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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of The Securities Exchange Act of 1934
Date
of Report (Date of earliest event reported): May 17, 2010
AMERICAN INTERNATIONAL GROUP, INC.
(Exact name of registrant as specified in its charter)
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1-8787
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13-2592361 |
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| (State or other jurisdiction
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(Commission File Number)
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(IRS Employer |
| of incorporation)
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Identification No.) |
70 Pine Street
New York, New York 10270
(Address of principal executive offices)
Registrant’s telephone number, including area code: (212) 770-7000
(Former name or former address, if changed since last report.)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy
the filing obligation of the registrant under any of the following provisions (see General
Instruction A.2. below):
o Written communications pursuant to Rule 425 under the Securities Act (17 CFR
230.425)
o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange
Act (17 CFR 240.14d-2(b))
o Pre-commencement communications pursuant to Rule 13e4(c) under the Exchange Act
(17 CFR 240.13e-4(c))
Item 7.01. Regulation FD Disclosure
On March 1, 2010, American International Group, Inc. (“AIG”) entered into a Share Purchase
Agreement with AIA Aurora LLC, an indirect wholly owned subsidiary of AIG (“Aurora”), Prudential
plc (“Prudential”) and Prudential Group plc (formerly Petrohue (UK) Investments Limited), pursuant
to which Prudential Group plc agreed to acquire AIA Group Limited (“AIA”), a wholly owned
subsidiary of Aurora, for approximately $35.5 billion in cash and securities of Prudential Group
plc. On May 17, 2010, Prudential published a prospectus relating to its rights issue (the
“Prospectus”). Prudential will also publish a listing document relating to the listing of the
entire issued share capital of Prudential on The Stock Exchange of Hong Kong Limited (the “Hong
Kong Listing Document” and together with the Prospectus, the “Prudential Documents”).
The Prudential Documents included certain financial information relating to AIA for the fiscal
quarters ended February 28, 2010 and 2009. This information (the “Prudential Data”), which is
reproduced below, was derived by Prudential, using assumptions developed by Prudential and not
shared with AIA, from certain unaudited data extracted from AIA’s management accounts (the “AIA
Data”).
The information in the box below has been prepared by Prudential.
FIRST QUARTER 2010 RESULTS FOR THE AIA GROUP
The following information was prepared by Prudential
on a basis consistent with Prudential’s reporting
basis for the comparable periods based on unaudited
financial data extracted from AIA’s management
accounts.
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3 months to |
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3 months to |
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| Sales — Annual Premium |
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28 February |
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28 February |
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| Equivalent (APE) |
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2010 |
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2009 |
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% change |
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$m |
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$m |
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Hong Kong |
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96 |
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85 |
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13 |
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Singapore and Brunei |
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31 |
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21 |
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48 |
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Thailand |
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97 |
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69 |
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41 |
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Korea |
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76 |
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68 |
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12 |
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China |
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44 |
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37 |
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19 |
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Malaysia |
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28 |
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23 |
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22 |
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Other markets |
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83 |
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90 |
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(8 |
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Group total |
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455 |
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393 |
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16 |
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3 months to |
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3 months to |
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28 February |
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28 February |
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| New business profit |
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2010 |
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2009 |
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% change |
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$m |
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$m |
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Group total — pre tax |
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198 |
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150 |
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32 |
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— post tax |
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141 |
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107 |
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32 |
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3 months to |
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3 months to |
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28 February |
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28 February |
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| Margin APE % |
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2010 |
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2009 |
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+/- % pts |
Group total — pre tax |
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44 |
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38 |
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+6pts |
— post tax |
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31 |
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27 |
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+4pts |
In the first quarter of 2010 new business
APE sales grew by 16% over the first quarter of 2009 at
actual exchange rates.
The first quarter 2010 growth was driven by strong
single premium sales due to the improvement in
investor sentiment as stock markets recovered. This
growth was particularly strong in Singapore and
Thailand where new business APE sales increased in the
first quarter of 2010 by 48% and 41% respectively.
Other markets new business APE sales in the first
quarter of 2010 decreased by 8%. The main contributing
factor for this was a 33% decrease in APE in
Australia, where the first quarter 2009 included new
business in respect of two large new group schemes.
The increase in the first quarter 2010 pre tax new
business margin to 44% from 38% reflects improvements
in pricing and product mix over those sold during the
financial year ended 30 November 2009.
EEV New Business Methodology and Assumptions
Valuation of new business
The contribution from new business has been prepared
in accordance with the EEV principles and guidance
issued in May 2004 by the European Insurers’ CFO Forum
except for certain disclosure points (described in the
Consulting Actuaries’ Report set out in the
prospectus, such that they relate to the new business
contribution for the 12 months to 30 November 2009).
The new business contribution represents the profits
determined by applying the same operating and economic
assumptions as those used for the 30 November 2009
value of in-force business. The only exception to this
is for Hong Kong and Thailand where the long term
returns were used for the whole projection period as
opposed to grading to market yields. The impact of
this difference is immaterial.
In determining the cost of required capital, the more
onerous (at 30 November 2009) of the local entity
reserving and regulatory capital basis and the Hong
Kong basis (at 150% of regulatory capital) for
branches of AIA and AIA-B has been assumed.
