Bring on tomorrow - AIG.com

ITEM 7 / EXECUTIVE SUMMARY.....................................................................................................................................................................................AIG Property Casualty is focused on the following strategic initiatives:........................................................................................................................Business Mix ShiftWe expect that shifting our mix of business to higher value lines andgeographies of opportunity will generate business with more favorableunderwriting results. However, as a result of the business mix shift toconsumer products, higher value commercial products, and the investmentin growth economy nations, policy acquisition expenses, including directmarketing costs, are expected to continue to increase.AIG Property rt CasualtyaOpportunitiesti• Continue shifting toward highervalue business to increaseprofitability.• Expand in attractive growtheconomies, specifically in AsiaPacific, the Middle East and........................................................................................................................ Underwriting ExcellenceLatin America.We anticipate that refining technical pricing account management toolsand marketing analytics will further enhance our risk selection process.We believe that accident year loss ratios will continue to improve due tothese actions.........................................................................................................................Claims Best PracticesWe expect to reduce loss costs by realizing greater efficiencies inservicing customer claims, introducing fraud detection tools anddeveloping knowledge of the economic drivers of losses, which willproactively mitigate reserve development and legal costs, and establisheffective pricing strategies.........................................................................................................................Operating Expense DisciplineWe continue to make strategic investments in systems, processes andtalent worldwide, which will result in elevated operating expense in theshort-term, but is expected to create additional value and greaterefficiency beginning in 2014.• Enhance risk selection andpricing to earn returnscommensurate to the riskassumed.• Implement improved claimspractices and advancedtechnology to lower the lossratio.• Apply operating expensediscipline and drive efficienciesby leveraging our globalfootprint.• Optimize the investmentportfolio by aligning it with ourrisk appetite and taxobjectives.Capital Efficiency..............................................................................................................................................................................................We plan to continue to execute capital management initiatives by enhancing broad-based risk tolerance guidelines forour operating units, implementing underwriting strategies to increase return on equity by line of business andreducing exposure to businesses with inadequate pricing and increased loss trends. In addition, we remain focusedon enhancing our global reinsurance strategy to improve capital efficiency.We continue to streamline our legal entity structure, to enhance transparency with regulators and optimize capitaland tax efficiency. For the year ended December 31, 2012, we completed 41 legal entity and branch restructuringtransactions. We completed the integration of our European operations into a single pan-European insurancecompany, AIG Europe Limited, and continued the restructuring activities in the Asia Pacific region, including focusingon the strategy to consolidate the Japan operations under one holding company. During 2012, our restructuring andcapital management initiatives enabled certain subsidiaries in Europe and the Asia Pacific region to return$575 million of capital to be used for general corporate purposes. We continue to implement restructuring plans ineach region and the overall end state structure is expected to be mostly completed by the end of 2014.Our Investment Strategy for AIG Property Casualty..............................................................................................................................................................................................Consistent with AIG’s worldwide insurance investment policy, we place primary emphasis on investments in fixedmaturity securities issued by corporations, municipalities and other governmental agencies, and to a lesser extent,common stocks, private equity, hedge funds and other alternative investments. We also attempt to enhance returnsthrough investments in a diversified portfolio of private equity funds, hedge funds, and partnerships. Although these..................................................................................................................................................................................................................................64 AIG 2012 Form 10-K