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COMPUTATION OF RATIOS OF Exhibit 12
EARNINGS TO FIXED CHARGES
American International Group, Inc. and Subsidiaries
(in thousands, except ratios)
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Years Ended December 31, 1995 1994 1993 1992 1991
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Income before income taxes and cumulative effect of
accounting changes $3,465,883 $2,951,979 $2,601,081 $2,137,048 $2,022,575
Less-Equity income of less than 50% owned persons 91,444 54,091 43,966 40,148 35,534
Add-Dividends from less than 50% owned persons 6,515 4,660 4,349 5,147 4,444
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3,380,954 2,902,548 2,561,464 2,102,047 1,991,485
Add-Fixed charges 1,483,752 1,404,633 1,213,487 1,233,132 977,816
Less-Capitalized interest 50,746 46,023 42,699 38,725 40,313
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Income before income taxes, cumulative effect of
accounting changes and fixed charges $4,813,960 $4,261,158 $3,732,252 $3,296,454 $2,928,988
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Fixed charges:
Interest costs $1,411,886 $1,335,300 $1,146,654 $1,166,732 $ 911,349
Rental expense* 71,866 69,333 66,833 66,400 66,467
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Total fixed charges $1,483,752 $1,404,633 $1,213,487 $1,233,132 $ 977,816
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Ratio of earnings to fixed charges 3.24 3.03 3.08 2.67 3.00
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* The proportion deemed representative of the interest factor.
The ratios shown are significantly affected as a result of the inclusion of the
fixed charges and operating results of AIG Financial Products Corp. and its
subsidiaries (AIGFP). AIGFP structures borrowings through guaranteed investment
agreements and engages in other complex financial transactions, including
interest rate and currency swaps. In the course of its business, AIGFP enters
into borrowings that are primarily used to purchase assets that yield rates
greater than the rates on the borrowings with the intent of earning a profit on
the spread and to finance the acquisition of securities utilized to hedge
certain transactions. The pro forma ratios of earnings to fixed charges,
excluding the effects of the operating results of AIGFP, are 4.77, 5.25, 5.66,
5.15 and 5.40 for 1995, 1994, 1993, 1992 and 1991, respectively. As AIGFP will
continue to be a subsidiary, AIG expects that these ratios will continue to be
lower than they would be if the fixed charges and operating results of AIGFP
were not included therein.
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