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Filed by American International Group, Inc.
Pursuant to Rule 425 under the Securities Act of 1933
Subject Company: American General Corporation
Commission File No. 1-7981
American International Group, Inc. ("AIG") and American General Corporation
("American General") have filed a proxy statement/prospectus and other relevant
documents concerning AIG's acquisition of American General with the Securities
and Exchange Commission ("SEC"). INVESTORS ARE URGED TO READ THE PROXY
STATEMENT/PROSPECTUS AND ANY OTHER RELEVANT DOCUMENTS FILED OR TO BE FILED IN
THE FUTURE WITH THE SEC BECAUSE THOSE DOCUMENTS CONTAIN IMPORTANT INFORMATION.
Investors will be able to obtain such documents free of charge at the SEC's
website at www.sec.gov. In addition, such documents may also be obtained free of
charge by contacting American International Group, Inc., 70 Pine Street, New
York, New York, 10270, Attention: Director of Investor Relations, or American
General Corporation, 2929 Allen Parkway, Houston, Texas, 77019, Attention:
Investor Relations.
American General and certain other persons referred to below may be deemed to be
participants in the solicitation of proxies from American General shareholders
to adopt the agreement providing for AIG's acquisition of American General. The
participants in this solicitation may include, under SEC rules, the directors
and executive officers of American General, who may have interests in the
transaction, including as a result of holding shares or stock options of
American General. A detailed list of the names and interests of American
General's directors and executive officers is contained in the definitive proxy
statement on Schedule 14A filed by American General with the SEC on March 28,
2001. Copies of that filing may be obtained free of charge at the SEC's website
at www.sec.gov.
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The following is a press release issued by AIG on July 26, 2001:
NEWS [AIG LETTERHEAD]
For information, please contact:
Charlene M. Hamrah (Investment Community)
(212) 770-7074
Joe Norton (News Media)
(212) 770-3144
AIG'S SECOND QUARTER 2001 INCOME EXCLUDING REALIZED
CAPITAL GAINS (LOSSES) ROSE 15.8 PERCENT TO $1.66 BILLION
NEW YORK, NY, July 26, 2001 - American International Group, Inc. (AIG) today
reported that its income excluding net realized capital gains (losses) increased
15.8 percent to $1.66 billion in the second quarter and, also excluding the
first quarter cumulative effect of a FASB mandated accounting change, 15.5
percent to $3.23 billion for the first six months of 2001.
Net income for the second quarter of 2001 increased 15.6 percent to
$1.63 billion, compared to $1.41 billion in the second quarter of 2000. For the
first six months of 2001, net income totaled $3.16 billion, an increase of 14.7
percent compared to $2.75 billion in the same period of 2000.
Revenues in the second quarter of 2001 rose 10.1 percent to $12.58
billion from $11.43 billion in the year-earlier quarter. For the first six
months, revenues totaled $24.73 billion, an increase of 10.8 percent over $22.32
billion in 2000.
At June 30, 2001, AIG's consolidated assets and shareholders' equity
approximated $335 billion and $42.5 billion, respectively.
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Following is a summary table of second quarter and six months
information (in millions, except per share amounts).
SECOND QUARTER SIX MONTHS
2001 2000 Change 2001 2000 Change
---- ---- ------ ---- ---- ------
Net income, as reported $ 1,627.0 $ 1,407.0 15.6% $ 3,158.8 $ 2,753.1 14.7%
Income, as adjusted* $ 1,656.9 $ 1,430.7 15.8% $ 3,228.6 $ 2,794.8 15.5%
PER SHARE RESULTS:**
Net income, as reported $ 0.69 $ 0.60 15.0% $ 1.34 $ 1.17 14.5%
Income, as adjusted* $ 0.70 $ 0.61 14.8% $ 1.37 $ 1.19 15.1%
Average shares outstanding 2,357.6 2,339.3 2,358.2 2,342.7
* Adjusted to exclude the cumulative effect of a first quarter 2001
accounting change and realized capital gains (losses), net of taxes.
** Share information reflects the three-for-two split in the form of a 50
percent common stock dividend, paid July 28, 2000.
