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Aig Report

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Submitted By kleinbub
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AIG continued to streamline its core insurance operations and restructure businesses, over the past few years, to enhance capital allocation and operating leverage. For this, AIG has been using the proceeds gained from the disposition of redundant businesses along with earnings from its ongoing business operations. The gradual recovery in the economy and equity market, post the downturn in 2008, has helped AIG to recoup the value of its investments and dispose of its redundant and risky businesses at attractive valuations. This in turn has helped in consistent improvement of the financial leverage along with the reduction in interest expenses. Consistent payoffs along with strategically divested assets improved the operating leverage and led to an operating cash flow of $3.95 billion in the first nine months of 2013, which surged from $3.68 billion in 2012 and an outflow of $81 million in 2011. Moreover, reduction in debt by $6.27 billion in the first nine months of 2013 from 2012-end level, through its liability management initiatives, helped improve debt-to-capital ratio to 17.6% at the end of Sep 2013 from 20.5% at 2012-end and about 31% at 2010-end. The redemption of notes worth $500 million in Sep 2013 will further improve the financial leverage. At the end of Sep 2013, AIG s DIB had excess liquidity worth $2.9 billion, while majority of DIB s debt is scheduled to mature in the next 5 years, thereby enhancing capital flexibility and buoyancy for long-term growth. Going ahead, the merger of AIU Insurance Company Ltd. (AIU) and Fuji Fire and Marine Insurance Co., in Japan, by the end of 2015 will further consolidate its core operations and reduce operating risks. Meanwhile, AIG is also reconsidering to bid for the IPO of ILFC, now that its sale deal appears to fall apart. A final decision will is expected by the end of 2013. We expect the company to benefit from…...

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