American International Group

Type: Public
On the web: http://www.aigcorporate.com
Employees: 116,000
Employee growth: 0.0%

Even to this day American International Group (AIG) is one of the world's largest insurance firms. While it remains in the spotlight for staggering losses and government bailouts, the company's subsidiaries are still providing insurance. AIG is a leading US provider of property/casualty and specialty insurance to commercial, institutional, and individual customers. Internationally, the company provides reinsurance, life insurance and retirement services, asset management, and financial services (including financing commercial aircraft leasing) in more than 120 countries. The US government holds more than 80% of the company, and its future remains in a state of flux.

Key numbers for fiscal year ending December, 2008:
Sales: $11,104.0M
One year growth: (89.9%)
Net income: ($99,289.0)M

Officers:
Chairman: Harvey Golub
President, CEO, and Director: Robert H. (Bob) Benmosche
VP and Chief Administrative Officer; SVP and Head Asset Management Restructuring: Jeffrey J. Hurd

Competitors:
Allianz
AXA
Zurich Financial Services

Incorporated: 1967
NAIC: 523120 Securities Brokerage; 523920 Portfolio Management; 524126 Direct Property and Casualty Insurance Carriers; 524113 Direct Life Insurance Car- riers; 524130 Reinsurance Carriers; 524210 Insurance Agencies and Brokerages; 532411 Commercial Air, Rail, and Water Transportation Equipment Rental and Leasing; 551112 Offices of Other Holding Companies

American International Group, Inc. (AIG) is a holding company for a network of subsidiaries primarily engaged in insurance and insurance-related activities, including property, casualty, life, financial services, retirement savings products, asset management, and aircraft leasing. AIG operates in more than 130 countries and jurisdictions, and its combined revenues make it the largest U.S.-based international insurance organization and one of the largest insurance firms in the world. AIG is the leading underwriter of commercial and industrial insurance in the United States and holds the number two position in the U.S. life insurance sector. The corporation, whose earliest roots were in Asia, has had an active history of mergers, acquisitions, and consolidations, and under the renowned stewardship of Maurice R. "Hank" Greenberg from the late 1960s into the early 21st century the company has grown into a global insurance giant.

In 1919 a 27-year-old U.S. businessman, Cornelius Vander Starr, opened a two-room, two-clerk insurance agency in Shanghai, China, and named it American Asiatic Underwriters (AAU). AAU, which later became part of American International Underwriters (AIU), initially served as an underwriter for insurance companies that had established branches in Shanghai. During a trip to New York in 1921 Starr added representation of other U.S. companies to his operations, including the Globe & Rutgers Company. Later that decade Starr brought representation of the Pittsburgh, Pennsylvania, company, National Union Fire Insurance, into his fold.

Starr's next quest was to gain general life insurance agency powers, but he found no U.S. companies willing to assume the risk because there were no life-expectancy statistics available for the Chinese population. In 1921 Starr overcame this obstacle by forming his own company, Asia Life Insurance Company (ALICO). ALICO's most popular product was a 20-year endowment policy, with rates established on the basis of Starr's personal observation that in general Chinese enjoyed longer life expectancies than their Western counterparts.

In 1926 Starr opened a New York office under the name American International Underwriters to serve as an insurance writer on U.S.-owned risks outside of North America. Like its Chinese counterpart, AIU also served as a general agent for U.S. insurers. By the end of the decade Starr's Chinese operations were seeing modest profits, and branch offices for both general and life insurance had been established throughout the Shanghai region. In 1931 Starr joined British and Chinese businessmen in a partnership and established the International Assurance Company (INTASCO).

AIU established a foundation for Latin American business in 1932 when George Moszkowski, who ran the company's New York office, negotiated the purchase of the Central American and Caribbean portfolios of a U.S. insurer withdrawing from foreign operations. AIU's operations in Central America remained modest throughout the decade.

Before, during, and after World War II, AIU was able to capitalize on world economic and political situations. With much of the world on the brink of war, in 1939 Starr moved his headquarters to New York, temporarily closing the Shanghai office. After hostilities broke out, operations of dominant Italian, German, and British agencies were reduced, and AIU expanded in Central America. In 1940 AIU established a regional headquarters in Cuba, and a half dozen offices in South America soon followed. AIU's Central American business grew with the local economies of these neutral countries during the war years.

