AIG(AIG) - 2024 Q1 - Quarterly Report

Part I – Financial Information Financial Statements AIG reported a significant Q1 2024 turnaround with net income attributable to common shareholders reaching $1.2 billion, a substantial increase from $23 million in Q1 2023, with total assets growing to $544.1 billion Condensed Consolidated Statements of Income (Loss) | Indicator | Three Months Ended March 31, 2024 (in millions) | Three Months Ended March 31, 2023 (in millions) | | :--- | :--- | :--- | | Total Revenues | $12,578 | $10,984 | | Total Benefits, Losses and Expenses | $10,527 | $11,215 | | Income (Loss) from Continuing Operations | $1,600 | $(87) | | Net Income (Loss) Attributable to AIG | $1,216 | $30 | | Net Income (Loss) Attributable to AIG Common Shareholders | $1,194 | $23 | | Diluted EPS from Continuing Operations | $1.74 | $0.03 | Condensed Consolidated Balance Sheet Highlights | Indicator | March 31, 2024 (in millions) | December 31, 2023 (in millions) | | :--- | :--- | :--- | | Total Investments | $322,216 | $322,672 | | Total Assets | $544,121 | $539,306 | | Total Liabilities | $495,011 | $488,005 | | Total AIG Shareholders' Equity | $43,385 | $45,351 | | Total Equity | $49,110 | $51,301 | Condensed Consolidated Statements of Cash Flows | Indicator | Three Months Ended March 31, 2024 (in millions) | Three Months Ended March 31, 2023 (in millions) | | :--- | :--- | :--- | | Net Cash Provided by Operating Activities | $519 | $497 | | Net Cash Provided by (Used in) Investing Activities | $308 | $(1,474) | | Net Cash Provided by (Used in) Financing Activities | $(1,141) | $817 | | Net Decrease in Cash and Restricted Cash | $(343) | $(158) | Note 1. Basis of Presentation Financial statements are prepared under U.S. GAAP, with AIG consolidating Corebridge Financial, Inc. after its AIG Life Limited sale - On April 8, 2024, Corebridge completed the sale of AIG Life Limited to Aviva plc, receiving gross proceeds of £453 million ($569 million)[21] - As of March 31, 2024, AIG holds a 52.7% ownership stake in Corebridge and continues to consolidate Corebridge in its financial statements. Blackstone Inc. holds a 10.1% equity stake in Corebridge[22] Note 3. Segment Information AIG reports across General Insurance, Life and Retirement, and Other Operations, with Q1 2024 adjusted pre-tax income of $1.36 billion for General Insurance and $991 million for Life and Retirement Adjusted Pre-tax Income (Loss) by Segment (in millions) | Segment | Q1 2024 | Q1 2023 | | :--- | :--- | :--- | | General Insurance | $1,358 | $1,248 | | Life and Retirement | $991 | $886 | | Other Operations | $(408) | $(491) | | Total Adjusted Pre-tax Income | $1,941 | $1,643 | Note 4. Held-For-Sale Classification As of March 31, 2024, AIG classified $2.39 billion in assets and $1.81 billion in liabilities as held-for-sale, primarily AIG Life Limited and real estate Assets and Liabilities Held-For-Sale (in millions) | Category | March 31, 2024 | December 31, 2023 | | :--- | :--- | :--- | | Total Assets Held for Sale | $2,388 | $2,268 | | Total Liabilities Held for Sale | $1,813 | $1,775 | Note 5. Fair Value Measurements AIG details $346.2 billion in assets and liabilities measured at fair value, categorized by Level 1, 2, and 3, with a significant portion in Level 2 bonds available for sale Assets and Liabilities Measured at Fair Value on a Recurring Basis (March 31, 2024, in millions) | Category | Level 1 | Level 2 | Level 3 | Total | | :--- | :--- | :--- | :--- | :--- | | Assets | | | | | | Bonds available for sale | $188 | $202,753 | $29,546 | $232,487 | | Separate account assets | $91,859 | $3,314 | $— | $95,173 | | Total Assets (net of netting) | $95,743 | $221,765 | $35,850 | $346,212 | | Liabilities | | | | | | Policyholder contract deposits | $— | $63 | $8,550 | $8,613 | | Market risk benefit liabilities | $— | $— | $5,167 | $5,167 | - Level 3 assets, valued using significant unobservable inputs, totaled $35.9 billion at March 31, 2024, increasing from $33.0 billion at year-end 2023, primarily due to purchases, sales, and