UNITED STATES
Form 10-Q
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(Mark One)
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þ
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QUARTERLY REPORT UNDER SECTION 13 OR
15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
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| For the quarterly period ended September 30, 2004 | ||
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o
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TRANSITION REPORT PURSUANT TO SECTION 13
OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
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| For the transition period from to | ||
Commission File Number 1-8787
American International Group, Inc.
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Delaware
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13-2592361 | |
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(State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) |
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70 Pine Street, New York, New York (Address of principal executive offices) |
10270 (Zip Code) |
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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 September 30, 2004: 2,604,570,819.
CONSOLIDATED BALANCE SHEET
(in millions) (unaudited)
| September 30, | December 31, | ||||||||||
| 2004 | 2003 | ||||||||||
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Assets:
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| Investments, financial services assets and cash: | |||||||||||
| Fixed maturities: | |||||||||||
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Bonds available for sale, at market value
(amortized cost: 2004 – $317,392; 2003 –
$288,160)
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$ | 330,735 | $ | 300,935 | |||||||
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Bonds held to maturity, at amortized cost (market
value: 2004 – $15,790; 2003 – $8,173)
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15,415 | 8,037 | |||||||||
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Bond trading securities, at market value
(cost: 2004 – $2,379; 2003 – $252)
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2,399 | 282 | |||||||||
| Equity securities: | |||||||||||
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Common stocks, at market value
(cost: 2004 – $13,348; 2003 – $6,884)
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14,235 | 7,678 | |||||||||
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Preferred stocks, at market value
(cost: 2004 – $1,879; 2003 – $1,743)
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1,915 | 1,906 | |||||||||
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Mortgage loans on real estate, net of allowance
(2004 – $106; 2003 – $101)
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12,833 | 12,295 | |||||||||
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Policy loans
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6,784 | 6,658 | |||||||||
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Collateral and guaranteed loans, net of allowance
(2004 – $17; 2003 – $15)
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2,293 | 2,296 | |||||||||
| Financial services assets: | |||||||||||
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Flight equipment primarily under operating
leases, net of accumulated depreciation (2004 –
$6,104; 2003 – $5,458)
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32,180 | 30,343 | |||||||||
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Securities available for sale, at market value
(cost: 2004 – $19,622; 2003 – $15,732)
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19,630 | 15,714 | |||||||||
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Trading securities, at market value
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3,551 | 3,300 | |||||||||
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Spot commodities, at market value
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133 | 250 | |||||||||
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Unrealized gain on interest rate and currency
swaps, options and forward transactions
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20,793 | 21,599 | |||||||||
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Trading assets
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2,360 | 2,548 | |||||||||
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Securities purchased under agreements to resell,
at contract value
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38,354 | 28,170 | |||||||||
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Finance receivables, net of allowance
(2004 – $462; 2003 – $453)
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21,531 | 17,609 | |||||||||
| Securities lending collateral, at cost (approximates market value) | 53,803 | 30,195 | |||||||||
| Other invested assets | 21,524 | 16,787 | |||||||||
| Short-term investments, at cost (approximates market value) | 14,672 | 8,914 | |||||||||
| Cash | 2,072 | 922 | |||||||||
| Total investments, financial services assets and cash | 617,212 | 516,438 | |||||||||
| Investment income due and accrued | 5,886 | 4,959 | |||||||||
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Premiums and insurance balances receivable, net
of allowance (2004 – $278; 2003 – $235)
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16,934 | 14,166 | |||||||||
| Reinsurance assets | 26,730 | 27,962 | |||||||||
| Deferred policy acquisition costs | 28,656 | 26,398 | |||||||||
| Investments in partially owned companies | 1,359 | 1,428 | |||||||||
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Real estate and other fixed assets, net of
accumulated depreciation (2004 – $4,599;
2003 – $4,247)
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5,999 | 6,006 | |||||||||
| Separate and variable accounts | 52,664 | 60,536 | |||||||||
| Goodwill | 8,407 | 7,633 | |||||||||
| Other assets | 12,573 | 12,820 | |||||||||
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Total assets
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$ | 776,420 | $ | 678,346 | |||||||
1
CONSOLIDATED BALANCE SHEET (continued)
(in millions, except share amounts) (unaudited)
| September 30, | December 31, | |||||||||
| 2004 | 2003 | |||||||||
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Liabilities:
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Reserve for losses and loss expenses
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$ | 62,150 | $ | 56,118 | ||||||
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Reserve for unearned premiums
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23,275 | 20,762 | ||||||||
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Future policy benefits for life and accident and
health insurance contracts
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98,105 | 92,970 | ||||||||
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Policyholders’ contract deposits
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208,497 | 171,989 | ||||||||
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Other policyholders’ funds
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9,704 | 9,100 | ||||||||
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Reserve for commissions, expenses and taxes
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4,584 | 4,487 | ||||||||
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Insurance balances payable
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3,422 | 2,592 | ||||||||
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Funds held by companies under reinsurance treaties
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5,522 | 4,664 | ||||||||
