由於Corebridge解除合併,我們不再提供人壽和退休部門,也不再包括資產管理和Corebridge Life Holdings,Inc.。其他業務部門內的利息和一般費用。其他業務的歷史業績已進行修訂以反映這些變化。之前報告的一般保險部門業績並未受到Corebridge解除合併的影響。 有關人壽與退休業務分離的更多詳細信息,請參閱注4。
其他業務主要包括資產的收入和費用,包括AIG母公司和其他公司子公司持有的AIG對Corebridge的所有權、與稅務屬性相關的遞延所得稅資產、企業費用和公司間沖銷、我們合併投資實體的業績、決選中的一般保險投資組合以及我們轉讓給Fortitude Reinsurance Company Ltd的遺留保險產品的歷史業績。(堅韌的Re)。
The loss recognized in the second quarter of 2024 for the deconsolidation of Corebridge includes (i) $8.5 billion of retained investment in Corebridge (Corebridge’s quoted stock price is used for fair value measurement, which is classified as level 1 in the fair value hierarchy), (ii) $817 million of certain other investments (considered level 3 in the fair value hierarchy) which are measured based on valuation techniques (i.e., third party appraisals) that use significant inputs (i.e., terminal capital rate and discount rate), and (iii) $378 million of an unsettled receivable. For details on fair value hierarchy, see Note 5.The loss on deconsolidation of Corebridge is calculated as follows:
(in millions)
Corebridge retained investment (48.4% @28.90 per share at June 9, 2024)
$
8,502
Retained interest in certain investment entities and other assets
1,195
Net fair value of assets retained
9,697
Corebridge book value at June 9, 2024
12,392
Less: Noncontrolling interests
5,732
Corebridge book value excluding noncontrolling interest
6,660
Gain on sale pre-tax
3,037
Tax expense
507
Subtotal: After tax gain
2,530
Reclassification adjustment of Accumulated other comprehensive loss at June 9, 2024
(7,214)
Loss on sale of Corebridge - after-tax
$
(4,684)
5. Fair Value Measurements
FAIR VALUE MEASUREMENTS ON A RECURRING BASIS
Assets and liabilities recorded at fair value in the Condensed Consolidated Balance Sheets are measured and classified in accordance with a fair value hierarchy consisting of three “levels” based on the observability of valuation inputs:
•Level 1: Fair value measurements based on quoted prices (unadjusted) in active markets that we have the ability to access for identical assets or liabilities. Market price data generally is obtained from exchange or dealer markets. We do not adjust the quoted price for such instruments.
•Level 2: Fair value measurements based on inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly. Level 2 inputs include quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, and inputs other than quoted prices that are observable for the asset or liability, such as interest rates and yield curves that are observable at commonly quoted intervals.
•Level 3: Fair value measurements based on valuation techniques that use significant inputs that are unobservable. Both observable and unobservable inputs may be used to determine the fair values of positions classified in Level 3. The circumstances for using these measurements include those in which there is little, if any, market activity for the asset or liability. Therefore, we must make certain assumptions about the inputs a hypothetical market participant would use to value that asset or liability.
In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, the level in the fair value hierarchy within which the fair value measurement in its entirety falls is determined based on the lowest level input that is significant to the fair value measurement in its entirety.
ITEM 1 | Notes to Condensed Consolidated Financial Statements (unaudited) | 5. Fair Value Measurements
The following table presents the gross components of purchases, sales, issuances and settlements, net, shown above, for the three and nine months ended September 30, 2024 and 2023 related to Level 3 assets and liabilities in the Condensed Consolidated Balance Sheets:
(in millions)
Purchases
Sales
Issuances
and
Settlements(a)
Purchases, Sales,
Issuances and
Settlements, Net(a)
Three Months Ended September 30, 2024
Assets:
Bonds available for sale:
Corporate debt
$
10
$
(4)
$
(2)
$
4
RMBS
87
(45)
(65)
(23)
CMBS
—
(12)
—
(12)
CLO/ABS
270
(563)
(21)
(314)
Total bonds available for sale
367
(624)
(88)
(345)
Other bond securities:
RMBS
—
—
(2)
(2)
CLO/ABS
—
—
(1)
(1)
Total other bond securities
—
—
(3)
(3)
Equity securities
2
—
—
2
Other invested assets
17
—
(12)
5
Other assets
—
—
(1)
(1)
Total
$
386
$
(624)
$
(104)
$
(342)
Liabilities:
Derivative liabilities, net
$
—
$
—
$
2
$
2
Fortitude Re funds withheld payable
—
—
(3)
(3)
Total
$
—
$
—
$
(1)
$
(1)
Three Months Ended September 30, 2023
Assets:
Bonds available for sale:
Obligations of states, municipalities and political subdivisions
Investments held in escrow accounts or otherwise subject to restriction as to their use were $164 million and $164 million, comprised of bonds available for sale and short-term investments at September 30, 2024 and December 31, 2023, respectively.
Reinsurance transactions between AIG and Fortitude Re were structured as modified coinsurance (modco) and loss portfolio transfer arrangements with funds withheld.
7. Lending Activities
The following table presents the composition of Mortgage and other loans receivable, net:
(in millions)
September 30, 2024
December 31, 2023
Commercial mortgages(a)
$
3,696
$
3,836
Life insurance policy loans
6
7
Commercial loans, other loans and notes receivable(b)
751
738
Total mortgage and other loans receivable(c)
4,453
4,581
Allowance for credit losses(c)(d)
(167)
(140)
Mortgage and other loans receivable, net(c)
$
4,286
$
4,441
(a)Commercial mortgages primarily represent loans for apartments, offices and retail properties, with exposures in California and New York representing the largest geographic concentrations (aggregating approximately 12 percent and 10 percent, respectively, at September 30, 2024 and 13 percent and 10 percent, respectively, at December 31, 2023).
(b)There were no loans that were held-for-sale carried at lower of cost or market as of September 30, 2024 and December 31, 2023.
(c)Excludes $37.6 billion at both September 30, 2024 and December 31, 2023 of loans receivable from AIG Financial Products Corp. (AIGFP), which has a full allowance for credit losses, recognized upon the deconsolidation of AIGFP. For additional information, see Note 1 to the Consolidated Financial Statements in the 2023 Annual Report.
(d)Does not include allowance for credit losses of $5 million and $9 million, respectively, at September 30, 2024 and December 31, 2023, in relation to off-balance-sheet commitments to fund commercial mortgage loans, which is recorded in Other liabilities.
Interest income is not accrued when payment of contractual principal and interest is not expected. Any cash received on impaired loans is generally recorded as a reduction of the current carrying amount of the loan. Accrual of interest income is generally resumed when delinquent contractual principal and interest is repaid or when a portion of the delinquent contractual payments are made and the ongoing required contractual payments have been made for an appropriate period. As of September 30, 2024 and December 31, 2023, $296 million and $73 million, respectively, of commercial mortgage loans were placed on nonaccrual status.
Accrued interest is presented separately and is included in Accrued investment income on the Condensed Consolidated Balance Sheets. As of September 30, 2024 and December 31, 2023, accrued interest receivable was $21 million and $21 million, respectively, associated with commercial mortgage loans.
A significant majority of commercial mortgages in the portfolio are non-recourse loans and, accordingly, the only guarantees are for specific items that are exceptions to the non-recourse provisions. It is therefore extremely rare for us to have cause to enforce the provisions of a guarantee on a commercial real estate or mortgage loan.
Nonperforming loans are generally those loans where payment of contractual principal or interest is more than 90 days past due. Nonperforming loans were not significant for any of the periods presented.
The following table presents debt service coverage ratios(a) for commercial mortgages by year of vintage:
September 30, 2024
2024
2023
2022
2021
2020
Prior
Total
(in millions)
>1.2X
$
34
$
500
$
246
$
559
$
164
$
1,766
$
3,269
1.00 - 1.20X
20
10
15
14
—
80
139
<1.00X
—
—
—
32
—
256
288
Total commercial mortgages
$
54
$
510
$
261
$
605
$
164
$
2,102
$
3,696
December 31, 2023
2023
2022
2021
2020
2019
Prior
Total
(in millions)
>1.2X
$
398
$
167
$
394
$
135
$
156
$
1,784
$
3,034
1.00 - 1.20X
5
71
254
56
21
298
705
<1.00X
—
11
—
—
—
86
97
Total commercial mortgages
$
403
$
249
$
648
$
191
$
177
$
2,168
$
3,836
The following table presents loan-to-value ratios(b) for commercial mortgages by year of vintage:
September 30, 2024
2024
2023
2022
2021
2020
Prior
Total
(in millions)
Less than 65%
$
34
$
411
$
169
$
493
$
156
$
1,368
$
2,631
65% to 75%
13
42
48
77
—
302
482
76% to 80%
—
—
—
35
—
113
148
Greater than 80%
7
57
44
—
8
319
435
Total commercial mortgages
$
54
$
510
$
261
$
605
$
164
$
2,102
$
3,696
December 31, 2023
2023
2022
2021
2020
2019
Prior
Total
(in millions)
Less than 65%
$
359
$
159
$
492
$
177
$
156
$
1,385
$
2,728
65% to 75%
10
15
137
—
21
367
550
76% to 80%
—
32
10
—
—
—
42
Greater than 80%
34
43
9
14
—
416
516
Total commercial mortgages
$
403
$
249
$
648
$
191
$
177
$
2,168
$
3,836
(a)The debt service coverage ratio compares a property’s net operating income to its debt service payments, including principal and interest. Our weighted average debt service coverage ratio was 1.9x and 1.8x at September 30, 2024 and December 31, 2023, respectively. The debt service coverage ratios are updated when additional relevant information becomes available.
(b)The loan-to-value ratio compares the current unpaid principal balance of the loan to the estimated fair value of the underlying property collateralizing the loan. Our weighted average loan-to-value ratio was 64 percent and 62 percent at September 30, 2024 and December 31, 2023, respectively. The loan-to-value ratios have been updated within the last three months to reflect the current carrying values of the loans. We update the valuations of collateral properties by obtaining independent appraisals, generally at least once per year.
The following table presents supplementary credit quality information related to commercial mortgages:
METHODOLOGY USED TO ESTIMATE THE ALLOWANCE FOR CREDIT LOSSES
For a discussion of our accounting policy for evaluating Mortgage and other loans receivable for impairment, see Note 7 to the Consolidated Financial Statements in the 2023 Annual Report.
The following table presents a rollforward of the changes in the allowance for credit losses on Mortgage and other loans receivable(a)(b):
Three Months Ended September 30,
2024
2023
(in millions)
Commercial Mortgages
Other Loans
Total
Commercial Mortgages
Other Loans
Total
Allowance, beginning of period
$
162
$
1
$
163
$
116
$
3
$
119
Addition to (release of) allowance for loan losses
3
1
4
17
—
17
Allowance, end of period
$
165
$
2
$
167
$
133
$
3
$
136
Nine Months Ended September 30,
2024
2023
(in millions)
Commercial Mortgages
Other Loans
Total
Commercial Mortgages
Other Loans
Total
Allowance, beginning of year
$
138
$
2
$
140
$
109
$
8
$
117
Loans charged off
—
—
—
(2)
—
(2)
Net charge-offs
—
—
—
(2)
—
(2)
Addition to (release of) allowance for loan losses
27
—
27
26
(5)
21
Allowance, end of period
$
165
$
2
$
167
$
133
$
3
$
136
(a)Does not include allowance for credit losses of $5 million and $9 million at September 30, 2024 and 2023, respectively, in relation to off-balance-sheet commitments to fund commercial mortgage loans, which is recorded in Other liabilities.
(b)Excludes $37.6 billion of loan receivable from AIGFP, which has a full allowance for credit losses, recognized upon the deconsolidation of AIGFP. For additional information, see Note 1 to the Consolidated Financial Statements in the 2023 Annual Report.
Our expectations and models used to estimate the allowance for losses on commercial mortgage loans are regularly updated to reflect the current economic environment.
LOAN MODIFICATIONS
The allowance for credit losses incorporates an estimate of lifetime expected credit losses and is recorded on each asset upon asset origination or acquisition. The starting point for the estimate of the allowance for credit losses is historical loss information, which includes losses from modifications of receivables to borrowers experiencing financial difficulty. We use a probability of default/loss given default model to determine the allowance for credit losses for our commercial mortgage loans. An assessment of whether a borrower is experiencing financial difficulty is made on the date of a modification.
Because the effect of most modifications made to borrowers experiencing financial difficulty is already included in the allowance for credit losses utilizing the measurement methodologies used to estimate the allowance, a change to the allowance for credit losses is generally not recorded upon modification.
When modifications are executed, they often will be in the form of principal forgiveness, term extensions, interest rate reductions, or some combination of any of these concessions. When principal is forgiven, the amortized cost basis of the asset is written off against the allowance for credit losses. The amount of the principal forgiveness is deemed to be uncollectible; therefore, that portion of the loan is written off, resulting in a reduction of the amortized cost basis and a corresponding adjustment to the allowance for credit losses.
We assess whether a borrower is experiencing financial difficulty based on a variety of factors, including the borrower’s current default on any of its outstanding debt, the probability of a default on any of its debt in the foreseeable future without the modification, the insufficiency of the borrower’s forecasted cash flows to service any of its outstanding debt (including both principal and interest), and the borrower’s inability to access alternative third party financing at an interest rate that would be reflective of current market conditions for a non-troubled debtor.
During the nine months ended September 30, 2024, commercial mortgage loans with an amortized cost of $5 million supporting the funds withheld arrangements with Fortitude Re were granted term extensions.
There were no loans that had defaulted during the nine months ended September 30, 2024 and 2023, that had been previously modified with borrowers experiencing financial difficulties.
AIG closely monitors the performance of the loans modified to borrowers experiencing financial difficulty to understand the effectiveness of its modification efforts. All loans with borrowers experiencing financial difficulty that have been modified in the 12 months prior to September 30, 2024 are current and performing in conjunction with their modified terms.
8. Reinsurance
FORTITUDE RE
Fortitude Re is the reinsurer of the majority of AIG’s run-off operations. The reinsurance transactions are structured as modco and loss portfolio transfer arrangements with funds withheld (funds withheld). In modco and funds withheld arrangements, the investments supporting the reinsurance agreements, and which reflect the majority of the consideration that would be paid to the reinsurer for entering into the transaction, are withheld by, and therefore continue to reside on the balance sheet of, the ceding company (i.e., AIG) thereby creating an obligation for the ceding company to pay the reinsurer (i.e., Fortitude Re) at a later date. Additionally, as AIG maintains ownership of these investments, AIG will maintain its existing accounting for these assets (e.g., the changes in fair value of available for sale securities will be recognized within OCI). AIG has established a funds withheld payable to Fortitude Re while simultaneously establishing a reinsurance asset representing reserves for the insurance coverage that Fortitude Re has assumed. The funds withheld payable contains an embedded derivative and changes in fair value of the embedded derivative related to the funds withheld payable are recognized in earnings through Net realized gains (losses). This embedded derivative is considered a total return swap with contractual returns that are attributable to various assets and liabilities associated with these reinsurance agreements.
As of September 30, 2024, $3.5 billionof reserves related to business written by multiple wholly-owned AIG subsidiaries, had been ceded to Fortitude Re under these reinsurance transactions.
There is a diverse pool of assets supporting the funds withheld arrangements with Fortitude Re. The following summarizes the composition of the pool of assets:
September 30, 2024
December 31, 2023
(in millions)
Carrying Value
Fair Value
Carrying Value
Fair Value
Corresponding Accounting Policy
Fixed maturity securities - available for sale(a)
$
2,148
$
2,148
$
2,180
$
2,180
Fair value through other comprehensive income (loss)
Fixed maturity securities - fair value option
749
749
655
655
Fair value through net investment income
Commercial mortgage loans
475
456
543
528
Amortized cost
Short-term investments
21
21
46
46
Fair value through net investment income
Funds withheld investment assets
3,393
3,374
3,424
3,409
Derivative assets, net(b)
—
—
—
—
Fair value through net realized gains (losses)
Other(c)
103
103
118
118
Amortized cost
Total
$
3,496
$
3,477
$
3,542
$
3,527
(a)The change in the net unrealized gains (losses) on available for sale securities related to the Fortitude Re funds withheld assets was $31 million ($25 million after-tax) and $(60) million ($(47) million after-tax), respectively for the nine months ended September 30, 2024 and 2023.
(b)The derivative assets and liabilities have been presented net of cash collateral. The derivative assets and liabilities supporting the Fortitude Re funds withheld arrangements had a fair market value of $3 million and $27 million, respectively, as of September 30, 2024. The derivative assets and liabilities supporting the Fortitude Re funds withheld arrangements had a fair market value of $1 million and $28 million, respectively, as of December 31, 2023. These derivative assets and liabilities are fully collateralized either by cash or securities.
(c)Primarily comprised of Cash and Accrued investment income.
The impact of the funds withheld arrangements with Fortitude Re was as follows:
Three Months Ended September 30,
Nine Months Ended September 30,
(in millions)
2024
2023
2024
2023
Net investment income - Fortitude Re funds withheld assets
$
51
$
29
$
123
$
106
Net realized gains (losses) on Fortitude Re funds withheld assets:
Net realized losses - Fortitude Re funds withheld assets
(18)
(3)
(38)
(64)
Net realized gains (losses) - Fortitude Re funds withheld embedded derivative
(157)
57
(158)
(25)
Net realized gains (losses) on Fortitude Re funds withheld assets
(175)
54
(196)
(89)
Income (loss) from continuing operations before income tax expense (benefit)
(124)
83
(73)
17
Income tax expense (benefit)(a)
(26)
18
(15)
4
Net income (loss)
(98)
65
(58)
13
Change in unrealized appreciation (depreciation) of all other investments(a)
67
(63)
25
(47)
Comprehensive income (loss)
$
(31)
$
2
$
(33)
$
(34)
(a)The income tax expense (benefit) and the tax impact in Accumulated other comprehensive income (loss) (AOCI) was computed using AIG’s U.S. statutory tax rate of 21 percent.
Various assets supporting the Fortitude Re funds withheld arrangements are reported at amortized cost, and as such, changes in the fair value of these assets are not reflected in the financial statements. However, changes in the fair value of these assets are included in the embedded derivative in the Fortitude Re funds withheld arrangement and the appreciation (depreciation) of the asset is the primary driver of the comprehensive income (loss) reflected above.
REINSURANCE – CREDIT LOSSES
The estimation of reinsurance recoverables involves a significant amount of judgment, particularly for latent exposures, such as asbestos, due to their long-tail nature. We assess the collectability of reinsurance recoverable balances in each reporting period, through either historical trends of disputes and credit events or financial analysis of the credit quality of the reinsurer. We record adjustments to reflect the results of these assessments through an allowance for credit losses and disputes on uncollectible reinsurance that reduces the carrying amount of reinsurance and deposit accounting assets on the consolidated balance sheets (collectively, reinsurance recoverables). This estimate requires significant judgment for which key considerations include:
•paid and unpaid amounts recoverable;
•whether the balance is in dispute or subject to legal collection;
•the relative financial health of the reinsurer as classified by the Obligor Risk Ratings (ORRs) we assign to each reinsurer based upon our financial reviews; reinsurers that are financially troubled (i.e., in run-off, have voluntarily or involuntarily been placed in receivership, are insolvent, are in the process of liquidation or otherwise subject to formal or informal regulatory restriction) are assigned ORRs that will generate a significant allowance; and
•whether collateral and collateral arrangements exist.
An estimate of the reinsurance recoverable's lifetime expected credit losses is established utilizing a probability of default and loss given default method, which reflects the reinsurer’s ORR. The allowance for credit losses excludes disputed amounts. An allowance for disputes is established for a reinsurance recoverable using the losses incurred model for contingencies.
The total reinsurance recoverables as of September 30, 2024 were $42.8 billion. As of that date, utilizing AIG’s ORRs, (i) approximately 82 percent of the reinsurance recoverables were investment grade; (ii) approximately 15 percent of the reinsurance recoverables were non-investment grade and (iii) approximately 3 percent of the reinsurance recoverables related to entities that were not rated by AIG.
The total reinsurance recoverables as of December 31, 2023 were $41.4 billion. As of that date, utilizing AIG’s ORRs, (i) approximately 83 percent of the reinsurance recoverables were investment grade; (ii) approximately 15 percent of the reinsurance recoverables were non-investment grade; (iii) approximately 2 percent of the reinsurance recoverables related to entities that were not rated by AIG.
As of September 30, 2024 and December 31, 2023, approximately 81 percent and 85 percent, respectively, of our non-investment grade reinsurance exposure related to captive insurers. These arrangements are typically collateralized by letters of credit, funds withheld or trust agreements.
The following table presents a rollforward of the reinsurance recoverable allowance:
Three Months Ended September 30,
Nine Months Ended September 30,
(in millions)
2024
2023
2024
2023
Balance, beginning of period
$
260
$
254
$
255
$
260
Addition to (release of) allowance for expected credit losses and disputes, net
9
1
9
(3)
Write-offs charged against the allowance for credit losses and disputes
—
—
(1)
(1)
Other changes
3
(1)
9
(2)
Balance, end of period
$
272
$
254
$
272
$
254
Past-Due Status
We consider a reinsurance asset to be past due when it is 90 days past due. The allowance for credit losses is estimated excluding disputed amounts. An allowance for disputes is established using the losses incurred method for contingencies. Past due balances on claims that are not in dispute were not material for any of the periods presented.
9. Deferred Policy Acquisition Costs
DAC represent those costs that are incremental and directly related to the successful acquisition of new or renewal of existing insurance contracts. We defer incremental costs that result directly from, and are essential to, the acquisition or renewal of an insurance contract. Such DAC generally include agent or broker commissions and bonuses, premium taxes, and medical and inspection fees that would not have been incurred if the insurance contract had not been acquired or renewed. Each cost is analyzed to assess whether it is fully deferrable. We partially defer costs, including certain commissions, when we do not believe that the entire cost is directly related to the acquisition or renewal of insurance contracts. Commissions that are not deferred to DAC are recorded in General operating and other expensesin the Condensed Consolidated Statements of Income (Loss).
We also defer a portion of employee total compensation and payroll-related fringe benefits directly related to time spent performing specific acquisition or renewal activities, including costs associated with the time spent on underwriting, policy issuance and processing, and sales force contract selling. The amounts deferred are derived based on successful efforts for each distribution channel and/or cost center from which the cost originates.
The following table presents a rollforward of DAC:
Nine Months Ended September 30,
(in millions)
2024
2023
Balance, beginning of year
$
2,117
$
2,343
Capitalization
2,665
3,319
Amortization expense
(2,543)
(2,894)
Other, including foreign exchange
(48)
(76)
Reclassified to held for sale
—
(623)
Balance, end of period
$
2,191
$
2,069
10. Variable Interest Entities
We enter into various arrangements with Variable Interest Entities (VIEs) in the normal course of business and consolidate the VIEs when we determine we are the primary beneficiary. This analysis includes a review of the VIE’s capital structure, related contractual relationships and terms, nature of the VIE’s operations and purpose, nature of the VIE’s interests issued and our involvement with the entity. When assessing the need to consolidate a VIE, we evaluate the design of the VIE as well as the related risks to which the entity was designed to expose the variable interest holders.
The primary beneficiary is the entity that has both (i) the power to direct the activities of the VIE that most significantly affect the entity’s economic performance and (ii) the obligation to absorb losses or the right to receive benefits that could be potentially significant to the VIE. While also considering these factors, the consolidation conclusion depends on the breadth of our decision-making ability and our ability to influence activities that significantly affect the economic performance of the VIE.
Creditors or beneficial interest holders of VIEs for which AIG is the primary beneficiary generally have recourse only to the assets and cash flows of the VIEs and do not have recourse to AIG, except in limited circumstances when AIG has provided a guarantee to the VIE’s interest holders. The following table presents the total assets and total liabilities associated with our variable interests in consolidated VIEs, as classified in the Condensed Consolidated Balance Sheets:
(in millions)
September 30, 2024
December 31, 2023
Assets:
Bonds available for sale
$
29
$
72
Mortgage and other loans receivable
—
122
Short-term investments
—
5
Accrued investment income
1
2
Other assets
1
1
Total*
$
31
$
202
Liabilities:
Debt of consolidated investment entities
$
—
$
38
Total
$
—
$
38
*The assets of each VIE can be used only to settle specific obligations of that VIE.
We calculate our maximum exposure to loss to be (i) the amount invested in the debt or equity of the VIE, (ii) the notional amount of VIE assets or liabilities where we have also provided credit protection to the VIE with the VIE as the referenced obligation, and (iii) other commitments and guarantees to the VIE.
The following table presents total assets of unconsolidated VIEs in which we hold a variable interest, as well as our maximum exposure to loss associated with these VIEs:
Maximum Exposure to Loss
(in millions)
Total VIE Assets
On-Balance Sheet(c)
Off-Balance Sheet
Total
September 30, 2024
Real estate and investment entities(a)
$
361,397
$
3,677
$
1,175
(d)
$
4,852
Other(b)
1,027
—
748
(e)
748
Total
$
362,424
$
3,677
$
1,923
$
5,600
December 31, 2023
Real estate and investment entities(a)
$
355,003
$
4,107
$
1,492
(d)
$
5,599
Other(b)
1,027
—
748
(e)
748
Total
$
356,030
$
4,107
$
2,240
$
6,347
(a)Comprised primarily of hedge funds and private equity funds.
(b)At September 30, 2024 and December 31, 2023, excludes approximately $1,925 million and $1,971 million, respectively, of VIE assets related to AIGFP and its consolidated subsidiaries, with maximum off-balance sheet exposure to loss of $1,894 million and $1,941 million, respectively. For additional information, see Note 1 to the Consolidated Financial Statements in the 2023 Annual Report.
(c)At September 30, 2024 and December 31, 2023, $3.7 billion and $4.1 billion, respectively, of our total unconsolidated VIE assets were recorded as Other invested assets.
(d)These amounts represent our unfunded commitments to invest in private equity funds and hedge funds.
(e)These amounts represent our estimate of the maximum exposure to loss under certain insurance policies issued to VIEs if a hypothetical loss occurred to the extent of the full amount of the insured value. Our insurance policies cover defined risks and our estimate of liability is included in our insurance reserves on the balance sheet.
For additional information on VIEs, see Note 10 to the Consolidated Financial Statements in the 2023 Annual Report.