At the end of World War II, the Shanghai office was reopened under the guidance of K.K. Tse. Several profitable years followed until the late 1940s, when the future of foreign activities in Shanghai grew dim. In 1949 key employees and documents were airlifted out of Shanghai and the regional headquarters moved to Hong Kong. In late 1950 operations in China were closed.

Meanwhile, many surrounding countries were recovering from war. With economic improvement underway, AIU entered Japan and West Germany by selling insurance to occupying U.S. troops. AIU's prewar operations in Europe had been limited to small agencies in France, Belgium, and the Netherlands, but postwar conditions, resulting in tight financing for local insurers, placed AIU in a position to expand its European business. At the same time, expansion of U.S. business abroad created opportunities for AIU's "home-foreign" business.

In 1947 Starr began a reorganization designed to revive war-torn operations and lay the groundwork for future growth. Starr's first move was to announce the incorporation of a Philippine arm of the American Life Insurance Company, the Philippine American Life Insurance Company (Philam Life), in 1947. U.S. businessman Earl Carroll was named to head up the new company, which grew quickly, largely through the sale of endowment policies. These policies provided farmers and small merchants with the means to build their savings in a country with few banks. Sales revenue was frequently reinvested in the local economy.

Started as a partnership, INTASCO, which until this time had maintained a relatively small life insurance business, was reorganized in 1948 when Starr took control of the business. He added "American" to the company's name, changed the company's abbreviated name to AIA, and assigned it the Southeast Asian territories of Malaysia, Singapore, and Thailand and the home-base front of Hong Kong.

That same year Starr began uniting his somewhat fragmented network of insurance companies, beginning with the creation of two Bermuda-based entities. The first, American International Underwriters Overseas, Ltd. (AIUO), became the parent of all established AIU agency companies overseas. The second, American International Reinsurance Company, Inc. (AIRCO), was designed to hold companies dealing primarily in life insurance. AIRCO also took control of company investment programs and served as a reinsurer for these subsidiaries. The last of Starr's trio of new organizations was American International Underwriters Association (AIUA), established in 1949 to serve as a partnership of U.S. insurance companies that were represented by AIU. AIUA provided for pooled business in stipulated percentages and shared assets that were kept overseas to meet local regulations.

Perhaps the most dramatic reorganization occurred within Starr's oldest life insurance company, ALICO. After lying dormant for a decade, the company was renamed American Life Insurance Company and assigned the Caribbean, Middle East, and some growing African nations. ALICO marketed life insurance to populations previously not attractive to insurers.

The 1950s were a period of rapid expansion for AIU. Branches were established in Western Europe, the Middle East, North Africa, and Australia. By the end of the decade AIU was operating in 75 countries. The 1950s also marked the emergence of Starr's companies in domestic markets.

In 1952 AIRCO acquired a majority interest in the Globe & Rutgers Insurance Company, a medium-sized U.S. fire insurance company once represented by AIU. A Globe & Rutgers subsidiary, the Insurance Company of the State of Pennsylvania, came with the purchase. Founded in 1794, the Pennsylvania subsidiary was the second oldest stock insurance company in the United States. American Home Assurance Company, which was founded in 1853, was also included in the package. Globe & Rutgers was later merged with American Home and took its name.

Starr and his colleagues joined the American Home board but left the company largely under old management. Earnings at the new subsidiary fluctuated greatly for several years. A net loss of $1.4 million was reported in 1957, followed by a net profit of better than $950,000 the following year. In an effort to stabilize earnings, AIRCO sold American Home's agency business to another insurer in 1962. That same year Starr named Maurice R. Greenberg as American Home president, and the company formed the American International Life Assurance Company of New York to specialize in term and group insurance. Greenberg had begun his insurance career ten years earlier with Continental Casualty Company. In 1960 he joined American International and was assigned the task of developing an overseas accident and health business.

In leading American Home, Greenberg focused on broker sales, allowing the company to issue its own policies and maintain underwriting control. The company concentrated on commercial and industrial risks, which involved negotiated rather than state-controlled rates. American Home also developed substantial reinsurance facilities in order to cover large shares of major risks and control insurance ratings. Greenberg initiated new products and services such as personal accident insurance, which emphasized deductibles. Meanwhile, American Home avoided medical insurance. The new sales system caught on, offering brokers the high deductibles that traditional insurers avoided but that some large corporations sought in order to cut costs.

