AIG 2005 Annual Report Download - page 198
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Computation of Ratios of Earnings to Fixed Charges Exhibit 12
Years Ended December 31,
(in millions, except ratios) 2005 2004 2003 2002 2001
Income before income taxes, minority interest and cumulative effect of
accounting changes $15,213 $14,845 $11,907 $ 7,808 $ 5,917
Less – Equity income of less than 50% owned persons (129) 164 146 168 14
Add – Dividends from less than 50% owned persons 146 22 13 13 2
15,488 14,703 11,774 7,653 5,905
Add – Fixed charges 7,663 6,049 5,762 4,893 5,695
Less – Capitalized interest 64 59 52 61 71
Income before income taxes, minority interest, cumulative effect of
accounting changes and fixed charges $23,087 $20,693 $17,484 $12,485 $11,529
Fixed charges:
Interest costs $ 7,464 $ 5,860 $ 5,588 $ 4,725 $ 5,538
Rental expense* 199 189 174 168 157
Total fixed charges $ 7,663 $ 6,049 $ 5,762 $ 4,893 $ 5,695
Ratio of earnings to fixed charges 3.01 3.42 3.03 2.55 2.02
Secondary Ratio
Interest credited to GIC and GIA policy and contract holders $ (4,760) $ (3,674) $ (3,578) $ (2,702) $ (3,196)
Total fixed charges excluding interest credited to GIC and GIA policy and
contract holders $ 2,903 $ 2,375 $ 2,184 $ 2,191 $ 2,499
Secondary ratio of earnings to fixed charges 6.31 7.17 6.37 4.47 3.33
* The proportion deemed representative of the interest factor.
The secondary ratio is disclosed for the convenience of fixed AIG’s insurance subsidiaries, principally SunAmerica Life
income investors and the rating agencies that serve them and Insurance Company and AIG Financial Products Corp. and its
is more comparable to the ratios disclosed by all issuers of fixed subsidiaries, respectively. The proceeds from GICs and GIAs
income securities. The secondary ratio removes interest are invested in a diversified portfolio of securities, primarily
credited to guaranteed investment contract (GIC) investment grade bonds. The assets acquired yield rates greater
policyholders and guaranteed investment agreement (GIA) than the rates on the related policyholders obligation or
contractholders. Such expenses are also removed from earnings contract, with the intent of earning a profit from the spread.
used in this calculation. GICs and GIAs are entered into by
146 AIG m Form 10-K