EX-12 2 y27490exv12.htm EX-12: STATEMENTS 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)   2006   2005   2004   2003   2002
 
Income before income taxes, minority interest and cumulative effect of accounting changes
   $ 21,687     $ 15,213     $ 14,845     $ 11,907     $ 7,808  
Less — Equity income of less than 50% owned companies
     188       (129 )     164       146       168  
Add — Dividends from less than 50% owned companies
     28       146       22       13       13  
 
      21,527       15,488       14,703       11,774       7,653  
Add — Fixed charges
     9,062       7,663       6,049       5,762       4,893  
Less — Capitalized interest
     59       64       59       52       61  
 
Income before income taxes, minority interest, cumulative effect of accounting changes and fixed charges
   $ 30,530     $ 23,087     $ 20,693     $ 17,484     $ 12,485  
 
Fixed charges:
                                        
 
Interest costs
   $ 8,843     $ 7,464     $ 5,860     $ 5,588     $ 4,725  
 
Rental expense*
     219       199       189       174       168  
 
Total fixed charges
   $ 9,062     $ 7,663     $ 6,049     $ 5,762     $ 4,893  
 
Ratio of earnings to fixed charges
     3.37       3.01       3.42       3.03       2.55  
 
Secondary Ratio
                                        
 
Interest credited to GIC and GIA policy and contract holders
   $ (5,128 )   $ (4,760 )   $ (3,674 )   $ (3,578 )   $ (2,702 )
Total fixed charges excluding interest credited to GIC and GIA policy and contract holders
   $ 3,934     $ 2,903     $ 2,375     $ 2,184     $ 2,191  
 
Secondary ratio of earnings to fixed charges
     6.46       6.31       7.17       6.37       4.47  
 
* 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 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.
188       AIG 2006 Form 10-K