ITEM 1 | Notes to Condensed Consolidated Financial Statements (unaudited) | 11. Derivatives and Hedge Accounting
11. Derivatives and Hedge Accounting
We use derivatives and other financial instruments as part of our financial risk management programs and as part of our investment operations. Interest rate derivatives (such as interest rate swaps) are used to manage interest rate risk associated with embedded derivatives contained in insurance contract liabilities, fixed maturity securities, outstanding medium- and long-term notes as well as other interest rate sensitive assets and liabilities. Foreign exchange derivatives (principally foreign exchange forwards and swaps) are used to economically mitigate risk associated with non-U.S. dollar denominated debt, net capital exposures, foreign currency transactions, and foreign denominated investments. Equity derivatives are used to economically mitigate financial risk associated with embedded derivatives. We use credit derivatives to manage our credit exposures. The derivatives are effective economic hedges of the exposures that they are meant to offset. As part of our strategy to enhance investment income, in addition to hedging activities, we also enter into derivative contracts with respect to investment operations, which may include, among other things, credit default swaps (CDSs), total return swaps and purchases of investments with embedded derivatives, such as equity-linked notes and convertible bonds.
The following table presents the notional amounts of our derivatives and the fair value of derivative assets and liabilities in the Condensed Consolidated Balance Sheets:
September 30, 2024
December 31, 2023
Gross Derivative Assets
Gross Derivative Liabilities
Gross Derivative Assets
Gross Derivative Liabilities
(in millions)
Notional Amount
Fair Value
Notional Amount
Fair Value
Notional Amount
Fair Value
Notional Amount
Fair Value
Derivatives designated as hedging instruments:(a)
Foreign exchange contracts
$
460
$
56
$
1,045
$
106
$
933
$
58
$
1,296
$
164
Derivatives not designated as hedging instruments:(a)
Interest rate contracts
905
305
982
333
14,657
741
1,165
352
Foreign exchange contracts
2,820
193
2,659
149
4,019
393
8,008
400
Equity contracts
45
31
45
31
36,045
66
—
—
Credit contracts(b)
57
33
218
34
1,804
33
504
36
Other contracts(c)
2,130
1
2,130
1
2,131
1
—
—
Total derivatives, gross
$
6,417
$
619
$
7,079
$
654
$
59,589
$
1,292
$
10,973
$
952
Counterparty netting(d)
(276)
(276)
(450)
(450)
Cash collateral(e)
(241)
(209)
(711)
(249)
Total derivatives on Condensed Consolidated Balance Sheets(f)
$
102
$
169
$
131
$
253
(a)Fair value amounts are shown before the effects of counterparty netting adjustments and offsetting cash collateral.
(b)As of September 30, 2024 and December 31, 2023, included CDSs on super senior multi-sector CLO with a net notional amount of $53 million and $50 million (fair value liability of $33 million and $32 million, respectively). The net notional amount represents the maximum exposure to loss on the portfolio.
(c)Consists primarily of stable value wraps and contracts with multiple underlying exposures.
(d)Represents netting of derivative exposures covered by a qualifying master netting agreement.
(e)Represents cash collateral posted and received that is eligible for netting.
(f)Freestanding derivatives only, excludes embedded derivatives. Derivative instrument assets and liabilities are recorded in Other assets and Other liabilities, respectively. Fair value of assets related to bifurcated embedded derivatives was $3.4 billion at September 30, 2024 and $3.4 billion at December 31, 2023. Fair value of liabilities related to bifurcated embedded derivatives was zero at both September 30, 2024 and December 31, 2023. A bifurcated embedded derivative is generally presented with the host contract in the Condensed Consolidated Balance Sheets. Embedded derivatives are primarily related to the funds withheld arrangement with Fortitude Re. For additional information, see Note 8.
COLLATERAL
We engage in derivative transactions that are not subject to a clearing requirement directly with unaffiliated third parties, in most cases, under International Swaps and Derivatives Association, Inc. (ISDA) Master Agreements. Many of the ISDA Master Agreements also include Credit Support Annex provisions, which provide for collateral postings that may vary at various ratings and threshold levels. We attempt to reduce our risk with certain counterparties by entering into agreements that enable collateral to be obtained from a counterparty on an upfront or contingent basis. We minimize the risk that counterparties might be unable to fulfill their contractual obligations by monitoring counterparty credit exposure and collateral value and generally requiring additional collateral to be posted upon the occurrence of certain events or circumstances. In addition, certain derivative transactions have provisions that require collateral to be posted by us upon a downgrade of our long-term debt ratings or give the counterparty the right to terminate the
ITEM 1 | Notes to Condensed Consolidated Financial Statements (unaudited) | 11. Derivatives and Hedge Accounting
transaction. In the case of some of the derivative transactions, upon a downgrade of our long-term debt ratings, as an alternative to posting collateral and subject to certain conditions, we may assign the transaction to an obligor with higher debt ratings or arrange for a substitute guarantee of our obligations by an obligor with higher debt ratings or take other similar action. The actual amount of collateral required to be posted to counterparties in the event of such downgrades, or the aggregate amount of payments that we could be required to make, depends on market conditions, the fair value of outstanding affected transactions and other factors prevailing at and after the time of the downgrade.
Collateral posted by us to third parties for derivative transactions was $574 million and $593 million at September 30, 2024 and December 31, 2023, respectively. In the case of collateral posted under derivative transactions that are not subject to clearing, this collateral can generally be repledged or resold by the counterparties. Collateral provided to us from third parties for derivative transactions was $456 million and $856 million at September 30, 2024 and December 31, 2023, respectively. In the case of collateral provided to us under derivative transactions that are not subject to clearing, we generally can repledge or resell collateral.
OFFSETTING
We have elected to present all derivative receivables and derivative payables, and the related cash collateral received and paid, on a net basis on our Condensed Consolidated Balance Sheets when a legally enforceable ISDA Master Agreement exists between us and our derivative counterparty. An ISDA Master Agreement is an agreement governing multiple derivative transactions between two counterparties. The ISDA Master Agreement generally provides for the net settlement of all, or a specified group, of these derivative transactions, as well as transferred collateral, through a single payment, and in a single currency, as applicable. The net settlement provisions apply in the event of a default on, or affecting any, one derivative transaction or a termination event affecting all, or a specified group of, derivative transactions governed by the ISDA Master Agreement.
HEDGE ACCOUNTING
We designated certain derivatives entered into with third parties as fair value hedges of available for sale investment securities held by our insurance subsidiaries. The fair value hedges include foreign currency forwards and cross currency swaps designated as hedges of the change in fair value of foreign currency denominated available for sale securities attributable to changes in foreign exchange rates.
We use foreign currency denominated debt and cross-currency swaps as hedging instruments in net investment hedge relationships to mitigate the foreign exchange risk associated with our non-U.S. dollar functional currency foreign subsidiaries. For net investment hedge relationships where issued debt is used as a hedging instrument, we assess the hedge effectiveness and measure the amount of ineffectiveness based on changes in spot rates. For net investment hedge relationships that use derivatives as hedging instruments, we assess hedge effectiveness and measure hedge ineffectiveness using changes in forward rates. For the three and nine months ended September 30, 2024, we recognized gains (losses) of $(41) million and $(7) million, respectively, and for the three and nine months ended September 30, 2023, we recognized gains (losses) of $38 million and $7 million, respectively, included in Change in foreign currency translation adjustments in OCI related to the net investment hedge relationships.
A qualitative methodology is utilized to assess hedge effectiveness.
The following table presents the gain (loss) recognized in income on our derivative instruments in fair value hedging relationships in the Condensed Consolidated Statements of Income (Loss):
Gains/(Losses) Recognized in Income for:
(in millions)
Hedging
Derivatives(a)
Excluded
Components(b)
Hedged Items
Net Impact
Three Months Ended September 30, 2024
Foreign exchange contracts:
Net realized gains/(losses)
$
53
$
6
$
(53)
$
6
Three Months Ended September 30, 2023
Foreign exchange contracts:
Net realized gains/(losses)
$
8
$
(6)
$
(8)
$
(6)
Nine Months Ended September 30, 2024
Foreign exchange contracts:
Net realized gains/(losses)
$
(62)
$
(21)
$
62
$
(21)
Nine Months Ended September 30, 2023
Foreign exchange contracts:
Net realized gains/(losses)
$
(183)
$
(8)
$
183
$
(8)
(a)Gains and losses on derivative instruments designated and qualifying in fair value hedges that are included in the assessment of hedge effectiveness.
(b)Gains and losses on derivative instruments designated and qualifying in fair value hedges that are excluded from the assessment of hedge effectiveness and recognized in income on a mark-to-market basis.
ITEM 1 | Notes to Condensed Consolidated Financial Statements (unaudited) | 11. Derivatives and Hedge Accounting
DERIVATIVES NOT DESIGNATED AS HEDGING INSTRUMENTS
The following table presents the effect of derivative instruments not designated as hedging instruments in the Condensed Consolidated Statements of Income (Loss):
Gains (Losses) Recognized in Income
Three Months Ended September 30,
Nine Months Ended September 30,
(in millions)
2024
2023
2024
2023
By Derivative Type:
Interest rate contracts
$
(1)
$
(32)
$
(3)
$
(34)
Foreign exchange contracts
3
369
(62)
243
Equity contracts
—
442
—
443
Commodity contracts
—
(1)
—
7
Credit contracts
3
—
3
(1)
Other contracts
—
(792)
—
(792)
Embedded derivatives
(157)
57
(158)
(25)
Total
$
(152)
$
43
$
(220)
$
(159)
By Classification:
Net investment income - excluding Fortitude Re funds withheld assets
$
—
$
—
$
—
$
—
Net investment income - Fortitude Re funds withheld assets
—
1
—
—
Net realized gains (losses) - excluding Fortitude Re funds withheld assets
7
(21)
(62)
(134)
Net realized gains (losses) on Fortitude Re funds withheld assets*
(159)
63
(158)
(25)
Total
$
(152)
$
43
$
(220)
$
(159)
*Includes over-the-counter derivatives supporting the funds withheld arrangements with Fortitude Re and the embedded derivative contained within the funds withheld payable with Fortitude Re.
CREDIT RISK-RELATED CONTINGENT FEATURES
We estimate that at September 30, 2024, based on our outstanding financial derivative transactions, a downgrade of our long-term senior debt ratings to BBB or BBB– by Standard & Poor’s Financial Services LLC, a subsidiary of S&P Global Inc., and/or a downgrade to Baa2 or Baa3 by Moody’s Investors’ Service, Inc. would permit counterparties to make additional collateral calls and permit certain counterparties to elect early termination of contracts, resulting in corresponding collateral postings and termination payments in the total amount of up to approximately $6 million. The aggregate fair value of our derivatives that were in a net liability position and that contain such credit risk-related contingencies which can be triggered below our long-term senior debt ratings of BBB+ or Baa1 was approximately $33 million and $32 million at September 30, 2024 and December 31, 2023, respectively. The aggregate fair value of assets posted as collateral under these contracts at September 30, 2024 and December 31, 2023, was approximately $33 million and $34 million, respectively.
HYBRID SECURITIES WITH EMBEDDED CREDIT DERIVATIVES
We invest in hybrid securities (such as credit-linked notes) with the intent of generating income and not specifically to acquire exposure to embedded derivative risk. As is the case with our other investments in RMBS, CMBS, CLO and ABS, our investments in these hybrid securities are exposed to losses only up to the amount of our initial investment in the hybrid security. Other than our initial investment in the hybrid securities, we have no further obligation to make payments on the embedded credit derivatives in the related hybrid securities.
We elect to account for our investments in these hybrid securities with embedded written credit derivatives at fair value, with changes in fair value recognized in Net investment income. Our investments in these hybrid securities are reported as Other bond securities in the Condensed Consolidated Balance Sheets. The fair value of these hybrid securities was under $1 million at both September 30, 2024 and December 31, 2023, respectively. These securities have par amounts of $17 million at both September 30, 2024 and December 31, 2023, respectively, and have remaining stated maturity dates that extend to 2052.
LIABILITY FOR UNPAID LOSSES AND LOSS ADJUSTMENT EXPENSES (LOSS RESERVES)
Loss reserves represent the accumulation of estimates of unpaid claims, including estimates for claims incurred but not reported and loss adjustment expenses, less applicable discount. We regularly review and update the methods used to determine loss reserve estimates. Any adjustments resulting from this review are reflected currently in pre-tax income, except to the extent such adjustment impacts a deferred gain under a retroactive reinsurance agreement, in which case the ceded portion would be amortized into pre-tax income in subsequent periods. Because these estimates are subject to the outcome of future events, changes in estimates are common given that loss trends vary and time is often required for changes in trends to be recognized and confirmed. Reserve changes that increase previous estimates of ultimate cost are referred to as unfavorable or adverse development or reserve strengthening. Reserve changes that decrease previous estimates of ultimate cost are referred to as favorable development or reserve releases.
Our gross loss reserves before reinsurance and discount are net of contractual deductible recoverable amounts due from policyholders of approximately $12.8 billion and $12.1 billionat September 30, 2024 and December 31, 2023, respectively. These recoverable amounts are related to certain policies with high deductibles (in excess of high dollar amounts retained by the insured through self-insured retentions, deductibles, retrospective programs, or captive arrangements, each referred to generically as “deductibles”), primarily for U.S. Commercial casualty business. With respect to the deductible portion of the claim, we manage and pay the entire claim on behalf of the insured and are reimbursed by the insured for the deductible portion of the claim. Thus, these recoverable amounts represent a credit exposure to us. At September 30, 2024 and December 31, 2023 we held collateral of approximately $8.6 billion and $8.7 billion, respectively, for these deductible recoverable amounts, consisting primarily of letters of credit and funded trust agreements. Allowance for credit losses for the unsecured portion of these recoverable amounts was $14 million at both September 30, 2024 and December 31, 2023.
The following table presents the rollforward of activity in loss reserves:
Three Months Ended September 30,
Nine Months Ended September 30,
(in millions)
2024
2023
2024
2023
Liability for unpaid loss and loss adjustment expenses, beginning of period
$
69,783
$
70,284
$
70,393
$
75,167
Reinsurance recoverable
(29,849)
(30,226)
(30,289)
(32,102)
Net Liability for unpaid loss and loss adjustment expenses, beginning of period
39,934
40,058
40,104
43,065
Losses and loss adjustment expenses incurred:
Current year
3,749
3,922
10,660
11,651
Prior years, excluding discount and amortization of deferred gain
187
(246)
79
(380)
Prior years, discount charge (benefit)
49
52
217
200
Prior years, amortization of deferred gain on retroactive reinsurance(a)
(212)
27
(277)
(58)
Total losses and loss adjustment expenses incurred
3,773
3,755
10,679
11,413
Losses and loss adjustment expenses paid:
Current year
(1,169)
(1,190)
(2,310)
(2,360)
Prior years
(2,285)
(2,561)
(7,739)
(9,104)
Total losses and loss adjustment expenses paid
(3,454)
(3,751)
(10,049)
(11,464)
Other changes:
Foreign exchange effect
891
(583)
237
(211)
Losses and loss adjustment expenses recognized within gain on divestitures
—
316
—
316
Retroactive reinsurance adjustment (net of discount)(b)
(107)
121
71
180
Dispositions
(5)
—
(5)
—
Reclassified to held for sale, net of reinsurance recoverables(c)
5
(159)
—
(3,542)
Total other changes
784
(305)
303
(3,257)
Liability for unpaid loss and loss adjustment expenses, end of period:
Net liability for unpaid losses and loss adjustment expenses
(a)Includes $3 million and $9 million for the retroactive reinsurance agreement with National Indemnity Company (NICO), a subsidiary of Berkshire Hathaway Inc. (Berkshire), covering U.S. asbestos exposures for the three months ended September 30, 2024 and 2023, respectively, and $47 million and $22 million for the nine months ended September 30, 2024 and 2023, respectively.
(b)Includes benefit (charge) from change in discount on retroactive reinsurance of $22 million and $24 million for the three months ended September 30, 2024 and 2023 respectively, and $100 million and $120 million for the nine months ended September 30, 2024 and 2023, respectively.
(c)Represents change in loss reserves included in Liabilities held for sale for the three months ended September 30, 2024 and 2023. For additional information, see Note 4.
(d)Excludes $1.5 billion of Reinsurance recoverable reclassified to Assets held for sale on the Condensed Consolidated Balance Sheets at September 30, 2023.
On January 20, 2017, we entered into an adverse development reinsurance agreement with NICO, under which we transferred to NICO 80 percent of the reserve risk on substantially all of our U.S. commercial long-tail exposures for accident years 2015 and prior. Under this agreement, we ceded to NICO 80 percent of the paid losses on subject business paid on or after January 1, 2016 in excess of $25 billion of net paid losses, up to an aggregate limit of $25 billion. At NICO’s 80 percent share, NICO’s limit of liability under the contract is $20 billion. We account for this transaction as retroactive reinsurance. We paid total consideration, including interest, of $10.2 billion. The consideration was placed into a collateral trust account as security for NICO’s claim payment obligations, and Berkshire has provided a parental guarantee to secure the obligations of NICO under the agreement.
Prior Year Development
During the three months ended September 30, 2024, we recognized unfavorable prior year loss reserve development of $187 million which does not reflect the benefit of recoveries under a retroactive adverse development cover, and excludes discount and amortization of deferred gain. The development in this period was largely driven by adverse development in U.S. Excess Casualty and UK/Europe Casualty and Financial Lines, offset by favorable development in Global Specialty and U.S. Property and Special Risks. During the nine months ended September 30, 2024, we recognized unfavorable prior year loss reserve development of $79 million excluding discount and amortization of deferred gain. The development in this period was largely driven by adverse development in U.S. Excess Casualty and UK/Europe Casualty and Financial Lines, offset by favorable development in Global Specialty, U.S. Property and Special Risks and on our loss sensitive U.S. Workers' Compensation business.
During the three months ended September 30, 2023, we recognized favorable prior year loss reserve development of $246 million excluding discount and amortization of deferred gain. The development in this period was largely driven by favorable development on our U.S. Workers' Compensation business, International Financial Lines in all regions except UK, which was adverse, and Japan Personal Insurance partially offset by unfavorable development on UK/Europe Casualty. During the nine months ended September 30, 2023, we recognized favorable prior year loss reserve development of $380 million excluding discount and amortization of deferred gain. The development in this period was largely driven by favorable development on our U.S. Workers' Compensation business, U.S. Other Casualty and Other Product Lines, partially offset by unfavorable development on UK/Europe Casualty and UK Financial Lines.
Discounting of Loss Reserves
At September 30, 2024 and December 31, 2023, the loss reserves reflect a net loss reserve discount of $1.2 billion and $1.2 billion, respectively, including tabular and non-tabular calculations based upon the following assumptions:
•The non-tabular workers’ compensation discount is calculated separately for companies domiciled in New York, Pennsylvania and Delaware, and follows the statutory regulations (prescribed or permitted) for each state.
–For New York companies, the discount is based on a 5 percent interest rate and the companies’ own payout patterns.
–The Pennsylvania and Delaware regulators approved use of a consistent benchmark discount rate and spread (U.S. Treasury rate plus a liquidity premium) to all of our workers’ compensation reserves in our Pennsylvania domiciled and Delaware domiciled companies, as well as our use of updated payout patterns specific to our primary and excess workers compensation portfolios. In 2020, the regulators also approved that the discount rate will be updated on an annual basis.
•The tabular workers’ compensation discount is calculated based on the mortality rate used in the 2007 U.S. Life table and interest rates prescribed or permitted by each state (i.e. New York is based on 5 percent interest rate and Pennsylvania and Delaware are based on U.S. Treasury rate plus a liquidity premium). In the case that applying this tabular discount factor to our nominal reserves produces a tabular discount that is greater than the indemnity portion of our case reserves, the tabular discount is capped at our estimate of the indemnity portion of our cases reserves (45 percent).
The discount for asbestos reserves has been fully accreted.
At September 30, 2024 and December 31, 2023, the discount consists of $280 million and $294 million of tabular discount, respectively, and $922 million and $939 million of non-tabular discount for workers’ compensation, respectively. During the nine months ended September 30, 2024 and 2023, the benefit / (charge) from changes in discount of $(131) million and $(85) million, respectively, were recorded as part of Policyholder benefits and losses incurred in the Condensed Consolidated Statements of Income (Loss).
The following table presents the components of the loss reserve discount discussed above:
(in millions)
September 30, 2024
December 31, 2023
U.S. workers' compensation
$
2,206
$
2,337
Retroactive reinsurance
(1,004)
(1,104)
Total reserve discount(a)(b)
$
1,202
$
1,233
(a)Excludes $197 million and $196 million of discount related to certain long-tail liabilities in the UK at September 30, 2024 and December 31, 2023, respectively.
(b)Includes gross discount of $665 million and $687 million, which was 100 percent ceded to Fortitude Re at September 30, 2024 and December 31, 2023, respectively.
The following table presents the net loss reserve discount benefit (charge):
Three Months Ended September 30,
Nine Months Ended September 30,
(in millions)
2024
2023
2024
2023
Current accident year
$
20
$
47
$
86
$
115
Accretion and other adjustments to prior year discount
(49)
(52)
(217)
(200)
Net reserve discount benefit (charge)
(29)
(5)
(131)
(85)
Change in discount on loss reserves ceded under retroactive reinsurance
22
24
100
120
Net change in total reserve discount*
$
(7)
$
19
$
(31)
$
35
*Excludes $1 million and $7 million discount related to certain long-tail liabilities in the UK for the three months ended September 30, 2024 and 2023, respectively, and excludes $1 million and $15 million discount related to certain long-tail liabilities in the UK for the nine months ended September 30, 2024 and 2023, respectively.
Amortization of Deferred Gain on Retroactive Reinsurance
Amortization of the deferred gain on retroactive reinsurance includes $209 million and $(36) million related to the adverse development reinsurance cover with NICO for the three months ended September 30, 2024 and 2023, respectively, and $230 million and $36 million related to the adverse development reinsurance cover with NICO for the nine months ended September 30, 2024 and 2023, respectively.
Amounts recognized reflect the amortization of the initial deferred gain at inception, as amended for subsequent changes in the deferred gain due to changes in subject reserves.
FUTURE POLICY BENEFITS
Future policy benefits primarily include reserves for traditional life and annuity payout contracts, which represent an estimate of the present value of future benefits less the present value of future net premiums. For traditional and limited pay long-duration products, benefit reserves are accrued and benefit expense is recognized using a net premium ratio methodology for each annual cohort of business.
The following tables present the balances and changes in the liability for future policy benefits and a reconciliation of the net liability for future policy benefits to the liability for future policy benefits in the Condensed Consolidated Balance Sheets:
Nine Months Ended September 30,
(in millions, except for liability durations)
2024
2023
Present value of expected net premiums
Balance, beginning of year
$
1,702
$
1,929
Effect of changes in discount rate assumptions (AOCI)
339
262
Beginning balance at original discount rate
2,041
2,191
Effect of actual variances from expected experience
(7)
(44)
Adjusted beginning of year balance
2,034
2,147
Issuances
75
100
Interest accrual
22
22
Net premium collected
(268)
(160)
Foreign exchange impact
(87)
(62)
Other
—
(63)
Ending balance at original discount rate
1,776
1,984
Effect of changes in discount rate assumptions (AOCI)
Effect of changes in discount rate assumptions (AOCI)
441
362
Beginning balance at original discount rate
2,590
2,742
Effect of actual variances from expected experience
(8)
(43)
Adjusted beginning of year balance
2,582
2,699
Issuances
79
104
Interest accrual
27
27
Benefit payments
(273)
(153)
Foreign exchange impact
(107)
(93)
Other
—
(74)
Ending balance at original discount rate
2,308
2,510
Effect of changes in discount rate assumptions (AOCI)
(264)
(461)
Balance, end of period
$
2,044
$
2,049
Net liability for future policy benefits, end of period
$
461
$
419
Deferred profit liability
1
1
Other reconciling items(a)
1,009
891
Future policy benefits
1,471
1,311
Less: Reinsurance recoverable
(813)
(712)
Net liability for future policy benefits after reinsurance recoverable
$
658
$
599
Weighted average liability duration of the liability for future policy benefits(b)
9.8
9.5
(a)Other reconciling items primarily include Accident & Health (short-duration) contracts of $776 million and $661 million at September 30, 2024 and 2023, respectively, of certain long-duration contracts that are 100 percent ceded.
(b)The weighted average liability durations are calculated as the modified duration using projected future net liability cash flows that are aggregated at the segment level, utilizing the segment level weighted average interest rates and current discount rate, which can be found in the table below.
The following table presents the amount of undiscounted expected future benefit payments and undiscounted and discounted expected gross premiums for future policy benefits for nonparticipating contracts:
Nine Months Ended September 30,
(in millions)
2024
2023
Undiscounted expected future benefits and expense
$
2,820
$
3,099
Undiscounted expected future gross premiums
3,881
4,275
Discounted expected future gross premiums (at current discount rate)
2,905
2,963
The following table presents the amount of revenue and interest recognized in the Condensed Consolidated Statements of Income (Loss) for future policy benefits for nonparticipating contracts:
Nine Months Ended September 30,
(in millions)
2024
2023
Gross premiums
$
326
$
338
Interest accretion
$
5
$
5
The following table presents the weighted-average interest rate for future policy benefits for nonparticipating contracts:
Nine Months Ended September 30,
2024
2023
Weighted-average interest rate, original discount rate
1.83
%
1.84
%
Weighted-average interest rate, current discount rate
3.30
%
3.92
%
The weighted average interest rates are calculated using projected future net liability cash flows that are aggregated to the segment level, and are represented as an annual rate.
ITEM 1 | Notes to Condensed Consolidated Financial Statements (unaudited) | 13. Contingencies, Commitments and Guarantees
13. Contingencies, Commitments and Guarantees
In the normal course of business, we enter into various contingent liabilities and commitments. In addition, AIG Parent guarantees various obligations of certain subsidiaries.
Although we cannot currently quantify our ultimate liability for unresolved litigation and investigation matters, including those referred to below, it is possible that such liability could have a material adverse effect on our consolidated financial condition or consolidated results of operations or consolidated cash flows for an individual reporting period.
LEGAL CONTINGENCIES
In the normal course of business, we are subject to regulatory and government investigations and actions, and litigation and other forms of dispute resolution in a large number of proceedings pending in various domestic and foreign jurisdictions. Certain of these matters involve potentially significant risk of loss due to potential for significant jury awards and settlements, punitive damages or other penalties. Many of these matters are also highly complex and may seek recovery on behalf of a class or similarly large number of plaintiffs. It is therefore inherently difficult to predict the size or scope of potential future losses arising from these matters. In our insurance and reinsurance operations, litigation and arbitration concerning the scope of coverage under insurance and reinsurance contracts, and litigation and arbitration in which our subsidiaries defend or indemnify their insureds under insurance contracts, are generally considered in the establishment of our loss reserves. Separate and apart from the foregoing matters involving insurance and reinsurance coverage, AIG Parent, our subsidiaries and their respective officers and directors are subject to a variety of additional types of legal proceedings brought by holders of AIG securities, customers, employees and others, alleging, among other things, breach of contractual or fiduciary duties, bad faith, indemnification and violations of federal and state statutes and regulations. With respect to these other categories of matters not arising out of claims for insurance or reinsurance coverage, we establish reserves for loss contingencies when it is probable that a loss will be incurred and the amount of the loss can be reasonably estimated. In many instances, we are unable to determine whether a loss is probable or to reasonably estimate the amount of such a loss and, therefore, the potential future losses arising from legal proceedings may exceed the amount of liabilities that we have recorded in our financial statements covering these matters. While such potential future charges could be material, based on information currently known to management, management does not believe that any such charges are likely to have a material adverse effect on our financial position or results of operation.
