Investor Presentaiton
Life and Retirement and AIG 2Q20 financial results impacted by
COVID-19 and capital markets; Fortitude transaction accounting
reflected in GAAP results
Life and
Retirement
AIG Consolidated
2Q20
Financial Results
Fortitude Sale
Completed &
Formation of
Syndicate 2019
AIG
ā
"
2Q20 APTI of $881M and adjusted return on attributed common equity* of 13.2% reflect lower deferred policy acquisition costs (DAC)
amortization and lower variable annuities reserves, each resulting from higher equity markets, and higher yield enhancement income,
offset by private equity losses, continued spread compression and elevated mortality from the impact of COVID-19
Variable Annuity product risk management features and hedging program continued to perform as expected; tighter credit spreads in
2Q20 drove a non-economic non-performance risk adjustment for the majority of the ~$1.0B hedging loss under GAAP compared to a
gain of $2.2B in 1Q20
Net loss of $7.9B ($9.15 per diluted share) and pre-tax loss from continuing operations of $9.7B includes:
- $6.7B after-tax loss from the sale and deconsolidation of Fortitude
- $1.8B after-tax net realized capital losses primarily related to mark-to-market losses from variable annuity and interest rate hedges
Adjusted after-tax income* (AATI) of $571M ($0.66/diluted share) and APTI* of $803M reflecting:
strong General Insurance AYCR, as adjusted, improvement in North America and International Commercial Lines and strong
performance in Life and Retirement
$674M of pre-tax CATS in General Insurance including $458M of estimated COVID-19 losses and $126M related to civil unrest;
elevated mortality related to COVID-19 recorded in Life and Retirement
- lower net investment income (NII) including private equity losses, which are generally recorded on a one-quarter lag and therefore
reflect first quarter 2020 market levels
Fortitude sale reduced total AIG shareholders' equity by $4.3B; adjusted common shareholders' equity* by $2.5B
Book value per common share of $71.68, a $3.25 decrease from year end 2019, primarily due to net loss from the sale of Fortitude;
Adjusted tangible book value per common share* of $50.16, a $2.72 per share decrease from year end 2019
On June 2, 2020, AIG completed the sale of 76.6% ownership in Fortitude for $2.2B of proceeds, significantly improving AIG's risk profile
and reducing exposure to long-tail runoff liabilities and related interest rate risk. The Carlyle Group, Inc. ("Carlyle") and T&D United
Capital Co., Ltd own 96.5% of Fortitude and AIG retained a 3.5% ownership interest
Fortitude Re, a wholly owned subsidiary of Fortitude, reinsures the majority of AIG's Legacy Portfolio making it one of AIG's largest
reinsurance counterparties. As these reinsurance transactions are structured as modified coinsurance and loss portfolio transfers with
funds withheld, AIG continues to reflect the invested assets supporting Fortitude Re's obligations in AIG's financial statements. As a
result of the sale, AIG updated its Non-GAAP measures this quarter to adjust for the modified coinsurance and funds withheld assets, as
the associated investment income is owed to Fortitude Re under the reinsurance agreements
AIG formed Syndicate 2019 in May 2020, the largest ever to be launched at Lloyd's. The syndicate, which is managed by Talbot,
exclusively reinsures risks related to AIG's Private Client Group, a recognized market leader in the High Net Worth market
Refers to financial measure not calculated in accordance with generally accepted accounting principles (Non-GAAP); definitions and abbreviations of Non-GAAP
measures and reconciliations to their closest GAAP measures can be found in this presentation under the heading Glossary of Non-GAAP Financial Measures and
Non-GAAP Reconciliations.
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