This Annual Report and other publicly available documents may include, and AIG's officers and representatives may from time to time make, statements which may constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are not historical facts but instead represent only AIG's belief regarding future events, many of which, by their nature, are inherently uncertain and outside of AIG's control. These statements may address, among other things, AIG's strategy for growth, product development, regulatory approvals, market position, financial results and reserves. It is possible that AIG's actual results and financial condition may differ, possibly materially, from the anticipated results and financial condition indicated in these forward-looking statements. Important factors that could cause AIG's actual results to differ, possibly materially, from those in the specific forward-looking statements are discussed throughout this Management's Discussion and Analysis of Financial Condition and Results of Operations. AIG is not under any obligation to (and expressly disclaims any such obligations to) update or alter any forward-looking statement, whether written or oral, that may be made from time to time, whether as a result of new information, future events or otherwise.
General insurance net investment income in 2000 increased 7.3 percent when compared to 1999. In 1999, net investment income increased 14.8 percent over 1998. The growth in net investment income in each of the three years was primarily attributable to new cash flow for investment and the consolidation of Transatlantic and 21st Century for twelve months in 1999 compared to six months in 1998. The new cash flow was generated from net general insurance operating cash flow and included the compounding of previously earned and reinvested net investment income. (See also the discussion under "Liquidity" herein and Note 8 of Notes to Financial Statements.)
Other income (deductions)-net includes AIG's equity in certain minor majority-owned subsidiaries and certain partially-owned companies, realized foreign exchange transaction gains and losses in substantially all currencies and unrealized gains and losses in hyperinflationary currencies, as well as the income and expenses of the parent holding company and other miscellaneous income and expenses. In 2000, net deductions amounted to $271 million. In 1999 and 1998, net deductions amounted to $197 million and $134 million, respectively. (See also the discussion under "Recent Developments" herein.)
At December 31, 2000, ILFC had increased the aggregate principal amount outstanding of its medium term and term notes to $8.70 billion, a net increase of $462 million, and recorded a net decline in its capital lease obligations of $207 million and a net increase in its commercial paper of $1.30 billion. At December 31, 2000, ILFC had $75 million in aggregate principal amount of debt securities registered for issuance from time to time, which debt had been sold as of March 16, 2001. An additional $2.0 billion principal amount of debt securities was registered as of January 5, 2001, under which $800 million in notes were sold as of March 16, 2001. A $750 million Medium Term Note program was implemented on January 19, 2001 under which $200 million has been sold as of March 16, 2001. In addition, ILFC established a Euro Medium Term Note Program for $2.0 billion, under which $771 million in notes were sold through December 31, 2000.
During 2000, AIG repurchased in the open market 10,351,600 shares of its common stock. Through March 22, 2001, AIG repurchased in the open market 2,525,000 shares of its common stock. AIG intends to continue to buy its common shares in the open market for general corporate purposes, including to satisfy its obligations under various employee benefit plans.
(v) Earnings Per Share: Basic earnings per common share are based on the weighted average number of common shares outstanding, retroactively adjusted to reflect all stock dividends and stock splits. Diluted earnings per share are based on
(a) The realized gains (losses) resulted from the disposition of available for sale fixed maturities.
At December 31, 2000, AIG had $781 million principal amount of debt securities registered and available for issuance from time to time. In early 2001, AIG established a new Medium Term Note program under which these securities may be issued.
(ii) Term Notes Issued by ILFC: ILFC has issued unsecured obligations which may not be redeemed prior to maturity.
(b) SunAmerica: The preferred stock consists of $185 million liquidation amount of 8.35% Trust Originated Preferred Securities issued by SunAmerica Capital Trust II in October 1995, $310 million liquidation amount of 8.30% Trust Originated Preferred Securities issued by SunAmerica Capital Trust III in November 1996, and $350 million liquidation amount of 7.5% Non-Voting Preferred Interests issued by Total Return LLC, a wholly owned subsidiary of SunAmerica, in March 2000.
The interest and other payment dates on the debentures correspond to the distribution and other payment dates on the preferred and common securities. The preferred and common securities will be redeemed on a pro rata basis, to the same extent as the debentures are repaid. Under certain circumstances involving a change in law or legal interpretation, the debentures may be distributed to holders of the preferred and common securities in liquidation of the grantor trust(s). AIG's obligations under the debentures and related agreements, taken together, provide a full and unconditional guarantee of payments due on the preferred securities.
(g) AIG and its subsidiaries, in common with the insurance industry in general, are subject to litigation, including claims for punitive damages, in the normal course of their business. AIG does not believe that such litigation will have a material effect on its operating results and financial condition.
The net benefit cost for the years ended December 31, 2000, 1999, and 1998 included the following components:
(b) Realized capital gains are not deemed to be an integral part of AIG's life insurance operations' internal reporting groups.