AIG Reports Fourth Quarter and Full Year 2019 Results

American International Group, Inc. (NYSE: AIG) today reported net income attributable to AIG common shareholders of $922 million, or $1.03 per diluted common share, for the fourth quarter of 2019, compared to a net loss attributable to AIG common shareholders of $622 million, or $0.70 per common share, in the prior-year quarter. The improvement was primarily due to the favorable impact of General Insurance underwriting and reinsurance actions, favorable net prior year loss reserve development of $153 million (pre-tax) compared to unfavorable net prior year loss reserve development of $365 million (pre-tax) in the prior-year quarter, a reduction in pre-tax net catastrophe losses of $385 million compared to the prior-year quarter, and an increase of $833 million (pre-tax) in net investment income compared to the prior-year quarter. Adjusted after-tax income attributable to AIG common shareholders was $919 million, or $1.03 per diluted common share, for the fourth quarter of 2019, compared to an adjusted after-tax loss attributable to AIG common shareholders of $559 million, or $0.63 per common share, in the prior-year quarter. The improvement was primarily due to the favorable impact of General Insurance underwriting and reinsurance actions, lower catastrophe losses and an increase in net investment income compared to the prior-year quarter.

For the full year of 2019, net income attributable to AIG common shareholders was $3.3 billion, or $3.74 per diluted common share, compared to a net loss attributable to AIG common shareholders of $6 million, or $0.01 per common share, in the prior year. The improvement was primarily due to a reduction in net catastrophe losses of $1.7 billion (pre-tax) compared to the prior year; the favorable impact of General Insurance underwriting and reinsurance actions; and an increase in net investment income of $2.1 billion (pre-tax) primarily reflecting asset growth, an increase in alternative returns, and the impact of lower interest rates on fair value option on fixed maturity securities compared to the prior year. Adjusted after-tax income attributable to AIG common shareholders was $4.1 billion, or $4.59 per diluted common share, for the full year of 2019, compared to $1.1 billion, or $1.17 per diluted common share, in the prior year. The improvement was primarily due to lower catastrophe losses, favorable net prior year loss reserve development compared to unfavorable net prior year loss reserve development in the prior year, and higher net investment income.

Brian Duperreault, AIG’s Chief Executive Officer, said: “Our financial results for the fourth quarter and for full year 2019 reflect the significant progress we made over the course of 2019 to position AIG for long-term, sustainable and profitable growth. For the full year 2019, after-tax income attributable to common shareholders was $4.1 billion, or $4.59 per diluted share, and Adjusted ROCE was 8.3%. The improvement in our financial performance over the course of last year was broad-based, with contributions from all of our segments, but most notable was the return to underwriting profitability in General Insurance. The full year combined ratio was 99.6% and the accident year combined ratio, as adjusted, was 96.0%. Life & Retirement also delivered solid results in the face of continued headwinds from low interest rates and tightening credit spreads. Finally, we were pleased to announce that we reached an agreement to sell a majority stake in Fortitude Re, our legacy insurance business, which is scheduled to close mid-year, subject to regulatory approvals.

“As we look to 2020, we will continue to be laser focused on executing on our strategy to position AIG as both a leading insurance franchise and a top-performing company and we remain committed to achieving a 10% Adjusted ROCE by the end of 2021. In addition to continued work as part of the turnaround of General Insurance, AIG 200 will be a top priority. AIG 200 is our multi-year, enterprise-wide transformation program focused on the long-term strategic positioning of AIG and designed to achieve operational excellence. I remain confident we are on the right path at AIG and am very proud of what our colleagues accomplished since I joined the company in 2017. We entered 2020 with great momentum and excitement about what the future holds for AIG,” Mr. Duperreault added.

FINANCIAL SUMMARY

(a) For periods reporting a loss, basic average common shares outstanding are used to calculate net income (loss) per diluted share attributable to AIG common shareholders. Diluted shares represent basic shares for the three-month period ended December 31, 2018 because we reported a net loss and an adjusted after-tax loss attributable to AIG common shareholders from continuing operations in that period.

All comparisons are against the fourth quarter of 2018, unless otherwise indicated. Refer to the AIG Fourth Quarter 2019 Financial Supplement, which is posted on AIG's website in the Investors section, for further information.