unrealized gains[51][52][54] Note 6. Investments AIG's investment portfolio, primarily $232.5 billion in bonds available for sale, generated $3.9 billion in net investment income for Q1 2024, an 11% increase year-over-year, despite $424 million in net realized losses Securities Available for Sale (Fair Value, in millions) | Category | March 31, 2024 | December 31, 2023 | | :--- | :--- | :--- | | Corporate debt | $135,818 | $138,432 | | Mortgage-backed, asset-backed and collateralized | $68,819 | $64,569 | | Non-U.S. governments | $11,968 | $12,453 | | Obligations of states, municipalities | $10,093 | $10,663 | | U.S. government & sponsored entities | $5,789 | $5,616 | | Total | $232,487 | $231,733 | Net Investment Income (in millions) | Component | Q1 2024 | Q1 2023 | | :--- | :--- | :--- | | Available for sale fixed maturity securities | $3,162 | $2,789 | | Interest on mortgage and other loans | $706 | $626 | | Other | $35 | $185 | | Total Net Investment Income | $3,904 | $3,533 | - Net realized losses totaled $424 million in Q1 2024, a significant improvement from the $1.9 billion loss in Q1 2023, largely due to a $1.2 billion swing in net realized gains (losses) on the Fortitude Re funds withheld embedded derivative[111] Note 12. Insurance Liabilities Total insurance liabilities include $70.1 billion for unpaid losses, $59.0 billion for future policy benefits, and $163.7 billion in policyholder contract deposits as of March 31, 2024 Key Insurance Liabilities (in billions) | Liability | March 31, 2024 | December 31, 2023 | | :--- | :--- | :--- | | Unpaid Losses and Loss Adjustment Expenses | $70.1 | $70.4 | | Future Policy Benefits | $59.0 | $58.6 | | Policyholder Contract Deposits | $163.7 | $162.0 | - For the three months ended March 31, 2024, there was no prior year loss reserve development recognized, excluding discount and amortization of deferred gain, compared to a favorable development of $27 million in the same period of 2023[191] Note 16. Equity In Q1 2024, AIG repurchased 23.4 million common shares for $1.7 billion and redeemed $500 million in preferred stock, followed by a new $10.0 billion share repurchase authorization and an 11% dividend increase in April 2024 - In Q1 2024, AIG repurchased 23.4 million common shares, reducing shares outstanding from 688.8 million to 671.0 million[250] - On March 15, 2024, AIG redeemed all 20,000 outstanding shares of its Series A Preferred Stock for an aggregate price of $500 million[247] - On April 30, 2024, the Board of Directors increased the quarterly common stock dividend by 11% to $0.40 per share and authorized a new $10.0 billion share repurchase program[252][253] Note 17. Earnings Per Common Share (EPS) AIG reported Q1 2024 basic EPS of $1.75 and diluted EPS of $1.74, a substantial increase from $0.03 in Q1 2023, reflecting significant net income growth EPS Calculation | Metric | Q1 2024 | Q1 2023 | | :--- | :--- | :--- | | Net Income Attributable to AIG Common Shareholders (millions) | $1,194 | $23 | | Weighted Average Shares Outstanding - Basic (millions) | 682.6 | 738.7 | | Weighted Average Shares Outstanding - Diluted (millions) | 688.0 | 744.1 | | Basic EPS | $1.75 | $0.03 | | Diluted EPS | $1.74 | $0.03 | Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses strong Q1 2024 performance, highlighting increased net income from improved underwriting and investment income, strategic capital management, and the impact of interest rates and currency volatility Executive Summary AIG's Q1 2024 performance, across General Insurance, Life and Retirement, and Other Operations, was influenced by rising interest rates improving yields but increasing annuity surrenders, alongside currency volatility - AIG's operating structure comprises three segments: General Insurance (North America, International), Life and Retirement (Individual, Group, Life, Institutional), and Other Operations (Corporate, asset management, eliminations)[292][293] - The rising interest rate environment has improved overall portfolio yields, with the yield pickup on new