During the late 1960s American International's corporate structure began to resemble its present form as it became an important commercial and industrial property and casualty insurer. While a new company organization was being forged through further acquisitions and reorganization, the insurance group began capitalizing on its innovative products and entrance into new markets.

Acquisitions during this period included controlling interests in the National Union Fire Insurance Company of Pittsburgh, Pennsylvania, which had been represented by AIU since 1927, and the New Hampshire Insurance Company. The former, which was threatened by high underwriting losses, was transformed much like American Home, and then linked with it in a pooling agreement. Commerce and Industry Insurance Company, a small property insurer specializing in highly protected risks, and Transatlantic Reinsurance Company were also acquired during this period.

The wholly owned American International Group, Inc. was formed by AIRCO in 1967. AIG represented the beginning of a major corporate reorganization, with the company formed to hold shares of other domestic companies, including American Home and New Hampshire. ALICO was soon added to AIG's holdings. Greenberg was elected president and CEO of AIG in 1967. The following year Starr died, having seen only the beginning of a new era for the insurance empire he had created.

In 1969, after going public, AIG acquired majority interests in National Union, New Hampshire, and American Home, paying for its increased stake in the three companies with AIG stock. In 1970 AIU and its agencies and subsidiaries became wholly owned subsidiaries of AIG.

Throughout the 1960s AIU's overseas business grew, despite the loss of its large Cuban business following Fidel Castro's takeover of that country. Since it had entered most major markets a decade earlier, expansion during this time was limited to growth within areas with established territories. In an effort to strengthen AIG's overseas position, an 18-month program was initiated in 1972 creating a regional system of benefits managers for Europe, Africa, Central America, South America, the Middle East, the Far East, and the United States. That same year the AIG subsidiary ALICO became the first foreign-owned company granted a license to sell insurance to Japanese nationals in Japan.

During the early 1970s AIG increased its specialization by forming a number of new groups. Subsidiaries created by AIG during this time included A.I. Credit Corporation to finance general insurance premiums written through both affiliate and nonaffiliate insurers; North American Managers, Inc., to sell insurance in the United States for foreign companies; AIG Oil Rig, Inc., to initiate and manage insurance for offshore oil- and gas-drilling rigs; AIG Risk Management, Inc., to provide worldwide risk management services; AIG Data Center, Inc.; and American International Insurance Company of Ireland, Ltd. During this period AIG also acquired all remaining shares of the New Hampshire and National Union companies.

AIG's profits took off in the 1970s, at a compounded growth rate of roughly 20 percent, with AIG's net income surpassing $50 million by 1975. High premiums in the new market areas of oil rigs and pension-fund management as well as the use of limited partnership insurance for high risks contributed to the growth.

Consolidation and reorganization continued in 1976, when AIU stopped writing policies for insurance companies it did not own. That same year the company was organized into four broad categories: the foreign general insurance division, the brokerage division of domestic general insurance, the agency division of domestic general insurance, and a life insurance division. The following year the subsidiary Transatlantic Reinsurance was reorganized as a major reinsurer, with shares sold to seven other companies. AIG absorbed its parent company, AIRCO, in 1978, completing a nine-year consolidation plan to simplify the corporate structure.

In 1979 AIG entered Eastern Europe and initiated joint ventures with state-owned insurers in Hungary, Poland, and Romania. In succeeding years similar operations were started in China and Yugoslavia. At the end of the 1970s AIG had 20 percent annual growth in revenues and had increased its size nearly tenfold. In 1979 AIG reported over $250 million in net income.

During the 1980s AIG ventured into healthcare services, and acquired a variety of financial and investment sources as well as real estate holdings. Acquisitions included United Guaranty Corporation, a residential mortgage insurance company; the Swiss bank Uberseebank A.G.; Ticino Societa d'Assicurazioni Sulla Vita, a Swiss-based life insurer; Southeastern Aviation Underwriters--later renamed AIG Aviation, Inc.--an airlines, aviation, and space program insurer; and Jurgovan & Blair, a health maintenance organization consulting business. In 1981 AIG, in combination with Presidio Oil Company, purchased a majority interest in 109 natural gas wells.