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Income taxes payable:
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Current
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2,709 | 1,977 | ||||||||
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Deferred
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6,564 | 5,778 | ||||||||
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Financial services liabilities:
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Borrowings under obligations of guaranteed
investment agreements
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18,461 | 15,337 | ||||||||
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Securities sold under agreements to repurchase,
at contract value
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19,473 | 14,810 | ||||||||
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Trading liabilities
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2,651 | 6,153 | ||||||||
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Securities and spot commodities sold but not yet
purchased, at market value
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4,895 | 5,458 | ||||||||
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Unrealized loss on interest rate and currency
swaps, options and forward transactions
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18,724 | 15,268 | ||||||||
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Trust deposits and deposits due to banks and
other depositors
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3,610 | 3,491 | ||||||||
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Commercial paper
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6,059 | 4,715 | ||||||||
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Notes, bonds, loans and mortgages payable
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56,925 | 50,138 | ||||||||
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Commercial paper
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3,165 | 1,223 | ||||||||
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Notes, bonds, loans and mortgages payable
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5,599 | 5,865 | ||||||||
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Preferred shareholders’ equity in subsidiary
companies subject to mandatory redemption
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1,488 | 1,682 | ||||||||
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Separate and variable accounts
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52,664 | 60,536 | ||||||||
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Minority interest
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4,159 | 3,311 | ||||||||
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Securities lending payable
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53,803 | 30,195 | ||||||||
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Other liabilities
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21,116 | 18,282 | ||||||||
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Total liabilities
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697,324 | 606,901 | ||||||||
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Preferred shareholders’ equity in
subsidiary companies
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193 | 192 | ||||||||
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Shareholders’ equity:
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Common stock, $2.50 par value;
5,000,000,000 shares authorized; shares issued
2004 – 2,751,327,476; 2003 – 2,751,327,476
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6,878 | 6,878 | ||||||||
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Additional paid-in capital
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575 | 568 | ||||||||
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Retained earnings
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68,456 | 60,960 | ||||||||
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Accumulated other comprehensive income
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4,700 | 4,244 | ||||||||
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Treasury stock, at cost; 2004 –
146,756,657; 2003 – 142,880,430 shares of common
stock
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(1,706 | ) | (1,397 | ) | ||||||
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Total shareholders’ equity
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78,903 | 71,253 | ||||||||
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Total liabilities, preferred
shareholders’ equity in subsidiary companies and
shareholders’ equity
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$ | 776,420 | $ | 678,346 | ||||||
2
CONSOLIDATED STATEMENT OF INCOME
(in millions, except per share amounts) (unaudited)
| Nine Months | Three Months | |||||||||||||||||
| Ended | Ended | |||||||||||||||||
| September 30, | September 30, | |||||||||||||||||
| 2004 | 2003 | 2004 | 2003 | |||||||||||||||
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Revenues:
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Premiums and other considerations
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$ | 50,150 | $ | 40,316 | $ | 17,690 | $ | 13,869 | ||||||||||
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Net investment income
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14,084 | 12,203 | 4,708 | 4,088 | ||||||||||||||
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Realized capital gains (losses)
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(72 | ) | (1,348 | ) | (12 | ) | (359 | ) | ||||||||||
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Other revenues
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8,695 | 7,953 | 3,025 | 2,708 | ||||||||||||||
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Total revenues
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72,857 | 59,124 | 25,411 | 20,306 | ||||||||||||||
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Benefits and expenses:
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Incurred policy losses and benefits
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42,709 | 33,989 | 15,434 | 11,523 | ||||||||||||||
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Insurance acquisition and other operating expenses
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17,510 | 15,277 | 6,019 | 5,279 | ||||||||||||||
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Total benefits and expenses
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60,219 | 49,266 | 21,453 | 16,802 | ||||||||||||||
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Income before income taxes, minority interest
and cumulative effect of an accounting change
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12,638 | 9,858 | 3,958 | 3,504 | ||||||||||||||
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Income taxes:
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Current
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3,207 | 2,384 | 607 | 873 | ||||||||||||||
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Deferred
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830 | 621 | 673 | 196 | ||||||||||||||
| 4,037 | 3,005 | 1,280 | 1,069 | |||||||||||||||
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Income before minority interest and cumulative
effect of an accounting change
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8,601 | 6,853 | 2,678 | 2,435 | ||||||||||||||
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Minority interest
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(390 | ) | (286 | ) | (166 | ) | (98 | ) | ||||||||||