Income before income taxes, minority interest and realized capital
gains (losses) for the second quarter of 2001 amounted to $2.43 billion, an
increase of 14.0 percent over the $2.13 billion reported in 2000. For the first
six months of 2001, income before income taxes, minority interest, cumulative
effect of a first quarter accounting change and realized capital gains (losses)
increased 14.7 percent to $4.75 billion from $4.14 billion reported last year.
Foreign exchange rates negatively affected the translation into U.S.
dollars of foreign currency general insurance net premiums written and life
insurance premium income and other considerations, as shown in the following
table, which compares second quarter 2001 to second quarter 2000.
WORLDWIDE FOREIGN WORLDWIDE FOREIGN
GENERAL GENERAL LIFE LIFE
INSURANCE INSURANCE INSURANCE INSURANCE
--------- --------- --------- ---------
Premium Growth in Original Currency 15.8% 7.3%* 22.8%** 21.9%**
Foreign Exchange Impact (3.5) (10.2) (9.2) (10.0)
Premium Growth as Reported in U.S. $ 12.3% (2.9%) 13.6% 11.9%
* Excluding Risk Finance business, core Foreign General net premiums written
rose 16.2% in original currency.
** Premium growth in original currency is reflected on a GAAP basis. Life
insurance premium income and other considerations reflect an increase in
original currency of 21.1% and 5.4%, respectively for Worldwide and
Foreign Life. Premium income and other considerations are impacted by a
decline in sales of tax-driven Guaranteed Income Bonds in the U.K.
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Commenting on second quarter performance, AIG Chairman M.R. Greenberg
said, "AIG had a good second quarter as a result of solid progress in most of
our principal businesses and geographic markets. Excluding realized capital
gains and losses, AIG's net income rose 15.8 percent to $1.66 billion. In the
property-casualty market, pricing continued to improve. While the global economy
remains soft, the flight to quality underway in many markets benefits AIG with
our strong ratings and financial condition. We have undertaken a number of new
marketing initiatives and alliances, and launched an array of new products that
will benefit future growth in our business.
"Reflecting rate increases in the commercial property-casualty market,
worldwide general insurance net premiums written grew 12.3 percent (15.8 percent
in original currency) to $5.06 billion. The combined ratio improved to 95.52 in
the second quarter of 2001, compared to 95.92 a year ago. Net catastrophe
losses, the majority from tropical storm Allison, were $30.0 million in the
quarter, compared to $19.0 million in the second quarter of 2000.
"In the United States, our Domestic Brokerage Group had record net
premiums written of $2.82 billion and a combined ratio of 98.77. In last year's
second quarter, net premiums written were $2.21 billion and the combined ratio
was 99.27. While rates continue to firm, much more is needed for the industry to
get back on an even keel and achieve overall profitability. In fact, over the
past decade, rates declined for many classes of business by 50 to 75 percent.
Over the same period, policy conditions broadened, which increased exposures in
many areas, while loss cost trends have also increased significantly. AIG has
declined to underwrite in excess of $4 billion of gross premiums over the past
decade that would not have yielded a satisfactory underwriting profit, and we
will continue to press strongly for rate adequacy.
"HSB Group, Inc., which is providing valuable specialized capabilities
to our worldwide general insurance operations, continued to produce good results
in the second quarter of 2001.
"Personal lines rates are rising, but are not yet adequate in a number
of states. We maintain underwriting discipline, and in fact, recently announced
that we intend to exit the New Jersey personal auto market, where necessary rate
increases are virtually impossible to obtain. The rate application process takes
years, and if a company decides to stop underwriting in the state, it can be
held hostage for two or more years. The absence of meaningful reform ultimately
increases costs for New Jersey drivers. This is hardly an example of a market
economy.
"United Guaranty Corporation, our mortgage guaranty insurance
subsidiary, continues to achieve outstanding performance. Net premiums written
increased 10.0 percent.
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"Our Foreign General insurance operations had an excellent quarter and
benefited from the global strengthening of property-casualty pricing. The
combined ratio improved to 90.77 in the second quarter of 2001. Excluding Risk
Finance business, which is highly transaction-oriented, the core business of our
Foreign General operations increased by 16.2% in original currency. Both Japan
and the United Kingdom, two of our major property-casualty markets, did
particularly well. During the quarter, we announced plans to form an
underwriting syndicate at Lloyd's, which will further enhance our global reach
and product capabilities.
