American International Group, Inc., and Subsidiaries
Exhibit 12
Computation of Ratios of Earnings to Fixed Charges
Years Ended December 31, | ||||||||||||||||||||
2008 | 2007 | 2006 | 2005 | 2004 | ||||||||||||||||
(In millions, except ratios) | ||||||||||||||||||||
Income (loss) before income taxes, minority interest and cumulative effect of change in accounting principles(a) | $ | (108,761 | ) | $ | 8,943 | $ | 21,687 | $ | 15,213 | $ | 14,845 | |||||||||
Add — Fixed charges | 20,456 | 11,470 | 9,062 | 7,663 | 6,049 | |||||||||||||||
Less — Capitalized interest | 27 | 37 | 59 | 64 | 59 | |||||||||||||||
Income (loss) before income taxes, minority interest, cumulative effect of change in accounting principles and fixed charges(a) | $ | (88,332 | ) | $ | 20,376 | $ | 30,690 | $ | 22,812 | $ | 20,835 | |||||||||
Fixed charges: | ||||||||||||||||||||
Interest costs | $ | 20,157 | $ | 11,213 | $ | 8,843 | $ | 7,464 | $ | 5,860 | ||||||||||
Rental expense(b) | 299 | 257 | 219 | 199 | 189 | |||||||||||||||
Total fixed charges | $ | 20,456 | $ | 11,470 | $ | 9,062 | $ | 7,663 | $ | 6,049 | ||||||||||
Preferred stock dividend requirements | $ | 400 | — | — | — | — | ||||||||||||||
Total combined fixed charges and preferred stock dividend requirements | $ | 20,856 | 11,470 | 9,062 | 7,663 | 6,049 | ||||||||||||||
Ratio of earnings to fixed charges | (c) | 1.78 | 3.39 | 2.98 | 3.44 | |||||||||||||||
Ratio of earnings to fixed charges and preferred stock dividends | (c) | 1.78 | 3.39 | 2.98 | 3.44 | |||||||||||||||
Secondary ratio of earnings to fixed charges | ||||||||||||||||||||
Interest credited to GIC and GIA policy and contract holders | $ | (2,492 | ) | $ | (6,660 | ) | $ | (5,128 | ) | $ | (4,760 | ) | $ | (3,674 | ) | |||||
Total fixed charges excluding interest credited to GIC and GIA policy and contract holders | $ | 17,964 | $ | 4,810 | $ | 3,934 | $ | 2,903 | $ | 2,375 | ||||||||||
Secondary ratio of earnings to fixed charges | (c) | 2.85 | 6.50 | 6.22 | 7.23 | |||||||||||||||
Secondary ratio of earnings to fixed charges and preferred stock dividend requirements | (c) | 2.85 | 6.50 | 6.22 | 7.23 | |||||||||||||||
(a) | Excludes undistributed earnings (loss) from equity method investments. | |
(b) | The proportion considered representative of the interest factor. | |
(c) | Earnings were insufficient to cover total fixed charges and total fixed charges and preferred stock dividends by $108,788 million and $109,188 million, respectively, for 2008. The coverage deficiency for total fixed charges and total fixed charges and preferred stock dividends excluding interest credited to GIC and GIA policy and contract holders was $106,296 million and $106,696 million respectively, for 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) 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.
346 AIG 2008Form 10-K