FOURTH QUARTER 2019 HIGHLIGHTS

General Insurance – Fourth quarter adjusted pre-tax income of $778 million was comprised of underwriting income of $12 million and net investment income of $766 million. Favorable net prior year loss reserve development totaled $153 million and was primarily due to favorable net prior year loss reserve development for accident year 2017. Catastrophe-related losses, net of reinsurance, totaled $411 million, including $233 million from Typhoon Hagibis and $146 million from Texas tornadoes and California wildfires. The combined ratio was 99.8. The accident year combined ratio, as adjusted, was 95.8, comprised of a 61.6 accident year loss ratio, as adjusted*, an improvement of 230 basis points from the prior-year quarter, and an expense ratio of 34.2, an improvement of 70 basis points from the prior-year quarter. The decrease in accident year loss ratio, as adjusted, reflected the underwriting and reinsurance actions taken to improve business mix and loss performance, and to reduce volatility in the General Insurance book of business.

Life and Retirement – Fourth quarter adjusted pre-tax income increased 35% to $839 million compared to the prior-year quarter. The increase reflected favorable impacts from equity market returns, favorable impacts from lower interest rates resulting in higher income on fair value option bonds and gains on calls, and higher assets driving higher base portfolio income, partially offset by spread compression due to lower reinvestment yields and slightly higher general operating expenses (GOE) from investments in the business compared to the prior-year quarter. Net flows were unfavorable compared to the prior-year quarter primarily due to lower Fixed Annuity sales and slightly higher group surrenders, partially offset by strong Index Annuity sales and higher group acquisition sales. Life and Retirement’s Adjusted ROCE for the fourth quarter of 2019 was 13.0%.

Net Investment Income – Fourth quarter net investment income increased 30% to $3.6 billion reflecting higher alternative investment income of $209 million compared to a loss in the prior-year quarter. Annualized yield for alternative investment income was 12.26% for the fourth quarter of 2019, above AIG’s 8% annualized assumption for the quarter, compared to -5.85% in the prior-year quarter.

Other Operations – Fourth quarter adjusted pre-tax loss of $586 million increased from an adjusted pre-tax loss of $420 million in the prior-year quarter, which included a loss of $133 million and a gain of $31 million, respectively, from consolidation, eliminations and other adjustments. Net of consolidation, eliminations and other adjustments, the slight increase in the pre-tax loss was primarily due to an increase in interest expense from consolidated investment entities of $44 million.

Legacy Results – Fourth quarter adjusted pre-tax income of $177 million compared to adjusted pre-tax loss of $150 million in the prior-year quarter. The fourth quarter of 2018 included a $105 million pre-tax charge resulting from loss recognition on certain Accident & Health cancer and disability blocks. Excluding the charge, the increase in pre-tax income was primarily due to higher net investment income.

Book Value per Common Share – As of December 31, 2019, book value per common share was $74.93 compared to $65.04 at December 31, 2018 reflecting an increase in retained earnings as a result of 2019 net income and an increase in AOCI as a result of lower interest rates on the fixed maturity portfolio. Adjusted book value per common share increased 7% to $58.89 compared to the prior year end due to growth in retained earnings as a result of $3.3 billion of net income attributable to AIG common shareholders in the twelve months ended December 31, 2019.

Return on Common Equity (ROCE) – ROCE for the fourth quarter and the twelve months ended December 31, 2019 was 5.7% and 5.3%, respectively, a significant improvement from the prior-year quarter and the twelve months ended December 31, 2018, due to higher net income attributable to AIG. Adjusted ROCE for the fourth quarter and twelve months ended December 31, 2019 was 7.3% and 8.3%, respectively, an improvement from (4.6)% and 2.1% in the prior-year quarter and twelve months ended December 31, 2018, respectively, due to higher adjusted after-tax income attributable to AIG common shareholders.

Liquidity and Capital – As of December 31, 2019, AIG Parent liquidity stood at approximately $7.6 billion, including $1.7 billion to be paid for an expected tax settlement with the Internal Revenue Service, which could be made as early as the first quarter of 2020.