Additionally, from time to time, various regulatory and governmental agencies review our transactions and practices in connection with industry-wide and other inquiries or examinations into, among other matters, the business practices of current and former operating insurance subsidiaries. Such investigations, inquiries or examinations could develop into administrative, civil or criminal proceedings or enforcement actions, in which remedies could include fines, penalties, restitution or alterations in our business practices, and could result in additional expenses, limitations on certain business activities and reputational damage.
OTHER COMMITMENTS
In the normal course of business, we enter into commitments to invest in limited partnerships, private equity funds and hedge funds and to purchase and develop real estate in the U.S. and abroad. These commitments totaled $1.5 billion and $1.7 billion at September 30, 2024 and December 31, 2023, respectively.
GUARANTEES
Subsidiaries
We have issued unconditional guarantees with respect to the prompt payment, when due, of all present and future payment obligations and liabilities of AIGFP and certain of its subsidiaries. We have also issued guarantees of all present and future payment obligations and liabilities of AIG Markets, Inc.
Due to the deconsolidation of AIGFP and its subsidiaries, as of September 30, 2024, a $100 million guarantee related to the obligations of AIGFP and certain of its subsidiaries was recognized, and is reported in Other liabilities.
We continue to guarantee certain policyholder contracts issued by Corebridge subsidiaries as well as certain debt issued by Corebridge Life Holdings, Inc. (CRBGLH). Pursuant to the Separation Agreement entered in by AIG and Corebridge on September 14, 2022, Corebridge must indemnify, defend and hold us harmless from and against any liability related to these guarantees. Also, under a collateral agreement, in the event of: (i) a ratings downgrade of Corebridge or the guaranteed debt below specified levels or (ii) the failure by CRBGLH to pay principal and interest on the guaranteed debt when due, Corebridge must collateralize an amount equal to
ITEM 1 | Notes to Condensed Consolidated Financial Statements (unaudited) | 13. Contingencies, Commitments and Guarantees
the sum of: (i) 100 percent of the principal amount outstanding, (ii) accrued and unpaid interest and (iii) 100 percent of the net present value of scheduled interest payments through the maturity dates of the debt.
Business and Asset Dispositions
We are subject to financial guarantees and indemnity arrangements in connection with the completed sales of businesses and assets. The various arrangements may be triggered by, among other things, declines in asset values, the occurrence of specified business contingencies, the realization of contingent liabilities, developments in litigation or breaches of representations, warranties or covenants provided by us. These arrangements are typically subject to various time limitations, defined by the contract or by operation of law, such as statutes of limitation. In some cases, the maximum potential obligation is subject to contractual limitations, while in other cases such limitations are not specified or are not applicable.
We are unable to develop a reasonable estimate of the maximum potential payout under certain of these arrangements. Overall, we believe the likelihood that we will have to make any material payments related to completed sales under these arrangements is remote, and no material liabilities related to these arrangements have been recorded in the Condensed Consolidated Balance Sheets.
Other
•For additional information on commitments and guarantees associated with VIEs, see Note 10.
•For additional information on derivatives, see Note 11.
14. Equity
SHARES OUTSTANDING
Preferred Stock
On March 14, 2019, we issued 20,000 shares of Series A 5.85% Non-Cumulative Perpetual Preferred Stock (Series A Preferred Stock) (equivalent to 20,000,000 Depositary Shares (the Depositary Shares), each representing a 1/1,000th interest in a share of Series A Preferred Stock), $5.00 par value and $25,000 liquidation preference per share (equivalent to $25 per Depositary Share). After underwriting discounts and expenses, we received net proceeds of approximately $485 million.
On March 15, 2024, we redeemed all 20,000 outstanding shares of our Series A Preferred Stock and all 20,000,000 of the corresponding Depositary Shares, each representing a 1/1,000th interest in a share of Series A Preferred Stock, for a redemption price of $25,000 per share (equivalent to $25.00 per Depositary Share) for an aggregate redemption price of $500 million, paid in cash. The $15 million difference between the aggregate redemption price and the outstanding par and additional paid in capital amount of $485 million was recorded as a reduction of retained earnings and is presented on Dividends on preferred stock and preferred stock redemption premiums on the Condensed Consolidated Statements of Income.
Common Stock
The following table presents a rollforward of outstanding shares:
Nine Months Ended September 30, 2024
Common Stock Issued
Treasury Stock
Common Stock Outstanding
(in millions)
Shares, beginning of year
1,906.7
(1,217.9)
688.8
Shares issued
—
6.7
6.7
Shares repurchased
—
(65.2)
(65.2)
Shares, end of period
1,906.7
(1,276.4)
630.3
Dividends
Dividends are payable on AIG common stock, par value $2.50 per share (AIG Common Stock) only when, as and if declared by our Board of Directors in its discretion, from funds legally available for this purpose. In considering whether to pay a dividend on or purchase shares of AIG Common Stock, our Board of Directors considers a number of factors, including, but not limited to: the capital resources available to support our insurance operations and business strategies, AIG’s funding capacity and capital resources in comparison to internal benchmarks, expectations for capital generation, rating agency expectations for capital, regulatory standards for capital and capital distributions, and such other factors as our Board of Directors may deem relevant.
Shares may be repurchased from time to time in the open market, private purchases, through forward, derivative, accelerated repurchase or automatic repurchase transactions or otherwise. Certain of our share repurchases have been and may from time to time be effected through the Securities Exchange Act of 1934, as amended (the Exchange Act) Rule 10b5-1 repurchase plans. On April 30, 2024, the Board of Directors authorized the repurchase of $10.0 billion of AIG Common Stock (inclusive of the approximately $3.9 billion remaining under the Board's prior share repurchase authorization).
The timing of any future repurchases will depend on market conditions, our business and strategic plans, financial condition, results of operations, liquidity and other factors.
Pursuant to an Exchange Act Rule 10b5-1 repurchase plan, from October 1, 2024 to October 30, 2024, we repurchased approximately 7 million shares of AIG Common Stock for an aggregate purchase price of approximately $500 million.
DIVIDENDS DECLARED
On November 4, 2024, our Board of Directors declared a cash dividend on AIG Common Stock of $0.40 per share, payable on December 30, 2024 to shareholders of record on December 16, 2024.
ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)
The following table presents a rollforward of Accumulated other comprehensive income (loss):
(in millions)
Unrealized Appreciation (Depreciation) of Fixed Maturity Securities on Which Allowance for Credit Losses Was Taken
Unrealized Appreciation (Depreciation) of All Other Investments
Change in Fair Value of Market Risk Benefits Attributable to Changes in Our Own Credit Risk
Change in the discount rates used to measure traditional and limited payment long-duration insurance contracts
Foreign Currency Translation Adjustments
Retirement Plan Liabilities Adjustment
Total
Balance, June 30, 2024, net of tax
$
(38)
$
(3,422)
$
—
$
22
$
(3,322)
$
(805)
$
(7,565)
Change in unrealized appreciation (depreciation) of investments*
45
1,581
—
—
—
—
1,626
Change in other
—
17
—
—
—
—
17
Change in discount rates
—
—
—
(12)
—
—
(12)
Change in foreign currency translation adjustments
—
—
—
—
427
—
427
Change in net actuarial loss
—
—
—
—
—
2
2
Change in prior service cost
—
—
—
—
—
(1)
(1)
Change in deferred tax asset (liability)
(8)
(249)
—
58
(13)
—
(212)
Total other comprehensive income
37
1,349
—
46
414
1
1,847
Noncontrolling interests
—
—
—
—
4
—
4
Balance, September 30, 2024, net of tax
$
(1)
$
(2,073)
$
—
$
68
$
(2,912)
$
(804)
$
(5,722)
Balance, June 30, 2023, net of tax
$
(60)
$
(16,655)
$
(315)
$
2,067
$
(3,174)
$
(845)
$
(18,982)
Change in unrealized appreciation (depreciation) of investments*
(69)
(7,025)
—
—
—
—
(7,094)
Change in other
(11)
17
—
—
—
—
6
Change in fair value of market risk benefits, net
—
—
(104)
—
—
—
(104)
Change in discount rates
—
—
—
1,470
—
—
1,470
Change in future policy benefits
—
173
—
—
—
—
173
Change in foreign currency translation adjustments
Unrealized Appreciation (Depreciation) of Fixed Maturity Securities on Which Allowance for Credit Losses Was Taken
Unrealized Appreciation (Depreciation) of All Other Investments
Change in Fair Value of Market Risk Benefits Attributable to Changes in Our Own Credit Risk
Change in the discount rates used to measure traditional and limited payment long-duration insurance contracts
Foreign Currency Translation Adjustments
Retirement Plan Liabilities Adjustment
Total
Balance, December 31, 2023, net of tax
$
(106)
$
(10,888)
$
(476)
$
1,233
$
(2,979)
$
(821)
$
(14,037)
Change in unrealized appreciation (depreciation) of investments*
98
(729)
—
—
—
—
(631)
Change in other
—
13
—
—
—
—
13
Change in fair value of market risk benefits, net
—
—
130
—
—
—
130
Change in discount rates
—
—
—
947
—
—
947
Change in future policy benefits
—
(59)
—
—
—
—
(59)
Change in foreign currency translation adjustments
—
—
—
—
173
—
173
Change in net actuarial loss
—
—
—
—
—
19
19
Change in prior service cost
—
—
—
—
—
2
2
Change in deferred tax asset (liability)
(20)
(92)
(28)
(166)
(14)
(4)
(324)
Corebridge deconsolidation, net of tax
42
8,513
330
(1,583)
(88)
—
7,214
Total other comprehensive income
120
7,646
432
(802)
71
17
7,484
Corebridge noncontrolling interests
2
610
33
(105)
(3)
—
537
Noncontrolling interests
17
(559)
(11)
258
1
—
(294)
Balance, September 30, 2024, net of tax
$
(1)
$
(2,073)
$
—
$
68
$
(2,912)
$
(804)
$
(5,722)
Balance, December 31, 2022, net of tax
$
(136)
$
(20,675)
$
(284)
$
2,459
$
(3,056)
$
(924)
$
(22,616)
Change in unrealized appreciation (depreciation) of investments*
44
(4,412)
—
—
—
—
(4,368)
Change in other
(11)
(36)
—
—
—
—
(47)
Change in fair value of market risk benefits, net
—
—
(250)
—
—
—
(250)
Change in discount rates
—
—
—
1,474
—
—
1,474
Change in future policy benefits
—
210
—
—
—
—
210
Change in foreign currency translation adjustments
—
—
—
—
(323)
—
(323)
Change in net actuarial loss
—
—
—
—
—
167
167
Change in prior service cost
—
—
—
—
—
3
3
Change in deferred tax asset (liability)
(9)
798
54
(374)
(33)
(45)
391
Total other comprehensive income (loss)
24
(3,440)
(196)
1,100
(356)
125
(2,743)
Corebridge noncontrolling interests
3
2,053
52
(331)
(10)
(1)
1,766
Noncontrolling interests
1
(1,401)
(59)
387
8
—
(1,064)
Balance, September 30, 2023, net of tax
$
(110)
$
(20,661)
$
(369)
$
2,841
$
(3,430)
$
(800)
$
(22,529)
*Includes net unrealized gains and losses attributable to businesses held for sale or reclassified to discontinued operations at September 30, 2024 and 2023.
The following table presents the other comprehensive income (loss) reclassification adjustments for the three and nine months ended September 30, 2024 and 2023, respectively:
(in millions)
Unrealized Appreciation (Depreciation) of Fixed Maturity Securities on Which Allowance for Credit Losses Was Taken
Unrealized Appreciation (Depreciation) of All Other Investments
Change in Fair Value of Market Risk Benefits Attributable to Changes in Our Own Credit Risk
Change in the discount rates used to measure traditional and limited payment long-duration insurance contracts
Foreign Currency Translation Adjustments
Retirement Plan Liabilities Adjustment
Total
Three Months Ended September 30, 2024
Unrealized change arising during period
$
45
$
1,514
$
—
$
(12)
$
427
$
(7)
$
1,967
Less: Reclassification adjustments included in net income
—
(84)
—
—
—
(8)
(92)
Total other comprehensive income (loss), before income tax expense (benefit)
45
1,598
—
(12)
427
1
2,059
Less: Income tax expense (benefit)
8
249
—
(58)
13
—
212
Total other comprehensive income (loss), net of income tax expense (benefit)
$
37
$
1,349
$
—
$
46
$
414
$
1
$
1,847
Three Months Ended September 30, 2023
Unrealized change arising during period
$
(80)
$
(6,998)
$
(104)
$
1,470
$
(279)
$
57
$
(5,934)
Less: Reclassification adjustments included in net income
—
(163)
—
—
—
(6)
(169)
Total other comprehensive income (loss), before income tax expense (benefit)
(80)
(6,835)
(104)
1,470
(279)
63
(5,765)
Less: Income tax expense (benefit)
(14)
(1,141)
(23)
323
(10)
18
(847)
Total other comprehensive income (loss), net of income tax expense (benefit)
Unrealized Appreciation (Depreciation) of Fixed Maturity Securities on Which Allowance for Credit Losses Was Taken
Unrealized Appreciation (Depreciation) of All Other Investments
Change in Fair Value of Market Risk Benefits Attributable to Changes in Our Own Credit Risk
Change in the discount rates used to measure traditional and limited payment long-duration insurance contracts
Foreign Currency Translation Adjustments
Retirement Plan Liabilities Adjustment
Total
Nine Months Ended September 30, 2024
Unrealized change arising during period
$
98
$
(1,129)
$
130
$
947
$
173
$
(2)
$
217
Less: Reclassification adjustments included in net income
(42)
(8,867)
(330)
1,583
88
(23)
(7,591)
Total other comprehensive income (loss), before of income tax expense (benefit)
140
7,738
460
(636)
85
21
7,808
Less: Income tax expense (benefit)
20
92
28
166
14
4
324
Total other comprehensive income (loss), net of income tax expense (benefit)
$
120
$
7,646
$
432
$
(802)
$
71
$
17
$
7,484
Nine Months Ended September 30, 2023
Unrealized change arising during period
$
10
$
(5,171)
$
(250)
$
1,474
$
(323)
$
147
$
(4,113)
Less: Reclassification adjustments included in net income
(23)
(933)
—
—
—
(23)
(979)
Total other comprehensive income (loss), before income tax expense (benefit)
33
(4,238)
(250)
1,474
(323)
170
(3,134)
Less: Income tax expense (benefit)
9
(798)
(54)
374
33
45
(391)
Total other comprehensive income (loss), net of income tax expense (benefit)
$
24
$
(3,440)
$
(196)
$
1,100
$
(356)
$
125
$
(2,743)
The following table presents the effect of the reclassification of significant items out of AOCI on the respective line items in the Condensed Consolidated Statements of Income (Loss)(a):
Amount Reclassified from AOCI
Affected Line Item in the
Three Months Ended September 30,
Condensed Consolidated
(in millions)
2024
2023
Statements of Income (Loss)
Unrealized appreciation (depreciation) of fixed maturity securities on which allowance for credit losses was taken
Investments
$
—
$
—
Net realized gains (losses)
Total
—
—
Unrealized appreciation (depreciation) of all other investments
Investments
(84)
(163)
Net realized gains (losses)
Total
(84)
(163)
Change in retirement plan liabilities adjustment
Prior-service credit
—
(1)
(b)
Actuarial losses
(8)
(5)
(b)
Total
(8)
(6)
Total reclassifications for the period
$
(92)
$
(169)
Amount Reclassified from AOCI
Affected Line Item in the
Nine Months Ended September 30,
Condensed Consolidated
(in millions)
2024
2023
Statements of Income (Loss)
Unrealized appreciation (depreciation) of fixed maturity securities on which allowance for credit losses was taken
Investments
$
—
$
(23)
Net realized gains (losses)
Total
—
(23)
Unrealized appreciation (depreciation) of all other investments
Investments
(354)
(933)
Net realized gains (losses)
Total
(354)
(933)
Change in retirement plan liabilities adjustment
Prior-service credit
(1)
(2)
(b)
Actuarial losses
(22)
(21)
(b)
Total
(23)
(23)
Corebridge deconsolidation, net of tax
(7,214)
—
(c)
Total reclassifications for the period
$
(7,591)
$
(979)
(a)The following items are not reclassified out of AOCI and included in the Condensed Consolidated Statements of Income (Loss) and thus have been excluded from the table: (a) Change in fair value of market risk benefits attributable to changes in our own credit risk and (b) Change in the discount rates used to measure traditional and limited-payment long-duration insurance contracts.
(b)These AOCI components are included in the computation of net periodic pension cost.
(c)Represents adjustments related to the deconsolidation of Corebridge which is reflected in Income (loss) from discontinued operations, net of taxes. See the rollforward of Accumulated other comprehensive income (loss) above for further details.
ITEM 1 | Notes to Condensed Consolidated Financial Statements (unaudited) | 15. Earnings Per Common Share (EPS)
15. Earnings Per Common Share (EPS)
The basic EPS computation is based on the weighted average number of common shares outstanding, adjusted to reflect all stock dividends and stock splits. The diluted EPS computation is based on those shares used in the basic EPS computation plus common shares that would have been outstanding assuming issuance of common shares for all dilutive potential common shares outstanding and adjusted to reflect all stock dividends and stock splits, using the treasury stock method or the if-converted method, as applicable.
The following table presents the computation of basic and diluted EPS:
Three Months Ended September 30,
Nine Months Ended September 30,
(dollars in millions, except per common share data)
2024
2023
2024
2023
Numerator for EPS:
Income from continuing operations
$
481
$
701
$
1,753
$
1,879
Less: Preferred stock dividends and preferred stock redemption premiums
—
7
22
22
Income attributable to AIG common shareholders from continuing operations
481
694
1,731
1,857
Income (loss) from discontinued operations, net of income tax expense
(24)
2,046
(3,580)
2,472
Less: Net income (loss) attributable to noncontrolling interests
(2)
720
475
801
Income (loss) from discontinued operations, net of noncontrolling interest
(22)
1,326
(4,055)
1,671
Net income (loss) attributable to AIG common shareholders
$
459
$
2,020
$
(2,324)
$
3,528
Denominator for EPS:
Weighted average common shares outstanding - basic
641,621,768
712,598,496
661,691,554
725,579,999
Dilutive common shares
5,743,674
6,128,816
5,663,515
5,453,046
Weighted average common shares outstanding - diluted(a)
647,365,442
718,727,312
667,355,069
731,033,045
Income (loss) per common share attributable to AIG common shareholders:
Basic:
Income from continuing operations
$
0.75
$
0.97
$
2.62
$
2.56
Income (loss) from discontinued operations
$
(0.03)
$
1.86
$
(6.13)
$
2.30
Income (loss) attributable to AIG common shareholders
$
0.72
$
2.83
$
(3.51)
$
4.86
Diluted:
Income from continuing operations
$
0.74
$
0.97
$
2.59
$
2.54
Income (loss) from discontinued operations
$
(0.03)
$
1.84
$
(6.07)
$
2.29
Income (loss) attributable to AIG common shareholders
$
0.71
$
2.81
$
(3.48)
$
4.83
(a)Potential dilutive common shares are primarily due to our share-based employee compensation plans. The number of potential common shares excluded from diluted shares outstanding was 0.1 million and 0.1 million for the three and nine months ended September 30, 2024, respectively, and 5.1 million and 5.4 million for the three and nine months ended September 30, 2023, respectively, because the effect of including those common shares in the calculation would have been anti-dilutive.
For information regarding our repurchases of AIG Common Stock, see Note 14.
16. Income Taxes
U.S. TAX LAW CHANGES
The Inflation Reduction Act of 2022 (H.R. 5376) includes a 15 percent corporate alternative minimum tax (CAMT) on adjusted financial statement income for corporations with average profits over $1 billion over a three-year period. While the U.S. Treasury and Internal Revenue Service (IRS) issued proposed regulations for CAMT during the third quarter of 2024, there are still certain details and specifics of application of the CAMT that remain unclear and we continue to evaluate the impact of the proposed regulations along with prior guidance.
BASIS OF PRESENTATION
We file a consolidated U.S. federal income tax return with our eligible U.S. subsidiaries. Income earned by subsidiaries operating outside the U.S. is taxed, and income tax expense is recorded, based on applicable U.S. and foreign laws.
ITEM 1 | Notes to Condensed Consolidated Financial Statements (unaudited) |16. Income Taxes
TAX ACCOUNTING POLICIES
We consider our foreign earnings with respect to certain operations in Canada, South Africa, Japan, Latin America, Bermuda as well as the European, Asia Pacific and Middle East regions to be indefinitely reinvested. These earnings relate to ongoing operations and have been reinvested in active business operations. A deferred tax liability has not been recorded for those foreign subsidiaries whose earnings are considered to be indefinitely reinvested. If recorded, such deferred tax liability would not be material to our consolidated financial condition. Deferred taxes, if necessary, have been provided on earnings of non-U.S. affiliates whose earnings are not indefinitely reinvested.
Global Intangible Low-Taxed Income (GILTI) imposes U.S. taxes on the excess of a deemed return on tangible assets of certain foreign subsidiaries. Consistent with accounting guidance, we have made an accounting policy election to treat GILTI taxes as a period tax charge in the period the tax is incurred.
INTERIM TAX CALCULATION METHOD
We use the estimated annual effective tax rate method in computing our interim tax provision. Certain items, including those deemed to be unusual, infrequent or that cannot be reliably estimated, are excluded from the estimated annual effective tax rate. In these cases, the actual tax expense or benefit is reported in the same period as the related item. Certain tax effects are also not reflected in the estimated annual effective tax rate, primarily certain changes in uncertain tax positions and realizability of deferred tax assets and are recorded in the period in which the change occurs.
INTERIM TAX EXPENSE (BENEFIT)
For the three months ended September 30, 2024, the effective tax rate on income from continuing operations was 25.9 percent. The effective tax rate on income from continuing operations differs from the statutory tax rate of 21 percent primarily due to tax charges associated with the effect of foreign operations, state and local income taxes and certain non-deductible expenses, partially offset by tax benefits related to the dividends received deduction applicable to post-deconsolidation Corebridge dividends and tax exempt income. The effect of foreign operations is primarily related to income of our foreign operations taxed at statutory tax rates higher than 21 percent, other foreign taxes, and foreign income subject to U.S. taxation.
For the nine months ended September 30, 2024, the effective tax rate on income from continuing operations was 24.6 percent. The effective tax rate on income from continuing operations differs from the statutory tax rate of 21 percent primarily due to tax charges associated with the effect of foreign operations, state and local income taxes and certain non-deductible expenses, partially offset by tax benefits related to the dividends received deduction applicable to post-deconsolidation Corebridge dividends, tax exempt income and excess tax benefits related to share-based compensation payments recorded through the income statement. The effect of foreign operations is primarily related to income of our foreign operations taxed at statutory tax rates higher than 21 percent, other foreign taxes, and foreign income subject to U.S. taxation.
For the three months ended September 30, 2023, the effective tax rate on income from continuing operations was 36.3 percent. The effective tax rate on income from continuing operations differs from the statutory tax rate of 21 percent primarily due to tax charges associated with tax adjustments related to prior year returns, the effect of foreign operations, and state and local income taxes. These tax charges were partially offset by tax benefits related to tax implications related to the announced sale of Validus Re and tax exempt income. The effect of foreign operations is primarily related to income of our foreign operations taxed at statutory tax rates higher than 21 percent, other foreign taxes, and foreign income subject to U.S. taxation.
For the nine months ended September 30, 2023, the effective tax rate on income from continuing operations was 21.3 percent. The effective tax rate on income from continuing operations differs from the statutory tax rate of 21 percent primarily due to tax charges associated with tax adjustments related to prior year returns, the effect of foreign operations, tax implications related to the announced sale of Validus Re, foreign valuation allowance changes, and state and local income taxes. These tax charges were partially offset by tax benefits related to the potential resolution of an IRS audit matter, net of an increase in associated uncertain tax benefits, tax exempt income and excess tax benefits related to share-based compensation payments recorded through the income statement. The effect of foreign operations is primarily related to income of our foreign operations taxed at statutory tax rates higher than 21 percent, other foreign taxes, and foreign income subject to U.S. taxation.
ASSESSMENT OF DEFERRED TAX ASSET VALUATION ALLOWANCE
The evaluation of the recoverability of our deferred tax asset and the need for a valuation allowance requires us to weigh all positive and negative evidence to reach a conclusion that it is more likely than not that all or some portion of the deferred tax asset will not be realized. The weight given to the evidence is commensurate with the extent to which it can be objectively verified. The more negative evidence that exists, the more positive evidence is necessary and the more difficult it is to support a conclusion that a valuation allowance is not needed.
ITEM 1 | Notes to Condensed Consolidated Financial Statements (unaudited) |16. Income Taxes
During the third quarter, taxable income projections were updated to reflect the latest projections of income for our insurance and non-insurance companies, the filing of our 2023 U.S. federal consolidated income tax return, 2024 transactions, and projections of taxable income generated from prudent and feasible tax planning strategies. Given there is a shorter carryforward period to utilize remaining net operating losses, we continue to consider multiple data points and stresses. Additionally, significant market volatility continues to impact actual and projected results of our business operations as well as our views on potential effectiveness of certain prudent and feasible tax planning strategies. In order to demonstrate the predictability and sufficiency of future taxable income necessary to support the realizability of the net operating losses and foreign tax credit carryforwards, we have considered forecasts of future income for each of our businesses, including assumptions about future macroeconomic and AIG-specific conditions and events, and any impact these conditions and events may have on our prudent and feasible tax planning strategies. We also subjected the forecasts to a variety of stresses of key assumptions and evaluated the effect on tax attribute utilization.
To the extent that the valuation allowance is attributed to changes in forecast of current year taxable income, the impact is included in our estimated annualized effective tax rate. A valuation allowance related to changes in forecasts of income in future periods as well as other items not related to the current year is recorded discretely.
After factoring in multiple data points and assessing the relative weight of all positive and negative evidence, we concluded that a valuation allowance of $300 million should remain on a portion of AIG's U.S. federal consolidated income tax group tax attribute carryforwards that are not more likely than not to be realized. Accordingly, during the nine months ended September 30, 2024, we recorded no change in valuation allowance.