"Transatlantic Holdings, Inc., whose results are reported through both
AIG's Domestic and Foreign General insurance segments, grew in net premiums
written and had a combined ratio of 102.9. Excluding $15 million in catastrophe
losses, the combined ratio was 99.6.
"Our Worldwide Life business had a very good quarter in both its
domestic and foreign operations. This segment of our business met our targeted
growth projections in most areas of the world. Overall, our Worldwide Life
Division's operating income rose 19.7 percent, to $1.07 billion. Life insurance
premiums and other considerations grew 14.8 percent or 21.1 percent on an
original currency basis. Japan, one of our largest overseas markets, had an
excellent quarter. Our life business in Japan now includes, in addition to
ALICO, AIG Star Life Insurance Co., Ltd., the business we acquired as part of
the Chiyoda reorganization. The addition of AIG Star Life increases the scope of
our Japanese life operations and adds approximately 5,000 agents to our Japan
life agency force.
"A major development in the second quarter was the definitive agreement
we announced in May to acquire American General Corporation. This acquisition
will significantly strengthen our position in the domestic life insurance
business and enhance our leadership in the rapidly growing retirement savings
market, complementing SunAmerica's operations. The American General acquisition
remains on track and American General has scheduled a shareholder vote for
August 15. We have received approvals from a number of states, and expect the
remaining approvals in August. We plan to close the transaction as soon as
possible thereafter. Our third quarter results will include the costs and
restructuring charges associated with the American General acquisition. AIG and
American General already have extensive studies underway to identify and plan
for revenue enhancement programs. We have project teams working on all aspects
of the integration process, and are enthusiastic about the benefits we expect to
realize from bringing American General into the AIG family.
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"Our Financial Services Group had a very good quarter. Operating income
increased 22.3 percent. International Lease Finance Corporation and AIG
Financial Products Corp. both had excellent results. AIG's Consumer Finance
Group continues to grow in the foreign markets in which it operates. American
General's significant presence in domestic consumer finance will add materially
to the overall scope of AIG's worldwide consumer finance business. AIG Trading
Group Inc. strengthened its management team during the quarter, and operations
are showing improved results.
"The asset management business was obviously impacted by soft economic
and financial market conditions during the second quarter. Nevertheless, our
Asset Management Group experienced better results than the industry in sales of
both variable annuities and mutual funds."
GENERAL INSURANCE
General insurance pretax income before realized capital losses for the
second quarter of 2001 was $946.2 million, 6.6 percent above the $887.6 million
last year. For the first six months of 2001, general insurance pretax income
before realized capital gains (losses) was $1.92 billion, an increase of 8.9
percent, compared to $1.76 billion in 2000.
Worldwide general insurance net premiums written in the second quarter
of 2001 amounted to $5.06 billion, 12.3 percent ahead of the $4.50 billion in
2000. For the first six months of 2001, general insurance net premiums written
were $9.92 billion, an increase of 13.6 percent, compared to $8.73 billion last
year.
General insurance net investment income rose 7.2 percent to $706.9
million in the second quarter and 7.6 percent to $1.42 billion in the first six
months of 2001.
LIFE INSURANCE
AIG's worldwide life insurance operations reported second quarter 2001
pretax income before realized capital losses of $1.07 billion, an increase of
19.7 percent, compared to $894.6 million in 2000. For the first six months of
2001, life insurance pretax income before realized capital losses increased 18.8
percent to $2.03 billion, compared to $1.71 billion last year.
Life insurance premium income and other considerations of $9.24 billion
was 14.8 percent above second quarter 2000 premium income and other
considerations of $8.04 billion. For the first six months, premium income and
other considerations amounted to $18.01 billion, a gain of 22.5 percent,
compared to $14.70 billion in 2000.
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Life insurance net investment income rose 12.1 percent to $1.95 billion
in the second quarter of 2001, compared to $1.74 billion for the same period
last year. For the first six months, net investment income amounted to $3.87
billion, an increase of 13.5 percent, compared to $3.41 billion in 2000.
FINANCIAL SERVICES
Financial services pretax operating income during the second quarter of
2001 increased 22.3 percent to $372.3 million, compared to $304.5 million in
2000. For the first six months of 2001, financial services operating income was
$700.9 million, a 19.7 percent increase, compared to $585.4 million in 2000.