In 1984 the company reported its first decline in profits, largely owing to underwriting losses including those resulting from a major hurricane. Some of AIG's specialty companies, such as AIG Oil Rig, AIG Energy, AIG Entertainment, and AIG Political Risk, which were created during the preceding 15 years, were consolidated in 1984 under the name AIG Specialty Agencies, Inc. That same year AIG special services division was introduced to underwrite risks such as extortion, kidnapping, and ransom demand.

In 1985 AIG's profit margin rebounded, with the company exceeding 1983 earnings and posting a net income of $420 million. In 1987 AIG surpassed $1 billion in net income. That same year AIG was authorized by the South Korean government to begin life insurance operations, ending a 15-year struggle to break into the Korean market. AIG became the second foreign insurance company in South Korea, with its largest international competitor, CIGNA Corporation, given approval earlier in the year.

Two important AIG executives, National Union President Joseph P. DeAlessandro and American Home President Dennis Busti, left AIG in 1987 for other companies. Maurice Greenberg's son, Jeffrey W. Greenberg, was moved over from the presidency of AIU's North American division and named new president of National Union, while Joseph R. Wiedemann was named American Home president. Wiedemann had been president of AIG's Boston-based subsidiary Lexington Insurance Company.

AIG broadened its trading markets in 1987 when it became the first foreign insurance organization on the Tokyo Stock Exchange. The following year AIG was listed on the London International Stock Exchange. Additional listings include Paris and Switzerland, added in 1990.

AIG continued diversification moves in 1988, forming a Hong Kong-based venture to introduce U.S. fast-food franchises into the Asian market. The venture marked the first time a U.S. institutional investor--AIG's Financial Investment Corporation of Asia--moved into an overseas franchise market.

That same year AIG also experienced some difficulty. It was involved in what is believed to be one of the largest insurance-related arbitration awards in history. Enron Corporation was awarded a $162 million claim from insurers for Peruvian properties that had been expropriated, and AIG was forced to pay nearly two-thirds of the judgment.

Throughout the 1980s AIG operated as one of two major sources of environmental-impairment-liability (EIL) insurance. Early in 1989 Greenberg proposed the creation of a hazardous-waste-cleanup tax funded through a 2 percent premium fee assessed on all commercial and casualty and property policies, with insurers matching that amount. Greenberg suggested the tax could help fund cleanup of Environmental Protection Agency Superfund sites and ultimately bring more insurers into EIL writing, but critics charged the plan was self-serving.

The late 1980s saw continued consolidation for AIG. The Financial Services Group was formed in 1987 to consolidate specialized financial operations. UNAT, AIG's general insurance company on the European continent, was formed later that year to consolidate operations in Europe and prepare for the elimination of trade barriers among European nations in 1992. Headquartered in Paris, UNAT's expanding territory included France, Belgium, the Netherlands, Sweden, Norway, and Denmark.

In 1989 AIGlobal was formed to provide a single source of comprehensive property and casualty, life, and group insurance, and facilitate corporate financial services for multinational companies. That same year International Healthcare and Jurgovan & Blair were merged to form American International Healthcare, Inc., an international consulting and management company for healthcare services.

From 1987 into the mid-1990s AIG continued its diversification into financial services. In 1987 a joint venture, AIG Financial Products Corp., was established to structure complex financial transactions, including interest rate and currency swaps. In 1988 AIG acquired ownership of 30 percent of A.B. Asesores Bursatiles, a Spanish brokerage, and invested in certain investment management and venture capital operations in the United Kingdom and Hong Kong. AIG Trading Corporation, a joint venture engaging in commodity transactions, was established in early 1990, and later that year AIG acquired International Lease Finance Corporation, which was engaged primarily in the acquisition of new and used commercial jet aircraft and the leasing of such aircraft to domestic and foreign airlines (it later became the leader in such leasing). In 1994 AIG Combined Risks Ltd. was formed as a London-based investment bank providing risk management solutions involving corporate finance, reinsurance, and derivative instruments. All of these companies were placed under the umbrella of AIG's Financial Services Group. By 1994 operating income for the group had climbed to $404.9 million.

During 1990 Transatlantic Holdings, Inc., a holding company formed to hold Transatlantic Reinsurance Company and another reinsurer, Putnam Reinsurance Company, went public in a secondary offering. AIG continued to hold approximately 41 percent of Transatlantic Holdings after the public offering.

