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View Q3 2010 Form 10-Q UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Form 10-Q (Mark One) ፼ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2010 or អ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission File Number 1-8787 American International Group, Inc. (Exact name of registrant as specified in its charter) Delaware 13-2592361 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 180 Maiden Lane, New York, New York 10038 (Address of principal executive offices) (Zip Code) Registrant’s telephone number, including area code: (212) 770-7000 Former name, former address and former fiscal year, if changed since last report: 70 Pine Street, New York, NY 10270 Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ፼ No អ Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ፼ No អ Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of ‘‘large accelerated filer,’’ ‘‘accelerated filer’’ and ‘‘smaller reporting company’’ in Rule 12b-2 of the Exchange Act. Large accelerated filer ፼ Accelerated filer អ Non-accelerated filer អ Smaller reporting company អ (Do not check if a smaller reporting company) Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes អ No ፼ As of October 29, 2010, there were 135,143,176 shares outstanding of the registrant’s common stock. (This page intentionally left blank) 2 American International Group, Inc. and Subsidiaries Table of Contents Description Page Number PART I – FINANCIAL INFORMATION Item 1. Financial Statements (unaudited) 4 Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations 108 Item 3. Quantitative and Qualitative Disclosures About Market Risk 216 Item 4. Controls and Procedures 216 PART II – OTHER INFORMATION Item 1. Legal Proceedings 217 Item 1A. Risk Factors 217 Item 6. Exhibits 217 Signatures 218 3 American International Group, Inc. and Subsidiaries Part I – FINANCIAL INFORMATION ITEM 1. Financial Statements (unaudited) Consolidated Balance Sheet September 30, December 31, (in millions) 2010 2009 Assets: Investments: Fixed maturity securities: Bonds available for sale, at fair value (amortized cost: 2010 – $277,804; 2009 – $364,491) $ 296,198 $ 365,551 Bond trading securities, at fair value 28,849 31,243 Equity securities: Common and preferred stock available for sale, at fair value (cost: 2010 – $7,389; 2009 – $6,464) 11,266 9,522 Common and preferred stock trading, at fair value 5,486 8,318 Mortgage and other loans receivable, net of allowance (portion measured at fair value: 2010 – $178; 2009 – $119) 22,943 27,461 Finance receivables, net of allowance 1,262 20,327 Flight equipment primarily under operating leases, net of accumulated depreciation 39,875 44,091 Other invested assets (portion measured at fair value: 2010 – $11,779; 2009 – $18,888) 36,006 45,235 Securities purchased under agreements to resell, at fair value 905 2,154 Short-term investments (portion measured at fair value: 2010 – $18,182; 2009 – $23,975) 34,462 47,263 Total investments 477,252 601,165 Cash 1,668 4,400 Accrued investment income 4,161 5,152 Premiums and other receivables, net of allowance 17,035 16,549 Reinsurance assets, net of allowance 24,515 22,425 Current and deferred income taxes 53 4,108 Deferred policy acquisition costs 25,300 40,814 Real estate and other fixed assets, net of accumulated depreciation 3,237 4,142 Unrealized gain on swaps, options and forward transactions, at fair value 7,639 9,130 Goodwill 1,447 6,195 Other assets, including prepaid commitment asset of $4,718 in 2010 and $7,099 in 2009 (portion measured at fair value: 2010 – $14; 2009 – $288) 16,607 18,976 Separate account assets, at fair value 58,209 58,150 Assets held for sale 234,842 56,379 Total assets $ 871,965 $ 847,585 See Accompanying Notes to Consolidated Financial Statements. 