ASSET MANAGEMENT
Asset management pretax operating income for the second quarter of 2001
amounted to $99.9 million, a decrease of 6.3 percent, compared to $106.6 million
in 2000. For the first six months of 2001, pretax operating income increased 0.4
percent to $211.1 million, compared to $210.3 million last year.
# # # #
AIG is the leading U.S.-based international insurance and financial
services organization and the largest underwriter of commercial and industrial
insurance in the United States. Its member companies write a wide range of
commercial, personal and life insurance products through a variety of
distribution channels in approximately 130 countries and jurisdictions
throughout the world. AIG's global businesses also include financial services
and asset management, including aircraft leasing, financial products, trading
and market making, consumer finance, institutional, retail and direct investment
fund asset management, real estate investment management, and retirement savings
products. American International Group, Inc.'s common stock is listed on the New
York Stock Exchange, as well as the stock exchanges in London, Paris,
Switzerland and Tokyo.
# # # #
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CAUTION CONCERNING FORWARD-LOOKING STATEMENTS
This press release may contain forward-looking statements. Please refer
to AIG's Quarterly Report on Form 10-Q for the quarter ended March 31, 2001 for
a description of the business environment in which AIG operates and the
important factors that may affect its business. AIG is not under any obligation
to (and expressly disclaims any such obligations to) update or alter its
forward-looking statements whether as a result of new information, future events
or otherwise.
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AMERICAN INTERNATIONAL GROUP, INC.
FINANCIAL HIGHLIGHTS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
Six Months Ended June 30, Three Months Ended June 30,
2001 2000 Change 2001 2000 Change
----------- ----------- -------- ---------- ---------- --------
General Insurance Operations:
Net Premiums Written $ 9,919,900 $ 8,729,714 13.6 % $5,055,147 $4,503,418 12.3 %
Net Premiums Earned 9,463,813 8,508,837 11.2 4,742,080 4,401,934 7.7
Adjusted Underwriting Profit 495,710 439,386 12.8 239,306 227,894 5.0
Net Investment Income 1,422,840 1,322,911 7.6 706,927 659,712 7.2
Income before Realized Capital Gains (Losses) 1,918,550 1,762,297 8.9 946,233 887,606 6.6
Realized Capital Gains (Losses) (57,701) 9,038 - (36,838) (3,048) -
Operating Income $ 1,860,849 $ 1,771,335 5.1 % $ 909,395 $ 884,558 2.8 %
-----------------------------------------------------------------------------------------------------------------------------------
Loss Ratio 74.92 75.14 74.21 75.08
Expense Ratio 20.79 20.71 21.31 20.84
Combined Ratio 95.71 95.85 95.52 95.92
-----------------------------------------------------------------------------------------------------------------------------------
Life Insurance Operations:
Premium Income and Other Considerations (a) $18,006,391 $14,696,108 22.5 % $9,236,180 $8,044,004 14.8 %
Net Investment Income 3,872,396 3,411,405 13.5 1,951,570 1,740,340 12.1
Income before Realized Capital Losses 2,026,931 1,706,697 18.8 1,070,521 894,610 19.7
Realized Capital Losses (20,901) (58,191) - (3,079) (29,456) -
Operating Income 2,006,030 1,648,506 21.7 1,067,442 865,154 23.4
Financial Services Operating Income 700,896 585,361 19.7 372,288 304,515 22.3
Asset Management Operating Income 211,096 210,342 0.4 99,871 106,555 (6.3)
Other Realized Capital Losses (17,423) (6,111) - (5,483) (2,380) -
Other Income (Deductions) - net (105,077) (121,593) - (59,166) (61,618) -
Income before Income Taxes, Minority Interest
and Cumulative Effect of an Accounting Change 4,656,371 4,087,840 13.9 2,384,347 2,096,784 13.7
Income Taxes 1,368,766 1,213,315 - 704,095 623,579 -
Income before Minority Interest and Cumulative
Effect of an Accounting Change 3,287,605 2,874,525 14.4 1,680,252 1,473,205 14.1
Minority Interest, after tax: (b)
Operating Income (121,052) (114,240) - (52,857) (63,737) -
Capital Gains (1,547) (7,151) - (392) (2,427) -
Income before Cumulative Effect of an Accounting Change 3,165,006 2,753,134 15.0 1,627,003 1,407,041 15.6
Cumulative Effect of an Accounting Change, net of tax (c) (6,246) 0 - 0 0 -
Net Income, as reported 3,158,760 2,753,134 14.7 1,627,003 1,407,041 15.6
Income, as adjusted (d) $ 3,228,573 $ 2,794,767 15.5 % $1,656,906 $1,430,703 15.8 %
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Per Share: (e)
Basic:
Net Income, as reported $ 1.35 $ 1.19 13.4 % $ 0.69 $ 0.61 13.1 %
Diluted:
Net Income, as reported 1.34 1.17 14.5 0.69 0.60 15.0
Income, as adjusted (d) $ 1.37 $ 1.19 15.1 % $ 0.70 $ 0.61 14.8 %
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Average Common Shares Outstanding (e)
- Basic 2,332,992 2,316,957 2,332,184 2,313,062
- Diluted 2,358,158 2,342,695 2,357,593 2,339,279
(a) GAAP premium income was $3,848,746 and $7,354,797 for the second quarter
and six months 2001, respectively, compared to $3,387,236 and $6,664,868
for the second quarter and six months 2000, respectively.