GENERAL INSURANCE

General Insurance - North America

General Insurance North America – Commentary

• Net premiums written decreased by 4% to $2.8 billion primarily due to underwriting actions and changes in reinsurance programs in 2019.
• A pre-tax underwriting loss of $19 million included $313 million of catastrophe losses, net of reinsurance, of which $193 million were in North America Commercial Lines and $120 million in North America Personal Insurance. Favorable net prior year loss reserve development was driven by favorable 2017 catastrophe loss reserve development and favorable workers’ compensation loss reserve development, partially offset by unfavorable loss reserve development for U.S. Financial Lines and Primary Construction Wrap run-off business.
• The North America combined ratio of 100.6 included 9.8 points of catastrophe losses and reinstatement premiums and (3.1) points of favorable net prior year loss reserve development. The accident year combined ratio, as adjusted, was 94.6, comprised of a 65.7 accident year loss ratio, as adjusted, and a 28.9 expense ratio. The 0.2 points improvement in the accident year loss ratio, as adjusted, reflected the beneficial impact of underwriting and reinsurance actions, partially offset by higher crop losses.
• The 1.8 points decrease in the expense ratio was largely driven by 2.0 points reduction in acquisition ratio due to changes in business mix, partially offset by 0.2 points increase in the GOE ratio.

General Insurance - International

General Insurance International – Commentary

• Net premiums written decreased 13% on a reported and constant dollar basis due to underwriting and changes in reinsurance programs in 2019.
• Pre-tax underwriting income of $31 million included $98 million of catastrophe losses, net of reinsurance, of which $51 million related to International Personal Insurance and $47 million related to International Commercial Lines. Favorable net prior year loss reserve development was $44 million, with $61 million of favorable net prior year loss reserve development in International Personal Insurance, partially offset by $17 million of unfavorable net prior year loss reserve development in International Commercial Lines.
• The International combined ratio was 99.1, down from 105.4 in the prior-year quarter. The accident year combined ratio, as adjusted, of 97.1 was comprised of a 57.7 accident year loss ratio, as adjusted, and a 39.4 expense ratio. The 4.4 points decrease in the accident year loss ratio, as adjusted, was primarily driven by Specialty Lines, Talbot Holdings, Ltd. and Japanese Personal Auto.
• The expense ratio increased 0.8 points primarily due to a 0.7 points increase in the GOE ratio and 0.1 points increase in the acquisition ratio.

LIFE AND RETIREMENT

Life and Retirement – Commentary

• Life and Retirement reported adjusted pre-tax income of $839 million compared to $623 million in the prior-year quarter primarily due to better Individual and Group Retirement results. Premiums and deposits decreased 14% to $7.1 billion compared to the prior-year quarter primarily due to lower Fixed Annuities deposits driven by lower interest rates. Net flows continue to be negative.
• Individual Retirement reported adjusted pre-tax income of $501 million compared to $327 million in the prior-year quarter. Adjusted pre-tax income improved as a result of favorable impacts from equity market returns, favorable impacts from lower interest rates driving higher income on fair value option bonds, and higher income resulting from growth in Index Annuity assets throughout 2019, partially offset by continued spread compression as a result of lower reinvestment yields compared to the prior-year quarter. Total net flows excluding Retail Mutual Funds were positive in the quarter, but lower compared to the prior-year period, driven by lower Fixed Annuity sales resulting from the lower interest rate environment.
• Group Retirement reported adjusted pre-tax income of $209 million compared to $159 million in the prior-year quarter. The improvement in adjusted pre-tax income was driven by the favorable impacts from equity market returns, partially offset by higher GOE related to investments in the business. Net flows remain negative primarily due to higher surrenders compared to the prior-year quarter.
• Life Insurance reported adjusted pre-tax income of $51 million compared to adjusted pre-tax income of $87 million in the prior-year quarter as favorable reserve refinements in the prior-year quarter were partially offset by favorable mortality in the current quarter.
• Institutional Markets adjusted pre-tax income of $78 million compared to $50 million in the prior-year quarter increased due to higher net investment income on a growing asset base driven by growth in Pension Risk Transfer and GIC reserves.

CONFERENCE CALL

AIG will host a conference call today, Thursday, February 13, 2020 at 9:00 a.m. ET to review these results. The call is open to the public and can be accessed via a live listen-only webcast in the Investors section of www.aig.com. A replay will be available after the call at the same location.

Additional supplementary financial data is available in the Investors section at www.aig.com.

