2007 Annual Report - AIG.com

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Ambassador Frank G. Wisner Vice Chairman External Affairs Lexington Insurance Company, the leading U.S.-based excess and surplus lines insurer; AIG Excess Casualty ® , DBG’s leading commercial umbrella provider; and AIG Environmental ® , a pioneer in pollution and eco-friendly liability coverages. AIG’s Domestic Accident & Health Division, which manages specialized accident and health risks for consumer, commercial and affinity group customers, and AIG Worldsource, which provides innovative global liability insurance solutions, as well as HSB Group, Inc., a leading worldwide provider of equipment breakdown and engineered lines insurance, all performed well in 2007 due in part to their execution of unique Deliver the Firm strategies. Integration costs and higher claims activity adversely affected results in our Domestic Personal Lines businesses. However, consolidation and product innovation will improve our market position going forward. AIG Private Client Group, which insures more than one-third of the Forbes 400 Richest Americans, achieved net written premium growth in excess of 37 percent. The group is building on the growing Dr. Jacob A. Frenkel Vice Chairman Global Economic Strategies popularity of its Wildfire Protection Unit with the deployment of its Hurricane Protection Unit ® in coastal regions. Transatlantic Holdings, Inc., a majorityowned holding company of international reinsurers, achieved record net income partly due to higher premium volume and favorable loss experience in its property lines. Significant home price deterioration associated with the ongoing U.S. housing crisis resulted in a challenging year for the domestic mortgage insurance business of United Guaranty Corporation (UGC). We expect similar domestic market conditions to last into 2009. Even so, growth in international markets, together with higher persistency that lifted domestic first-lien renewal premiums, produced solid growth in net premiums written. With operations today in 15 countries, UGC is prudently pursuing additional international opportunities in promising markets such as Japan, India, Australia and Germany. In addition to the WOFE license it received in China, AIG’s Foreign General Insurance group also launched a new operation in Oman and opened a new branch in Qatar, strengthening its position as the most extensive property-casualty network in the world. Full year results were adversely affected by the losses from the June 2007 U.K. floods and higher non-catastrophic losses; however, underwriting results were excellent. Foreign General continues to refine its customized product range to meet the requirements of a growing worldwide middle class while developing products for underserved markets. Life Insurance & Retirement Services AIG’s Life Insurance & Retirement Services group carries on a long tradition of excellence it has earned during many years of industry leadership. In 2007, the group had strong top line growth, and momentum is building on the strength of new and enhanced products, as well as new distribution initiatives. However, operating income decreased compared to 2006, primarily due to higher net realized capital losses in 2007. Foreign Life operations devoted significant management time and resources to building our business in China and India. Progress continues on the merger of AIG Star Life Insurance Co., Ltd., and AIG Edison Life Insurance Company, which we hope to complete in early 2009. We are encouraged by promising results from the introduction of new variable annuity products. In addition, further deregulation in the bank channel and the privatization of Japan Post Insurance Co., Ltd., are creating opportunities to sell our products through vast new distribution systems. 6 AIG 2007 Annual Report
AIG’s life insurance network is the most extensive of any life insurance organization. Our life businesses abroad include market-leading companies such as American International Assurance Company, Limited, consistently rated one of the most trusted brands in Southeast Asia. ALICO operates in more than 50 countries, with a strong and growing presence in Japan, Europe, the Middle East and Latin America. The Philippine American Life and General Insurance Company observed its 60th anniversary and remains the premier life insurer in the Philippines. Our Taiwan life insurance unit, Nan Shan Life Insurance Company, Ltd., once again received recognition throughout the year for its quality customer service. In the United States, AIG American General enhanced its position as a leading life insurer by introducing more than 25 new or revised products and riders in 2007. Its acquisition of direct marketer Matrix Direct, Inc., helped the company expand beyond its traditional distribution methods. AIG American General continues to place significant emphasis on cross-selling efforts by developing coordinated offerings with AIG Investments, DBG and AIG Retirement. The launch of the“Live Longer Retire Stronger” national advertising campaign boosted recognition of AIG’s retirement services capabilities while supporting our global branding initiative. Domestic retirement services operations continue to address the growing need for asset accumulation, protection and guaranteed income solutions. AIG Annuity Insurance Company, the largest issuer of fixed annuities in the United States, responded to difficult market conditions by launching new products and by expanding distribution. AIG VALIC, now operating as AIG Retirement, achieved double-digit deposit growth and a steady increase in fee income and assets under management. AIG SunAmerica, a leader in variable annuities, achieved record fee income and assets under management by responding to the demand for “income for life” solutions. The launch of the “Live Longer Retire Stronger” national advertising campaign boosted recognition of AIG’s retirement services capabilities while supporting our global branding initiative. Financial Services The Financial Services group recorded an operating loss of $9.52 billion for 2007 primarily due to the unrealized market valuation losses related to the AIGFP super senior credit default swap portfolio. We continue to believe that AIGFP will not realize significant losses from this derivative business, which insures against the default of certain securities. Since its creation, AIGFP has been a strong performer and is an important component of AIG’s diverse portfolio of businesses. We continue to see good potential across all product segments of our Financial Services group. Together, they diversify our revenues and complement our core insurance operations. AIG’s International Lease Finance Corporation (ILFC) has the largest aircraft fleet in the world, as measured by fleet value, and is the largest single customer to date for the new Boeing 787 Dreamliner. AIG was named one of “The Global 100” most sustainable companies at the World Economic Forum in Davos, Switzerland. AIG is developing environmentally sustainable properties, such as Spruce Peak at Stowe, Vt.,developed by AIG Global Real Estate. AIG 2007 Annual Report 7
Page 1 and 2: AMERICAN INTERNATIONAL GROUP, INC.
Page 3 and 4: FINANCIAL HIGHLIGHTS (in millions,
Page 5 and 6: overall financial condition, althou
Page 7: Group Executive Committee We are ad
Page 11 and 12: We have also begun to address the e
Page 13 and 14: WHAT WE SEE The ability to see and
Page 15 and 16: The Major Accounts Practice within
Page 17 and 18: Around the world, the middle class
Page 19 and 20: WE SEE GROWTH OPPORTUNITIES IN EMER
Page 21 and 22: To grow the strength of the AIG glo
Page 23 and 24: Since 2003, the AIG Disaster Relief
Page 25 and 26: RESPECT Respect encompasses how we
Page 27 and 28: Life Insurance & Retirement Service
Page 29 and 30: Domestic Brokerage Group— Gross P
Page 31 and 32: In the summer of 2007, widespread f
Page 33 and 34: in gross premiums written. It launc
Page 35 and 36: It grew new business premiums from
Page 37 and 38: emerging markets for its services,
Page 39 and 40: ILFC—Revenues by Region Total = $
Page 41 and 42: AIG Investments acquired a 94 perce
Page 43 and 44: and changing interest rates, as wel
Page 45 and 46: American International Group, Inc.
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American International Group, Inc.
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Index of Notes to Consolidated Fina
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