American International Group, Inc. (NYSE: AIG) today reported financial results for the fourth quarter and full year ended December 31, 2020.
For the full year of 2020, net loss attributable to AIG common shareholders was $6.0 billion, or $6.88 per common share, compared to net income of $3.3 billion, or $3.74 per diluted common share, in the prior year. The loss was primarily driven by a $6.7 billion after-tax loss from the sale and deconsolidation of Fortitude Group Holdings LLC (Fortitude) on June 2, 2020. The sale, for which AIG received $2.2 billion in consideration at closing, improved AIG’s risk profile and reduced exposure to long-tail runoff liabilities and related interest rate risk.
AATI was $2.2 billion, or $2.52 per diluted common share, for the full year of 2020, compared to $4.1 billion, or $4.58 per diluted common share, in the prior year. The decrease was primarily due to lower APTI from General Insurance and higher adjusted pre-tax loss (APTL) from Other Operations. The decrease in General Insurance APTI was primarily due to higher CATs including $1.1 billion of COVID-19 CATs. The increase in Other Operations APTL was primarily due to the sale of Fortitude in the second quarter of 2020, lower net investment income on available for sale fixed maturity securities, the impact of consolidated investment entities on consolidation and eliminations, and higher interest expense related to debt issuances in the second quarter of 2020.
For the fourth quarter of 2020, net loss attributable to AIG common shareholders was $60 million, or $0.07 per common share, compared to net income of $922 million, or $1.03 per diluted common share, in the prior year quarter. The loss was primarily due to $1.2 billion of after-tax net realized capital losses, principally from the non-economic impact of the non-performance risk adjustment on the fair value of variable annuity embedded derivatives, net of hedges, and from losses on other derivatives and hedges.
AATI was $827 million, or $0.94 per diluted common share, for the fourth quarter of 2020 compared to $923 million, or $1.03 per diluted common share, in the prior year quarter primarily due to higher CATs, including COVID-19 CATs, as well as unfavorable prior year loss reserve development, net of reinsurance, (PYD) partially offset by improved alternative investment returns. The decrease also reflects the sale of Fortitude in the second quarter of 2020, which had APTI of $70 million in the fourth quarter of 2019.
Total consolidated net investment income for the fourth quarter of 2020 was $4.0 billion compared to $3.6 billion in the prior year quarter. Total net investment income, APTI basis*, of $3.2 billion decreased 7%. Excluding the impact of Fortitude in the fourth quarter of 2019, fourth quarter 2020 total net investment income, APTI basis*, increased 9%, or $262 million, compared to the prior year quarter primarily reflecting higher private equity and hedge fund returns.
Brian Duperreault, AIG’s Chief Executive Officer, said: “AIG’s fourth quarter and full year 2020 operating results demonstrate the continued progress we are making to position AIG for long-term, sustainable and profitable growth. We are effectively managing the impacts of COVID-19 and natural catastrophes and remain well capitalized in this environment of unprecedented uncertainty.
“The General Insurance business continues to improve, with a 1.9 point improvement in the accident year combined ratio, as adjusted, compared to 2019 and 5.6 point improvement in the accident year combined ratio, as adjusted, compared to 2018. Life and Retirement delivered strong returns and remains well positioned to meet the ever-growing needs for protection, retirement savings and lifetime income solutions.
“As I transition into my role as Executive Chairman, I want to thank our global colleagues who have shown unyielding resilience, dedication and perseverance in their efforts to serve our clients, distribution partners, communities and other stakeholders – even as their own lives and work situations have been severely disrupted by the COVID-19 crisis. This strength of human spirit is at the core of AIG and visible in all that we do. I look forward to supporting Peter Zaffino as he becomes the next Chief Executive Officer of AIG and, along with our world-class team, continues AIG’s journey to become a top performing company and leading insurance franchise.”
Book value per common share was $76.46 as of December 31, 2020, an increase of 3.5% compared to September 30, 2020. Adjusted book value per common share was $57.01, an increase of 0.4% compared to September 30, 2020 reflecting unrealized gains on the investment portfolio. ROCE and Adjusted ROCE were (9.4)% and 4.4%, respectively, for the twelve months ended December 31, 2020 and (0.4)% and 6.7%, respectively, on an annualized basis for the fourth quarter of 2020.
As of December 31, 2020, AIG Parent liquidity stood at approximately $10.5 billion compared to $7.6 billion at December 31, 2019. In December 2020, AIG repaid $708 million aggregate principal amount of its 6.400% Notes Due 2020. AIG’s total debt and preferred stock leverage at December 31, 2020 was 28.4%. On February 1, 2021, AIG repaid $1.5 billion aggregate principal amount of its 3.300% Notes Due 2021.
Today, the Board of Directors declared a quarterly cash dividend of $0.32 per share on AIG Common Stock (NYSE: AIG), par value $2.50 per share. The dividend is payable on March 30, 2021 to stockholders of record at the close of business on March 16, 2021.
The Board of Directors also declared a quarterly cash dividend of $365.625 per share on AIG Series A 5.85% Non-Cumulative Perpetual Preferred Stock, with a liquidation preference of $25,000 per share, which are represented by depositary shares (NYSE: AIG PRA), each representing a 1/1,000th interest in a share of preferred stock. Holders of depositary shares will receive $0.365625 per depositary share. The dividend is payable on March 15, 2021 to holders of record at the close of business on February 26, 2021.
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