The conference call (including the financial results presentation material), the earnings release and the financial supplement may include, and officers and representatives of AIG may from time to time make and discuss, projections, goals, assumptions and statements that may constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. These projections, goals, assumptions and statements are not historical facts but instead represent only a belief regarding future events, many of which, by their nature, are inherently uncertain and outside AIG’s control. These projections, goals, assumptions and statements include statements preceded by, followed by or including words such as “will,” “believe,” “anticipate,” “expect,” “intend,” “plan,” “focused on achieving,” “view,” “target,” “goal” or “estimate.” These projections, goals, assumptions and statements may relate to future actions, prospective services or products, future performance or results of current and anticipated services or products, sales efforts, expenses, the outcome of contingencies such as legal proceedings, anticipated organizational, business or regulatory changes, anticipated sales, monetization and/or acquisitions of businesses or assets, or successful integration of acquired businesses, management succession and retention plans, exposure to risk, trends in operations and financial results.

It is possible that AIG’s actual results and financial condition will differ, possibly materially, from the results and financial condition indicated in these projections, goals, assumptions and statements. Factors that could cause AIG’s actual results to differ, possibly materially, from those in the specific projections, goals, assumptions and statements include:

• changes in market and industry conditions;
• the occurrence of catastrophic events, both natural and man-made, and the effects of climate change;
• AIG’s ability to effectively execute on AIG 200 operational programs designed to achieve underwriting excellence, modernization of AIG’s operating infrastructure, enhanced user and customer experiences and unification of AIG;
• AIG’s ability to consummate the sale of its controlling interest in Fortitude Holdings and AIG’s ability to successfully manage Legacy Portfolios;
• changes in judgments concerning potential cost saving opportunities;
• actions by credit rating agencies;
• changes in judgments concerning insurance underwriting and insurance liabilities;
• the impact of potential information technology, cybersecurity or data security breaches, including as a result of cyber-attacks or security vulnerabilities;
• disruptions in the availability of AIG’s electronic data systems or those of third parties;
• the effectiveness of strategies to recruit and retain key personnel and to implement effective succession plans;
• the requirements, which may change from time to time, of the global regulatory framework to which AIG is subject;
• significant legal, regulatory or governmental proceedings;
• concentrations in AIG’s investment portfolios;
• changes to the valuation of AIG’s investments;
• AIG’s ability to successfully dispose of, monetize and/or acquire businesses or assets or successfully integrate acquired businesses;
• changes in judgments concerning the recognition of deferred tax assets and goodwill impairment; and
• such other factors discussed in Part II, Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations (MD&A) and Part I, Item 1A. Risk Factors in AIG’s Annual Report on Form 10-K for the year ended December 31, 2019 (which will be filed with the Securities and Exchange Commission), Part I, Item 2. MD&A in AIG’s Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2019, Part I, Item 2. MD&A in AIG’s Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2019, Part I, Item 2. MD&A in AIG’s Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2019, and Part II, Item 7. MD&A and Part I, Item 1A. Risk Factors in AIG’s Annual Report on Form 10-K for the year ended December 31, 2018.

AIG is not under any obligation (and expressly disclaims any obligation) to update or alter any projections, goals, assumptions or other statements, whether written or oral, that may be made from time to time, whether as a result of new information, future events or otherwise.

COMMENT ON REGULATION G AND NON-GAAP FINANCIAL MEASURES

Throughout this press release, including the financial highlights, AIG presents its financial condition and results of operations in the way it believes will be most meaningful and representative of its business results. Some of the measurements AIG uses are “non-GAAP financial measures” under Securities and Exchange Commission rules and regulations. GAAP is the acronym for “generally accepted accounting principles” in the United States. The non-GAAP financial measures AIG presents are listed below and may not be comparable to similarly-named measures reported by other companies. The reconciliations of such measures to the most comparable GAAP measures in accordance with Regulation G are included within the relevant tables attached to this news release or in the Fourth Quarter 2019 Financial Supplement available in the Investors section of AIG’s website, www.aig.com.

Book Value per Common Share, Excluding Accumulated Other Comprehensive Income (AOCI) and Book Value per Common Share, Excluding AOCI and Deferred Tax Assets (DTA) (Adjusted Book Value per Common Share) are used to show the amount of AIG’s net worth on a per-common share basis. AIG believes these measures are useful to investors because they eliminate items that can fluctuate significantly from period to period, including changes in fair value of AIG’s available for sale securities portfolio, foreign currency translation adjustments and U.S. tax attribute deferred tax assets. These measures also eliminate the asymmetrical impact resulting from changes in fair value of AIG’s available for sale securities portfolio wherein there is largely no offsetting impact for certain related insurance liabilities. AIG excludes deferred tax assets representing U.S. tax attributes related to net operating loss carryforwards and foreign tax credits as they have not yet been utilized. Amounts for interim periods are estimates based on projections of full-year attribute utilization. As net operating loss carryforwards and foreign tax credits are utilized, the portion of the DTA utilized is included in these book value per common share metrics. Book value per common share, excluding AOCI, is derived by dividing Total AIG common shareholders’ equity, excluding AOCI, by total common shares outstanding. Adjusted Book Value per Common Share is derived by dividing Total AIG common shareholders’ equity, excluding AOCI and DTA (Adjusted Common Shareholders’ Equity), by total common shares outstanding.