For the nine months ended September 30, 2024, recent changes in market conditions, including changes in interest rates, impacted the unrealized tax gains and losses in the available for sale securities portfolios of our general insurance and non-insurance companies, resulting in a decrease to deferred tax assets related to net unrealized tax capital losses. The deferred tax assets relate to the unrealized tax capital losses for which the carryforward period has not yet begun. As of September 30, 2024, based on all available evidence, we concluded that a valuation allowance of $369 million is necessary on a portion of the deferred tax assets related to unrealized tax capital losses that are not more-likely-than-not to be realized. For the three and nine months ended September 30, 2024, we recorded a decrease in valuation allowance of $204 million and $181 million, respectively, associated with the unrealized tax capital losses in AIG's available for sale securities portfolio. The valuation allowance decrease was allocated to other comprehensive income.
For the nine months ended September 30, 2024, we recognized a net $15 million decrease in deferred tax asset valuation allowance associated with certain foreign jurisdictions.
TAX EXAMINATIONS
We are currently under examination by the IRS for the tax years 2011 through 2019, and are engaging in the Appeals process for certain disagreed issues related to tax years 2007 through 2010.
ACCOUNTING FOR UNCERTAINTY IN INCOME TAXES
At both September 30, 2024 and December 31, 2023, our unrecognized tax benefits, excluding interest and penalties, were $1.4 billion. At both September 30, 2024 and December 31, 2023, the amounts of unrecognized tax benefits that, if recognized, would favorably affect the effective tax rate were $1.4 billion. Unrecognized tax benefits that would not affect the effective tax rate generally relate to such factors as the timing, rather than the permissibility of the deduction.
Interest and penalties related to unrecognized tax benefits are recognized in income tax expense. At September 30, 2024 and December 31, 2023, we had accrued liabilities of $53 million and $52 million, respectively, for the payment of interest (net of the federal benefit) and penalties. For the nine months ended September 30, 2024 and September 30, 2023, we accrued expense of $1 million and benefit of $5 million, respectively, for the payment of interest and penalties.
Although it is reasonably possible that a change in the balance of unrecognized tax benefits may occur within the next 12 months, based on the information currently available, we do not expect any change to be material to our consolidated financial condition.
17. Subsequent Events
DEBT REDEMPTION
On October 21, 2024, AIG announced that we will redeem all of our outstanding Zero Coupon Callable Notes Due 2047 (the Notes) on November 22, 2024 (the Redemption Date) for a redemption price equal to 135.631% of the face amount of the Notes outstanding on such Redemption Date. As of October 21, 2024, $400,000,000 face amount of the Notes was outstanding.
ITEM 2 |Management’s Discussion and Analysis of Financial Condition and Results of Operations
Glossary and Acronyms of Selected Insurance Terms and References
Throughout this Management’s Discussion and Analysis of Financial Condition and Results of Operations (MD&A), we use certain terms and abbreviations, which are summarized in the Glossary and Acronyms.
American International Group, Inc. (AIG) has incorporated into this discussion a number of cross-references to additional information included throughout this Quarterly Report on Form 10-Q and in our Annual Report on Form 10-K for the year ended December 31, 2023 (the 2023 Annual Report) to assist readers seeking additional information related to a particular subject.
In this Quarterly Report on Form 10-Q, unless otherwise mentioned or unless the context indicates otherwise, we use the terms “AIG,” “we,” “us,” “our” or "the Company" to refer to American International Group, Inc., a Delaware corporation, and its consolidated subsidiaries. We use the term “AIG Parent” to refer solely to American International Group, Inc., and not to any of its consolidated subsidiaries.
Cautionary Statement Regarding Forward-Looking Information and Factors That May Affect Future Results
This Quarterly Report on Form 10-Q and other publicly available documents may include, and members of management may from time to time make and discuss, statements which, to the extent they are not statements of historical or present fact, may constitute “forward-looking statements” within the meaning of the U.S. Private Securities Litigation Reform Act of 1995. These forward‑looking statements are intended to provide management’s current expectations or plans for future operating and financial performance, based on assumptions currently believed to be valid and accurate. Forward-looking statements are often preceded by, followed by or include words such as “will,” “believe,” “anticipate,” “expect,” “expectations,” “intend,” “plan,” “strategy,” “prospects,” “project,” “anticipate,” “should,” “guidance,” “outlook,” “confident,” “focused on achieving,” “view,” “target,” “goal,” “estimate” and other words of similar meaning in connection with a discussion of future operating or financial performance. These statements may include, among other things, projections, goals and assumptions that relate to future actions, prospective services or products, future performance or results of current and anticipated services or products, sales efforts, expense reduction efforts, the outcome of contingencies such as legal proceedings, anticipated organizational, business or regulatory changes, the effect of catastrophic events, both natural and man-made, and macroeconomic and/or geopolitical events, anticipated dispositions, monetization and/or acquisitions of businesses or assets, the successful integration of acquired businesses, management succession and retention plans, exposure to risk, trends in operations and financial results, and other statements that are not historical facts.
All forward-looking statements involve risks, uncertainties and other factors that may cause actual results and financial condition to differ, possibly materially, from the results and financial condition expressed or implied in the forward-looking statements. Factors that could cause actual results to differ, possibly materially, from those in specific projections, targets, goals, plans, assumptions and other forward-looking statements include, without limitation:
•the impact of adverse developments affecting economic conditions in the markets in which we operate in the U.S. and globally, including adverse developments related to financial market conditions, macroeconomic trends, fluctuations in interest rates and foreign currency exchange rates, inflationary pressures, including social inflation, pressures on the commercial real estate market, an economic slowdown or recession, any potential U.S. federal government shutdown and geopolitical events or conflicts, including the conflict between Russia and Ukraine and the conflict in Israel and the surrounding areas;
•the occurrence of catastrophic events, both natural and man-made, including the effects of climate change, geopolitical events and conflicts and civil unrest;
•disruptions in the availability or accessibility of our or a third party’s information technology systems, including hardware and software, infrastructure or networks, and the inability to safeguard the confidentiality and integrity of customer, employee or company data due to cyberattacks, data security breaches, or infrastructure vulnerabilities;
•our ability to effectively implement restructuring initiatives and potential cost-savings opportunities;
•our ability to effectively implement technological advancements, including the use of artificial intelligence (AI), and respond to competitors' AI and other technology initiatives;
•the effectiveness of strategies to retain and recruit key personnel and to implement effective succession plans;
•our ability to successfully dispose of, monetize and/or acquire businesses or assets or successfully integrate acquired businesses, and the anticipated benefits thereof;
•concentrations in our investment portfolios, including our continuing equity market exposure to Corebridge Financial, Inc. (Corebridge);
•our reliance on third-party investment managers;
•changes in the valuation of our investments, including Corebridge common stock;
•our reliance on third parties to provide certain business and administrative services;
•availability of adequate reinsurance or access to reinsurance on acceptable terms;
•changes in judgments or assumptions concerning insurance underwriting and insurance liabilities;
•concentrations of our insurance, reinsurance and other risk exposures;
•nonperformance or defaults by counterparties;
•our ability to adequately assess risk and estimate related losses as well as the effectiveness of our enterprise risk management policies and procedures, including with respect to business continuity and disaster recovery plans;
•difficulty in marketing and distributing products through current and future distribution channels;
•actions by rating agencies with respect to our credit and financial strength ratings as well as those of its businesses and subsidiaries;
•changes in judgments concerning the recognition of deferred tax assets and the impairment of goodwill;
•the effects of sanctions, including those related to the conflict in the Middle East and between Russia and Ukraine, and the failure to comply with those sanctions;
•our ability to address evolving stakeholder expectations and regulatory requirements with respect to environmental, social and governance matters;
•changes to sources of or access to liquidity;
•changes in accounting principles and financial reporting requirements or their applicability to us;
•the effects of changes in laws and regulations, including those relating to cybersecurity and data privacy, and the regulation of insurance, in the U.S. and other countries in which we operate;
•changes to tax laws in the U.S. and other countries in which we operate;
•the outcome of significant legal, regulatory or governmental proceedings;
•our ability to effectively execute on sustainability targets and standards;
•the impact of epidemics, pandemics and other public health crises and responses thereto; and
•such other factors discussed in:
–Part I, Item 2. MD&A of this Quarterly Report on Form 10‑Q;
–Part I, Item 1A. Risk Factors and Part II, Item 7. MD&A of the 2023 Annual Report; and
–our other filings with the Securities and Exchange Commission (SEC).
Forward-looking statements speak only as of the date of this report, or in the case of any document incorporated by reference, the date of that document. We are not under any obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by applicable law. Additional information as to factors that may cause actual results to differ materially from those expressed or implied in any forward-looking statements is disclosed from time to time in other filings with the SEC.
Throughout this MD&A, we present our financial condition and results of operations in the way we believe will be most meaningful and representative of our business results. Some of the measurements we use are “non-GAAP financial measures” under SEC rules and regulations. GAAP is the acronym for “generally accepted accounting principles” in the United States. The non-GAAP financial measures we present may not be comparable to similarly-named measures reported by other companies.
We use the following operating performance measures because we believe they enhance the understanding of the underlying profitability of continuing operations and trends of our business segments. We believe they also allow for more meaningful comparisons with our insurance competitors. When we use these measures, reconciliations to the most comparable GAAP measure are provided on a consolidated basis in the Consolidated Results of Operations section of this MD&A.
Book value per share, excluding investments related cumulative unrealized gains and losses in accumulated other comprehensive income (loss) (AOCI) adjusted for the cumulative unrealized gains and losses related to Fortitude Re funds withheld assets (collectively, Investments AOCI) (Adjusted book value per share) is used to show the amount of our net worth on a per share basis after eliminating the fair value of investments that can fluctuate significantly from period to period due to changes in market conditions. In addition, we adjusted for the cumulative unrealized gains and losses related to Fortitude Re funds withheld assets held by AIG in support of Fortitude Re’s reinsurance obligations to AIG (Fortitude Re funds withheld assets) since these fair value movements are economically transferred to Fortitude Re. Adjusted book value per share is derived by dividing total AIG common shareholders’ equity, excluding Investments AOCI (AIG adjusted common equity) by total common shares outstanding.
Book Value per share, excluding Goodwill, Value of business acquired (VOBA), Value of distribution channel acquired (VODA) and Other intangible assets (Tangible book value per share) is used to provide a useful measure of the realizable shareholder value on a per share basis. Tangible book value per share is derived by dividing Total AIG common shareholders’ equity, excluding intangible assets (AIG tangible common shareholders’ equity) by total common shares outstanding.
Book value per share, excluding Investments AOCI, deferred tax assets (DTA) and AIG’s ownership interest in Corebridge (Core operating book value per share) is used to show the amount of our net worth on a per share basis after eliminating Investments AOCI, DTA and AIG’s ownership interest in Corebridge. We believe this measure is useful to investors because it eliminates fair value of investments that can fluctuate significantly from period to period due to changes in market conditions. We also exclude only the portion of DTA representing U.S. tax attributes related to net operating loss carryforwards (NOLs) and corporate alternative minimum tax credits (CAMTCs) and foreign tax credits (FTCs) that have not yet been utilized. Amounts for interim periods are estimates based on projections of full-year attribute utilization. As NOLs, CAMTCs and FTCs are utilized, the portion of the DTA utilized is included. We exclude AIG’s ownership interest in Corebridge since it is not a core long-term investment for AIG. Core operating book value per share is derived by dividing total AIG common shareholders’ equity, excluding Investments AOCI, DTA and AIG’s ownership interest in Corebridge (AIG core operating shareholders’ equity) by total common shares outstanding.
Return on equity – Adjusted after-tax income excluding Investments AOCI (Adjusted return on equity) is used to show the rate of return on common shareholders’ equity excluding Investments AOCI. We believe this measure is useful to investors because it eliminates fair value of investments which can fluctuate significantly from period to period due to changes in market conditions. Adjusted return on equity is derived by dividing actual or, for interim periods, annualized adjusted after-tax income attributable to AIG common shareholders by average AIG adjusted common shareholders’ equity.
Return on Equity – Adjusted After-tax Income, Excluding Goodwill, VOBA, VODA and Other Intangible assets (Return on tangible equity) is used to show the return on AIG tangible common shareholder’s equity, which we believe is a useful measure of realizable shareholder value. We exclude Goodwill, VOBA, VODA and Other intangible assets from AIG common shareholders’ equity to derive AIG tangible common shareholders’ equity. Return on AIG tangible common equity is derived by dividing actual or, for interim periods, annualized adjusted after-tax income attributable to AIG common shareholders by average AIG tangible common equity.
Return on equity – Adjusted after-tax income excluding Investments AOCI, DTA and AIG’s ownership interest in Corebridge (Core operating return on equity) is used to show the rate of return on common shareholders’ equity excluding Investments AOCI, DTA and AIG’s ownership interest in Corebridge. We believe this measure is useful to investors because it eliminates fair value of investments that can fluctuate significantly from period to period due to changes in market conditions. We also exclude only the portion of DTA representing U.S. tax attributes related to NOLs and CAMTCs and FTCs that have not yet been utilized. Amounts for interim periods are estimates based on projections of full-year attribute utilization. As NOLs, CAMTCs and FTCs are utilized, the portion of the DTA utilized is included. We exclude AIG’s ownership interest in Corebridge since it is not a core long-term investment for AIG. This metric will provide greater insight as to the underlying profitability of our property and casualty business. Core operating return on equity is derived by dividing actual or, for interim periods, annualized adjusted after-tax income attributable to AIG common shareholders by average AIG core operating shareholders’ equity.
Adjusted revenues exclude Net realized gains (losses), income from non-operating litigation settlements (included in Other income for GAAP purposes) and income from elimination of the international reporting lag. Adjusted revenues is a GAAP measure for our segments.
Adjusted pre-tax income is derived by excluding the items set forth below from income from continuing operations before income tax. This definition is consistent across our segments. These items generally fall into one or more of the following broad categories: legacy matters having no relevance to our current businesses or operating performance; adjustments to enhance transparency to the underlying economics of transactions; and measures that we believe to be common to the industry. APTI is a GAAP measure for our segments. Excluded items include the following:
•changes in the fair values of equity securities and AIG's ownership interest in Corebridge;
•net investment income on Fortitude Re funds withheld assets;
•net realized gains and losses on Fortitude Re funds withheld assets;
•loss (gain) on extinguishment of debt;
•all net realized gains and losses except earned income (periodic settlements and changes in settlement accruals) on derivative instruments used for non-qualifying (economic) hedging or for asset replication. Earned income on such economic hedges is reclassified from net realized gains and losses to specific APTI line items based on the economic risk being hedged (e.g. net investment income);
•income or loss from discontinued operations;
•net loss reserve discount benefit (charge);
•pension expense related to lump sum payments to former employees;
•net gain or loss on divestitures and other;
•non-operating litigation reserves and settlements;
•restructuring and other costs related to initiatives designed to reduce operating expenses, improve efficiency and simplify our organization;
•the portion of favorable or unfavorable prior year reserve development for which we have ceded the risk under retroactive reinsurance agreements and related changes in amortization of the deferred gain;
•integration and transaction costs associated with acquiring or divesting businesses;
•losses from the impairment of goodwill;
•non-recurring costs associated with the implementation of non-ordinary course legal or regulatory changes or changes to accounting principles; and
•income from elimination of the international reporting lag.
Adjusted after-tax income attributable to AIG common shareholders is derived by excluding the tax effected adjusted pre-tax income (APTI) adjustments described above, dividends on preferred stock and preferred stock redemption premiums, noncontrolling interest on net realized gains (losses), other non-operating expenses and the following tax items from net income attributable to AIG:
•deferred income tax valuation allowance releases and charges;
•changes in uncertain tax positions and other tax items related to legacy matters having no relevance to our current businesses or operating performance; and
•net tax charge related to the enactment of the Tax Cuts and Jobs Act.
Ratios: We, along with most property and casualty insurance companies, use the loss ratio, the expense ratio and the combined ratio as measures of underwriting performance. These ratios are relative measurements that describe, for every $100 of net premiums earned, the amount of losses and loss adjustment expenses (which for General Insurance excludes net loss reserve discount), and the amount of other underwriting expenses that would be incurred. A combined ratio of less than 100 indicates underwriting income and a combined ratio of over 100 indicates an underwriting loss. Our ratios are calculated using the relevant segment information calculated under GAAP, and thus may not be comparable to similar ratios calculated for regulatory reporting purposes. The underwriting environment varies across countries and products, as does the degree of litigation activity, all of which affect such ratios. In addition, investment returns, local taxes, cost of capital, regulation, product type and competition can have an effect on pricing and consequently on profitability as reflected in underwriting income and associated ratios.
Accident year loss and accident year combined ratios, as adjusted (Accident year loss ratio, ex-CATs and Accident year combined ratio, ex-CATs): both the accident year loss and accident year combined ratios, as adjusted, exclude catastrophe losses and related reinstatement premiums, prior year development, net of premium adjustments, and the impact of reserve discounting. Natural catastrophe losses are generally weather or seismic events, in each case, having a net impact on AIG in excess of $10 million and man-made catastrophe losses, such as terrorism and civil disorders that exceed the $10 million threshold. We believe that as adjusted ratios are meaningful measures of our underwriting results on an ongoing basis as they exclude catastrophes and the impact of reserve discounting which are outside of management’s control. We also exclude prior year development to provide transparency related to current accident year results.
Results from discontinued operations, including Corebridge, are excluded from all of these measures.
The preparation of financial statements in accordance with GAAP requires the application of accounting policies that often involve a significant degree of judgment.
The accounting policies that we believe are most dependent on the application of estimates and assumptions, which are critical accounting estimates, are related to the determination of:
•loss reserves;
•reinsurance assets, including the allowance for credit losses and disputes;
•goodwill impairment;
•allowance for credit losses on certain investments, primarily on loans and available for sale fixed maturity securities;
•fair value measurements of certain financial assets and financial liabilities; and
•income taxes, in particular the recoverability of our deferred tax asset and establishment of provisions for uncertain tax positions.
These accounting estimates require the use of assumptions about matters, some of which are highly uncertain at the time of estimation. To the extent actual experience differs from the assumptions used, our consolidated financial condition, results of operations and cash flows could be materially affected.
Certain critical accounting estimates were eliminated as a result of the Corebridge deconsolidation. There were no changes to the remaining critical accounting estimates. For further details, see Note 4 to the Condensed Consolidated Financial Statements.
For a detailed discussion of our critical accounting estimates, see Part II, Item 7. MD&A – Critical Accounting Estimates in the 2023 Annual Report.
Executive Summary
OVERVIEW
This overview of the MD&A highlights selected information and may not contain all of the information that is important to current or potential investors in our securities. You should read this Quarterly Report on Form 10-Q, together with the 2023 Annual Report, in their entirety for a more detailed description of events, trends, uncertainties, risks and critical accounting estimates affecting us.
OPERATING STRUCTURE
In September 2022, AIG closed on the initial public offering of Corebridge. Since September 2022 and through June 9, 2024, AIG sold portions of its interests in Corebridge through secondary public offerings. On June 9, 2024, AIG held 48.4 percent of Corebridge common stock, waived its right to majority representation on the Corebridge Board of Directors and one of AIG's designees resigned from the Corebridge Board of Directors as of June 9, 2024 (the Deconsolidation Date). As a result, AIG met the requirements for the deconsolidation of Corebridge. The historical financial results of Corebridge, for all periods presented, are reflected in these Condensed Consolidated Financial Statements as discontinued operations.
Due to share repurchases by Corebridge and sale of shares by AIG after the Deconsolidation Date, as of September 30, 2024, AIG held 48.6 percent of the outstanding common stock of Corebridge.
As a result of the Corebridge deconsolidation, we no longer present a Life and Retirement segment and no longer include asset management and Corebridge Life Holdings, Inc. interest and general expenses within the Other Operations segment. Historical results of Other Operations have been revised to reflect these changes. Previously reported results for the General Insurance segment were not impacted by the deconsolidation of Corebridge. As of September 30, 2024, AIG reports the results of its businesses through two segments – General Insurance and Other Operations. General Insurance consists of two operating segments – North America and International. Other Operations is primarily comprised of corporate and consolidation and eliminations.
For additional information on our business segments, see Note 3 to the Condensed Consolidated Financial Statements, and for information regarding the separation of Life and Retirement and the sale of our global individual personal travel insurance and assistance business, see Notes 1 and 4 to the Condensed Consolidated Financial Statements.
Business Segments
General Insurance
General Insuranceis a leading provider of insurance products and services for commercial and personal insurance customers. It includes one of the world’s most far-reaching property casualty networks. General Insurance offers a broad range of products to customers through a diversified, multichannel distribution network. Customers value General Insurance’s strong capital position, extensive risk management and claims experience and its ability to be a market leader in critical lines of the insurance business.
General Insurance includes the following major operating companies: National Union Fire Insurance Company of Pittsburgh, Pa. (National Union); American Home Assurance Company (American Home); Lexington Insurance Company (Lexington); AIG General Insurance Company, Ltd.; AIG Asia Pacific Insurance, Pte, Ltd.; AIG Europe S.A.; American International Group UK Ltd.; Talbot Underwriting Ltd. (Talbot); Western World Insurance Company and Glatfelter Insurance Group (Glatfelter).
Other Operations
Other Operationsprimarily consists of income from assets held by AIG Parent and other corporate subsidiaries, deferred tax assets related to tax attributes, corporate expenses and intercompany eliminations, results of our consolidated investment entities, General Insurance portfolios in run-off as well as the historical results of our legacy insurance lines ceded to Fortitude Re.
REGULATORY, INDUSTRY AND ECONOMIC FACTORS
Regulatory Environment
Our operations around the world are subject to regulation by many different types of regulatory authorities, including insurance and securities in the United States and abroad. The insurance and financial services industries are generally subject to close regulatory scrutiny and supervision.
For example, on March 6, 2024, the SEC adopted its climate-related disclosure rules, which require registrants to provide detailed climate-related disclosures in registration statements and periodic reports, but the rules have been stayed pending the completion of judicial review. Other jurisdictions in which we operate, including the European Union, have adopted or are considering similar (and in some cases more stringent) climate- and sustainability-related reporting requirements, including through the Corporate Sustainability Reporting Directive. In addition, the Corporate Sustainability Due Diligence Directive imposes due diligence requirements for identifying and mitigating potential environmental and human rights impacts of covered entities and their value chains, along with requirements to adopt and disclose a climate transition plan.
In the European Union, the EU Digital Operational Resilience Act (DORA) will require covered entities, including insurance intermediaries, reinsurance intermediaries and ancillary insurance intermediaries, other than micro-, small, or medium enterprises, to comply with a wide range of organizational and technical requirements to identify, manage and mitigate operational risk arising from use of network and information systems and, in particular, the use of third party information and communication technology service providers. Covered entities will be required to comply with DORA by January 2025.
Our insurance subsidiaries are subject to regulation and supervision by the states and jurisdictions in which they do business. We expect that the domestic and international regulations applicable to us and our regulated entities will continue to evolve for the foreseeable future.
For information regarding our regulation and supervision by different regulatory authorities in the United States and abroad, see Part I, Item 1. Business – Regulation and Part I, Item 1A. Risk Factors – Regulation in the 2023 Annual Report and Note 16 to the Condensed Consolidated Financial Statements.
Impact of Changes in the Interest Rate Environment
Certain U.S. benchmark rates continued to fluctuate in 2024 as markets reacted to change in inflation trends, geopolitical risk and the decisions of the Board of Federal Reserve System. Our Net investment income is impacted by market interest rates as well as the deployment of asset allocation strategies to enhance yield, manage duration and interest rate risk. The change in interest rates and credit spreads impact our ability to reinvest future cash flows at rates equal or greater than the rates on sales and maturities. For additional information on our investment and asset-liability management strategies, see Investments.
Impact of Currency Volatility
Currency volatility remains acute. Strengthening of the U.S. dollar against the Euro, British pound and the Japanese yen (the Major Currencies) impacts income for our businesses with substantial international operations. In particular, growth trends in net premiums written reported in U.S. dollars can differ significantly from those measured in original currencies. The net effect on underwriting results, however, is significantly mitigated, as both revenues and expenses are similarly affected.
These currencies may continue to fluctuate, especially as a result of central bank responses to inflation, concerns regarding future economic growth and other macroeconomic factors, and such fluctuations will affect net premiums written growth trends reported in U.S. dollars, as well as financial statement line item comparability.
General Insurance businesses are transacted in most major foreign currencies. The following table presents the average of the quarterly weighted average exchange rates of the Major Currencies, which have the most significant impact on our businesses:
Three Months Ended September 30,
Percentage
Nine Months Ended September 30,
Percentage
Rate for 1 USD
2024
2023
Change
2024
2023
Change
Major Currency:
GBP
0.78
0.79
(1)
%
0.79
0.81
(2)
%
EUR
0.92
0.91
1
%
0.92
0.92
—
%
JPY
153.68
142.47
8
%
151.18
136.68
11
%
Unless otherwise noted, references to the effects of foreign exchange in the General Insurance discussion of results of operations are with respect to movements in the Major Currencies included in the preceding table.
Consolidated Results of Operations
The following section provides a comparative discussion of our consolidated results of operations on a reported basis for the three and nine months ended September 30, 2024 and 2023. Factors that relate primarily to a specific business are discussed in more detail within the business segment operations section.
For information regarding the critical accounting estimates that affect our results of operations, see Critical Accounting Estimates above and Part II, Item 7. MD&A – Critical Accounting Estimates in the 2023 Annual Report.
