EX-12 2 y44393exv12.htm EX-12: STATEMENT RE COMPUTATION OF RATIOS EX-12
 

American International Group, Inc. and Subsidiaries
Computation of Ratios of Earnings to Fixed Charges
Exhibit 12
 
                                           
Years Ended December 31,                    
(in millions, except ratios)   2007   2006   2005   2004   2003
 
Income before income taxes, minority interest and cumulative effect of accounting changes
   $ 8,943     $ 21,687     $ 15,213     $ 14,845     $ 11,907  
Less — Equity income of less than 50% owned companies
     160       188       (129 )     164       146  
Add — Dividends from less than 50% owned companies
     30       28       146       22       13  
 
      8,813       21,527       15,488       14,703       11,774  
Add — Fixed charges
     11,470       9,062       7,663       6,049       5,762  
Less — Capitalized interest
     37       59       64       59       52  
 
Income before income taxes, minority interest, cumulative effect of accounting changes and fixed charges
   $ 20,246     $ 30,530     $ 23,087     $ 20,693     $ 17,484  
 
Fixed charges:
                                        
 
Interest costs
   $ 11,213     $ 8,843     $ 7,464     $ 5,860     $ 5,588  
 
Rental expense*
     257       219       199       189       174  
 
Total fixed charges
   $ 11,470     $ 9,062     $ 7,663     $ 6,049     $ 5,762  
 
Ratio of earnings to fixed charges
     1.77       3.37       3.01       3.42       3.03  
 
Secondary Ratio
                                        
 
Interest credited to GIC and GIA policy and contract holders
   $ (6,660 )   $ (5,128 )   $ (4,760 )   $ (3,674 )   $ (3,578 )
Total fixed charges excluding interest credited to GIC and GIA policy and contract holders
   $ 4,810     $ 3,934     $ 2,903     $ 2,375     $ 2,184  
 
Secondary ratio of earnings to fixed charges
     2.82       6.46       6.31       7.17       6.37  
 
* 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 earnings used in this calculation. GICs and GIAs are entered into by AIG’s insurance subsidiaries, principally SunAmerica 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 contract, with the intent of earning a profit from the spread.
214        AIG 2007 Form 10-K