(b) Represents minority shareholders' equity in operating income and capital
gains of certain consolidated subsidiaries, including Transatlantic
Holdings, Inc. and 21st Century Insurance Group.
(c) Represents the cumulative effect of an accounting change, net of tax,
related to the adoption of FASB 133 "Accounting for Derivative Instruments
and Hedging Activities".
(d) Adjusted to exclude the cumulative effect of a first quarter 2001
accounting change and realized capital gains (losses), net of taxes.
(e) Share information reflects the three-for-two split in the form of a 50
percent stock dividend, paid July 28, 2000.
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AMERICAN INTERNATIONAL GROUP, INC.
SUPPLEMENTARY DATA
(IN THOUSANDS)
Six Months Ended June 30, Three Months Ended June 30,
2001 2000 Change 2001 2000 Change
----------- ----------- ------ ----------- ----------- ------
General Insurance Operations:
Net Premiums Written
Brokerage Division $ 5,467,739 $ 4,289,413 27.5 % $ 2,817,887 $ 2,211,874 27.4 %
Personal Lines 1,246,488 1,232,922 1.1 611,986 631,653 (3.1)
Mortgage Guaranty 238,963 218,328 9.5 120,444 109,49 10.0
----------- ----------- ----------- -----------
Total Domestic General 6,953,190 5,740,663 21.1 3,550,317 2,953,021 20.2
Foreign General (a) 2,966,710 2,989,051 (0.7) 1,504,830 1,550,39 (2.9)
----------- ----------- ----------- -----------
Total 9,919,900 8,729,714 13.6 5,055,147 4,503,418 12.3
Operating Income (b)
Brokerage Division 1,083,958 974,385 11.2 531,166 515,476 3.0
Personal Lines 19,172 64,709 (70.4) 6,711 23,228 (71.1)
Mortgage Guaranty 212,759 179,922 18.3 110,715 86,704 27.7
Intercompany Adjustments 11,658 41,216 -- 5,828 20,951 --
----------- ----------- ----------- -----------
Total Domestic General 1,327,547 1,260,232 5.3 654,420 646,359 1.2
Foreign General 591,003 502,065 17.7 291,813 241,247 21.0
----------- ----------- ----------- -----------
Total $ 1,918,550 $ 1,762,297 8.9 % $ 946,233 $ 887,606 6.6 %
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Combined Ratio:
Brokerage Division 98.50 100.07 98.77 99.27
Personal Lines 103.88 98.06 104.30 99.38
Mortgage Guaranty 33.16 38.84 30.35 42.21
Total Domestic General 97.13 97.25 97.32 97.14
Foreign General 91.98 92.91 90.77 93.27
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Losses and Loss Expenses Paid $ 6,978,848 $ 6,324,452 10.3 % $ 3,470,008 $ 3,257,833 6.5 %
Change in Loss and LAE Reserve 111,789 69,186 61.6 49,009 47,198 3.8
----------- ----------- ----------- -----------
Losses and Loss Expenses Incurred 7,090,637 6,393,638 10.9 3,519,017 3,305,031 6.5
Net Loss and LAE Reserve 25,063,385 24,668,858 1.6
GAAP Underwriting Profit 495,710 439,386 12.8 239,306 227,894 5.0
Life Insurance Operations: (c)
Premium Income and Other Considerations
Domestic
Life (d) 357,775 298,247 20.0 184,187 145,561 26.5
Annuities, Pension and
Investment Products (e) 7,874,266 4,526,454 74.0 4,047,754 2,674,423 51.4
----------- ----------- ----------- -----------
Total 8,232,041 4,824,701 70.6 4,231,941 2,819,984 50.1