The following table presents our consolidated results of operations and other key financial metrics:
Three Months Ended September 30,
Percentage Change
Nine Months Ended September 30,
Percentage Change
(in millions)
2024
2023
2024
2023
Revenues:
Premiums
$
5,945
$
6,543
(9)
%
$
17,564
$
19,533
(10)
%
Net investment income:
Net investment income - excluding Fortitude Re funds withheld assets
922
827
11
2,819
2,431
16
Net investment income - Fortitude Re funds withheld assets
51
29
76
123
106
16
Total net investment income
973
856
14
2,942
2,537
16
Net realized gains (losses):
Net realized gains (losses) - excluding Fortitude Re funds withheld assets and embedded derivative
8
(189)
NM
(238)
(571)
58
Net realized losses on Fortitude Re funds withheld assets
(18)
(3)
NM
(38)
(64)
41
Net realized gains (losses) on Fortitude Re funds withheld embedded derivative
Income from continuing operations before income tax expense
649
1,100
(41)
2,324
2,388
(3)
Income tax expense
168
399
(58)
571
509
12
Income from continuing operations
481
701
(31)
1,753
1,879
(7)
Income (loss) from discontinued operations, net of income taxes
(24)
2,046
NM
(3,580)
2,472
NM
Net income (loss)
457
2,747
(83)
(1,827)
4,351
NM
Less: Net income (loss) attributable to noncontrolling interests
(2)
720
NM
475
801
(41)
Net income (loss) attributable to AIG
459
2,027
(77)
(2,302)
3,550
NM
Less: Dividends on preferred stock and preferred stock redemption premiums
—
7
NM
22
22
—
Net income (loss) attributable to AIG common shareholders
$
459
$
2,020
(77)
%
$
(2,324)
$
3,528
NM
%
(in millions, except per share data)
September 30, 2024
December 31, 2023
Balance sheet data:
Total assets
$
169,449
$
539,306
Long-term debt
9,892
10,375
Debt of consolidated investment entities
162
231
Total AIG shareholders’ equity
45,039
45,351
Book value per share
71.46
65.14
Adjusted book value per share
73.90
78.50
Tangible book value per share
65.37
59.60
Core operating book value per share
54.68
52.74
NET INCOME (LOSS) ATTRIBUTABLE TO AIG COMMON SHAREHOLDERS
Three Months Ended September 30, 2024 and 2023 Comparison
Net income (loss) attributable to AIG common shareholders decreased $1.6 billion due to the following:
•a decrease in Income (loss) from discontinued operations, net of income taxes of $2.1 billion primarily as a result of the inclusion of Corebridge net income in 2023; and
•a decrease in underwriting income driven by unfavorable prior year loss reserve development of $187 million which does not reflect the benefit of recoveries under a retroactive adverse development cover, as well as the sale of AIG Re and the impact of mix change, partially offset by portfolio growth.
The decrease in Net income (loss) attributable to AIG common shareholders was partially offset by the following, on a pre-tax basis:
•an increase in Net realized gains excluding Fortitude Re funds withheld assets and embedded derivative of $197 million, primarily driven by a $95 million increase in foreign exchange gains and lower losses on sales of securities of $86 million and higher derivative and hedge activity gains of $27 million, partially offset by lower sales on alternative investments of $43 million;
•an increase in Net investment income of $117 million primarily driven by dividends received from Corebridge of $65 million, an increase in the fair value of equity securities of $29 million, an increase in the fair value of fixed maturity securities where we elected the fair value option of $25 million as a result of the higher interest rate environment and higher returns on our alternative investments of $23 million, partially offset by changes in Corebridge stock price of $(35) million;
•a decrease in income attributable to noncontrolling interest of $722 million primarily driven by the deconsolidation of Corebridge; and
•a decrease in income tax expense of $231 million as a result of lower income from continuing operations.
Nine Months Ended September 30, 2024 and 2023 Comparison
Net income (loss) attributable to AIG common shareholders decreased $5.9 billion due to the following:
•a decrease in Income (loss) from discontinued operations, net of income taxes of $6.1 billion primarily as a result of the loss on deconsolidation of Corebridge of $4.7 billion and Corebridge net income in 2023;
•a decrease in underwriting income driven by unfavorable prior year reserve development of $79 million, which does not reflect the benefit of recoveries under a retroactive adverse development cover, as well as the sales of AIG Re and Crop Risk Services, partially offset by improved portfolio performance and growth; and
•an increase in income tax expense of $62 million as a result of prior year discrete items.
The decrease in Net income (loss) attributable to AIG common shareholders was partially offset by the following, on a pre-tax basis:
•an increase in Net investment income of $405 million primarily driven by dividends received from Corebridge of $133 million and changes in its stock price of $30 million, higher income on available for sale fixed maturity securities of $144 million and an increase in the fair value of equity securities of $51 million, partially offset by lower returns on our alternative investments of $30 million;
•an increase in Net realized gains excluding Fortitude Re funds withheld assets and embedded derivative of $333 million, primarily driven by a $232 milliondecrease in losses from sales of securities, lower derivative and hedge activity losses of $71 million and a $51 million increase in foreign exchange gains, partially offset by lower sales on alternative investments of $30 million; and
•a decrease in net income attributable to noncontrolling interest of $326 million primarily driven by the deconsolidation of Corebridge.
INCOME TAX EXPENSE ANALYSIS
For the three months ended September 30, 2024 and 2023, the effective tax rate on income (loss) from continuing operations was 25.9 percent and 36.3 percent, respectively. For the nine months ended September 30, 2024 and 2023, the effective tax rate on income (loss) from continuing operations was 24.6 percent and 21.3 percent, respectively.
For additional information, see Note 16 to the Condensed Consolidated Financial Statements.
NON-GAAP RECONCILIATIONS
The following table presents reconciliations of Book value per share to Adjusted book value per share, Tangible book value per share and Core operating book value per share, which are non-GAAP measures. For additional information, see Use of Non-GAAP Measures.
September 30,
December 31,
(in millions, except per share data)
2024
2023
Total AIG shareholders' equity
$
45,039
$
45,351
Preferred equity
—
485
Total AIG common shareholders' equity
45,039
44,866
Less: Investments related AOCI
(2,074)
(10,994)
Add: Cumulative unrealized gains and losses related to Fortitude Re funds withheld assets
(531)
(1,791)
Subtotal: Investments AOCI
(1,543)
(9,203)
Adjusted common shareholders' equity
$
46,582
$
54,069
Total AIG common shareholders' equity
$
45,039
$
44,866
Less Intangible Assets:
Goodwill
3,453
3,422
Value of distribution channel acquired
132
145
Other intangibles
249
249
Total intangibles assets
3,834
3,816
AIG tangible common shareholders' equity
$
41,205
$
41,050
Total AIG common shareholders' equity
$
45,039
$
44,866
Less: AIG's ownership interest in Corebridge
8,143
6,738
Less: Investments related AOCI - AIG
(2,074)
(3,084)
Add: Cumulative unrealized gains and losses related to Fortitude Re funds withheld assets - AIG
The following table presents reconciliations of Return on equity to Adjusted return on equity, Tangible return on equity and Core operating return on equity, which are non-GAAP measures. For additional information, see Use of Non-GAAP Measures.
Three Months Ended September 30,
Nine Months Ended September 30,
Year Ended December 31,
(dollars in millions)
2024
2023
2024
2023
2023
Actual or annualized net income (loss) attributable to AIG common shareholders
$
1,836
$
8,080
$
(3,099)
$
4,704
$
3,614
Actual or annualized adjusted after-tax income attributable to AIG common shareholders
$
3,192
$
2,984
$
3,255
$
3,048
$
3,181
Average AIG common shareholders' equity
$
44,742
$
40,734
$
44,434
$
41,196
$
41,930
Less: Average investments AOCI
(2,194)
(16,091)
(5,864)
(16,244)
(14,836)
Average AIG adjusted common shareholders' equity
$
46,936
$
56,825
$
50,298
$
57,440
$
56,766
Average AIG common shareholders' equity
$
44,742
$
40,734
$
44,434
$
41,196
$
41,930
Less: Average intangibles
3,813
3,824
3,811
4,134
4,070
Average AIG tangible common shareholders' equity
$
40,929
$
36,910
$
40,623
$
37,062
$
37,860
Average AIG common shareholders' equity
$
44,742
$
40,734
$
44,434
$
41,196
$
41,930
Less: Average AIG's ownership interest in Corebridge
8,355
6,591
7,510
7,536
7,376
Less: Average Investments AOCI - AIG
(2,194)
(4,495)
(2,387)
(3,440)
(3,254)
Less: Average deferred tax assets
4,017
4,119
4,125
4,325
4,322
Average AIG core operating shareholders' equity
$
34,564
$
34,519
$
35,186
$
32,775
$
33,486
Return on equity
4.1
%
19.8
%
(7.0)
%
11.4
%
8.6
%
Adjusted return on equity
6.8
5.3
6.5
5.3
5.6
Return on tangible equity
7.8
8.1
8.0
8.2
8.4
Core operating return on equity
9.2
8.6
9.3
9.3
9.5
The following table presents a reconciliation of revenues to adjusted revenues
Three Months Ended September 30,
Nine Months Ended September 30,
(in millions)
2024
2023
2024
2023
Revenues
$
6,751
$
7,267
$
20,074
$
21,412
Changes in the fair values of equity securities and AIG's investment in Corebridge
(25)
(31)
(172)
(93)
Other (income) expense - net
1
(17)
(16)
(40)
Net investment income on Fortitude Re funds withheld assets
(51)
(29)
(123)
(106)
Net realized losses on Fortitude Re funds withheld assets
18
3
38
64
Net realized (gains) losses on Fortitude Re funds withheld embedded derivative
157
(57)
158
25
Net realized (gains) losses(a)
(8)
191
232
577
Non-operating litigation reserves and settlements
—
—
—
(1)
Net impact from elimination of international reporting lag(b)
—
—
—
(4)
Adjusted revenues
$
6,843
$
7,327
$
20,191
$
21,834
(a)Includes all net realized gains and losses except earned income (periodic settlements and changes in settlement accruals) on derivative instruments used for non-qualifying (economic) hedging or for asset replication and net realized gains and losses on Fortitude Re funds withheld assets.
(b)For additional information, see Note 1 to the Consolidated Financial Statements in the 2023 Annual Report.
The following table presents a reconciliation of pre-tax income (loss)/net income (loss) attributable to AIG to adjusted pre-tax income (loss)/adjusted after-tax income (loss) attributable to AIG:
Three Months Ended September 30,
2024
2023
(in millions, except per common share data)
Pre-tax
Total Tax (Benefit) Charge
Non- controlling Interests(c)
After Tax
Pre-tax
Total Tax (Benefit) Charge
Non- controlling Interests(c)
After Tax
Pre-tax income/net income, including noncontrolling interests
$
649
$
168
$
—
$
457
$
1,100
$
399
$
—
$
2,747
Noncontrolling interests
2
2
(720)
(720)
Pre-tax income/net income attributable to AIG - including discontinued operations
$
649
$
168
$
2
$
459
$
1,100
$
399
$
(720)
$
2,027
Dividends on preferred stock and preferred stock redemption premiums
—
7
Net income attributable to AIG common shareholders
$
459
$
2,020
Changes in uncertain tax positions and other tax adjustments
3
—
(3)
(57)
—
57
Deferred income tax valuation allowance (releases) charges
9
—
(9)
(5)
—
5
Changes in the fair values of equity securities and AIG's investment in Corebridge
(25)
(5)
—
(20)
(31)
(6)
—
(25)
Loss on extinguishment of debt and preferred stock redemption premiums
—
—
—
—
21
4
—
17
Net investment income on Fortitude Re funds withheld assets
(51)
(11)
—
(40)
(29)
(6)
—
(23)
Net realized losses on Fortitude Re funds withheld assets
18
4
—
14
3
—
—
3
Net realized (gains) losses on Fortitude Re funds withheld embedded derivative
157
33
—
124
(57)
(12)
—
(45)
Net realized (gains) losses(a)
(7)
(27)
—
20
190
42
—
148
(Income) loss from discontinued operations
24
(2,046)
Net gain on divestitures and other
8
28
—
(20)
(101)
(21)
—
(80)
Unfavorable (favorable) prior year development and related amortization changes ceded under retroactive reinsurance agreements
126
27
—
99
(75)
(16)
—
(59)
Net loss reserve discount charge
29
6
—
23
5
1
—
4
Pension expense related to lump sum payments to former employees
—
—
—
—
8
2
—
6
Integration and transaction costs associated with acquiring or divesting businesses
22
5
—
17
2
—
—
2
Restructuring and other costs
137
28
—
109
49
10
—
39
Non-recurring costs related to regulatory or accounting changes
4
1
—
3
4
1
—
3
Noncontrolling interests(c)
(2)
(2)
720
720
Adjusted pre-tax income/Adjusted after-tax income attributable to AIG common shareholders
$
1,067
$
269
$
—
$
798
$
1,089
$
336
$
—
$
746
Weighted average diluted shares outstanding
647.4
718.7
Income per common share attributable to AIG common shareholders (diluted)
$
0.71
$
2.81
Adjusted after-tax income per common share attributable to AIG common shareholders (diluted)
$
1.23
$
1.04
Nine Months Ended September 30,
2024
2023
(in millions, except per common share data)
Pre-tax
Total Tax (Benefit) Charge
Non- controlling Interests(c)
After Tax
Pre-tax
Total Tax (Benefit) Charge
Non- controlling Interests(c)
After Tax
Pre-tax income/net income (loss), including noncontrolling interests
$
2,324
$
571
$
—
$
(1,827)
$
2,388
$
509
$
—
$
4,351
Noncontrolling interests
(475)
(475)
(801)
(801)
Pre-tax income/net income (loss) attributable to AIG - including discontinued operations
$
2,324
$
571
$
(475)
$
(2,302)
$
2,388
$
509
$
(801)
$
3,550
Dividends on preferred stock and preferred stock redemption premiums
22
22
Net income (loss) attributable to AIG common shareholders
$
(2,324)
$
3,528
Changes in uncertain tax positions and other tax adjustments
8
—
(8)
175
—
(175)
Deferred income tax valuation allowance (releases) charges
15
—
(15)
(51)
—
51
Changes in the fair values of equity securities and AIG's investment in Corebridge
(172)
(36)
—
(136)
(93)
(19)
—
(74)
Loss on extinguishment of debt and preferred stock redemption premiums
1
—
—
16
21
4
—
17
Net investment income on Fortitude Re funds withheld assets
(123)
(26)
—
(97)
(106)
(22)
—
(84)
Net realized losses on Fortitude Re funds withheld assets
38
8
—
30
64
13
—
51
Net realized losses on Fortitude Re funds withheld embedded derivative
158
33
—
125
25
5
—
20
Net realized losses(a)
234
28
—
206
573
131
—
442
(Income) loss from discontinued operations
3,580
(2,472)
Net gain on divestitures and other
(94)
12
—
(106)
(89)
(19)
—
(70)
Unfavorable (favorable) prior year development and related amortization changes ceded under retroactive reinsurance agreements
66
14
—
52
(112)
(24)
—
(88)
Net loss reserve discount charge
131
27
—
104
85
18
—
67
Pension expense related to lump sum payments to former employees
—
—
—
—
62
13
—
49
Integration and transaction costs associated with acquiring or divesting businesses
37
8
—
29
10
2
—
8
Restructuring and other costs(d)
630
132
—
498
264
55
—
209
Non-recurring costs related to regulatory or accounting changes
15
3
—
12
19
4
—
15
Net impact from elimination of international reporting lag(b)
—
—
—
—
(12)
(3)
—
(9)
Noncontrolling interests(c)
475
475
801
801
Adjusted pre-tax income (loss)/Adjusted after-tax income (loss) attributable to AIG common shareholders
Income (loss) per common share attributable to AIG common shareholders (diluted)
$
(3.48)
$
4.83
Adjusted after-tax income per common share attributable to AIG common shareholders (diluted)
$
3.66
$
3.13
(a)Includes all net realized gains and losses except earned income (periodic settlements and changes in settlement accruals) on derivative instruments used for non-qualifying (economic) hedging or for asset replication and net realized gains and losses on Fortitude Re funds withheld assets.
(b)For additional information, see Note 1 to the Consolidated Financial Statements in the 2023 Annual Report.
(c)Noncontrolling interest primarily relates to Corebridge and is the portion of Corebridge earnings that AIG did not own. Corebridge is consolidated until June 9, 2024. The historical results of Corebridge owned by AIG are reflected in the Income (loss) from discontinued operations, net of income taxes.
(d)In the three and nine months ended September 30, 2024, Restructuring and other costs increased primarily as a result of employee-related costs, including severance, and real estate impairment charges.
PRE-TAX INCOME (LOSS) COMPARISON
Pre-tax income was $649 million and $1.1 billion in the three months ended September 30, 2024 and 2023, respectively. Pre-tax income was $2.3 billion and $2.4 billion in the nine months ended September 30, 2024 and 2023, respectively.
For the main drivers impacting AIG’s results of operations, see – Net Income (Loss) Attributable to AIG Common Shareholders above.
ADJUSTED PRE-TAX INCOME (LOSS) COMPARISON
Adjusted pre-tax income was $1.1 billion and $1.1 billion in the three months ended September 30, 2024 and 2023, respectively. Adjusted pre-tax income was $3.2 billion and $3.1 billion in the nine months ended September 30, 2024 and 2023, respectively.
For the main drivers impacting AIG’s adjusted pre-tax income (loss), see Business Segment Operations.
Business Segment Operations
Our business operations consist of General Insurance and Other Operations.
General Insurance consists of two operating segments: North America and International. Other Operations is primarily comprised of corporate and consolidation and eliminations.
The following table summarizes Adjusted pre-tax income (loss) from our business segment operations. See also Note 3 to the Condensed Consolidated Financial Statements.
Three Months Ended September 30,
Nine Months Ended September 30,
(in millions)
2024
2023
2024
2023
General Insurance
North America - Underwriting income
$
37
$
235
$
424
$
886
International - Underwriting income
400
376
1,039
821
Net investment income
773
756
2,281
2,227
General Insurance
1,210
1,367
3,744
3,934
Other Operations
Other Operations before consolidation and eliminations
ITEM 2 | Business Segment Operations | General Insurance
General Insurance
General Insurance is managed by our geographic markets of North America and International. Our global presence is underpinned by our multinational capabilities to provide Commercial Lines and Personal Insurance products within these geographic markets.
PRODUCTS AND DISTRIBUTION
North America consists of insurance businesses in the United States, Canada and Bermuda.
International consists of regional insurance businesses in Japan, the United Kingdom, Europe, Middle East and Africa (EMEA region), Asia Pacific, Latin America and Caribbean, and China. International also includes the results of Talbot as well as AIG’s Global Specialty business.
Property: Products include commercial and industrial property, including business interruption, as well as package insurance products and services that cover exposures to man-made and natural disasters.
Liability: Products include general liability, environmental, commercial automobile liability, workers’ compensation, excess casualty and crisis management insurance products. Casualty also includes risk-sharing and other customized structured programs for large corporate and multinational customers.
Financial Lines: Products include professional liability insurance for a range of businesses and risks, including directors and officers, mergers and acquisitions, fidelity, employment practices, fiduciary liability, cyber risk, kidnap and ransom, and errors and omissions insurance.
Specialty: Products include marine, energy-related property insurance products, aviation, political risk, trade credit, trade finance and portfolio solutions.
On July 3, 2023, AIG completed the sale of Crop Risk Services, Inc. (CRS) to American Financial Group, Inc. and in substance, AIG exited the crop business. For periods prior to the sale of CRS, the underwriting results are included in adjusted pre-tax income of General Insurance – North America.
On November 1, 2023, AIG completed the sale of Validus Reinsurance, Ltd. (Validus Re), including AlphaCat Managers Ltd. and Talbot Treaty reinsurance business to RenaissanceRe Holdings Ltd. (RenaissanceRe). For periods prior to the sale of Validus Re, the underwriting results are included in adjusted pre-tax income of General Insurance – North America.
For additional information, see Note 1 to the Consolidated Financial Statements in the 2023 Annual Report.
Accident & Health: Products include voluntary and sponsor-paid personal accident and supplemental health products for individuals, employees, associations and other organizations, as well as a broad range of travel insurance products and services for leisure and business travelers.
On June 26, 2024, AIG entered into a definitive agreement to sell its global individual personal travel insurance and assistance business to Zurich Insurance Group. The agreement includes the Travel Guard business and its servicing capabilities, excluding our travel insurance businesses in Japan and our AIG joint venture arrangement in India. Travel coverages offered through AIG’s Accident & Health business are also excluded from this agreement. For additional information, see Note 4 to the Condensed Consolidated Financial Statements.
Personal Lines: Products include personal auto and personal property in selected markets, comprehensive extended warranty, device protection insurance, home warranty and related services, and insurance for high net-worth individuals offered through Private Client Select (PCS) in the U.S. that covers auto, homeowners, umbrella, yacht, fine art and collections.
ITEM 2 | Business Segment Operations | General Insurance
General Insurance products in North America and International markets are distributed through various channels, including captive and independent agents, brokers, affinity partners, airlines and travel agents, and retailers. Our global platform enables writing multinational and cross-border risks in both Commercial Lines and Personal Insurance.
BUSINESS STRATEGY
Profitable Growth: Build on our high-quality portfolio by focusing on targeted growth through continued underwriting discipline, improved retentions and new business development. Deploy capital efficiently to act opportunistically and achieve growth in profitable lines, geographies and customer segments, while taking a disciplined underwriting approach to exposure management, terms and conditions and rate change to achieve our risk/return hurdles. Continue to be open to inorganic growth opportunities in profitable markets and segments to expand our capabilities and footprint.
Underwriting Excellence: Continue to enhance portfolio optimization through strength of underwriting framework and guidelines as well as clear communication of risk appetite and rate adequacy. Empower and increase accountability of the underwriter and continue to integrate underwriting, claims and actuarial to enable better decision making. Focus on enhancing risk selection, driving consistent underwriting best practices and building robust monitoring standards to improve underwriting results.
Reinsurance Optimization: Strategically partner with reinsurers to effectively manage exposure to losses arising from frequency of large catastrophic events and severity from individual risk losses. We strive to optimize our reinsurance program to manage volatility and protect the balance sheet from tail events and unpredictable net losses in support of our profitable growth objectives.
COMPETITION AND CHALLENGES
General Insurance operates in a highly competitive industry against global, national and local insurers and reinsurers and underwriting syndicates in specific market areas and product types. Insurance companies compete through a combination of risk acceptance criteria, product pricing, service levels and terms and conditions. We serve our business and individual customers on a global basis – from the largest multinational corporations to local businesses and individuals. General Insurance seeks to differentiate itself in the markets where we participate by providing leading expertise and insight to clients, distribution partners and other stakeholders, delivering underwriting excellence and value-driven insurance solutions and providing high quality, tailored end-to-end support to stakeholders. In doing so, we leverage our world-class global franchise, multinational capabilities, balance sheet strength and financial flexibility.
Our challenges include:
•ensuring adequate business pricing given passage of time to reporting and settlement for insurance business, particularly with respect to long-tail Commercial Lines exposures;
•impact of social and economic inflation on claim frequency and severity; and
•volatility in claims arising from natural and man-made catastrophes and other aggregations of risk exposure.
INDUSTRY AND ECONOMIC FACTORS
The results of General Insurance for the nine months ended September 30, 2024 reflect continued strong performance from our Commercial Lines portfolio and focused execution on our portfolio management strategies within Personal Insurance. Across our North America and International Commercial Lines of business we have seen increased demand for our insurance products and strong growth in new business. We continue to monitor the impact of inflation and other economic factors on rate adequacy and loss cost trends. Similarly, we are monitoring monetary policy actions taken or anticipated to be taken by central banks and the corresponding impact on market interest rates.
General Insurance – North America
North America Commercial continues to pursue profitable growth. While market discipline continues to support price increases across most lines, we are seeing capacity move back into the market in certain segments given pricing levels which is putting pressure on rates. We have focused on retaining our best accounts which has led to strong retention across the portfolio. These retention rates are often coupled with an exposure limit management strategy to reduce volatility within the portfolio. We continue to proactively identify segment growth areas as market conditions warrant through effective portfolio management, while non-renewing unprofitable business.
ITEM 2 | Business Segment Operations | General Insurance
Personal Insurance growth prospects are supported by the need for full life cycle products and coverage, increases in personal wealth accumulation, and awareness of insurance protection and risk management. We compete in the high net worth market, accident and health insurance, travel insurance, and warranty services.
General Insurance – International
We are continuing to pursue growth in our most profitable lines of business and diversify our portfolio across all regions by expanding key business lines while remaining a market leader in key developed and developing markets. We are maintaining our underwriting discipline, reducing gross and net limits where appropriate, utilizing reinsurance to reduce volatility, as well as continuing our risk selection strategy to improve profitability.
Personal Insurance focuses on individual customers, as well as group and corporate clients. Although market competition within Personal Insurance has increased, we continue to benefit from underwriting quality and portfolio diversity.
GENERAL INSURANCE RESULTS
Three Months Ended September 30,
Nine Months Ended September 30,
(in millions)
2024
2023
Change
2024
2023
Change
Underwriting results:
Net premiums written
$
6,380
$
6,462
(1)
%
$
17,825
$
20,964
(15)
%
Increase in unearned premiums
(433)
(40)
NM
(343)
(1,786)
81
Net premiums earned
5,947
6,422
(7)
17,482
19,178
(9)
Losses and loss adjustment expenses incurred(a)
3,611
3,828
(6)
10,472
11,432
(8)
Acquisition expenses:
Amortization of deferred policy acquisition costs
863
918
(6)
2,532
2,761
(8)
Other acquisition expenses
292
308
(5)
825
957
(14)
Total acquisition expenses
1,155
1,226
(6)
3,357
3,718
(10)
General operating expenses
744
757
(2)
2,190
2,321
(6)
Underwriting income
437
611
(28)
1,463
1,707
(14)
Net investment income
773
756
2
2,281
2,227
2
Adjusted pre-tax income
$
1,210
$
1,367
(11)
%
$
3,744
$
3,934
(5)
%
Loss ratio(a)
60.7
59.6
1.1
59.9
59.6
0.3
Acquisition ratio
19.4
19.1
0.3
19.2
19.4
(0.2)
General operating expense ratio
12.5
11.8
0.7
12.5
12.1
0.4
Expense ratio
31.9
30.9
1.0
31.7
31.5
0.2
Combined ratio(a)
92.6
90.5
2.1
91.6
91.1
0.5
Adjustments for accident year loss ratio, as adjusted and accident year combined ratio, as adjusted:
Catastrophe losses and reinstatement premiums
(6.9)
(6.9)
—
(4.9)
(5.0)
0.1
Prior year development, net of reinsurance and prior year premiums
2.6
2.7
(0.1)
1.4
1.6
(0.2)
Accident year loss ratio, as adjusted
56.4
55.4
1.0
56.4
56.2
0.2
Accident year combined ratio, as adjusted
88.3
86.3
2.0
88.1
87.7
0.4
(a)Consistent with our definition of APTI, excludes net loss reserve discount and the portion of favorable or unfavorable prior year reserve development for which we have ceded the risk under retroactive reinsurance agreements and related changes in amortization of the deferred gain.
