EX-12 2 y22494exv12.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)   2006   2005   2006   2005
 
Income before income taxes, minority interest and cumulative effect of an accounting change
   $ 5,241     $ 6,701     $ 10,034     $ 12,350  
Less – Equity income of less than 50% owned persons
     110       30       130       93  
Add – Dividends from less than 50% owned persons
     15       123       18       126  
 
      5,146       6,794       9,922       12,383  
Add – Fixed charges
     2,048       1,739       3,996       3,469  
Less – Capitalized interest
     14       15       29       30  
 
Income before income taxes, minority interest, cumulative effect of an accounting change and fixed charges
   $ 7,180     $ 8,518     $ 13,889     $ 15,822  
 
Fixed charges:
                                
 
Interest costs
   $ 1,995     $ 1,687     $ 3,891     $ 3,366  
 
Rental expense*
     53       52       105       103  
 
Total fixed charges
   $ 2,048     $ 1,739     $ 3,996     $ 3,469  
 
Ratio of earnings to fixed charges
     3.51       4.90       3.48       4.56  
 
Secondary Ratio
                                
 
Interest credited to GIC and GIA policy and contract holders
   $ (1,097 )   $ (968 )   $ (2,187 )   $ (2,062 )
Total fixed charges excluding interest credited to GIC and GIA policy and contract holders
   $ 951     $ 771     $ 1,809     $ 1,407  
 
Secondary ratio of earnings to fixed charges
     6.40       9.79       6.47       9.78  
 
* The portion 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 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.