Foreign (f)
Life (d) 7,220,146 6,329,286 14.1 3,914,882 3,264,893 19.9
Annuities, Pension and
Investment Products (e) 2,554,204 3,542,121 (27.9) 1,089,357 1,959,127 (44.4)
----------- ----------- ----------- -----------
Total $ 9,774,350 $ 9,871,407 (1.0)% $ 5,004,239 $ 5,224,020 (4.2)%
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SUPPLEMENTARY DATA CONTINUED
Six Months Ended June 30, Three Months Ended June 30,
2001 2000 Change 2001 2000 Change
---------- ---------- --------- ---------- ---------- --------
Life Insurance Operations continued
Net Investment Income
Domestic $2,137,542 $1,879,331 13.7 % $1,079,003 $ 955,237 13.0 %
Foreign 1,734,854 1,532,074 13.2 872,567 785,103 11.1
---------- ---------- ---------- ----------
Total 3,872,396 3,411,405 13.5 1,951,570 1,740,340 12.1
Operating Income (b)
Domestic 731,187 625,138 17.0 367,252 325,983 12.7
Foreign 1,295,744 1,081,559 19.8 703,269 568,627 23.7
---------- ---------- ---------- ----------
Total 2,026,931 1,706,697 18.8 1,070,521 894,610 19.7
Financial Services:
Revenues
International Lease Finance Corp. 1,278,193 1,156,790 10.5 656,588 607,179 8.1
AIG Financial Products Corp. 519,267 450,926 15.2 271,576 238,561 13.8
AIG Trading Group Inc. 58,751 134,830 (56.4) 19,859 61,780 (67.9)
Other 244,192 127,444 91.6 127,619 67,228 89.8
---------- ---------- ---------- ----------
Total 2,100,403 1,869,990 12.3 1,075,642 974,748 10.4
Operating Income
International Lease Finance Corp. 343,956 309,932 11.0 183,466 171,180 7.2
AIG Financial Products Corp. 354,082 278,575 27.1 188,838 139,139 35.7
AIG Trading Group Inc. 13,905 35,226 (60.5) 7,388 13,375 (44.8)
Other 33,469 (2,820) -- 14,813 (1,915) --
Intercompany Reclassifications (44,516) (35,552) -- (22,217) (17,264) --
---------- ---------- ---------- ----------
Total 700,896 585,361 19.7 372,288 304,515 22.3
SunAmerica:
Operating Income (b)(c) 718,714 670,320 7.2 350,598 345,524 1.5
Total Sales $8,164,039 $6,673,620 22.3 % $3,925,209 $3,812,138 3.0 %
Effective Tax Rates:
Excluding Capital Gains (Losses) 29.52% 29.79% 29.63% 29.89%
Capital Gains (Losses) Alone 35.41% 37.60% 35.00% 39.13%
As Reported 29.40% 29.68% 29.53% 29.74%
(a) The growth in foreign net premiums written in original currency was 7.3
percent and 8.0 percent for the second quarter and six months of 2001,
respectively.
(b) Operating income excludes realized capital gains (losses).
(c) Results for SunAmerica Inc. are included in Life Insurance and Asset
Management Operations.
(d) Includes traditional life, interest sensitive and variable life products.
(e) Quarterly fluctuations in the sale of investment products do not represent
a trend for the year.
(f) The growth in foreign life premiums in original currency was 31.1 percent
in the quarter and 22.9 percent for the six months. Foreign annuities,
pension and investment products in original currency declined 37.5 percent
for the quarter and 20.9 percent for the six months, impacted by a decline
in sales of tax-driven Guaranteed Income Bonds in the U. K.