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Income before cumulative effect of an
accounting change
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8,211 | 6,567 | 2,512 | 2,337 | ||||||||||||||
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Cumulative effect of an accounting change, net
of tax
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(181 | ) | – | – | – | |||||||||||||
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Net income
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$ | 8,030 | $ | 6,567 | $ | 2,512 | $ | 2,337 | ||||||||||
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Earnings per common share:
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Basic
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Income before cumulative effect of an accounting
change
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$ | 3.15 | $ | 2.52 | $ | 0.97 | $ | 0.90 | ||||||||||
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Cumulative effect of an accounting change, net of
tax
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(0.07 | ) | – | – | – | |||||||||||||
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Net income
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$ | 3.08 | $ | 2.52 | $ | 0.97 | $ | 0.90 | ||||||||||
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Diluted
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Income before cumulative effect of an accounting
change
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$ | 3.12 | $ | 2.50 | $ | 0.95 | $ | 0.89 | ||||||||||
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Cumulative effect of an accounting change, net of
tax
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(0.07 | ) | – | – | – | |||||||||||||
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Net income
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$ | 3.05 | $ | 2.50 | $ | 0.95 | $ | 0.89 | ||||||||||
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Cash dividends per common share
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$ | 0.205 | $ | 0.159 | $ | 0.075 | $ | 0.065 | ||||||||||
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Average shares outstanding:
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Basic
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2,608 | 2,610 | 2,606 | 2,610 | ||||||||||||||
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Diluted
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2,630 | 2,628 | 2,628 | 2,628 | ||||||||||||||
3
CONSOLIDATED STATEMENT OF CASH FLOWS
(in millions) (unaudited)
| Nine Months Ended September 30, | 2004 | 2003 | |||||||||
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Summary:
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Net cash provided by operating
activities
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$ | 20,432 | $ | 20,557 | |||||||
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Net cash used in investing
activities
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(54,578 | ) | (40,086 | ) | |||||||
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Net cash provided by financing
activities
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35,295 | 19,289 | |||||||||
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Change in cumulative translation
adjustments
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1 | 24 | |||||||||
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Change in cash
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1,150 | (216 | ) | ||||||||
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Cash at beginning of period
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922 | 1,165 | |||||||||
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Cash at end of period
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$ | 2,072 | $ | 949 | |||||||
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Cash flows from operating
activities:
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Net income
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$ | 8,030 | $ | 6,567 | |||||||
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Adjustments to reconcile net income to net
cash provided by operating activities:
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Noncash revenues, expenses, gains and losses
included in income:
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Change in:
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General and life insurance reserves
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16,288 | 16,843 | |||||||||
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Premiums and insurance balances receivable and
payable – net
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(1,939 | ) | (1,795 | ) | |||||||
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Reinsurance assets
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1,232 | (2,962 | ) | ||||||||
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Deferred policy acquisition costs
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(2,366 | ) | (2,128 | ) | |||||||
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Investment income due and accrued
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(880 | ) | (546 | ) | |||||||
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Funds held under reinsurance treaties
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858 | 792 | |||||||||
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Other policyholders’ funds
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604 | 380 | |||||||||
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Current and deferred income taxes – net
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1,562 | 1,513 | |||||||||
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Reserve for commissions, expenses and taxes
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96 | 132 | |||||||||
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Other assets and liabilities – net
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1,417 | (472 | ) | ||||||||
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Trading assets and liabilities – net
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(3,314 | ) | 959 | ||||||||
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Trading securities, at market value
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(251 | ) | 877 | ||||||||
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Spot commodities, at market value
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117 | 165 | |||||||||
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Net unrealized (gain) loss on interest rate and
currency swaps, options and forward transactions
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4,262 | (147 | ) | ||||||||
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Securities purchased under agreements to resell
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(10,184 | ) | 2,310 | ||||||||
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Securities sold under agreements to repurchase
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4,663 | 2,050 | |||||||||
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Securities and spot commodities sold but not yet
purchased, at market value
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(563 | ) | (6,524 | ) | |||||||
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Realized capital (gains) losses
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72 | 1,348 | |||||||||
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Equity in income of partially owned companies and
other invested assets
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(935 | ) | (389 | ) | |||||||