AMERICAN INTERNATIONAL GROUP INC - 10-Q Quarterly Report

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q


(Mark One)
þ		QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

		For the quarterly period ended March 31, 2004
or

o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

		For the transition period from to

Commission File Number 1-8787

American International Group, Inc.

(Exact name of registrant as specified in its charter)


Delaware		13-2592361
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

70 Pine Street, New York, New York (Address of principal executive offices)		10270 (Zip Code)

Registrant’s telephone number, including area code: (212) 770-7000

Former name, former address and former fiscal year, if changed since last report: None

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ü No

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes ü No

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of March 31, 2004: 2,608,225,354.

American International Group, Inc. and Subsidiaries

CONSOLIDATED BALANCE SHEET

(in millions) (unaudited)


				March 31,		December 31,
				2004		2003

Assets:
	Investments, financial services assets and cash:
		Fixed maturities:
			Bonds available for sale, at market value (amortized cost: 2004 – $301,249; 2003 – $288,160)	$	319,182	$	300,935
			Bonds held to maturity, at amortized cost (market value: 2004 – $10,039; 2003 – $8,173)		9,823		8,037
			Bond trading securities, at market value (cost: 2004 – $1,884; 2003 – $252)		1,966		282
		Equity securities:
			Common stocks (cost: 2004 – $11,482; 2003 – $6,884)		12,529		7,678
			Nonredeemable preferred stocks (cost: 2004 – $1,831; 2003 – $1,743)		2,045		1,906
		Mortgage loans on real estate, net of allowance (2004 – $101; 2003 – $101)			12,218		12,295
		Policy loans			6,825		6,658
		Collateral and guaranteed loans, net of allowance (2004 – $15; 2003 – $15)			2,283		2,296
		Financial services assets:
			Flight equipment primarily under operating leases, net of accumulated depreciation (2004 – $5,484; 2003 – $5,458)		30,807		30,343
			Securities available for sale, at market value (cost: 2004 – $17,940; 2003 – $15,732)		17,930		15,714
			Trading securities, at market value		4,877		3,300
			Spot commodities, at market value		183		250
			Unrealized gain on interest rate and currency swaps, options and forward transactions		21,452		21,599
			Trading assets		1,886		2,548
			Securities purchased under agreements to resell, at contract value		26,351		28,170
			Finance receivables, net of allowance (2004 – $445; 2003 – $453)		18,494		17,609
		Securities lending collateral, at cost (approximates market value)			40,695		30,195
		Other invested assets			19,124		16,787
		Short-term investments, at cost (approximates market value)			16,782		8,914
		Cash			1,920		922

			Total investments, financial services assets and cash		567,372		516,438
	Investment income due and accrued				5,388		4,959
	Premiums and insurance balances receivable, net of allowance (2004 – $257; 2003 – $235)				15,835		14,166
	Reinsurance assets				28,167		27,962
	Deferred policy acquisition costs				26,690		26,398
	Investments in partially owned companies				1,497		1,428
	Real estate and other fixed assets, net of accumulated depreciation (2004 – $4,363; 2003 – $4,247)				5,999		6,006
	Separate and variable accounts				51,962		60,536
	Goodwill				7,683		7,633
	Other assets				13,561		12,820

Total assets				$	724,154	$	678,346

See Accompanying Notes to Financial Statements.

American International Group, Inc. and Subsidiaries

CONSOLIDATED BALANCE SHEET (continued)

(in millions, except share amounts) (unaudited)




			March 31,			December 31,
			2004			2003

Liabilities:
	Reserve for losses and loss expenses		$	57,725		$	56,118
	Reserve for unearned premiums			22,004			20,762
	Future policy benefits for life and accident and health insurance contracts			94,613			92,970
	Policyholders’ contract deposits			193,384			171,989
	Other policyholders’ funds			9,581			9,100
	Reserve for commissions, expenses and taxes			5,009			4,487
	Insurance balances payable			3,352			2,592
	Funds held by companies under reinsurance treaties			4,977			4,664
	Income taxes payable:
		Current		2,778			1,977
		Deferred		7,123			5,778
	Financial services liabilities:
		Borrowings under obligations of guaranteed investment agreements		15,414			15,337
		Securities sold under agreements to repurchase, at contract value		14,956			14,810
		Trading liabilities		4,817			6,153
		Securities and spot commodities sold but not yet purchased, at market value		5,227			5,458
		Unrealized loss on interest rate and currency swaps, options and forward transactions		15,731			15,268
		Trust deposits and deposits due to banks and other depositors		3,516			3,491
		Commercial paper		5,294			4,715
		Notes, bonds, loans and mortgages payable		51,868			50,138
	Commercial paper			2,519			1,223
	Notes, bonds, loans and mortgages payable			5,813			5,865
	Preferred shareholders’ equity in subsidiary companies subject to mandatory redemption			1,682			1,682
	Separate and variable accounts			51,962			60,536
	Minority interest			3,792			3,311
	Securities lending payable			40,695			30,195
	Other liabilities			23,350			18,282

Total liabilities				647,182			606,901

Preferred shareholders’ equity in subsidiary companies				193			192

Shareholders’ equity:
	Common stock, $2.50 par value; 5,000,000,000 shares authorized; shares issued 2004 – 2,751,327,476; 2003 – 2,751,327,476			6,878			6,878
	Additional paid-in capital			567			568
	Retained earnings			63,446			60,960
	Accumulated other comprehensive income (loss)			7,315			4,244
	Treasury stock, at cost; 2004 – 143,102,122; 2003 – 142,880,430 shares of common stock			(1,427	)		(1,397	)

Total shareholders’ equity				76,779			71,253

Total liabilities, preferred shareholders’ equity in subsidiary companies and shareholders’ equity			$	724,154		$	678,346

See Accompanying Notes to Financial Statements.

