AIG 2014 Annual Report Download - page 4

Last year, we made progress toward these financial objec-
tives. For the full year, we:
• Grew book value per share, excluding AOCI and DTA, by
12 percent.
• Reduced our net GOE by 3.5 percent through disciplined
cost management.
• Increased shareholders’ equity 6.4 percent to
$106.9 billion.
• Achieved a normalized return on equity, excluding AOCI
and DTA, of 7.4 percent, reflecting nearly 5 percent in
core insurance pre-tax operating income growth and
improved capital efficiencies.
Managing our business to maximize intrinsic value in a sus-
tainable way means resisting the urge to blindly pursue market
share and sales volume, and instead growing the best-quality
business where we are – or have the potential to be – a
market leader. It means not being distracted by normal quar-
terly fluctuations in earnings per share, and instead patiently
working to deliver growth in book value per share. Through
this continued discipline, we will be able to consistently deliver
value to our clients and shareholders.
The core elements of our plan to achieve this are:
• Managing capital in a way that limits our risks while maxi-
mizing returns to shareholders.
• Enhancing our operating model, so we can efficiently
deploy our human and technology resources in ways
that heighten our ability to make the smartest underwriting
decisions while consistently delivering the best results for
our clients.
• Investing in our infrastructure, ensuring that our company
stays competitive in a world of constant technological and
market innovation.
Managing Your Capital Wisely
In 2014, we continued to make progress deploying capital
to enhance long-term returns, while prudently managing our
liquidity and capital risks. We did this by:
• Completing $4.9 billion in share repurchases.
• Strengthening the financial flexibility of AIG Parent with
distributions of $10.4 billion from our insurance companies.
• Reducing our overall debt by approximately $10.5 billion.
• Pursuing strategic, complementary acquisition
opportunities.
Continuing our liability management initiatives, we’ve taken
advantage of opportunities to buy back high-cost, illiquid
debt and replace it with new, more liquid debt at lower yields.
Since early 2012, our credit spreads have narrowed hundreds
of basis points, reflecting the investment community’s acknowl-
edgment of AIG’s improved risk profile. The rating agencies
have also recognized our restructuring and deleveraging
efforts. Moody’s and S&P have our ratings on stable outlook,
and Fitch recently revised our outlook from stable to positive,
citing improvement in our capital position and debt servicing
capabilities.
Managing the company to intrinsic value extends from how
we price the liabilities generated by our businesses to the way
we invest the float generated by premiums. We are therefore
evaluating how to enhance the total return on the investments
in our general account, rather than focusing primarily on net
investment income. While we prioritize organic growth in mak-
ing decisions about where we can most effectively deploy
your capital, we also continuously evaluate acquisition oppor-
tunities across the globe that align with our strategic direction,
provide capabilities that support our business priorities, and
produce attractive financial returns.
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