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American International Group Inc (NYSE:AIG)
Interest Coverage
9.68 (As of Jun. 2014)

Interest Coverage is a ratio that determines how easily a company can pay interest expenses on outstanding debt. It is calculated by dividing a company’s Operating Income (EBIT) by its Interest Expense. American International Group Inc's Operating Income for the three months ended in Jun. 2014 was $4,480 Mil. American International Group Inc's Interest Expense for the three months ended in Jun. 2014 was $-463 Mil. American International Group Inc's interest coverage for the quarter that ended in Jun. 2014 was 9.68. The higher the ratio, the stronger the company’s financial strength is.

AIG' s 10-Year Interest Coverage Range
Min: 0.05   Max: 9999.99
Current: 4.37

0.05
9999.99

During the past 13 years, the highest interest coverage of American International Group Inc was 9999.99. The lowest was 0.05. And the median was 3.31.

AIG's Interest Coverageis ranked higher than
74% of the 129 Companies
in the Global Insurance - Diversified industry.

( Industry Median: 6.97 vs. AIG: 4.37 )

Definition

Interest Coverage is a ratio that determines how easily a company can pay interest expenses on outstanding debt. It is calculated by dividing a company’s Operating Income (EBIT) by its Interest Expense:

If Interest Expense is negative and Operating Income is positive, then

Interest Coverage=-1*Operating Income/Interest Expense

Else if Interest Expense is negative and Operating Income is negative, then

American International Group Inc did not have earnings to cover the interest expense.

Else if Interest Expense is 0 and Long-Term Debt is 0, or Interest Expense is positive, then

American International Group Inc had no debt.

American International Group Inc's Interest Coverage for the fiscal year that ended in Dec. 2013 is calculated as

Here, for the fiscal year that ended in Dec. 2013, American International Group Inc's Interest Expense was $-2,142 Mil. Its Operating Income was $9,368 Mil. And its Long-Term Debt was $41,693 Mil.

Interest Coverage=-1*Operating Income (A: Dec. 2013 )/Interest Expense (A: Dec. 2013 )
=-1*9368/-2142
=4.37

American International Group Inc's Interest Coverage for the quarter that ended in Jun. 2014 is calculated as

Here, for the three months ended in Jun. 2014, American International Group Inc's Interest Expense was $-463 Mil. Its Operating Income was $4,480 Mil. And its Long-Term Debt was $38,414 Mil.

Interest Coverage=-1*Operating Income (Q: Jun. 2014 )/Interest Expense (Q: Jun. 2014 )
=-1*4480/-463
=9.68

* All numbers are in millions except for per share data and ratio. All numbers are in their own currency.

The higher the ratio, the stronger the company’s financial strength is.


Explanation

Ben Graham requires that a company has a minimum interest coverage of 5 with the companies he invested. If the interest coverage is less than 2, the company is burdened by debt. Any business slow or recession may drag the company into a situation where it cannot pay the interest on its debt.

Interest Coverage is an important factor when GuruFocus ranks a company’s overage financial strength.


Related Terms

Operating Income, Interest Expense, Financial Strength


Historical Data

* All numbers are in millions except for per share data and ratio. All numbers are in their own currency.

American International Group Inc Annual Data

Dec04Dec05Dec06Dec07Dec08Dec09Dec10Dec11Dec12Dec13
interest_coverage At LossAt LossAt Loss1.88At LossAt Loss2.250.051.254.37

American International Group Inc Quarterly Data

Mar12Jun12Sep12Dec12Mar13Jun13Sep13Dec13Mar14Jun14
interest_coverage 7.902.944.25At Loss4.985.922.284.304.759.68
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