The following table presents General Insurance net premiums written by operating segment, showing change on both reported and constant dollar basis:
ITEM 2 | Business Segment Operations | General Insurance
The following tables present General Insurance accident year catastrophes(a) by geography and number of events:
(dollars in millions)
# of
Events
North America
International
Total
Three Months Ended September 30, 2024
Flooding, rainstorms and other
3
$
—
$
15
$
15
Windstorms and hailstorms
16
280
76
356
Winter storms
2
2
2
4
Wildfires
1
36
—
36
Earthquakes
1
—
—
—
Reinstatement premiums
6
—
6
Total catastrophe-related charges
23
$
324
$
93
$
417
Three Months Ended September 30, 2023
Flooding, rainstorms and other
2
$
—
$
7
$
7
Windstorms and hailstorms
23
188
70
258
Winter storms
2
(1)
(2)
(3)
Wildfires
2
139
19
158
Earthquakes
1
5
—
5
Reinstatement premiums
36
1
37
Total catastrophe-related charges
30
$
367
$
95
$
462
Nine Months Ended September 30, 2024
Flooding, rainstorms and other
3
$
2
$
130
$
132
Windstorms and hailstorms
16
476
135
611
Winter storms
2
52
2
54
Wildfires
1
36
—
36
Earthquakes
1
—
10
10
Reinstatement premiums
12
(2)
10
Total catastrophe-related charges
23
$
578
$
275
$
853
Nine Months Ended September 30, 2023
Flooding, rainstorms and other
2
$
10
$
85
$
95
Windstorms and hailstorms
23
401
201
602
Winter storms
2
27
15
42
Wildfires
2
149
19
168
Earthquakes
1
20
14
34
Reinstatement premiums
35
—
35
Total catastrophe-related charges
30
$
642
$
334
$
976
(a)Natural catastrophe losses are generally weather or seismic events, in each case, having a net impact on AIG in excess of $10 million and man-made catastrophe losses, such as terrorism and civil unrest that exceed the $10 million threshold.
ITEM 2 | Business Segment Operations | General Insurance
Three Months Ended September 30,
Nine Months Ended September 30,
(in millions)
2024
2023
Change
2024
2023
Change
Adjustments for accident year loss ratio, as adjusted and accident year combined ratio, as adjusted:
Catastrophe losses and reinstatement premiums
(12.2)
(11.3)
(0.9)
(7.5)
(6.7)
(0.8)
Prior year development, net of reinsurance and prior year premiums
2.4
5.6
(3.2)
1.6
4.0
(2.4)
Accident year loss ratio, as adjusted
60.2
58.4
1.8
60.2
59.2
1.0
Accident year combined ratio, as adjusted
88.8
86.6
2.2
88.6
87.7
0.9
(a)Consistent with our definition of APTI, excludes net loss reserve discount and the portion of favorable or unfavorable prior year reserve development for which we have ceded the risk under retroactive reinsurance agreements and related changes in amortization of the deferred gain.
Business and Financial Highlights
Net Premiums Written Comparison for the Three Months Ended September 30, 2024 and 2023
Net premiums written decreased by $74 million due to a decline in Commercial Lines ($99 million), primarily driven by the sale of AIG Re, partially offset by growth in Casualty driven by pricing levels and new business production. This decline in Commercial Lines was partially offset by higher production in Personal Insurance ($25 million), particularly in PCS driven by positive rate change and new business production.
Net Premiums Written Comparison for the Nine Months Ended September 30, 2024 and 2023
Net premiums written decreased by $3.0 billion due to a decline in Commercial Lines ($3.1 billion), driven by the sales of AIG Re and CRS.
Underwriting Income (Loss) Comparison for the Three Months Ended September 30, 2024 and 2023
Underwriting income decreased by $198 million primarily due to:
•lower net favorable prior year development (3.2 points or $128 million), with higher favorable development from Property and Financial Lines, while Casualty turned unfavorable driven by a large settlement of a legacy mass tort claim with most of the gross loss in accident years covered under the Adverse Development Cover; and
•the sale of AIG Re.
This decrease was partially offset by portfolio growth.
Underwriting Income (Loss) Comparison for the Nine Months Ended September 30, 2024 and 2023
Underwriting income decreased by $462 million primarily due to:
•lower net favorable prior year development (2.4 points or $259 million), primarily from Casualty development which turned unfavorable driven by a large settlement of a legacy mass tort claim with most of the gross loss in accident years covered under the Adverse Development Cover; and
•the sales of AIG Re and Crop Risk Services.
This decrease was partially offset by improved portfolio performance and growth.
ITEM 2 | Business Segment Operations | General Insurance
Three Months Ended September 30,
Nine Months Ended September 30,
(in millions)
2024
2023
Change
2024
2023
Change
Loss ratio
53.3
55.4
(2.1)
55.1
57.4
(2.3)
Acquisition ratio
20.7
19.8
0.9
20.3
20.4
(0.1)
General operating expense ratio
13.9
13.5
0.4
14.0
13.9
0.1
Expense ratio
34.6
33.3
1.3
34.3
34.3
—
Combined ratio
87.9
88.7
(0.8)
89.4
91.7
(2.3)
Adjustments for accident year loss ratio, as adjusted and accident year combined ratio, as adjusted:
Catastrophe losses and reinstatement premiums
(2.8)
(2.8)
—
(2.8)
(3.3)
0.5
Prior year development, net of reinsurance and prior year premiums
2.9
0.1
2.8
1.1
(0.8)
1.9
Accident year loss ratio, as adjusted
53.4
52.7
0.7
53.4
53.3
0.1
Accident year combined ratio, as adjusted
88.0
86.0
2.0
87.7
87.6
0.1
Business and Financial Highlights
Net Premiums Written Comparison for the Three Months Ended September 30, 2024 and 2023
Net premiums written, excluding the impact of unfavorable foreign exchange ($76 million), increased by $68 million due to:
•growth in Commercial Lines ($34 million), notably in Specialty and Property driven by strength of renewal retentions and new business production, partially offset by the sale of AIG Re and lower production in Financial Lines; and
•growth in Personal Insurance ($34 million) driven by Personal Auto.
Net Premiums Written Comparison for the Nine Months Ended September 30, 2024 and 2023
Net premiums written, excluding the unfavorable impact of foreign exchange ($250 million), increased by $144 million primarily due to:
•growth in Personal Insurance ($85 million) driven by Personal Auto and Travel, partially offset by lower production in Warranty; and
•growth in Commercial Lines ($59 million), notably in Property, Specialty and Casualty driven by strength of renewal retentions and new business production, partially offset by the sale of AIG Re and lower production in Financial Lines.
Underwriting Income (Loss) Comparison for the Three Months Ended September 30, 2024 and 2023
Underwriting income increased by $24 million primarily due to:
•net favorable prior year reserve development of $102 million in 2024 compared to net favorable prior year reserve development in 2023 of $19 million (2.8 points or $83 million), with higher favorable development in Specialty, and Property development which turned favorable, partially offset by Financial Lines development which turned unfavorable, and higher unfavorable development within Casualty driven by claim-specific emergence in European Excess Casualty on accident year 2016.
This increase was partially offset by a higher expense ratio (1.3 points) reflecting a higher acquisition ratio (0.9 points) and general operating expense ratio (0.4 points) primarily driven by changes in business mix.
Underwriting Income (Loss) Comparison for the Nine Months Ended September 30, 2024 and 2023
Underwriting income increased by $218 million primarily due to:
•net favorable prior year reserve development of $112 million in 2024 compared to net unfavorable prior year reserve development in 2023 of $65 million (1.9 points or $177 million), primarily as a result of higher favorable development in Specialty, and Property which turned favorable, partially offset by Financial Lines development which turned unfavorable, and higher unfavorable development within Casualty driven by claim-specific emergence in European Excess Casualty on accident year 2016; and
•lower catastrophe losses (0.5 points or $59 million).
ITEM 2 | Business Segment Operations | Other Operations
Other Operations
Other Operations primarily consists of income and expenses from assets, including AIG's ownership of Corebridge, held by AIG Parent and other corporate subsidiaries, deferred tax assets related to tax attributes, corporate expenses and intercompany eliminations, results of our consolidated investment entities, General Insurance portfolios in run-off as well as the historical results of our legacy insurance lines ceded to Fortitude Re.
OTHER OPERATIONS RESULTS
Three Months Ended September 30,
Nine Months Ended September 30,
(in millions)
2024
2023
Change
2024
2023
Change
Adjusted revenues:
Premiums
$
(1)
$
123
NM
%
$
83
$
354
(77)
%
Net investment income:
Interest and dividends
77
67
15
256
183
40
Other investment income (loss)
54
(9)
NM
106
(32)
NM
Investment expenses
(6)
(13)
54
(17)
(21)
19
Total net investment income
125
45
178
345
130
165
Other income
(1)
3
NM
3
6
(50)
Total adjusted revenues
123
171
(28)
431
490
(12)
Benefits, losses and expenses:
Losses and loss adjustment expenses incurred
7
114
(94)
78
329
(76)
Acquisition expenses
(4)
16
NM
8
42
(81)
General operating expenses:
Corporate and Other
146
175
(17)
489
514
(5)
Amortization of intangible assets
4
4
—
13
22
(41)
Total general operating expenses
150
179
(16)
502
536
(6)
Interest expense
111
133
(17)
339
398
(15)
Total benefits, losses and expenses
264
442
(40)
927
1,305
(29)
Adjusted pre-tax loss before consolidation and eliminations
(141)
(271)
48
(496)
(815)
39
Consolidation and eliminations
(2)
(7)
71
(3)
(20)
85
Adjusted pre-tax loss
$
(143)
$
(278)
49
%
$
(499)
$
(835)
40
%
THREE MONTHS ENDED SEPTEMBER 30, 2024 AND 2023 COMPARISON
Adjusted pre-tax loss before consolidation and eliminations was $141 million in 2024 compared to $271 million in 2023, a decrease of $130 million, primarily due to:
•higher net investment income of $80 million due to dividend income from Corebridge in 2024 compared to $0 in 2023 and on AIG Parent portfolio due to higher yields and higher average balance; and
•lower interest expense of $22 million primarily driven by interest savings from $2.2 billion debt reduction, through cash tender offers and debt redemption and maturity in 2023 and 2024.
NINE MONTHS ENDED SEPTEMBER 30, 2024 AND 2023 COMPARISON
Adjusted pre-tax loss before consolidation and eliminations was $496 million in 2024 compared to $815 million in 2023, a decrease of $319 million, primarily due to:
•higher net investment income of $215 million due to dividend income from Corebridge in 2024 compared to $0 in 2023 and on AIG Parent portfolio due to higher yields and higher average balance; and
•lower interest expense of $59 million primarily driven by interest savings from $2.6 billion debt repurchases, through cash tender offers and debt redemption and maturity in 2023 and 2024.
Our investment strategies are tailored to the specific business needs of each segment by targeting an asset allocation mix that supports estimated cash flow needs of our outstanding liabilities and provides diversification from an asset class, sector, issuer, and geographic perspective. The primary objectives are generation of investment income, preservation of capital, liquidity management and growth of surplus. The majority of assets backing our insurance liabilities consist of fixed maturity securities.
Our Investment Management Agreements with BlackRock, Inc.
Since April 2022, AIG insurance company subsidiaries have entered into separate investment management agreements with BlackRock, Inc. and its investment advisory affiliates (BlackRock). As of September 30, 2024, BlackRock manages $64 billion of our investment portfolio, consisting of liquid fixed income, certain private placements and private equity assets. In addition, liquid fixed income assets associated with the Fortitude Re funds withheld asset portfolio were separately transferred to BlackRock for management in 2022.
INVESTMENT HIGHLIGHTS IN THE NINE MONTHS ENDED SEPTEMBER 30, 2024
•Blended investment yields on new investments are higher than blended rates on investments that were sold, matured or called during this period. We continued to make investments in structured securities and other fixed maturity securities with attractive risk-adjusted return characteristics to improve yields and increase net investment income.
•Total Net investment income increased for the nine months ended September 30, 2024 compared to the same period in the prior year, primarily due to dividend income from AIG's equity in Corebridge, higher income on available for sale fixed maturity securities and short term instruments, partially offset by lower income from alternative investments and mortgage loans.
INVESTMENT STRATEGIES
Investment strategies are assessed at the segment level and involve considerations that include local and general market and economic conditions, duration and cash flow management, risk appetite and volatility constraints, rating agency and regulatory capital considerations, tax, regulatory and legal investment limitations, and, as applicable, environmental, social and governance considerations.
Some of our key investment strategies are as follows:
•Our fundamental strategy across the portfolios is to seek investments with similar duration and cash flow characteristics to the associated insurance liabilities to the extent practicable.
•We seek to purchase investments that offer enhanced yield through illiquidity premiums, such as private placements and commercial mortgage loans, which also add portfolio diversification. These assets typically afford credit protections through covenants, ability to customize structures that meet our insurance liability needs, and deeper due diligence given information access.
•Given our global presence, we seek investments that provide diversification from investments available in local markets. To the extent we purchase these investments, we generally hedge any currency risk using derivatives, which could provide opportunities to earn higher risk adjusted returns compared to investments in the functional currency.
•AIG Parent, included in Other Operations, actively manages its assets and liabilities, counterparties and duration. AIG Parent’s liquidity sources are held primarily in the form of cash and short-term investments. This strategy allows us to both diversify our sources of liquidity and reduce the cost of maintaining sufficient liquidity.
•Within the U.S., General Insurance investments are generally split between reserve backing and surplus portfolios.
–Insurance reserves are backed mainly by investment grade fixed maturity securities that meet our duration, risk-return, capital, tax, liquidity, credit quality and diversification objectives. We assess asset classes based on their fundamental underlying risk factors, including credit (public and private), commercial real estate and residential real estate, regardless of whether such investments are bonds, loans, or structured products.
–Surplus investments seek to enhance portfolio returns and are generally comprised of a mix of fixed maturity investment grade and below investment grade securities and various alternative asset classes, including private equity, real estate equity, and hedge funds. Over the past few years, hedge fund investments have been reduced.
•Outside of the U.S., fixed maturity securities held by our insurance companies consist primarily of investment-grade securities generally denominated in the currencies of the countries in which we operate.
•We also utilize derivatives to manage our asset and liability duration as well as currency exposures.
Asset-Liability Management
The investment strategy within the General Insurance companies focuses on growth of surplus, maintenance of sufficient liquidity for unanticipated insurance claims, and preservation of capital. General Insurance invests primarily in fixed maturity securities issued by corporations, municipalities and other governmental agencies; structured securities collateralized by, among other assets, residential and commercial real estate; and commercial mortgage loans. Fixed maturity securities of the General Insurance companies have an average duration of 3.7 years, with an average of 4.0 years for North America and 3.1 years for International.
While invested assets backing reserves of the General Insurance companies are primarily invested in conventional liquid fixed maturity securities, we have continued to allocate to asset classes that offer higher yields through structural and illiquidity premiums, particularly in our North America operations. In addition, we continue to invest in both fixed rate and floating rate asset-backed investments to manage our exposure to potential changes in interest rates and inflation. We seek to diversify the portfolio across asset classes, sectors and issuers to mitigate idiosyncratic portfolio risks.
In addition, a portion of the surplus of General Insurance companies is invested in a diversified portfolio of alternative investments that seek to balance liquidity, volatility and growth of surplus. Although these alternative investments are subject to periodic earnings fluctuations, they have historically achieved yields in excess of the fixed maturity portfolio yields and have provided added diversification to the broader portfolio.
National Association of Insurance Commissioners (NAIC) Designations of Fixed Maturity Securities
The Securities Valuation Office (SVO) of the NAIC evaluates the investments of U.S. insurers for statutory reporting purposes and assigns fixed maturity securities to one of six categories called NAIC Designations. In general, NAIC Designations of ‘1’ highest quality, or ‘2’ high quality, include fixed maturity securities considered investment grade, while NAIC Designations of ‘3’ through ‘6’ generally include fixed maturity securities referred to as below investment grade. NAIC Designations for non-agency Residential Mortgage Backed Securities (RMBS) and Commercial Mortgage Backed Securities (CMBS) are calculated using third party modeling results provided through the NAIC. These methodologies result in an improved NAIC Designation for such securities compared to the rating typically assigned by the three major rating agencies. The following tables summarize the ratings distribution of AIG subsidiaries’ fixed maturity security portfolio by NAIC Designation, and the distribution by composite AIG credit rating, which is generally based on ratings of the three major rating agencies. For fixed maturity securities where no NAIC Designation is assigned or able to be calculated using third-party data, the NAIC Designation category used in the first table below reflects an internal rating.
The NAIC Designations presented below do not reflect the added granularity to the designation categories adopted by the NAIC in 2020, which further subdivide each category of fixed maturity securities by appending letter modifiers to the numerical designations.
For a full description of the composite AIG credit ratings, see – Credit Ratings below.
The following table presents the fixed maturity security portfolio categorized by NAIC Designation, at fair value:
September 30, 2024
(in millions)
NAIC Designation
1
2
Total Investment Grade
3
4
5
6
Total Below Investment Grade
Total
Other fixed maturity securities
$
34,497
$
13,478
$
47,975
$
1,946
$
1,147
$
168
$
36
$
3,297
$
51,272
Mortgage-backed, asset-backed and collateralized
14,851
492
15,343
18
63
4
5
90
15,433
Total*
$
49,348
$
13,970
$
63,318
$
1,964
$
1,210
$
172
$
41
$
3,387
$
66,705
*Excludes $38 million of fixed maturity securities for which no NAIC Designation is available.
The following table presents the fixed maturity security portfolio categorized by composite AIG credit rating, at fair value:
September 30, 2024
(in millions)
Composite AIG Credit Rating
AAA/AA/A
BBB
Total Investment Grade
BB
B
CCC and Lower
Total Below Investment Grade
Total
Other fixed maturity securities
$
34,564
$
13,417
$
47,981
$
1,783
$
1,323
$
185
$
3,291
$
51,272
Mortgage-backed, asset-backed and collateralized
13,526
606
14,132
49
117
1,135
1,301
15,433
Total*
$
48,090
$
14,023
$
62,113
$
1,832
$
1,440
$
1,320
$
4,592
$
66,705
*Excludes $38 million of fixed maturity securities for which no NAIC Designation is available.
At September 30, 2024, approximately 64 percent of our fixed maturity securities were held by our U.S. entities. Approximately 93 percent of these securities were rated investment grade by one or more of the principal rating agencies.
Moody’s Investors Service Inc. (Moody’s), Standard & Poor’s Financial Services LLC, a subsidiary of S&P Global Inc. (S&P), or similar foreign rating services rate a significant portion of our foreign entities’ fixed maturity securities portfolio. Rating services are not available for some foreign-issued securities. We closely monitor the credit quality of the foreign portfolio’s non-rated fixed maturity securities. At September 30, 2024, approximately 83 percent of such investments were either rated investment grade or, on the basis of analysis of our investment managers, were equivalent from a credit standpoint to securities rated investment grade. Approximately 30 percent of the foreign entities’ fixed maturity securities portfolio is comprised of sovereign fixed maturity securities supporting policy liabilities in the country of issuance.
Composite AIG Credit Ratings
With respect to our fixed maturity securities, the credit ratings in the table below and in subsequent tables reflect: (i) a composite of the ratings of the three major rating agencies, or when agency ratings are not available, the NAIC Designation assigned by the NAIC SVO (99 percent of total fixed maturity securities), or (ii) our internal ratings when these investments have not been rated by any of the major rating agencies or the NAIC. The “Non-rated” category in those tables consists of fixed maturity securities that have not been rated by any of the major rating agencies, the NAIC or us.
For information regarding credit risks associated with investments see Part II, Item 7. MD&A – Enterprise Risk Management in the 2023 Annual Report.
The following table presents the composite AIG credit ratings of our fixed maturity securities calculated on the basis of their fair value:
The following table presents the fair value of our available-for-sale securities:
(in millions)
September 30, 2024
December 31, 2023
Bonds available for sale:
U.S. government and government sponsored entities
$
4,514
$
4,395
Obligations of states, municipalities and political subdivisions
4,651
4,833
Non-U.S. governments
8,733
8,396
Corporate debt
33,034
32,346
Mortgage-backed, asset-backed and collateralized:
RMBS
6,419
6,207
CMBS
4,106
4,147
CLO/ABS
4,523
4,918
Total mortgage-backed, asset-backed and collateralized
15,048
15,272
Total bonds available for sale*
$
65,980
$
65,242
*At September 30, 2024 and December 31, 2023, the fair value of bonds available for sale held by us that were below investment grade or not rated totaled $3.1 billion and $5.2 billion, respectively.
The following table presents the fair value of our aggregate credit exposures to non-U.S. governments for our fixed maturity securities:
(in millions)
September 30, 2024
December 31, 2023
Canada
$
1,466
$
1,340
Germany
964
929
Japan
655
699
United Kingdom
469
478
France
401
430
Australia
384
314
Israel
340
201
Korea, Republic of
311
293
Malaysia
248
183
Denmark
230
227
Other
3,292
3,326
Total
$
8,760
$
8,420
The following table presents the fair value of our aggregate European credit exposures by major sector for our fixed maturity securities:
At September 30, 2024, the U.S. municipal bond portfolio was composed primarily of essential service revenue bonds and high-quality tax-exempt bonds with 99 percent of the portfolio rated A or higher.
The following table presents the fair values of our available for sale U.S. municipal bond portfolio by state and municipal bond type:
September 30, 2024
(in millions)
State General Obligation
Local General Obligation
Revenue
Total Fair Value
December 31, 2023 Total Fair Value
California
$
215
$
186
$
480
$
881
$
903
New York
43
115
544
702
746
Texas
1
253
189
443
490
Illinois
27
43
191
261
301
Massachusetts
53
20
163
236
209
Florida
4
—
227
231
227
Pennsylvania
58
1
141
200
203
Connecticut
58
3
88
149
109
New Jersey
3
2
135
140
200
Georgia
67
26
38
131
159
Ohio
12
—
75
87
89
Hawaii
79
—
7
86
89
Oregon
20
40
25
85
83
All other states
118
32
869
1,019
1,025
Total
$
758
$
721
$
3,172
$
4,651
$
4,833
Investments in Corporate Debt Securities
The following table presents the fair value of our available for sale corporate debt securities by industry categories:
Industry Category
(in millions)
September 30, 2024
December 31, 2023
Financial institutions:
Money center/Global bank groups
$
4,553
$
5,153
Regional banks – other
216
222
Life insurance
717
617
Securities firms and other finance companies
654
296
Insurance non-life
419
938
Regional banks – North America
1,999
2,029
Other financial institutions
4,598
3,152
Utilities
2,873
2,989
Communications
1,992
2,111
Consumer noncyclical
3,067
3,436
Capital goods
1,762
1,552
Energy
1,658
1,672
Consumer cyclical
3,430
3,049
Basic materials
1,749
1,141
Other
3,347
3,989
Total*
$
33,034
$
32,346
*At September 30, 2024 and December 31, 2023, approximately 91 percent and 90 percent, respectively, of these investments were rated investment grade.
The following table presents the fair value of AIG’s RMBS available for sale securities:
(in millions)
September 30, 2024
December 31, 2023
Agency RMBS
$
3,026
$
2,827
Alt-A RMBS
1,421
1,338
Subprime RMBS
308
323
Prime non-agency
793
580
Other housing related
871
1,139
Total RMBS(a)(b)
$
6,419
$
6,207
(a)Includes approximately $1.3 billion and $1.3 billion at September 30, 2024 and December 31, 2023, respectively, of certain RMBS that had experienced deterioration in credit quality since their origination. This excludes impact of U.S. debt downgrade of Fannie Mae and Freddie Mac. For additional information on purchased credit deteriorated securities, see Note 6 to the Condensed Consolidated Financial Statements.
(b)The weighted average expected life was six years and seven years at September 30, 2024 and December 31, 2023, respectively.
Our investments guidelines for investing in RMBS, CLO and other asset-backed securities (ABS) take into consideration the quality of the originator, the manager, the servicer, security credit ratings, underlying characteristics of the mortgages, borrower characteristics, and the level of credit enhancement in the transaction.
Investments in CMBS
The following table presents the fair value of our CMBS available for sale securities:
(in millions)
September 30, 2024
December 31, 2023
CMBS (traditional)
$
3,075
$
3,604
Agency
766
488
Other
265
55
Total
$
4,106
$
4,147
The fair value of CMBS holdings remained stable during the nine months ended September 30, 2024. The majority of our investments in CMBS are in tranches that contain substantial credit protection features through collateral subordination. The majority of CMBS holdings are traditional conduit transactions, broadly diversified across property types and geographical areas.
Investments in CLO/ABS
The following table presents the fair value of our CLO/ABS available for sale securities by collateral type:
The following table shows the aging of the unrealized losses of fixed maturity securities, the extent to which the fair value is less than amortized cost or cost, and the number of respective items in each category:
September 30, 2024
Less Than or Equal
Greater Than 20%
Greater Than 50%
to 20% of Cost(b)
to 50% of Cost(b)
of Cost(b)
Total
Aging(a)
Unrealized
Unrealized
Unrealized
Unrealized
(dollars in millions)
Cost(c)
Loss
Items(d)
Cost(c)
Loss
Items(d)
Cost(c)
Loss
Items(d)
Cost(c)
Loss
Items(d)
Investment grade bonds
0-6 months
$
5,257
$
68
1,610
$
24
$
6
6
$
—
$
—
2
$
5,281
$
74
1,618
7-11 months
957
44
307
96
24
2
—
—
1
1,053
68
310
12 months or more
25,009
1,790
6,982
1,836
575
363
240
135
17
27,085
2,500
7,362
Total
$
31,223
$
1,902
8,899
$
1,956
$
605
371
$
240
$
135
20
$
33,419
$
2,642
9,290
Below investment grade bonds
0-6 months
$
725
$
25
448
$
29
$
9
31
$
4
$
3
13
$
758
$
37
492
7-11 months
70
3
32
—
—
—
—
—
—
70
3
32
12 months or more
1,347
84
727
66
19
26
10
9
7
1,423
112
760
Total
$
2,142
$
112
1,207
$
95
$
28
57
$
14
$
12
20
$
2,251
$
152
1,284
Total bonds
0-6 months
$
5,982
$
93
2,058
$
53
$
15
37
$
4
$
3
15
$
6,039
$
111
2,110
7-11 months
1,027
47
339
96
24
2
—
—
1
1,123
71
342
12 months or more
26,356
1,874
7,709
1,902
594
389
250
144
24
28,508
2,612
8,122
Total
$
33,365
$
2,014
10,106
$
2,051
$
633
428
$
254
$
147
40
$
35,670
$
2,794
10,574
(a)Represents the number of consecutive months that fair value has been less than cost by any amount.
(b)Represents the percentage by which fair value is less than cost.
(c)For bonds, represents amortized cost net of allowance.
(d)Item count is by CUSIP by subsidiary.
The allowance for credit losses was $3 million for investment grade bonds and $37 million for below investment grade bonds as of September 30, 2024.
Commercial Mortgage Loans
At September 30, 2024, we had direct commercial mortgage loan exposure of $3.7 billion.
The following table presents the commercial mortgage loan exposure by location and class of loan based on amortized cost:
For additional information on commercial mortgage loans, see Note 7 to the Condensed Consolidated Financial Statements and Note 7 to the Consolidated Financial Statements in the 2023 Annual Report.
