EX-12 8 y35350exv12.htm EX-12: STATEMENT RE COMPUTATION OF RATIOS EX-12
 

Exhibit 12
American International Group, Inc.
Computation of Ratios of Earnings to Fixed Charges
                                   
 
    Three Months   Six Months
    Ended June 30,   Ended June 30,
         
(in millions, except ratios)   2007   2006   2007   2006
 
Income before income taxes, minority interest and cumulative effect of an accounting change
   $ 6,328     $ 5,241     $ 12,500     $ 10,034  
Less – Equity income of less than 50% owned persons
     49       110       91       130  
Add – Dividends from less than 50% owned persons
     25       15       25       18  
 
      6,304       5,146       12,434       9,922  
 
Add – Fixed charges
     2,442       2,048       5,114       3,996  
Less – Capitalized interest
     9       14       20       29  
 
Income before income taxes, minority interest, cumulative effect of an accounting change and fixed charges
   $ 8,737     $ 7,180     $ 17,528     $ 13,889  
 
Fixed charges:
                                
 
Interest costs
   $ 2,381     $ 1,995     $ 4,993     $ 3,891  
 
Rental expense*
     61       53       121       105  
 
Total fixed charges
   $ 2,442     $ 2,048     $ 5,114     $ 3,996  
 
Ratio of earnings to fixed charges
     3.58       3.51       3.43       3.48  
 
Secondary Ratio
                                
 
Interest credited to GIC and GIA policy and contract holders
   $ (1,268 )   $ (1,097 )   $ (2,847 )   $ (2,187 )
Total fixed charges excluding interest credited to GIC and GIA policy and contract holders
   $ 1,174     $ 951     $ 2,267     $ 1,809  
 
Secondary ratio of earnings to fixed charges
     6.36       6.40       6.48       6.47  
 
*  The proportion deemed representative of the interest factor.
The secondary ratio is disclosed for the convenience of fixed income investors and the rating agencies that serve them and is more comparable to the ratios disclosed by all issuers of fixed income securities. The secondary ratio removes interest credited to guaranteed investment contract (GIC) policyholders and guaranteed investment agreement (GIA) contractholders. Such interest expenses are also removed from income before income taxes, minority interest and cumulative effect of an accounting change used in this calculation. GICs and GIAs are entered into by AIG’s insurance subsidiaries, principally Sun America Life Insurance Company and AIG Financial Products Corp. and its subsidiaries, respectively. The proceeds from GICs and GIAs are invested in a diversified portfolio of securities, primarily investment grade bonds. The assets acquired yield rates greater than the rates on the related policyholders obligation or agreement, with the intent of earning operating income from the spread.