In June 1990 AIG agreed to buy Fischbach Corporation for $43 million. Fischbach, a Florida-based contractor, was an AIG performance-bond customer that had begun to experience financial difficulties. If Fischbach had failed, AIG could have been forced to pay hundreds of millions of dollars to companies with which Fischbach had contracted. After the purchase, AIG sold 51 percent of Fischbach to contractor Peter Kiewit Sons' Inc.

In 1992 AIG garnered much bad publicity over a memo written by Jeffrey Greenberg, who by then had become an executive vice-president of AIG. Issued on the day that Hurricane Andrew reached the coast of Florida, the memo, sent to presidents of AIG subsidiary companies, seemed to suggest that AIG underwriters should be encouraged to push for premium increases in the wake of the hurricane: "Begin by calling your underwriters together and explaining the significance of the hurricane. This is an opportunity to get price increases now. We must be the first and it begins by establishing the psychology with our own people. Please get it moving today." When the memo was made public it prompted investigations in both Florida and Louisiana, and denunciations from insurance watchdog groups, as well as consumer activist Ralph Nader who accused AIG of trying to start a cycle of "price gouging." Maurice Greenberg maintained, however, that the contents of the memo were taken out of context and were part of a larger AIG discussion of long-needed rate increases for commercial insurance.

During the early 1990s AIG continued to expand outside the United States, thereby increasing its non-U.S. revenue to 52 percent of the total by 1994. Asia and the states of the former Soviet Union were particular targets during this period. Led by Maurice Greenberg's son Evan, AIG's Asia-Pacific Division reentered the Chinese market in 1992 when it became the first insurer to receive a license there since the Communist revolution in 1949. Two years later AIG also became the first insurer to return to Pakistan when it formed a subsidiary of ALICO to sell life and related types of insurance (the Pakistani government had nationalized all insurance companies in 1972). In early 1995, AIG reached an agreement with the Tata Group of India to jointly operate a life and nonlife insurance business in India once these insurance markets were opened to private and foreign investment. Meanwhile, AIG continued to be the largest foreign insurer in Japan.

To the west, Russia and Uzbekistan were added to the AIG empire in 1994. Through joint ventures with local firms, AIG established commercial insurance and political risk insurance operations in Uzbekistan. Later in 1994 AIG received a license for its joint venture in Russia, the Russian American Insurance Company, which would offer commercial insurance to Russian companies and foreign firms operating in Russia.

During 1994 AIG also branched out into additional insurance lines within the U.S. market. AIG made an initial $216 million investment in 20th Century Industries, a private auto insurer in California that had incurred heavy losses as a result of the Northridge earthquake and was on the brink of insolvency. AIG pledged to invest additional capital if certain conditions were met. AIG also stepped in to rescue Alexander & Alexander Services, Inc. (A&A), a New York-based independent insurance broker. AIG's $200 million investment was intended to allow A&A to reorganize itself and improve profitability.

In the 27 years since Maurice Greenberg had taken over as CEO from the company founder, Greenberg had guided AIG into position as a leader in its field with total assets reaching $114.35 billion in 1994. In an industry that had been rocked by several huge natural disasters in the late 1980s and early 1990s, AIG's return on equity remained remarkably stable throughout the period, ranging from 11.75 percent to 18.83 percent, thanks largely to the geographic and operational diversity engineered by Greenberg.

In the late 1990s AIG made a number of significant acquisitions and investments as part of Greenberg's continuing expansion drive. In 1996 the firm spent more than $100 million to acquire SPC Credit Ltd., a medium-size Hong Kong company specializing in consumer and commercial finance. Two years later AIG spent $150 million for a 7 percent stake in the Blackstone Group, a leveraged buyout firm, and also agreed to invest $1.2 billion in future Blackstone buyout funds. Also in 1998 AIG gained majority control of 20th Century Industries and also took control of the company board as its influence at the company increased. Two years later 20th Century changed its name to 21st Century Insurance Group.