investments averaging 150 basis points over dispositions in Q1 2024, though it also increased annuity surrenders[297][300] - The strengthening of the U.S. dollar, particularly a 10% increase against the Japanese Yen year-over-year, impacts reported growth trends for international operations, though the net effect on underwriting results is largely mitigated[304][306] Consolidated Results of Operations AIG's Q1 2024 net income attributable to common shareholders increased by $1.2 billion to $1.19 billion, driven by favorable changes in realized gains and higher net investment income, with adjusted pre-tax income rising to $1.9 billion - The increase in net income was primarily driven by a $1.2 billion favorable change in net realized gains on the Fortitude Re funds withheld embedded derivative, higher net investment income of $371 million, and a $565 million favorable change in the fair value of market risk benefits[310] Reconciliation to Adjusted Book Value Per Common Share | Metric (in millions, except per share) | March 31, 2024 | December 31, 2023 | | :--- | :--- | :--- | | Total AIG Common Shareholders' Equity | $43,385 | $44,866 | | Less: AOCI (adjusted for Fortitude Re) | $(12,965) | $(12,246) | | Less: Deferred Tax Assets | $4,153 | $4,313 | | Adjusted Common Shareholders' Equity | $52,197 | $52,799 | | Book Value Per Common Share | $64.66 | $65.14 | | Adjusted Book Value Per Common Share | $77.79 | $76.65 | Business Segment Operations In Q1 2024, General Insurance adjusted pre-tax income grew to $1.36 billion, Life and Retirement increased to $991 million, and Other Operations reduced its loss to $408 million Adjusted Pre-tax Income by Segment (in millions) | Segment | Q1 2024 | Q1 2023 | | :--- | :--- | :--- | | General Insurance | $1,358 | $1,248 | | Life and Retirement | $991 | $886 | | Other Operations | $(408) | $(491) | | Total | $1,941 | $1,643 | Quantitative and Qualitative Disclosures About Market Risk Market risk disclosures are incorporated by reference from the Enterprise Risk Management section of the Management's Discussion and Analysis - The disclosures regarding market risk are incorporated by reference from the Enterprise Risk Management section of the MD&A[494] Controls and Procedures AIG's management concluded that disclosure controls and procedures were effective as of March 31, 2024, with no material changes to internal control over financial reporting during the quarter - Based on an evaluation as of March 31, 2024, AIG's Chief Executive Officer and Chief Financial Officer concluded that the company's disclosure controls and procedures were effective[495] - No changes occurred during the quarter ended March 31, 2024, that have materially affected, or are reasonably likely to materially affect, the company's internal control over financial reporting[496] Part II – Other Information Legal Proceedings For a detailed discussion of legal proceedings, this section refers to Note 15 of the Condensed Consolidated Financial Statements - For details on legal proceedings, the report refers to Note 15 of the Condensed Consolidated Financial Statements[497] Risk Factors This section directs readers to the risk factors discussed in Part I, Item 1A of the company's 2023 Annual Report on Form 10-K - The report refers to the Risk Factors section of the 2023 Annual Report for a detailed discussion of potential risks[498] Unregistered Sales of Equity Securities and Use of Proceeds In Q1 2024, AIG repurchased 23.4 million common shares for $1.7 billion, with a new $10.0 billion repurchase program authorized on April 30, 2024 Share Repurchases in Q1 2024 | Period | Total Shares Repurchased | Average Price Paid per Share* | | :--- | :--- | :--- | | January 1-31 | 8,017,057 | $68.51 | | February 1-29 | 7,816,140 | $70.02 | | March 1-31 | 7,557,502 | $75.57 | | Total | 23,390,699 | $71.30 | - On April 30, 2024, the Board of Directors authorized a new repurchase program for $10.0 billion of AIG Common Stock, which includes the approximately $3.9 billion remaining from the prior authorization[500]