EX-12 4 y51401aexv12.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
    Ended March 31,
     
(in millions, except ratios)   2008   2007
 
Income (loss) before income taxes and minority interest
   $ (11,264 )   $ 6,172  
Less – Equity income of less than 50% owned persons
     9       42  
Add – Dividends from less than 50% owned persons
     —       —  
 
      (11,273 )     6,130  
 
Add – Fixed charges
     2,192       2,672  
Less – Capitalized interest
     9       11  
 
Income (loss) before income taxes, minority interest and fixed charges
   $ (9,090 )   $ 8,791  
 
Fixed charges:
                
 
Interest costs
   $ 2,117     $ 2,612  
 
Rental expense(a)
     75       60  
 
Total fixed charges
   $ 2,192     $ 2,672  
 
Ratio of earnings to fixed charges
     (b )     3.29  
 
Secondary Ratio
                
 
Interest credited to GIC and GIA policy and contract holders
   $ (926 )   $ (1,579 )
Total fixed charges excluding interest credited to GIC and GIA policy and contract holders
   $ 1,266     $ 1,093  
 
Secondary ratio of earnings to fixed charges
     (b )     6.60  
 
(a) The proportion considered representative of the interest factor.
(b) Earnings were inadequate to cover total fixed charges by $11,282 million for the three-month period ended March 31, 2008. The coverage deficiency for total fixed charges excluding interest credited to GIC and GIA policy and contract holders was $10,356 million for the three-month period ended March 31, 2008.
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) contract holders. Such interest expenses are also removed from income (loss) before income taxes and minority interest 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.