Net Realized Gains and Losses
The following table presents the components of Net realized gains (losses):
Three Months Ended September 30,
2024
2023
(in millions)
Excluding Fortitude Re Funds Withheld Assets
Fortitude Re Funds Withheld Assets
Total
Excluding Fortitude Re Funds Withheld Assets
Fortitude Re Funds Withheld Assets
Total
Sales of fixed maturity securities
$
(66)
$
(18)
$
(84)
$
(152)
$
(4)
$
(156)
Change in allowance for credit losses on fixed maturity securities
1
(1)
—
(7)
—
(7)
Change in allowance for credit losses on loans
(3)
(1)
(4)
(16)
3
(13)
Foreign exchange transactions
65
1
66
(30)
(5)
(35)
All other derivatives and hedge accounting
7
(2)
5
(20)
6
(14)
Sales of alternative investments
(18)
—
(18)
25
—
25
Other
22
3
25
11
(3)
8
Net realized gains (losses) – excluding Fortitude Re funds withheld embedded derivative
8
(18)
(10)
(189)
(3)
(192)
Net realized gains (losses) on Fortitude Re funds withheld embedded derivative
—
(157)
(157)
—
57
57
Net realized gains (losses)
$
8
$
(175)
$
(167)
$
(189)
$
54
$
(135)
Nine Months Ended September 30,
2024
2023
(in millions)
Excluding Fortitude Re Funds Withheld Assets
Fortitude Re Funds Withheld Assets
Total
Excluding Fortitude Re Funds Withheld Assets
Fortitude Re Funds Withheld Assets
Total
Sales of fixed maturity securities
$
(320)
$
(34)
$
(354)
$
(552)
$
(63)
$
(615)
Change in allowance for credit losses on fixed maturity securities
(18)
(1)
(19)
(31)
—
(31)
Change in allowance for credit losses on loans
(23)
—
(23)
(23)
2
(21)
Foreign exchange transactions
176
(2)
174
125
—
125
All other derivatives and hedge accounting
(62)
—
(62)
(133)
—
(133)
Sales of alternative investments
(4)
(1)
(5)
26
—
26
Other
13
—
13
17
(3)
14
Net realized gains (losses) – excluding Fortitude Re funds withheld embedded derivative
(238)
(38)
(276)
(571)
(64)
(635)
Net realized losses on Fortitude Re funds withheld embedded derivative
—
(158)
(158)
—
(25)
(25)
Net realized gains (losses)
$
(238)
$
(196)
$
(434)
$
(571)
$
(89)
$
(660)
Higher Net realized gains excluding Fortitude Re funds withheld assets in the three months ended September 30, 2024 were primarily due to lower losses on sales of fixed maturity securities, higher gains on foreign exchange transactions and all other derivatives and hedge accounting compared to the prior year period. Lower Net realized losses excluding Fortitude Re funds withheld assets in the nine months ended September 30, 2024 compared to 2023 were primarily due to lower losses on sales of fixed maturity securities and higher derivatives gains compared to the prior year period.
Net realized gains (losses) on Fortitude Re funds withheld assets primarily reflect changes in the valuation of the modified coinsurance and funds withheld assets. Increases in the valuation of these assets result in losses to AIG as the appreciation on the assets under those reinsurance arrangements must be transferred to Fortitude Re. Decreases in valuation of the assets result in gains to AIG as the depreciation on the assets under those reinsurance arrangements must be transferred to Fortitude Re. For additional information on the impact of the funds withheld arrangements with Fortitude Re, see Note 8 to the Condensed Consolidated Financial Statements.
For additional information on our investment portfolio, see Note 6 to the Condensed Consolidated Financial Statements.
Change in Unrealized Gains and Losses on Investments
The change in net unrealized gains and losses on investments in the three and nine months ended September 30, 2024 was primarily attributable to a change in the fair value of fixed maturity securities. For the three months ended September 30, 2024, net unrealized gains related to fixed maturity securities were $1.6 billion due primarily to lower interest rates and narrowing of credit spreads. For the nine months ended September 30, 2024, net unrealized gains were $1.5 billion due to lower interest rates and narrowing of credit spreads.
The change in net unrealized gains and losses on investments in the three and nine months ended September 30, 2023 was primarily attributable to a change in the fair value of fixed maturity securities. For the three months ended September 30, 2023, net unrealized losses related to fixed maturity securities were $670 million due primarily to an increase in interest rates. For the nine months ended September 30, 2023, net unrealized gains were $159 million primarily due to widening of credit spreads.
For additional information on our investment portfolio, see Note 6 to the Condensed Consolidated Financial Statements.
Insurance Reserves
LIABILITY FOR UNPAID LOSSES AND LOSS ADJUSTMENT EXPENSES (LOSS RESERVES)
The following table presents the components of our gross and net loss reserves by segment and major lines of business(a):
September 30, 2024
December 31, 2023
(in millions)
Net liability for unpaid losses and loss adjustment expenses
Reinsurance recoverable on unpaid losses and loss adjustment expenses
Gross liability for unpaid losses and loss adjustment expenses
Net liability for unpaid losses and loss adjustment expenses
Reinsurance recoverable on unpaid losses and loss adjustment expenses
Gross liability for unpaid losses and loss adjustment expenses
General Insurance:
U.S. Workers' Compensation (net of discount)
$
2,598
$
4,087
$
6,685
$
2,655
$
4,099
$
6,754
U.S. Excess Casualty
3,241
3,258
6,499
3,321
3,272
6,593
U.S. Other Casualty
4,289
3,599
7,888
4,112
3,676
7,788
U.S. Financial Lines
5,519
1,729
7,248
5,672
1,622
7,294
U.S. Property and Special Risks
4,218
1,357
5,575
4,403
1,494
5,897
U.S. Personal Insurance
838
2,098
2,936
767
2,163
2,930
UK/Europe Casualty and Financial Lines
8,021
2,075
10,096
7,447
1,951
9,398
UK/Europe Property and Special Risks
3,095
1,819
4,914
2,913
1,665
4,578
UK/Europe and Japan Personal Insurance
1,432
692
2,124
1,483
671
2,154
Other product lines(b)
5,512
5,134
10,646
5,416
5,182
10,598
Unallocated loss adjustment expenses(b)
1,711
659
2,370
1,298
841
2,139
Total General Insurance
40,474
26,507
66,981
39,487
26,636
66,123
Other Operations Run-Off:
U.S. run-off long tail insurance lines (net of discount)
277
3,229
3,506
283
3,360
3,643
Other run-off product lines
225
64
289
228
60
288
Blackboard U.S. Holdings, Inc.
50
115
165
91
119
210
Unallocated loss adjustment expenses
11
114
125
15
114
129
Total Other Operations Run-Off
563
3,522
4,085
617
3,653
4,270
Total
$
41,037
$
30,029
$
71,066
$
40,104
$
30,289
$
70,393
(a)Includes net loss reserve discount of $1.2 billion and $1.2 billion at September 30, 2024 and December 31, 2023, respectively. For information regarding loss reserve discount, see Note 12 to the Condensed Consolidated Financial Statements.
(b)Other product lines and Unallocated loss adjustment expenses includes Gross liability for unpaid losses and loss adjustment expense and Reinsurance recoverable on unpaid losses and loss adjustment expense for the Fortitude Re reinsurance of $2.7 billion and $2.9 billion at September 30, 2024 and December 31, 2023, respectively.
The following table summarizes incurred (favorable) unfavorable prior year development net of reinsurance by segment:
Three Months Ended September 30,
Nine Months Ended September 30,
(in millions)
2024
2023
2024
2023
General Insurance:
North America
$
(63)
$
(154)
$
(165)
$
(408)
International
(90)
15
(101)
86
Total General Insurance*
$
(153)
$
(139)
$
(266)
$
(322)
Other Operations Run-Off
2
(3)
2
(3)
Total prior year favorable development
$
(151)
$
(142)
$
(264)
$
(325)
*Includes the amortization attributed to the deferred gain at inception from the National Indemnity Company (NICO) adverse development reinsurance agreement of $34 million and $41 million for the three months ended September 30, 2024 and 2023, respectively, and $102 million and $123 million for the nine months ended September 30, 2024 and 2023, respectively. Consistent with our definition of APTI, the amount excludes the portion of (favorable)/unfavorable prior year reserve development for which we have ceded the risk under the NICO reinsurance agreements of $304 million and $(145) million for the three months ended September 30, 2024 and 2023, respectively, and $241 million and $(178) million for the nine months ended September 30, 2024 and 2023, respectively. Also excludes the related changes in amortization of the deferred gain, which were $178 million and $(68) million for the three months ended September 30, 2024 and 2023, respectively, and $175 million and $(65) million for the nine months ended September 30, 2024 and 2023, respectively.
Net Loss Development
In the three months ended September 30, 2024, we recognized favorable prior year loss reserve development of $151 million. The key components of this development were:
North America
•Favorable development on U.S. Property and Special Risks reflecting favorable loss experience in Retail and Wholesale Property.
•Favorable development on Financial Lines in U.S. and Canada, reflecting favorable experience across most reserving classes, offset by unfavorable development in M&A and High Excess classes.
•Amortization benefit related to the deferred gain on the adverse development cover.
•Adverse development on U.S. Excess Casualty driven by a large settlement of a legacy mass tort claim with most of the gross loss in accident years covered under the Adverse Development Cover.
International
•Favorable development on Other Product Lines, primarily driven by Global Specialty which saw favorable development in Energy, Marine and Aviation lines.
•Adverse development on UK/Europe Casualty and Financial Lines driven by unfavorable development in UK Financial Lines partially offset by favorable development in EMEA Financial Lines, and unfavorable development in European Excess Casualty driven by claim-specific emergence on accident year 2016.
•Favorable development on UK/Europe Property and Special Risks reflecting favorable development across a majority of regions.
•Favorable development on UK/Europe and Japan Personal Insurance primarily driven by Japan A&H and Auto, partially offset by unfavorable Personal Auto in EMEA.
In the nine months ended September 30, 2024, we recognized favorable prior year loss reserve development of $264 million. The key components of this development were:
North America
•Favorable development on our U.S. Workers' Compensation reflecting continued favorable loss experience.
•Adverse development on U.S. Excess Casualty driven by a large settlement of a legacy mass tort claim with most of the gross loss in accident years covered under the Adverse Development Cover.
•Favorable development on U.S. Property and Special Risks reflecting favorable loss experience in Retail and Wholesale Property.
•Favorable development on Financial Lines in U.S. and Canada, reflecting favorable experience across most reserving classes, offset by unfavorable development in M&A and High Excess classes.
•Favorable development on U.S. Other Casualty, reflecting favorability across numerous Casualty reserving classes, partially offset by unfavorable development on Commercial Auto and Wholesale Primary General Liability.
•Amortization benefit related to the deferred gain on the adverse development cover.
•Favorable development on Other Product Lines, primarily driven by Global Specialty which saw favorable development across multiple lines.
•Adverse development on UK/Europe Casualty and Financial Lines driven by unfavorable development in UK Financial Lines partially offset by favorable development in EMEA Financial Lines, and unfavorable development in European Excess Casualty driven by claim-specific emergence on accident year 2016.
•Favorable development on UK/Europe Property and Special Risks reflecting favorable development across a majority of regions.
•Favorable development on UK/Europe and Japan Personal Insurance primarily driven by Japan A&H and Auto, partially offset by unfavorable Personal Auto in EMEA.
In the three months ended September 30, 2023, we recognized favorable prior year loss reserve development of $142 million. The key components of this development were:
North America
•Favorable development on our U.S. Workers' Compensation business reflecting continued favorable loss experience.
•Amortization benefit related to the deferred gain on the adverse development cover.
International
•Unfavorable development in UK/Europe Casualty and UK Financial Lines reflecting unfavorable loss experience.
In the nine months ended September 30, 2023, we recognized favorable prior year loss reserve development of $325 million. The key components of this development were:
North America
•Favorable development on U.S. Workers' Compensation business reflecting continued favorable loss experience.
•Favorable development in U.S. Other Casualty reflecting favorable experience in Primary Casualty.
•Amortization benefit related to the deferred gain on the adverse development cover.
•Favorable development in U.S. Property and Special Risks reflecting favorable attritional loss experience along with favorable development on prior year catastrophes.
International
•Unfavorable development in UK/Europe Casualty and UK Financial Lines reflecting unfavorable loss experience.
•Favorable development on Japan Personal Insurance reflecting favorable loss experience.
•Unfavorable development on prior year catastrophes.
The following tables summarize incurred (favorable) unfavorable prior year development net of reinsurance, by segment and major lines of business, and by accident year groupings:
Three Months Ended September 30, 2024
(in millions)
Total
2023
2022 & Prior
General Insurance North America:
U.S. Workers' Compensation
$
(11)
$
—
$
(11)
U.S. Excess Casualty
72
4
68
U.S. Other Casualty
(2)
—
(2)
U.S. Financial Lines
(32)
—
(32)
U.S. Property and Special Risks
(53)
(51)
(2)
U.S. Personal Insurance
(1)
(10)
9
Other Product Lines
(36)
13
(49)
Total General Insurance North America
$
(63)
$
(44)
$
(19)
General Insurance International:
UK/Europe Casualty and Financial Lines
$
181
$
(4)
$
185
UK/Europe Property and Special Risks
(44)
(3)
(41)
UK/Europe and Japan Personal Insurance
(33)
2
(35)
Other Product Lines
(194)
(40)
(154)
Total General Insurance International
$
(90)
$
(45)
$
(45)
Other Operations Run-Off
2
—
2
Total Prior Year (Favorable) Unfavorable Development
We note that for certain categories of claims (e.g., construction defect claims and environmental claims) and for reinsurance recoverable, losses may sometimes be reclassified to an earlier or later accident year as more information about the date of occurrence becomes available to us.
Significant Reinsurance Agreements
In the first quarter of 2017, we entered into an adverse development reinsurance agreement with NICO, under which we transferred to NICO 80 percent of the reserve risk on substantially all of our U.S. Commercial long-tail exposures for accident years 2015 and prior. Under this agreement, we ceded to NICO 80 percent of the losses on subject business paid on or after January 1, 2016 in excess of $25 billion of net paid losses, up to an aggregate limit of $25 billion. We account for this transaction as retroactive reinsurance. This transaction resulted in a gain, which under GAAP retroactive reinsurance accounting is deferred and amortized into income over the settlement period. NICO created a collateral trust account as security for their claim payment obligations to us, into which they deposited the consideration paid under the agreement, and Berkshire Hathaway Inc. has provided a parental guarantee to secure NICO’s obligations under the agreement.
For a description of AIG’s catastrophe reinsurance protection for 2023, see Part II, Item 7. MD&A – Enterprise Risk Management – Insurance Risks – General Insurance Companies’ Key Risks – Natural Catastrophe Risk in the 2023 Annual Report.
The table below shows the calculation of the deferred gain on the adverse development reinsurance agreement, the effect of discounting of loss reserves and amortization of the deferred gain.
(in millions)
September 30, 2024
December 31, 2023
Gross Covered Losses
Covered reserves before discount
$
10,127
$
10,849
Inception to date losses paid
31,181
30,157
Attachment point
(25,000)
(25,000)
Covered losses above attachment point
$
16,308
$
16,006
Deferred Gain Development
Covered losses above attachment ceded to NICO (80%)
$
13,046
$
12,805
Consideration paid including interest
(10,188)
(10,188)
Pre-tax deferred gain before discount and amortization
2,858
2,617
Discount on ceded losses(a)
(1,004)
(1,104)
Pre-tax deferred gain before amortization
1,854
1,513
Inception to date amortization of deferred gain at inception
(1,530)
(1,428)
Inception to date amortization attributed to changes in deferred gain(b)
(64)
64
Deferred gain liability reflected in AIG's balance sheet
$
260
$
149
(a)The accretion of discount and a reduction in effective interest rates is offset by changes in estimates of the amount and timing of future recoveries.
(b)Excluded from APTI.
The following table presents the rollforward of activity in the deferred gain from the adverse development reinsurance agreement:
Three Months Ended September 30,
Nine Months Ended September 30,
(in millions)
2024
2023
2024
2023
Balance at beginning of period, net of discount
$
143
$
196
$
149
$
205
(Favorable) unfavorable prior year reserve development ceded to NICO(a)
304
(145)
241
(178)
Amortization attributed to deferred gain at inception(b)
(34)
(41)
(102)
(123)
Amortization attributed to changes in deferred gain(c)
(175)
77
(128)
87
Changes in discount on ceded loss reserves
22
24
100
120
Balance at end of period, net of discount
$
260
$
111
$
260
$
111
(a)Prior year reserve development ceded to NICO under the retroactive reinsurance agreement is deferred under GAAP.
(b)Represents amortization of the deferred gain recognized in APTI.
The lines of business subject to this agreement include those with longer tails, which carry a higher degree of uncertainty. Since inception, there have been periods of both favorable and unfavorable prior year development. This agreement will continue to reduce the impact of volatility in the development on our ultimate loss estimates over time.
Fortitude Re was established during the first quarter of 2018 in a series of reinsurance transactions related to our run-off operations. Those reinsurance transactions were designed to consolidate most of our insurance run-off lines into a single legal entity. As of September 30, 2024, $3.5 billionof reserves related to business written by multiple wholly-owned AIG subsidiaries, had been ceded to Fortitude Re under these reinsurance transactions.
Liquidity and Capital Resources
OVERVIEW
Liquidity refers to the ability to generate sufficient cash resources to meet the cash requirements of our business operations and payment obligations.
Capital refers to the long-term financial resources available to support the operation of our businesses, fund business growth and cover financial and operational needs that arise from adverse circumstances. Our primary source of ongoing capital generation is derived from the profitability of our insurance subsidiaries. We must comply with numerous constraints on our capital positions. These constraints drive the requirements for capital adequacy at AIG and the individual businesses and are based on internally defined risk tolerances, regulatory requirements, rating agency and creditor expectations and business needs.
For information regarding our liquidity risk framework, see Part II, Item 7. MD&A – Enterprise Risk Management – Risk Appetite, Limits, Identification and Measurement and Part II, Item 7. MD&A – Enterprise Risk Management – Liquidity Risk Management in the 2023 Annual Report.
We believe that we have sufficient liquidity and capital resources to satisfy future requirements and meet our obligations to policyholders, customers, creditors and debt-holders, including those arising from reasonably foreseeable contingencies or events. Nevertheless, some circumstances may cause our cash or capital needs to exceed projected liquidity or readily deployable capital resources.
For information regarding risks associated with our liquidity and capital resources, see Part I, Item 1A. – Risk Factors – Liquidity, Capital and Credit in the 2023 Annual Report.
Depending on market conditions, regulatory and rating agency considerations and other factors, we may take various liability and capital management actions. Liability management actions may include, but are not limited to, repurchasing or redeeming outstanding debt, issuing new debt or engaging in debt exchange offers. Capital management actions may include, but are not limited to, issuing preferred stock, paying dividends to our shareholders on AIG Common Stock, par value $2.50 per share (AIG Common Stock) and repurchases of AIG Common Stock.
During the nine months ended September 30, 2024, our General Insurance companies distributed dividends of $2.9 billion to AIG Parent or applicable intermediate holding companies.
Sales of Corebridge Shares by AIG
In June and July 2024, we sold an aggregate of approximately 31.9 million shares of Corebridge common stock in a secondary offering at a public offering price of $29.20 per share, which included 30 million shares initially offered and the partial exercise by the underwriters of their option to purchase additional shares. The aggregate gross proceeds to AIG Parent were approximately $932 million.
In August 2024, we sold approximately 8 million shares of Corebridge common stock to Corebridge at the per share purchase price of $24.90. The aggregate proceeds to AIG Parent were $200 million.
In September 2024, we sold 5 million shares of Corebridge common stock in a Rule 144 transaction at the per share purchase price of $26.86. The aggregate proceeds to AIG Parent were approximately $134 million.
USES
General Borrowings(a)
During the nine months ended September 30, 2024, $509 million of debt categorized as general borrowings matured, was repaid or redeemed, including:
•Repayment of $459 million aggregate principal amount of our 4.125% Notes due February 15, 2024.
•Redemption of €41.55 million aggregate principal amount of our Series A-3 Junior Subordinated Debentures, equivalent to approximately $46 million at the time of repayment.
We made interest payments on our general borrowings totaling $335 million during the nine months ended September 30, 2024.
Dividends
During the nine months ended September 30, 2024:
•We made a cash dividend payment of $365.625 per share on our Series A 5.85% Non-Cumulative Perpetual Preferred Stock (Series A Preferred Stock) for the three months ended March 31, 2024 totaling $7 million. On March 15, 2024, we redeemed all 20,000 outstanding shares of our Series A Preferred Stock and all 20,000,000 of the corresponding Depositary Shares, each representing a 1/1,000th interest in a share of Series A Preferred Stock for an aggregate redemption price of $500 million, paid in cash.
•We made cash dividend payments in the amount of $0.40 per share on AIG Common Stock for each of the three month periods ended September 30, 2024 and June 30, 2024 (an increase of 11 percent from prior dividend payments), and $0.36 per share for the three months ended March 31, 2024, totaling $758 million.
Repurchases of Common Stock(b)
During the nine months ended September 30, 2024, AIG Parent repurchased approximately 65 million shares of AIG Common Stock, for an aggregate purchase price of approximately $4.8 billion.
(a)On October 21, 2024, we announced that we will redeem all of our outstanding Zero Coupon Callable Notes Due 2047 (the Notes) on November 22, 2024 (the Redemption Date) for a redemption price equal to 135.631% of the face amount of the Notes outstanding on such Redemption Date. As of October 21, 2024, $400,000,000 face amount of the Notes was outstanding.
(b)Pursuant to a Securities Exchange Act of 1934 (the Exchange Act) Rule 10b5-1 repurchase plan, from October 1, 2024 to October 30, 2024, AIG Parent repurchased approximately 7 million shares of AIG Common Stock for an aggregate purchase price of approximately $500 million.
Insurance companies generally receive most premiums in advance of the payment of claims or policy benefits. The ability of insurance companies to generate positive cash flow is affected by the frequency and severity of losses under their insurance policies, policy retention rates, effective management of our investment portfolio and operating expense discipline.
Interest payments totaled $581 million and $745 million in the nine months ended September 30, 2024 and 2023, respectively. Excluding interest payments, AIG had operating cash inflows of $3.7 billion, including $104 million outflow from discontinued operations, in the nine months ended September 30, 2024 compared to operating cash inflows of $5.4 billion, including $119 million outflow from discontinued operations, in the prior year period.
Investing Cash Flow Activities
Net cash used in investing activities in the nine months ended September 30, 2024 was $1.0 billion, including $4.2 billion used in discontinued operations, compared to net cash used in investing activities of $4.1 billion, including $2.5 billion from discontinued operations, in the prior year period.
Financing Cash Flow Activities
Net cash used in financing activities in the nine months ended September 30, 2024 totaled $2.1 billion, reflecting:
•$758 million to pay dividends of $0.40 per share in each of the three month periods ended September 30, 2024 and June 30, 2024, and $0.36 per share for the three months ended March 31, 2024 on AIG Common Stock;
•$22 million to pay a first quarter dividend of $365.625 per share on AIG’s Series A Preferred Stock and redemption premiums;
•$4.8 billion to repurchase approximately 65 million shares of AIG Common Stock;
•$509 million in net outflows from the issuance and repayment of long-term debt; and
•$4.4 billion in net inflows from discontinued operations.
Net cash used in financing activities in the nine months ended September 30, 2023 totaled $239 million reflecting:
•$748 million to pay dividends of $0.36 per share in the three months ended September 30, 2023 and June 30, 2023, and $0.32 per share for the three months ended March 31, 2023 on AIG Common Stock;
•$22 million to pay quarterly dividends of $365.625 per share on AIG’s Series A Preferred Stock;
•$1.9 billion to repurchase approximately 35 million shares of AIG Common Stock;
•$67 million in net inflows from the issuance and repayment of long-term debt;
•$6 million in net outflows from the issuance and repayment of debt of consolidated investment entities; and
•$1.8 billionin net inflows from discontinued operations.
LIQUIDITY AND CAPITAL RESOURCES OF AIG PARENT AND SUBSIDIARIES
AIG Parent
As of September 30, 2024 and December 31, 2023, respectively, AIG Parent and applicable intermediate holding companies had approximately $7.2 billion and $12.1 billion in liquidity sources held in the form of cash, short-term investments and AIG Parent's committed, revolving syndicated credit facility of $3.0 billion as of September 30, 2024 and $4.5 billion as of December 31, 2023. AIG Parent’s primary sources of liquidity are dividends, distributions, loans and other payments from subsidiaries and credit facilities. AIG Parent’s primary uses of liquidity are for debt service, capital and liability management, operating expenses and dividends on AIG Common Stock.
We expect to access the debt and preferred equity markets from time to time to meet funding requirements as needed.
We utilize our capital resources to support our businesses, with the majority of capital allocated to our insurance operations. Should we have or generate more capital than is needed to support our business strategies (including organic or inorganic growth opportunities) or mitigate risks inherent to our business, we may develop plans to distribute such capital to shareholders via dividends or AIG Common Stock repurchase authorizations or deploy such capital towards liability management.
Insurance Companies
We expect that our insurance companies will be able to continue to satisfy reasonably foreseeable future liquidity requirements and meet their obligations, including those arising from reasonably foreseeable contingencies or events, through cash from operations and, to the extent necessary, monetization of invested assets.
Our insurance companies’ liquidity resources are primarily held in the form of cash, short-term investments and publicly traded, investment grade rated fixed maturity securities. Each of our material insurance companies’ liquidity is monitored through various internal liquidity risk measures. The primary sources of liquidity are premiums, fees, reinsurance recoverables and investment income and maturities. Certain of our insurance companies have access to Federal Home Loan Bank (FHLB) borrowings as an additional source of funding. The primary uses of liquidity are paid losses, reinsurance payments, interest payments, dividends, expenses, investment purchases and collateral requirements.
Our insurance companies may require additional funding to meet capital or liquidity needs under certain circumstances. For example, large catastrophes may require us to provide additional support to the affected operations of our insurance companies.
We are party to several letter of credit agreements with various financial institutions, which issue letters of credit from time to time in support of our insurance companies. These letters of credit are subject to reimbursement by us in the event of a drawdown of these letters of credit. Letters of credit issued in support of our insurance companies totaled approximately $2.3 billion at September 30, 2024.
CREDIT FACILITIES
We maintain a syndicated, multicurrency revolving credit facility as a potential source of liquidity for general corporate purposes. On September 27, 2024, we amended and restated the five-year syndicated credit facility that was entered into on November 19, 2021 (the Previous Facility). The amended and restated five-year syndicated credit facility (the Facility) provides for aggregate commitments by the bank syndicate to provide AIG Parent with unsecured revolving loans and/or standby letters of credit of up to $3.0 billion (the Previous Facility was up to $4.5 billion). The Facility is scheduled to expire in September 2029 (the Previous Facility was scheduled to expire in November 2026).
