AIG 2007 Annual Report Download - page 45

AIG 2007 Annual Report 43
Compound
Annual
(in millions) Growth Rate
Years Ended December 31, 2007 2006(a) 2005(a) 2004(a) 2003(a) 2003–2007
General Insurance operations:
Gross premiums written $58,798 $ 56,280 $ 52,725 $ 52,046 $ 46,938 5.8%
Net premiums written 47,067 44,866 41,872 40,623 35,031 7.7
Net premiums earned 45,682 43,451 40,809 38,537 31,306 9.9
Underwriting profit (loss)(b)(c) 4,500 4,657 (2,050) (247) 1,975 22.9
Net investment income(d) 6,132 5,696 4,031 3,196 2,566 24.3
Operating income before net realized capital gains (losses) 10,632 10,353 1,981 2,949 4,541 23.7
Net realized capital gains (losses) (106) 59 334 228 (39) —
General Insurance operating income(b)(c)(d) 10,526 10,412 2,315 3,177 4,502 23.7
Life Insurance & Retirement Services operations:
Premiums and other considerations 33,627 30,766 29,501 28,167 23,568 9.3
Net investment income(d) 22,341 20,024 18,677 15,654 13,278 13.9
Operating income before net realized capital gains (losses) 10,584 10,033 9,123 7,923 6,608 12.5
Net realized capital gains (losses)(e) (2,398) 88 (158) 45 362 —
Life Insurance & Retirement Services operating income(d)(e) 8,186 10,121 8,965 7,968 6,970 4.1
Financial Services operating income (loss), excluding net realized
capital gains (losses)(f)(g) (8,983) 2,338 2,256 2,298 2,189 —
FAS 133gains (losses)211 (1,822) 2,014 (122) (1,010) —
Net realized capital gains (losses) (100) (133) 154 (45) 123 —
Capital Markets other-than-temporary impairments (643) —————
Financial Services operating income (loss)(f)(g) (9,515) 383 4,424 2,131 1,302 —
Asset Management operating income, excluding
net realized capital gains (losses) 2,164 1,663 1,881 1,887 1,275 14.1
Net realized capital gains (losses) (1,000) (125) 82 60 (754) 7.3
Asset Management operating income 1,164 1,538 1,963 1,947 521 22.3
Other Operations before net realized capital gains (losses)(h) (1,731)(1,398) (3,034) (651) (915) —
Other Operations net realized capital gains (losses) (409) (37) 269 78 (473) —
Consolidation and elimination adjustments 722 668 311 195 — —
Income before income taxes, minority interest
and cumulative effect of accounting changes(d)(i) 8,943 21,687 15,213 14,845 11,907 (6.9)
Income taxes 1,455 6,537 4,258 4,407 3,556 —
Income before minority interest and cumulative
effect of accounting changes 7,488 15,150 10,955 10,438 8,351 (2.7)
Minority interest (1,288) (1,136) (478) (455) (252) —
Cumulative effect of accounting changes —34 — (144) 9 —
Net income $ 6,200 $ 14,048 $ 10,477 $ 9,839 $ 8,108 (6.5)%
* Includes reconciliation of certain non-GAAP financial measures in accordance with SEC Regulation G.
(a) Certain reclassifications have been made to prior period amounts to conform to the current period presentation.
(b) Includes current year catastrophe-related losses of $276 million, $2.89 billion and $1.05 billion in 2007, 2005 and 2004, respectively. There were no significant catastrophe-
related losses in 2006 or 2003.
(c) Operating income was reduced by fourth quarter charges of $1.8 billion and $850 million in 2005 and 2004, respectively, resulting from the annual review of General Insurance
reserves. In 2006, 2005 and 2004, changes in estimates for asbestos and environmental reserves were $198 million, $873 million and $850 million, respectively.
(d)In 2006, includes effect of out of period adjustments related to the accounting for certain interests in UCITS. The effect was an increase of $490 million in operating income for
General Insurance and an increase of $169 million in operating income for Life Insurance & Retirement Services.
(e) In 2007, 2006, 2005, 2004 and 2003, includes other-than-temporary impairment charges of $2.8 billion, $641 million, $425 million, $441 million and $1.2 billion, respectively.
(f) These amounts result primarily from interest rate and foreign currency derivatives that are effective economic hedges of investments and borrowings. These gains (losses) in 2007 include
a $380 million out of period charge to reverse net gains recognized on transfers of available-for-sale securities among legal entities consolidated within AIGFP. In 2006, includes an out
of period charge of $223 million related to the remediation of the material weakness in internal control over the accounting for certain derivative transactions under FAS 133. In the first
quarter of 2007, AIGFP began applying hedge accounting for certain of its interest rate swaps and foreign currency forward contracts, hedging its investments and borrowings.
(g) In 2007, includes an unrealized market valuation loss of $11.5 billion on AIGFP’s super senior credit default swap portfolio.
(h)In 2005, includes $1.6 billion of regulatory settlement costs.
(i) In 2007, 2006, 2005, 2004 and 2003, includes other-than-temporary impairment charges of $4.7 billion, $944 million, $598 million, $684 million and $1.5 billion, respectively. Also
includes gains (losses) from hedging activities that did not qualify for hedge accounting treatment under FAS 133, including the related foreign exchange gains and losses. In 2007,
2006, 2005, 2004 and 2003, the effect was $(1.44) billion, $(1.87) billion, $2.02 billion, $671 million and $(1.22) billion in operating income, respectively. These amounts result primarily
from interest rate and foreign currency derivatives that are effective economic hedges of investments and borrowings.
FIVE YEAR SUMMARY OF CONSOLIDATED OPERATIONS
*
American International Group, Inc. and Subsidiaries