- The prior-year period included a $1.165 billion loss on the Fortitude Re funds withheld embedded derivative; Q1 2024 recorded a $13 million gain. Fortitude Re-related activities contributed $160 million to net income in Q1 2024 versus a $592 million loss in Q1 2023.
- General Insurance net premiums written declined 35% to $4.512 billion, largely reflecting the sales of AIG Re and Crop Risk Services. Net premiums earned declined 8% to $5.786 billion, but the combined ratio improved.
- Life and Retirement premiums increased 7% to $2.362 billion. Higher interest rates improved investment yields and supported fixed and fixed index annuity sales, but also increased surrenders and withdrawals.
- Unrealized investment losses were $1.214 billion, compared with unrealized gains of $5.005 billion in Q1 2023, primarily due to higher interest rates. Accumulated other comprehensive loss increased to $14.869 billion from $14.037 billion.
- AIG repurchased approximately 23 million common shares for $1.7 billion, redeemed all Series A preferred stock for $500 million, and paid $243 million of common dividends.
Cash Flow, Liquidity, Debt and Capital
- Operating cash flow was $519 million. Investing activities provided $308 million, while financing activities used $1.141 billion, principally because of share repurchases, dividends, preferred stock redemption and debt repayments.
- AIG Parent and applicable intermediate holding companies had approximately $9.6 billion of liquidity sources, including cash, short-term investments and a $4.5 billion committed revolving credit facility. The full $4.5 billion facility remained available at March 31, 2024 and expires in November 2026.
- Corebridge had a separate $2.5 billion facility fully available and $250 million outstanding under a delayed-draw term loan facility.
- Total debt declined to $19.318 billion. AIG general borrowings were $9.845 billion, Corebridge debt was $9.368 billion, and debt of consolidated investment entities was $2.617 billion.
- Management stated that it believes liquidity and capital resources are sufficient for reasonably foreseeable obligations, while noting that catastrophes, market movements, ratings actions and other events could increase funding needs.
Guidance, Outlook, Commentary and Risks
The filing does not provide a specific quantitative earnings or revenue guidance range. Management expects higher reinvestment yields and continued demand for fixed and fixed index annuities, but also expects elevated surrender risk, competition, crediting-rate pressure and market volatility.
- Key risks include interest-rate and equity-market volatility, inflation and social inflation, catastrophe losses, commercial real estate exposure, credit impairments, counterparty and reinsurance risk, foreign-exchange movements, cybersecurity and technology disruptions, regulatory changes, tax uncertainty and litigation.
- AIG had $71.1 billion of reinsurance recoverables at March 31, 2024; approximately 90% were investment grade, 9% were non-investment grade and 1% were unrated. Fortitude Re-related reserves ceded were approximately $29.8 billion.
- Commercial mortgage loans totaled $38.5 billion, with the largest geographic exposures in New York and California. The portfolio’s weighted-average debt-service coverage ratio was 1.9x and weighted-average loan-to-value ratio was 60%.
- Available-for-sale bonds had $25.4 billion of gross unrealized losses, including $22.5 billion on securities held in a loss position for at least 12 months. Management concluded the losses were primarily non-credit related and did not intend or expect to be required to sell the securities before recovery.
- Legal contingencies include the Moriarty litigation and related California cases concerning life-insurance lapse-notice requirements. AIG has accrued its current estimate of probable loss, but states that unresolved litigation could materially affect a particular reporting period.
- AIG expects to be subject to the 15% corporate alternative minimum tax in 2024. Deferred tax asset valuation allowances included $300 million for certain U.S. tax attributes and $1.8 billion for certain unrealized tax capital losses.
- On April 8, 2024, Corebridge completed the sale of AIG Life Limited to Aviva for gross proceeds of £453 million, or approximately $569 million.
Subsequent Capital Allocation Actions
- From April 1 through April 26, 2024, AIG repurchased approximately 7 million additional shares for approximately $558 million.
- On April 30, 2024, the board authorized $10.0 billion of common-stock repurchases, inclusive of approximately $3.9 billion remaining under the prior authorization.
- The board declared a quarterly common dividend of $0.40 per share, an 11% increase from the prior quarterly dividend.
Investor Verification Checklist
- Verify the sustainability of Q1 adjusted pre-tax income after excluding market-sensitive and non-operating items, particularly Fortitude Re gains and market risk benefit movements.
- Monitor General Insurance accident-year loss trends, catastrophe experience, reserve development and the effect of discontinued or divested businesses on premium comparisons.
- Track Life and Retirement surrender rates, net flows, minimum guaranteed crediting rates and the effect of higher rates on spreads and hedging results.
- Review the carrying value, unrealized losses and credit quality of corporate, structured and commercial real estate investments, including the $38.5 billion commercial mortgage portfolio.
- Assess the liquidity impact of planned share repurchases, the $0.40 dividend, debt maturities and potential collateral requirements following ratings changes.
- Follow the Corebridge separation and AIG’s remaining 52.7% ownership, including future monetization plans and related noncontrolling-interest effects.
- Review developments in Moriarty-related litigation, tax examinations, deferred tax asset valuation allowances and other regulatory contingencies.