Our ability to utilize the Facility is conditioned on the satisfaction of certain legal, operating, administrative and financial covenants and other requirements contained in the Facility. These include covenants relating to our maintenance of a specified total consolidated net worth and total consolidated debt to total consolidated capitalization. Failure to satisfy these and other requirements contained in the Facility would restrict our access to the Facility and could have a material adverse effect on our financial condition, results of operations and liquidity.
As of September 30, 2024, a total of $3.0 billion remained available under the Facility.
CONTRACTUAL OBLIGATIONS
As of September 30, 2024, other than obligations associated with Corebridge, which are no longer considered obligations of AIG as a result of deconsolidation, there have been no material changes in our contractual obligations from December 31, 2023, a description of which may be found in Part II, Item 7. MD&A – Liquidity and Capital Resources – Contractual Obligations in the 2023 Annual Report.
OFF-BALANCE SHEET ARRANGEMENTS AND COMMERCIAL COMMITMENTS
As of September 30, 2024, other than off-balance sheet arrangements and commercial commitments associated with Corebridge, which are no longer considered obligations of AIG as a result of deconsolidation, there have been no material changes in our off-balance sheet arrangements and commercial commitments from December 31, 2023, a description of which may be found in Part II, Item 7. MD&A – Liquidity and Capital Resources – Off-Balance Sheet Arrangements and Commercial Commitments in the 2023 Annual Report.
DEBT
We expect to service and repay general borrowings through maturing investments and dispositions of invested assets, future cash flows from operations, cash flows generated from invested assets, future debt or preferred stock issuances and other financing arrangements.
The following table provides the rollforward of our total debt outstanding:
Other subsidiaries' notes, bonds, loans and mortgages payable - not guaranteed by AIG
—
1
—
—
—
1
Total long-term debt
$
10,375
$
1
$
(509)
$
5
$
20
$
9,892
Debt of consolidated investment entities - not guaranteed by AIG(a)
$
231
$
—
(1)
—
(68)
(b)
$
162
(a)At September 30, 2024, includes debt of consolidated investment entities primarily related to real estate investments of $162 million. At December 31, 2023, includes debt of consolidated investment entities related to real estate investments of $79 million and other securitization vehicles of $152 million.
(b)Includes the effect of consolidating previously unconsolidated partnerships.
Debt Maturities
The following table summarizes maturing long-term debt at September 30, 2024 of AIG for the next four quarters:
Fourth Quarter
First Quarter
Second Quarter
Third Quarter
(in millions)
2024
2025
2025
2025
Total
General borrowings
$
—
$
263
$
146
$
—
$
409
The following table presents maturities of long-term debt (including unamortized original issue discount, hedge accounting valuation adjustments and fair value adjustments, when applicable):
September 30, 2024
Year Ending
(in millions)
Total
2025
2026
2027
2028
2029
Thereafter
Debt issued or guaranteed:
General borrowings:
Notes and bonds payable(a)
$
8,649
$
146
$
267
$
914
$
340
$
191
$
6,791
Junior subordinated debt
942
—
—
—
—
—
942
AIG Japan Holdings Kabushiki Kaisha
263
263
—
—
—
—
—
Total general borrowings
9,854
409
267
914
340
191
7,733
Borrowings supported by assets:
Notes and bonds payable
19
12
7
—
—
—
—
Series AIGFP matched notes and bonds payable
18
—
—
—
—
—
18
Total borrowings supported by assets
37
12
7
—
—
—
18
Total debt issued or guaranteed
9,891
421
274
914
340
191
7,751
Other subsidiaries notes, bonds, loans and mortgages payable
1
—
—
—
1
—
—
Total(b)
$
9,892
$
421
$
274
$
914
$
341
$
191
$
7,751
(a)On October 21, 2024, AIG announced that we will redeem all of our outstanding Zero Coupon Callable Notes Due 2047 (the Notes) on November 22, 2024 (the Redemption Date) for a redemption price equal to 135.631% of the face amount of the Notes outstanding on such Redemption Date. As of October 21, 2024, $400,000,000 face amount of the Notes was outstanding.
(b)Does not reflect $162 million of notes issued by consolidated investment entities, for which recourse is limited to the assets of the respective investment entities and for which there is no recourse to the general credit of AIG.
CREDIT RATINGS
Credit ratings estimate a company’s ability to meet its obligations and may directly affect the cost and availability of financing to that company. The following table presents the credit ratings of AIG Parent as of the date of this filing. Figures in parentheses indicate the relative ranking of the ratings within the agency’s rating categories; that ranking refers only to the major rating category and not to the modifiers assigned by the rating agencies.
(a)Moody’s appends numerical modifiers 1, 2 and 3 to the generic rating categories to show relative position within the rating categories.
(b)S&P ratings may be modified by the addition of a plus or minus sign to show relative standing within the major rating categories.
(c)Fitch Ratings Inc. (Fitch) ratings may be modified by the addition of a plus or minus sign to show relative standing within the major rating categories.
These credit ratings are current opinions of the rating agencies. They may be changed, suspended or withdrawn at any time by the rating agencies as a result of changes in, or unavailability of, information or based on other circumstances. Ratings may also be withdrawn at our request.
We are party to some agreements that contain “ratings triggers.” Depending on the ratings maintained by one or more rating agencies, these triggers could result in (i) the termination or limitation of credit availability or a requirement for accelerated repayment, (ii) the termination of business contracts or (iii) a requirement to post collateral for the benefit of counterparties.
In the event of a downgrade of our long-term senior debt ratings, certain AIG entities would be required to post additional collateral under some derivative and other transactions, or certain of the counterparties of such entities would be permitted to terminate such transactions early.
The actual amount of collateral that we would be required to post to counterparties in the event of such downgrades, or the aggregate amount of payments that we could be required to make, depends on market conditions, the fair value of outstanding affected transactions and other factors prevailing at the time of the downgrade.
FINANCIAL STRENGTH RATINGS
Financial Strength ratings estimate an insurance company’s ability to pay its obligations under an insurance policy. The following table presents the ratings of our significant insurance subsidiaries as of the date of this filing.
A.M. Best
S&P
Fitch
Moody’s
National Union Fire Insurance Company of Pittsburgh, Pa.
A
A+
A+
A2
Lexington Insurance Company
A
A+
A+
A2
American Home Assurance Company
A
A+
A+
A2
AIG Europe S.A.
NR
A+
NR
A2
American International Group UK Ltd.
A
A+
NR
A2
AIG General Insurance Co. Ltd.
NR
A+
NR
NR
In February 2024, S&P revised its outlook on AIG Parent and its core General Insurance subsidiaries to positive from stable and affirmed the ‘BBB+/A-2’ issuer credit ratings on AIG Parent and ‘A+’ financial strength ratings on the core General Insurance entities.
On January 26, 2024, A.M. Best upgraded the Long-Term Issuer Credit Ratings (Long-Term ICR) of AIG General Insurance subsidiaries to ‘a+’ from ‘a’, the Long-Term ICR of AIG Parent to ‘bbb+’ from ‘bbb’, and revised the outlook of the Long-Term ICRs to stable from positive. A.M. Best also affirmed the 'A' Financial Strength Rating of the AIG General Insurance subsidiaries with stable outlook.
These financial strength ratings are current opinions of the rating agencies. They may be changed, suspended or withdrawn at any time by the rating agencies as a result of changes in, or unavailability of, information or based on other circumstances.
For information regarding the effects of downgrades in our credit ratings and financial strength ratings, see Part I, Item 1A. Risk Factors – Liquidity, Capital and Credit – “A downgrade by one or more of the rating agencies in the Insurer Financial Strength ratings of our insurance or reinsurance companies could limit their ability to write or prevent them from writing new business and impair their retention of customers and in-force business, and a downgrade in our credit ratings could adversely affect our business, results of operations, financial condition and liquidity” in the 2023 Annual Report and Note 11 to the Condensed Consolidated Financial Statements.
REGULATION AND SUPERVISION
For a discussion of our regulation and supervision by different regulatory authorities in the United States and abroad, including with respect to our liquidity and capital resources, see Part I, Item 1. Business – Regulation and Part I, Item 1A. Risk Factors – Regulation in the 2023 Annual Report, and Executive Summary – Regulatory, Industry and Economic Factors – Regulatory Environment in this MD&A.
On November 4, 2024, our Board of Directors declared a cash dividend on AIG Common Stock of $0.40 per share, payable on December 30, 2024 to shareholders of record on December 16, 2024.
The payment of any future dividends will be at the discretion of our Board of Directors and will depend on various factors. For further detail on our dividends, see Note 14 to the Condensed Consolidated Financial Statements.
REPURCHASES OF AIG COMMON STOCK
Our Board of Directors has authorized the repurchase of shares of AIG Common Stock through a series of actions. On April 30, 2024, the Board of Directors authorized the repurchase of $10.0 billion of AIG Common Stock (inclusive of the approximately $3.9 billion remaining under the Board's prior share repurchase authorization). During the nine months ended September 30, 2024, AIG Parent repurchased approximately 65 million shares of AIG Common Stock for an aggregate purchase price of $4.8 billion. Pursuant to an Exchange Act Rule 10b5-1 repurchase plan, from October 1, 2024 to October 30, 2024, we repurchased approximately 7 million shares of AIG Common Stock for an aggregate purchase price of approximately $500 million. As of October 30, 2024, $7.0 billion remained under the Board's authorization.
The timing of any future share repurchases will depend on market conditions, our business and strategic plans, financial condition, results of operations, liquidity and other factors, as discussed further in Note 14 to the Condensed Consolidated Financial Statements.
DIVIDEND RESTRICTIONS
Payments of dividends to AIG Parent or intermediate holding companies by its insurance subsidiaries are subject to certain restrictions imposed by regulatory authorities.
For information regarding restrictions on payments of dividends by our subsidiaries, see Note 14 to the Condensed Consolidated Financial Statements.
Enterprise Risk Management
Risk management includes the identification and measurement of various forms of risk, the establishment of risk thresholds and the creation of processes intended to maintain risks within these thresholds while optimizing returns.
OVERVIEW
Risk management is an integral part of our business strategy and a key element of our approach to corporate governance. We have an integrated process for managing risks throughout our organization in accordance with our firm-wide risk appetite. Our Board of Directors has oversight responsibility for the management of risk. Our Enterprise Risk Management (ERM) Department oversees and integrates the risk management functions in each of our business units, providing senior management with a consolidated view of AIG’s major risk positions. ERM embeds risk management in our key day-to-day business processes. Nevertheless, our risk management efforts may not always be successful and material adverse effects on our business, results of operations, cash flows, liquidity or financial condition may occur. For further information regarding the risks associated with our business and operations, seePart II, Item 1A. Risk Factors.
AIG employs a Three Lines of Defense model. AIG’s business leaders assume full accountability for the risks and controls in their segments, and ERM performs a review, challenge and oversight function. The third line consists of our Internal Audit Group that provides independent assurance to AIG’s Board of Directors.
For additional information on AIG’s risk management program, see Part II, Item 7. MD&A ─ Enterprise Risk Management in the 2023 Annual Report.
The scope and magnitude of our market risk exposures is managed under a robust framework that contains defined risk limits and minimum standards for managing market risk in a manner consistent with our risk appetite statement.As of September 30, 2024, other than the elimination of market risk sensitive data as a result of the deconsolidation of Corebridge, there have been no material changes in our market risk exposures, which may be found in Part II, Item 7. MD&A ─ Enterprise Risk Management in the 2023 Annual Report. See Part I, Item 1A. Risk Factors in the 2023 Annual Report on how difficult conditions in the financial markets and the economy generally may materially adversely affect our business and results of our operations.
Accident year The annual calendar accounting period in which loss events occurred, regardless of when the losses are actually reported, booked or paid.
Accident year combined ratio, as adjusted (Accident year combined ratio, ex-CAT) The combined ratio excluding catastrophe losses and related reinstatement premiums, prior year development, net of premium adjustments, and the impact of reserve discounting.
Accident year loss ratio, as adjusted (Accident year loss ratio, ex-CAT) The loss ratio excluding catastrophe losses and related reinstatement premiums, prior year development, net of premium adjustments, and the impact of reserve discounting.
Acquisition ratio Acquisition costs divided by net premiums earned. Acquisition costs are those costs incurred to acquire new and renewal insurance contracts and also include the amortization of VOBA and DAC. Acquisition costs vary with sales and include, but are not limited to, commissions, premium taxes, direct marketing costs and certain costs of personnel engaged in sales support activities such as underwriting.
Adjusted revenues exclude Net realized gains (losses), income from non-operating litigation settlements (included in Other income for GAAP purposes), changes in fair value of securities used to hedge guaranteed living benefits (included in Net investment income for GAAP purposes) and income from elimination of the international reporting lag. Adjusted revenues is a GAAP measure for our segments.
Attritional losses are losses recorded in the current accident year, which are not catastrophe losses.
Book Value per share, excluding Goodwill, Value of business acquired (VOBA), Value of distribution channel acquired (VODA) and Other intangible assets (Tangible book value per share) is used to provide a useful measure of the realizable shareholder value on a per share basis. Tangible book value per share is derived by dividing Total AIG common shareholders’ equity, excluding intangible assets (AIG tangible common shareholders’ equity) by total common shares outstanding.
Book value per share, excluding Investments AOCI, deferred tax assets (DTA) and AIG’s ownership interest in Corebridge (Core operating book value per share) is used to show the amount of our net worth on a per share basis after eliminating Investments AOCI, DTA and AIG’s ownership interest in Corebridge. We believe this measure is useful to investors because it eliminates fair value of investments that can fluctuate significantly from period to period due to changes in market conditions. We also exclude only the portion of DTA representing U.S. tax attributes related to net operating loss carryforwards (NOLs) and corporate alternative minimum tax credits (CAMTCs) and foreign tax credits (FTCs) that have not yet been utilized. Amounts for interim periods are estimates based on projections of full-year attribute utilization. As NOLs, CAMTCs and FTCs are utilized, the portion of the DTA utilized is included. We exclude AIG’s ownership interest in Corebridge since it is not a core long-term investment for AIG. Core operating book value per share is derived by dividing total AIG common shareholders’ equity, excluding Investments AOCI, DTA and AIG’s ownership interest in Corebridge (AIG core operating shareholders’ equity) by total common shares outstanding.
Book value per share, excluding investments related cumulative unrealized gains and losses in accumulated other comprehensive income (loss) (AOCI) adjusted for the cumulative unrealized gains and losses related to Fortitude Re funds withheld assets (collectively, Investments AOCI) (Adjusted book value per share) is used to show the amount of our net worth on a per share basis after eliminating the fair value of investments that can fluctuate significantly from period to period due to changes in market conditions. In addition, we adjusted for the cumulative unrealized gains and losses related to Fortitude Re funds withheld assets held by AIG in support of Fortitude Re’s reinsurance obligations to AIG (Fortitude Re funds withheld assets) since these fair value movements are economically transferred to Fortitude Re. Adjusted book value per share is derived by dividing total AIG common shareholders’ equity, excluding Investments AOCI (AIG adjusted common equity) by total common shares outstanding.
Casualty insurance Insurance that is primarily associated with the losses caused by injuries to third persons, i.e., not the insured, and the legal liability imposed on the insured as a result.
Combined ratio Sum of the loss ratio and the acquisition and general operating expense ratios.
Credit Support AnnexA legal document generally associated with an ISDA Master Agreement that provides for collateral postings which could vary depending on ratings and threshold levels.
DAC Deferred Policy Acquisition Costs Deferred costs that are incremental and directly related to the successful acquisition of new business or renewal of existing business.
Deferred gain on retroactive reinsurance Retroactive reinsurance is a reinsurance contract in which an assuming entity agrees to reimburse a ceding entity for liabilities incurred as a result of past insurable events. If the amount of premium paid by the ceding reinsurer is less than the related ceded loss reserves, the resulting gain is deferred and amortized over the settlement period of the reserves. Any related development on the ceded loss reserves recoverable under the contract would increase the deferred gain if unfavorable, or decrease the deferred gain if favorable.
Expense ratio Sum of acquisition expenses and general operating expenses, divided by net premiums earned.
General operating expense ratio General operating expenses divided by net premiums earned. General operating expenses are those costs that are generally attributed to the support infrastructure of the organization and include but are not limited to personnel costs, projects and bad debt expenses. General operating expenses exclude losses and loss adjustment expenses incurred, acquisition expenses, and investment expenses.
IBNR Incurred But Not Reported Estimates of claims that have been incurred but not reported to us.
ISDA Master Agreement An agreement between two counterparties, which may have multiple derivative transactions with each other governed by such agreement, that generally provides for the net settlement of all or a specified group of these derivative transactions, as well as pledged collateral, through a single payment, in a single currency, in the event of a default on, or affecting any, one derivative transaction or a termination event affecting all, or a specified group of, derivative transactions.
Loan-to-value ratio Principal amount of loan amount divided by appraised value of collateral securing the loan.
Loss Adjustment ExpensesThe expenses directly attributed to settling and paying claims of insureds and include, but are not limited to, legal fees, adjuster’s fees and the portion of general expenses allocated to claim settlement costs.
Loss ratio Losses and loss adjustment expenses incurred divided by net premiums earned.
Loss reserve development The increase or decrease in incurred losses and loss adjustment expenses related to prior years as a result of the re-estimation of loss reserves at successive valuation dates for a given group of claims.
Loss reserves Liability for unpaid losses and loss adjustment expenses. The estimated ultimate cost of settling claims relating to insured events that have occurred on or before the balance sheet date, whether or not reported to the insurer at that date.
Master netting agreement An agreement between two counterparties who have multiple derivative contracts with each other that provides for the net settlement of all contracts covered by such agreement, as well as pledged collateral, through a single payment, in a single currency, in the event of default on or upon termination of any one such contract.
Natural catastrophe losses are generally weather or seismic events having a net impact on AIG in excess of $10 million each and man-made catastrophe losses, such as terrorism and civil disorders that exceed the $10 million threshold.
Net premiums written represent the sales of an insurer, adjusted for reinsurance premiums assumed and ceded, during a given period. Net premiums earned are the revenue of an insurer for covering risk during a given period. Net premiums written are a measure of performance for a sales period, while net premiums earned are a measure of performance for a coverage period.
Noncontrolling interests The portion of equity ownership in a consolidated subsidiary not attributable to the controlling parent company.
Pool A reinsurance arrangement whereby all of the underwriting results of the pool members are combined and then shared by each member in accordance with its pool participation percentage.
Prior year development See Loss reserve development.
RBC Risk-Based Capital A formula designed to measure the adequacy of an insurer’s statutory surplus compared to the risks inherent in its business.
Reinstatement premiums Premiums on an insurance policy over and above the initial premium imposed at the beginning of the policy payable to reinsurers or receivable from insurers to restore coverage limits that have been reduced or exhausted as a result of reinsured losses under certain excess of loss reinsurance contracts.
Reinsurance The practice whereby one insurer, the reinsurer, in consideration of a premium paid to that insurer, agrees to indemnify another insurer, the ceding company, for part or all of the liability of the ceding company under one or more policies or contracts of insurance which it has issued.
Reinsurance recoverables are comprised of paid losses recoverable, ceded loss reserves, ceded reserves for unearned premiums.
Retroactive reinsurance See Deferred gain on retroactive reinsurance.
Return on Equity – Adjusted After-tax Income, Excluding Goodwill, VOBA, VODA and Other Intangible assets (Return on tangible equity) is used to show the return on AIG tangible common shareholder’s equity, which we believe is a useful measure of realizable shareholder value. We exclude Goodwill, VOBA, VODA and Other intangible assets from AIG common shareholders’ equity to derive AIG tangible common shareholders’ equity. Return on AIG tangible common equity is derived by dividing actual or, for interim periods, annualized adjusted after-tax income attributable to AIG common shareholders by average AIG tangible common equity.
Return on equity – Adjusted after-tax income excluding Investments AOCI (Adjusted return on equity) is used to show the rate of return on common shareholders’ equity excluding Investments AOCI. We believe this measure is useful to investors because it eliminates fair value of investments which can fluctuate significantly from period to period due to changes in market conditions. Adjusted return on equity is derived by dividing actual or, for interim periods, annualized adjusted after-tax income attributable to AIG common shareholders by average AIG adjusted common shareholders’ equity.
Return on equity – Adjusted after-tax income excluding Investments AOCI, DTA and AIG’s ownership interest in Corebridge (Core operating return on equity) is used to show the rate of return on common shareholders’ equity excluding Investments AOCI, DTA and AIG’s ownership interest in Corebridge. We believe this measure is useful to investors because it eliminates fair value of investments that can fluctuate significantly from period to period due to changes in market conditions. We also exclude only the portion of DTA representing U.S. tax attributes related to NOLs and CAMTCs and FTCs that have not yet been utilized. Amounts for interim periods are estimates based on projections of full-year attribute utilization. As NOLs, CAMTCs and FTCs are utilized, the portion of the DTA utilized is included. We exclude AIG’s ownership interest in Corebridge since it is not a core long-term investment for AIG. This metric will provide greater insight as to the underlying profitability of our property and casualty business. Core operating return on equity is derived by dividing actual or, for interim periods, annualized adjusted after-tax income attributable to AIG common shareholders by average AIG core operating shareholders’ equity.
Subrogation The amount of recovery for claims we have paid our policyholders, generally from a negligent third party or such party’s insurer.
Unearned premium reserve Liabilities established by insurers and reinsurers to reflect unearned premiums, which are usually refundable to policyholders if an insurance or reinsurance contract is canceled prior to expiration of the contract term.
VOBA Value of Business Acquired Present value of future pre-tax profits from in-force policies of acquired businesses discounted at yields applicable at the time of purchase. VOBA is reported in DAC in the Condensed Consolidated Balance Sheets.
Acronyms
A&H
Accident and Health Insurance
ISDA
International Swaps and Derivatives Association, Inc.
ABS
Asset-Backed Securities
Moody's
Moody's Investors' Service Inc.
APTI
Adjusted pre-tax income
NAIC
National Association of Insurance Commissioners
CDS
Credit Default Swap
NM
Not Meaningful
CLO
Collateralized Loan Obligations
ORR
Obligor Risk Ratings
CMBS
Commercial Mortgage-Backed Securities
RMBS
Residential Mortgage-Backed Securities
ERM
Enterprise Risk Management
S&P
Standard & Poor's Financial Services LLC
FASB
Financial Accounting Standards Board
SEC
Securities and Exchange Commission
GAAP
Accounting Principles Generally Accepted in the United States of America
ITEM 3 | Quantitative and Qualitative Disclosures About Market Risk
ITEM 3 | Quantitative and Qualitative Disclosures About Market Risk
The information required by this item is set forth in the Enterprise Risk Management section of Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations and is incorporated herein by reference.
ITEM 4 | Controls and Procedures
EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES
Disclosure controls and procedures are designed to ensure that information required to be disclosed in reports filed or submitted under the Securities Exchange Act of 1934, as amended (the Exchange Act), is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms and that such information is accumulated and communicated to management, including the Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosures. In connection with the preparation of this Quarterly Report on Form 10-Q, an evaluation was carried out by American International Group, Inc. (AIG) management, with the participation of AIG’s Chief Executive Officer and Chief Financial Officer, of the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act), as of September 30, 2024. Based on this evaluation, AIG’s Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of September 30, 2024.
CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING
There have been no changes in our internal control over financial reporting (as defined in Rule 13a-15(f)) that have occurred during the quarter ended September 30, 2024 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
For a discussion of legal proceedings, see Note 13 to the Condensed Consolidated Financial Statements, which is incorporated herein by reference.
ITEM 1A | Risk Factors
In addition to the other information set forth in this Quarterly Report on Form 10-Q, you should carefully consider the risk factors discussed in Part I, Item 1A. Risk Factors in our 2023 Annual Report and Part II, Item 1A. Risk Factors in our Quarterly Report on Form 10-Q for the Quarter Ended June 30, 2024.
ITEM 2 |Unregistered Sales of Equity Securities and Use of Proceeds
The following table provides information about purchases made by or on behalf of AIG or any “affiliated purchaser” (as defined in Rule 10b-18(a)(3) under the Securities Exchange Act of 1934 (the Exchange Act)) of AIG Common Stock during the three months ended September 30, 2024:
Period
Total Number of Shares Repurchased
Average Price Paid per Share*
Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs
Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs (in millions)
July 1-31
6,991,177
$
76.73
6,991,177
$
8,423
August 1-31
6,975,234
73.43
6,975,234
7,911
September 1-30
6,181,836
73.53
6,181,836
7,456
Total
20,148,247
$
74.60
20,148,247
$
7,456
*Excludes excise tax of $50 million due to the Inflation Reduction Act of 2022 for the nine months ended September 30, 2024.
During the three months ended September 30, 2024, AIG Parent repurchased approximately 20 million shares of AIG Common Stock, par value $2.50 per share (AIG Common Stock) for an aggregate purchase price of $1.5 billion. From October 1, 2024 to October 30, 2024, we repurchased approximately 7 million shares of AIG Common Stock for an aggregate purchase price of approximately $500 million. On April 30, 2024, the Board of Directors authorized the repurchase of $10.0 billion of AIG Common Stock (inclusive of the approximately $3.9 billion remaining under the Board's prior share repurchase authorization).
Shares may be repurchased from time to time in the open market, private purchases, through forward, derivative, accelerated repurchase or automatic repurchase transactions or otherwise. Certain of our share repurchases have been and may from time to time be effected through Exchange Act Rule 10b5-1 repurchase plans. The timing of any future share repurchases will depend on market conditions, our business and strategic plans, financial condition, results of operations, liquidity and other factors.
Interactive data files pursuant to Rule 405 of Regulation S-T formatted in iXBRL (Inline eXtensible Business Reporting Language): (i) the Condensed Consolidated Balance Sheets as of September 30, 2024 and December 31, 2023, (ii) the Condensed Consolidated Statements of Income (Loss) for the three and nine months ended September 30, 2024 and 2023, (iii) the Condensed Consolidated Statements of Equity for the three and nine months ended September 30, 2024 and 2023, (iv) the Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2024 and 2023, (v) the Condensed Consolidated Statements of Comprehensive Income (Loss) for the three and nine months ended September 30, 2024 and 2023 and (vi) the Notes to the Condensed Consolidated Financial Statements
Filed herewith.
104
Cover Page Interactive Data File (formatted as inline XBRL with applicable taxonomy extension information contained in Exhibits 101)
Filed herewith.
*Certain schedules and other similar attachments to this exhibit have been omitted from this filing pursuant to Item 601(a)(5) of Regulation S-K. The Company will provide a copy of such omitted documents to the Securities and Exchange Commission upon request.
** This information is furnished and not filed for purposes of Sections 11 and 12 of the Securities Act of 1933 and Section 18 of the Securities Exchange Act of 1934.
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.