The new business contribution for 2010 does not allow
for any excess of acquisition expenses over the unit
cost assumptions. This assumption is consistent with
the preparation of the new business contribution for
the 12 months to 30 November 2009 as set
-3-
out in the
Consulting Actuaries’ Report in the prospectus.
Principal economic assumptions
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The same economic assumptions have been used to determine
the new business contribution for the 3 months ending 28 February
2010 and the 3 months ending 28 February 2009. This is appropriate
as, given the fact that the new business is largely regular premium
business, the key economic assumptions impacting the new business
contribution are the long-term assumptions. These assumptions are
not expected to vary significantly between 2009 and 2010. |
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Initial returns on fixed income assets have been based on
current market yields, adjusted for the risk of default. |
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Long term returns for fixed income assets reflect expected
returns having regard to historical returns, estimates of long term
forward rates from yields available on Government bonds and current
bond yields. |
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Where initial returns on fixed interest assets differ
markedly from long term returns, returns are assumed to grade to
the long term returns linearly over the estimated mean term of the
existing fixed interest assets. |
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Equity returns have been determined by reference to the
projected long term yield on 10-year government bonds plus an
equity risk premium which varies by territory with a maximum risk
premium of 600 basis points. |
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Risk discount rates are set equal to risk-free rates plus a
risk margin. The risk margin reflects any non-diversifiable risk
associated with the emergence of distributable earnings that is not
allowed for elsewhere in the valuation. |
The tables below summarise the principal financial
assumptions at 28 February 2010 and 28 February 2009:
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Indonesia |
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Indonesia |
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(USD |
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(Rupiah |
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Australia |
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China |
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Hong Kong |
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denominated) |
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denominated) |
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Korea |
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New business risk discount rate |
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9.0 |
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10.0 |
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8.0 |
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12.5 |
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17.0 |
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10.0 |
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Government bond yield |
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5.75 |
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3.7 |
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3.8 |
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6.9 |
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11.0 |
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5.2 |
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-4-
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Singapore & |
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Malaysia |
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New Zealand |
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Philippines |
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Brunei |
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Taiwan |
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Thailand |
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Vietnam |
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% |
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New business risk
discount rate |
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9.0 |
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9.0 |
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14.0 |
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7.5 |
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8.0 |
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10.0 |
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16.0 |
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Government bond yield |
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4.5 |
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6.3 |
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7.5 |
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2.9 |
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1.7 |
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4.2 |
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9.25 |
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AIA Group Total |
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28 February 2010 |
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28 February 2009 |
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% |
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New business weighted risk discount rate (note) |
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9.5 |
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9.3 |
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| Note: |
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The weighted risk discount rates shown for the AIA Group above have been determined by
weighting each country’s risk discount rates by reference to the EEV basis new business
result. |
Approach to estimate the new business contribution for the 3 months ended 28 February 2009
The new business contribution for the 3 months ended 28 February 2009 has been estimated
assuming that new business margins (as a percentage of APE) for each product group within each
territory are the same as for the 12 months ended 30 November 2009. It has therefore been
implicitly assumed that the mix of business within each product group has remained unchanged during
the 12 months ended 30 November 2009. Should this product mix have changed during this period, the
new business contribution for the 3 months ended 28 February 2009 could be materially different to
that shown.
Foreign exchange rates
Foreign currency profits have been translated at average exchange rates for the period. The
principal exchange rates are as follows:
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Average for |
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Average for |
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3 months to |
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3 months to |
| Local currency: USD$ |
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28 February 2010 |
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28 February 2009 |
China |
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6.83 |
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6.85 |
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Hong Kong |
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7.75 |
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7.75 |
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Korea |
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1,154.30 |
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1,384.60 |
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Malaysia |
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3.40 |
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3.59 |
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Singapore |
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1.40 |
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1.49 |
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Thailand |
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33.14 |
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35.09 |
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-5-
None of AIG, Aurora, AIA, their respective affiliates or any of their directors, officers and
employees participated in the calculation of the Prudential Data or the selection of the
assumptions on which they were based. None of AIG, Aurora, AIA, their respective affiliates or any
of their directors, officers and employees has approved the Prudential Data or accepts
responsibility for the Prudential Data for any purpose, including for purposes of any offering of
securities by Prudential.
In addition to the AIA Data, AIG provided to Prudential certain unaudited information on AIA’s
results for the fiscal quarters ended February 28, 2010 and 2009, prepared for inclusion as a
discontinued operation in AIG’s unaudited consolidated financial statements prepared in accordance
with U.S. generally accepted accounting principles for the three months ended March 31, 2010, as
follows:
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| (USD in millions)(unaudited) |
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2010 |
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2009 |
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Total Revenues: |
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$ |
3,175 |
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$ |
2,787 |
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Pre-tax Income: |
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658 |
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390 |
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-6-
SIGNATURES
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 hereunto duly authorized.
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AMERICAN INTERNATIONAL GROUP, INC.
(Registrant)
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| Date: May 17, 2010 |
By: |
/s/ Kathleen E. Shannon
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Name: |
Kathleen E. Shannon |
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Title: |
Senior Vice President and Secretary |
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-7-