4 American International Group, Inc. and Subsidiaries Consolidated Balance Sheet (Continued) September 30, December 31, (in millions, except share data) 2010 2009 Liabilities: Liability for unpaid claims and claims adjustment expense $ 86,297 $ 85,386 Unearned premiums 24,633 21,363 Future policy benefits for life and accident and health insurance contracts 78,655 116,001 Policyholder contract deposits (portion measured at fair value: 2010 – $4,763; 2009 – $5,214) 135,545 220,128 Other policyholder funds 13,375 13,252 Commissions, expenses and taxes payable 3,455 4,950 Insurance balances payable 3,380 4,393 Funds held by companies under reinsurance treaties 701 774 Securities sold under agreements to repurchase (portion measured at fair value: 2010 – $3,242; 2009 – $3,221) 3,901 3,505 Securities and spot commodities sold but not yet purchased, at fair value 163 1,030 Unrealized loss on swaps, options and forward transactions, at fair value 6,455 5,403 Trust deposits and deposits due to banks and other depositors (portion measured at fair value: 2010 – $15; 2009 – $15) 936 1,641 Other liabilities 22,308 22,503 Federal Reserve Bank of New York Commercial Paper Funding Facility (portion measured at fair value: 2009 – $2,742) - 4,739 Federal Reserve Bank of New York credit facility 20,470 23,435 Other long-term debt (portion measured at fair value: 2010 – $13,300; 2009 – $13,195) 93,419 113,298 Separate account liabilities 58,209 58,150 Liabilities held for sale 209,323 48,599 Total liabilities 761,225 748,550 Commitments, contingencies and guarantees (see Note 9) Redeemable noncontrolling interests in partially owned consolidated subsidiaries (including $107 and $211 associated with businesses held for sale in 2010 and 2009, respectively) 2,027 959 AIG shareholders’ equity: Preferred stock Series E; $5.00 par value; shares issued: 2010 and 2009 – 400,000, at aggregate liquidation value 41,605 41,605 Series F; $5.00 par value; shares issued: 2010 and 2009 – 300,000, aggregate liquidation value: 2010 – 7,543; 2009 – 5,344 7,378 5,179 Series C; $5.00 par value; shares issued: 2010 and 2009 – 100,000, aggregate liquidation value: 2010 and 2009 – $0.5 23,000 23,000 Common stock, $2.50 par value; 5,000,000,000 shares authorized; shares issued: 2010 – 141,799,335; 2009 – 141,732,263 354 354 Treasury stock, at cost; 2010 – 6,660,908; 2009 – 6,661,356 shares of common stock (873) (874) Additional paid-in capital 5,864 6,358 Accumulated deficit (14,486) (11,491) Accumulated other comprehensive income 18,000 5,693 Total AIG shareholders’ equity 80,842 69,824 Noncontrolling interests: Noncontrolling nonvoting, callable, junior and senior preferred interests held by Federal Reserve Bank of New York 25,955 24,540 Other (including $403 and $2,234 associated with businesses held for sale in 2010 and 2009, respectively) 1,916 3,712 Total noncontrolling interests 27,871 28,252 Total equity 108,713 98,076 Total liabilities and equity $ 871,965 $ 847,585 See Accompanying Notes to Consolidated Financial Statements. 5 American International Group, Inc. and Subsidiaries Consolidated Statement of Income (Loss) Three Months Ended Nine Months Ended September 30, September 30, (dollars in millions, except per share data) 2010 2009 2010 2009 Revenues: Premiums and other considerations $ 12,639 $ 11,695 $ 35,931 $ 39,052 Net investment income 5,231 6,409 15,469 14,044 Net realized capital losses: Total other-than-temporary impairments on available for sale securities (459) (901) (1,397) (5,200) Portion of other-than-temporary impairments on available for sale fixed maturity securities recognized in Accumulated other comprehensive income (345) (57) (595) 304 Net other-than-temporary impairments on available for sale securities recognized in net loss (804) (958) (1,992) (4,896) Other realized capital gains (losses) 143 (897) 510 (77) Total net realized capital losses (661) (1,855) (1,482) (4,973) Unrealized market valuation gains on Capital Markets super senior credit default swap portfolio 152 959 432 1,143 Other income 1,730 2,396 5,264 7,520 Total revenues 19,091 19,604 55,614 56,786 Benefits, claims and expenses: Policyholder benefits and claims incurred 11,175 11,340 30,747 36,600 Policy acquisition and other insurance expenses 3,898 3,533 11,168 11,765 Interest expense 2,158 2,093 5,334 6,680 Restructuring expenses and related asset impairment and other expenses 159 254 339 908 Net loss (gain) on sale of divested businesses (4) 885 (126) 1,192 Other expenses 1,283 2,016 4,354 5,465 Total benefits, claims and expenses 18,669 20,121 51,816 62,610 Income (loss) from continuing operations before income tax expense (benefit) 422 (517) 3,798 (5,824) Income tax expense (benefit) 469 (408) 1,044 (1,510) Income (loss) from continuing operations (47)
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