AIG 2006 Annual Report Download - page 79

American International Group, Inc. and Subsidiaries
Segment Results (h) Includes consolidation and elimination adjustments which increased
revenues and operating income by $296 million and $74 million,
The following table summarizes the operations of each respectively, in 2006.
principal segment for the years ended December 31, (i) Represents income before income taxes, minority interest, and cumula-
tive effect of accounting changes.
2006, 2005 and 2004. See also Note 2 of Notes to
Consolidated Financial Statements. (j) Includes current year catastrophe-related losses of $3.28 billion and
$1.16 billion in 2005 and 2004, respectively. There were no significant
(in millions) 2006 2005 2004 catastrophe-related losses in 2006. Includes additional losses incurred
and net reinstatement premiums related to prior year catastrophes of
Revenues(a):$165 million and $292 million in 2006 and 2005, respectively.
General Insurance(b)(c) $ 49,206 $ 45,174 $41,961 (k) Includes current year catastrophe-related losses from unconsolidated
Life Insurance & subsidiaries of $312 million and $96 million in 2005 and 2004. There
Retirement Services(c)(d) 50,163 47,376 43,402 were no significant catastrophe-related losses in 2006.
Financial Services(e)(f) 8,010 10,525 7,495
General Insurance
Asset Management(g) 5,814 5,325 4,714
Other(h) 1505 94 AIG’s General Insurance operations provide property and casualty
Total $113,194 $108,905 $97,666 products and services throughout the world. The increase in
General Insurance operating income in 2006 compared to 2005
Operating Income(a)(i)(j):
was primarily attributable to an improvement in underwriting
General Insurance(c) $ 10,412 $ 2,315 $ 3,177
Life Insurance & results for DBG, including the absence of catastrophe-related
Retirement Services(c) 10,032 8,904 7,925 losses, which amounted to $2.89 billion in 2005. Operating
Financial Services(f) 524 4,276 2,180 income for 2006 also reflected higher net investment income,
Asset Management 2,346 2,253 2,125 including the effect of the out of period adjustments related to the
Other(h)(k) (1,627) (2,535) (562) accounting for certain interests in unit investment trusts.
Total $ 21,687 $ 15,213 $14,845 Life Insurance & Retirement Services
(a) Includes the effect of hedging activities that did not qualify for hedge
accounting treatment under FAS 133, including the related foreign AIG’s Life Insurance & Retirement Services operations provide
exchange gains and losses. For 2006, 2005 and 2004, respectively, insurance, financial and investment products throughout the world.
the effect was $(1.86) billion, $2.02 billion and $385 million in Foreign operations contributed approximately 68 percent, 59 per-
revenues and $(1.86) billion, $2.02 billion and $671 million in cent and 61 percent of AIG’s Life Insurance & Retirement
operating income. These amounts result primarily from interest rate
and foreign currency derivatives that are hedging available for sale Services operating income in 2006, 2005 and 2004, respectively.
securities and borrowings. Life Insurance & Retirement Services operating income in-
(b) Represents the sum of General Insurance net premiums earned, net creased 13 percent in 2006 compared to 2005 on higher GAAP
investment income and realized capital gains (losses). premiums and an increase in net investment income. Net
(c) Includes the effect of out of period adjustments related to the investment income in 2006 included the effect of an out of period
accounting for certain interests in unit investment trusts. For 2006, the adjustment related to the accounting for certain interests in unit
effect was an increase of $490 million in both revenues and operating
income for General Insurance and an increase of $240 million and investment trusts. Realized capital gains included in revenues and
$169 million in revenues and operating income, respectively, for Life operating income were $88 million in 2006 compared to realized
Insurance & Retirement Services. capital losses of $158 million in 2005. Results for 2006 were
(d) Represents the sum of Life Insurance & Retirement Services GAAP particularly strong in the Foreign Life operations that were helped
premiums, net investment income and realized capital gains (losses).
by increased net investment income, higher realized gains and
Included in realized capital gains (losses) and operating income is the
effect of hedging activities that did not qualify for hedge accounting lower acquisition costs. Domestic Life Insurance & Retirement
treatment under FAS 133 and the application of FAS 52, of $355 mil- Services operating income declined from the prior year on lower
lion, $(495) million and $(140) million for 2006, 2005 and 2004, realized gains, the charge discussed above relating to the
respectively.
Superior National arbitration and the exiting of the financial
(e) Represents interest, lease and finance charges.
institutions credit insurance business.
(f) Includes the effect of hedging activities that did not qualify for hedge
accounting treatment under FAS 133, including the related foreign Financial Services
exchange gains and losses. For 2006, 2005 and 2004, respectively,
the effect was $(1.82) billion, $2.01 billion, and $(122) million in both AIG’s Financial Services subsidiaries engage in diversified activi-
revenues and operating income for Capital Markets. These amounts
result primarily from interest rate and foreign currency derivatives that ties including aircraft and equipment leasing, capital markets,
are economically hedging available for sale securities and borrowings. consumer finance and insurance premium finance.
For 2004, the effect was $(27) million in operating income for Aircraft Financial Services operating income decreased in 2006 com-
Leasing. During 2006 and 2005, Aircraft Leasing derivative gains and
pared to 2005 primarily due to the effects of hedging activities
losses were reported as part of AIG’s Other category, and were not
reported in Aircraft Leasing operating income. that did not qualify for hedge accounting treatment under
(g) Represents net investment income with respect to spread-based FAS 133. AIG is reinstituting hedge accounting in the first quarter
products and management and advisory fees. of 2007 for AIGFP. In addition to the effects of FAS 133,
fluctuations in revenues and operating income from period to
Form 10-K 2006 AIG 29