American International Group, Inc. and Subsidiaries

CONSOLIDATED STATEMENT OF INCOME



(in millions, except per share amounts) (unaudited)

Three Months Ended March 31,			2004			2003

Revenues:
	Premiums and other considerations		$	16,139		$	13,072
	Net investment income			4,720			3,966
	Realized capital gains (losses)			83			(632	)
	Other revenues			2,695			2,521

	Total revenues			23,637			18,927

Benefits and expenses:
	Incurred policy losses and benefits			13,734			11,140
	Insurance acquisition and other operating expenses			5,612			4,863

	Total benefits and expenses			19,346			16,003

Income before income taxes, minority interest and cumulative effect of an accounting change				4,291			2,924

Income taxes (benefits):
	Current			1,473			689
	Deferred			(117	)		187

				1,356			876

Income before minority interest and cumulative effect of an accounting change				2,935			2,048

Minority interest				(98	)		(94	)

Income before cumulative effect of an accounting change				2,837			1,954

Cumulative effect of an accounting change, net of tax				(181	)		–

Net income				2,656			1,954

Earnings per common share:
	Basic
		Income before cumulative effect of an accounting change	$	1.09		$	0.75
		Cumulative effect of an accounting change, net of tax		(0.07	)		–
		Net income		1.02			0.75

	Diluted
		Income before cumulative effect of an accounting change	$	1.08		$	0.74
		Cumulative effect of an accounting change, net of tax		(0.07	)		–
		Net income		1.01			0.74

Cash dividends per common share			$	0.065		$	0.047

Average shares outstanding:
	Basic			2,610			2,610
	Diluted			2,633			2,628

See Accompanying Notes to Financial Statements.

American International Group, Inc. and Subsidiaries

CONSOLIDATED STATEMENT OF CASH FLOWS



(in millions) (unaudited)

Three Months Ended March 31,				2004			2003

Summary:
	Net cash provided by operating activities			$	9,220		$	8,831
	Net cash used in investing activities				(20,265	)		(16,037	)
	Net cash provided by financing activities				11,992			6,642

	Change in cumulative translation adjustments				51			59
	Change in cash				998			(505	)
	Cash at beginning of period				922			1,165

	Cash at end of period			$	1,920		$	660

Cash flows from operating activities:
	Net income			$	2,656		$	1,954

	Adjustments to reconcile net income to net cash provided by operating activities:
		Noncash revenues, expenses, gains and losses included in income:
		Change in:
			General and life insurance reserves		6,528			6,017
			Premiums and insurance balances receivable and payable – net		(910	)		(1,058	)
			Reinsurance assets		(205	)		(1,387	)
			Deferred policy acquisition costs		(1,097	)		(771	)
			Investment income due and accrued		(381	)		(229	)
			Funds held under reinsurance treaties		313			454
			Other policyholders’ funds		481			285
			Current and deferred income taxes – net		684			361
			Reserve for commissions, expenses and taxes		521			(65	)
			Other assets and liabilities – net		252			1,373
			Trading assets and liabilities – net		(674	)		409
			Trading securities, at market value		(1,577	)		(2,027	)
			Spot commodities, at market value		67			(117	)
			Net unrealized (gain) loss on interest rate and currency swaps, options and forward transactions		610			357
			Securities purchased under agreements to resell		1,819			1,461
			Securities sold under agreements to repurchase		146			2,402
			Securities and spot commodities sold but not yet purchased, at market value		(231	)		(1,859	)
		Realized capital (gains) losses			(83	)		632
		Equity in income of partially owned companies and other invested assets			(362	)		(44	)
		Amortization of premium and discount on securities			74			(2	)
		Depreciation expenses, principally flight equipment			487			447
		Provision for finance receivable losses			90			102
		Other – net			12			136

		Total adjustments			6,564			6,877

Net cash provided by operating activities				$	9,220		$	8,831

See Accompanying Notes to Financial Statements.

American International Group, Inc. and Subsidiaries

CONSOLIDATED STATEMENT OF CASH FLOWS (Continued)



(in millions) (unaudited)

Three Months Ended March 31,		2004			2003


Cash flows from investing activities:
Cost of bonds, at market sold	$	30,088		$	32,933
Cost of bonds, at market matured or redeemed		4,122			3,661
Cost of equity securities sold		3,664			1,479
Realized capital gains (losses)		83			(632	)
Purchases of fixed maturities		(48,863	)		(47,224	)
Purchases of equity securities		(4,797	)		(1,483	)
Mortgage, policy and collateral loans granted		(555	)		(516	)
Repayments of mortgage, policy and collateral loans		539			418
Sales of securities available for sale		620			915
Maturities of securities available for sale		324			1,378
Purchases of securities available for sale		(3,100	)		(3,245	)
Sales of flight equipment		1,080			–
Purchases of flight equipment