AIG Return on Common Equity – Adjusted After-tax Income Excluding AOCI and DTA (Adjusted Return on Common Equity) is used to show the rate of return on common shareholders’ equity. AIG believes this measure is useful to investors because it eliminates items that can fluctuate significantly from period to period, including changes in fair value of AIG’s available for sale securities portfolio, foreign currency translation adjustments and U.S. tax attribute deferred tax assets. This measure also eliminates the asymmetrical impact resulting from changes in fair value of AIG’s available for sale securities portfolio wherein there is largely no offsetting impact for certain related insurance liabilities. AIG excludes deferred tax assets representing U.S. tax attributes related to net operating loss carryforwards and foreign tax credits as they have not yet been utilized. Amounts for interim periods are estimates based on projections of full-year attribute utilization. As net operating loss carryforwards and foreign tax credits are utilized, the portion of the DTA utilized is included in Adjusted Return on Common Equity. Adjusted Return on Common Equity is derived by dividing actual or annualized adjusted after-tax income attributable to AIG common shareholders by average Adjusted Common Shareholders’ Equity.

Core and Life and Retirement Adjusted Attributed Common Equity is an attribution of total AIG Adjusted Common Shareholders’ Equity to these segments based on AIG’s internal capital model, which incorporates the segments’ respective risk profiles. Adjusted attributed common equity represents AIG’s best estimates based on current facts and circumstances and will change over time.

Core and Life and Retirement Return on Common Equity – Adjusted After-tax Income (Adjusted Return on Attributed Common Equity) is used to show the rate of return on Adjusted Attributed Common Equity. Adjusted Return on Attributed Common Equity is derived by dividing actual or annualized Adjusted After-tax Income by Average Adjusted Attributed Common Equity.

Adjusted After-tax Income Attributable to Core and Life and Retirement is derived by subtracting attributed interest expense, income tax expense and attributed dividends on preferred stock from adjusted pre-tax income. Attributed debt and the related interest expense and dividends on preferred stock are calculated based on AIG’s internal capital model. Tax expense or benefit is calculated based on an internal attribution methodology that considers among other things the taxing jurisdiction in which the segments conduct business, as well as the deductibility of expenses in those jurisdictions.

Adjusted Revenues exclude Net realized capital gains (losses), income from non-operating litigation settlements (included in Other income for GAAP purposes) and changes in fair value of securities used to hedge guaranteed living benefits (included in Net investment income for GAAP purposes). Adjusted revenues is a GAAP measure for AIG’s operating segments.

AIG uses the following operating performance measures because AIG believes they enhance the understanding of the underlying profitability of continuing operations and trends of AIG’s business segments. AIG believes they also allow for more meaningful comparisons with AIG’s insurance competitors. When AIG uses these measures, reconciliations to the most comparable GAAP measure are provided on a consolidated basis.

Adjusted Pre-tax Income (APTI) is derived by excluding the items set forth below from income from continuing operations before income tax. This definition is consistent across AIG’s segments. These items generally fall into one or more of the following broad categories: legacy matters having no relevance to AIG’s current businesses or operating performance; adjustments to enhance transparency to the underlying economics of transactions; and measures that AIG believes to be common to the industry. APTI is a GAAP measure for AIG’s segments. Excluded items include the following:

Adjusted After-tax Income attributable to AIG common shareholders (AATI) is derived by excluding the tax effected APTI adjustments described above, dividends on preferred stock, and the following tax items from net income attributable to AIG:

• deferred income tax valuation allowance releases and charges;
• changes in uncertain tax positions and other tax items related to legacy matters having no relevance to AIG’s current businesses or operating performance; and
• net tax charge related to the enactment of the Tax Cuts and Jobs Act (Tax Act); and by excluding the net realized capital gains (losses) from noncontrolling interests.

See page 18 for the reconciliation of Net income attributable to AIG to Adjusted After-tax Income Attributable to AIG.

Ratios: AIG, along with most property and casualty insurance companies, uses the loss ratio, the expense ratio and the combined ratio as measures of underwriting performance. These ratios are relative measurements that describe, for every $100 of net premiums earned, the amount of losses and loss adjustment expenses (which for General Insurance excludes net loss reserve discount), and the amount of other underwriting expenses that would be incurred. A combined ratio of less than 100 indicates underwriting income and a combined ratio of over 100 indicates an underwriting loss. AIG’s ratios are calculated using the relevant segment information calculated under GAAP, and thus may not be comparable to similar ratios calculated for regulatory reporting purposes. The underwriting environment varies across countries and products, as does the degree of litigation activity, all of which affect such ratios. In addition, investment returns, local taxes, cost of capital, regulation, product type and competition can have an effect on pricing and consequently on profitability as reflected in underwriting income and associated ratios.

Accident year loss and combined ratios, as adjusted: both the accident year loss and combined ratios, as adjusted, exclude catastrophe losses and related reinstatement premiums, prior year development, net of premium adjustments, and the impact of reserve discounting. Natural catastrophe losses are generally weather or seismic events having a net impact on AIG in excess of $10 million each and man-made catastrophe losses, such as terrorism and civil disorders that exceed the $10 million threshold. AIG believes that as adjusted ratios are meaningful measures of AIG’s underwriting results on an ongoing basis as they exclude catastrophes and the impact of reserve discounting which are outside of management’s control. AIG also excludes prior year development to provide transparency related to current accident year results.

Premiums and deposits: includes direct and assumed amounts received and earned on traditional life insurance policies, group benefit policies and life‑contingent payout annuities, as well as deposits received on universal life, investment‑type annuity contracts, Federal Home Loan Bank (FHLB) funding agreements and mutual funds.

Results from discontinued operations are excluded from all of these measures.

American International Group, Inc. (AIG) is a leading global insurance organization. Building on 100 years of experience, today AIG member companies provide a wide range of property casualty insurance, life insurance, retirement solutions, and other financial services to customers in more than 80 countries and jurisdictions. These diverse offerings include products and services that help businesses and individuals protect their assets, manage risks and provide for retirement security. AIG common stock is listed on the New York Stock Exchange.

Additional information about AIG can be found at www.aig.com | YouTube: www.youtube.com/aig | Twitter: @AIGinsurance www.twitter.com/AIGinsurance | LinkedIn: www.linkedin.com/company/aig. These references with additional information about AIG have been provided as a convenience, and the information contained on such websites is not incorporated by reference into this press release.

AIG is the marketing name for the worldwide property-casualty, life and retirement, and general insurance operations of American International Group, Inc. For additional information, please visit our website at www.aig.com. All products and services are written or provided by subsidiaries or affiliates of American International Group, Inc. Products or services may not be available in all countries and jurisdictions, and coverage is subject to underwriting requirements and actual policy language. Non-insurance products and services may be provided by independent third parties. Certain property-casualty coverages may be provided by a surplus lines insurer. Surplus lines insurers do not generally participate in state guaranty funds, and insureds are therefore not protected by such funds.

(a) Includes all net realized capital gains and losses except earned income (periodic settlements and changes in settlement accruals) on derivative instruments used for non-qualifying (economic) hedging or for asset replication.

(b) Noncontrolling interests is primarily due to the 19.9 percent investment in Fortitude Group Holdings, LLC (Fortitude Holdings) by an affiliate of The Carlyle Group L.P. (Carlyle), which occurred in the fourth quarter of 2018. Carlyle is allocated 19.9 percent of Fortitude Holdings’ standalone financial results. Fortitude Holdings’ results are mostly eliminated in AIG’s consolidated income from continuing operations given that its results arise from intercompany transactions. Noncontrolling interests is calculated based on the standalone financial results of Fortitude Holdings. The most significant component of Fortitude Holdings’ standalone results includes the change in fair value of the embedded derivatives, which moved materially in the year due to lower rates and tightening credit spreads in the first nine months of 2019, but reversed trend in the fourth quarter of 2019, and which are recorded in net realized capital gains and losses of Fortitude Holdings. In accordance with AIG's adjusted after-tax income definition, realized capital gains and losses are excluded from noncontrolling interests.