Having maintained prominent positions in two key business areas--general insurance and life insurance--over the decades and having more recently built up a significant financial services business, AIG next sought to add a fourth leg to its operations in the area of retirement savings and asset management. The first major move toward this end came at the beginning of 1999 when SunAmerica Inc. was acquired for $18.3 billion. Based in Los Angeles, SunAmerica was a major player in the hot area of variable annuities, a retirement savings product similar to a mutual fund but with insurance features and tax advantages. SunAmerica was also involved in the more traditional area of fixed annuities as well as in managing mutual funds. In 1997 it had $2.1 billion in revenue, $379 million in net income, and $40 billion in assets. The synergies that could be gained through the acquisition were quite apparent: AIG would gain access to SunAmerica's network of more than 9,000 U.S. brokers who could sell AIG life insurance and other products, while SunAmerica's retirement savings products could be sold through AIG's huge life insurance sales force in Asia, Europe, and South America.

In November 2000 AIG acquired HSB Group Inc. for about $1.2 billion. HSB was the parent company of the Hartford Steam Boiler Inspection and Insurance Company, which specialized in insuring steam boilers and other mechanical and electrical equipment. Also in 2000 AIG became the first U.S. insurance company to receive a license to establish a subsidiary in Vietnam. Early the following year, a bankruptcy court in Japan named AIG to be the exclusive sponsor of the reorganization of the troubled Chiyoda Mutual Life Insurance Company, the 12th largest insurer in Japan. This led later in the year to the acquisition of Chiyoda, which was renamed AIG Star Life Insurance Co., Ltd., a move that further added to AIG's already strong position in Japan.

In August 2001 AIG completed the largest acquisition in its history--in fact, the largest insurance takeover ever--the $23 billion purchase of American General Corporation. This deal was a logical follow-up to the SunAmerica acquisition as Houston-based American General had a strong position in fixed and variable annuities and in mutual funds. But American General, which had total assets in excess of $120 billion, was also a major player in the U.S. life insurance and consumer finance markets, and the acquisition resulted in AIG becoming the number two life insurance firm in the United States, trailing only Prudential Financial, Inc. Life insurance was also now by far AIG's largest business segment, accounting for 48.3 percent of 2001 pretax income, with general insurance contributing 25.5 percent; financial services, 17.1 percent; and retirement savings and asset management, 9.1 percent.

In December 2001, with insurance rates surging in the aftermath of the events of September 11, and with the insurance industry facing in excess of $50 billion in claims--by far the largest insurance event in history--AIG joined with Chubb Corporation, a unit of Goldman, Sachs & Co., and other investors to form Allied World Assurance Company Holdings, Ltd. Based in Bermuda, the new firm was created to provide additional commercial property and casualty insurance and reinsurance capacity to meet the needs of clients with large and complex risks. For insurance companies, joint ventures such as this one--and there were several others formed around this same time--provided a way for the firms to pool risks.

Despite suffering $820 million in losses related to September 11 and taking a special charge of $1.36 billion in connection with the acquisition and integration of American General, AIG still managed to post net income for 2001 of $5.36 billion, which was only a slight decline over the $5.64 billion figure for the preceding year. Revenues increased 9.4 percent for the year, to $62.4 billion, and total assets grew 15.5 percent, to $492.98 billion. Return on equity was 11.9 percent, an uncharacteristically low figure for a company that had reported four straight years of return on equity in excess of 15 percent.

It was clear that AIG was continuing its remarkable period of stellar performance under Maurice Greenberg's leadership, and Greenberg during his more than 30 years in charge had become a legend in the insurance industry. One question that kept recurring year after year in regard to AIG's future was who would succeed Greenberg (he turned 76 in 2001) and become only the third leader in AIG history. Over the years several potential successors had left AIG to head up other firms, not willing to wait for Greenberg to retire. A new and louder round of speculation arose in mid-1995 when Jeffrey Greenberg, who had been widely rumored to be the latest heir apparent, abruptly resigned from the firm. Some observers then raised the possibility that Jeffrey's brother Evan was the new heir apparent, using his recent promotion to executive vice-president to support their theory. Evan remained the assumed heir until September 2000 when he too resigned suddenly. This latest departure led to expressions of concern from certain analysts, but Maurice Greenberg continued to state that he had no plans to retire and that a succession plan was in place--although he refused to provide any details about it.

Principal Subsidiaries

AIG Annuity Insurance Company; AIG Financial Products Corp.; AIG Global Investment Group, Inc.; AIG SunAmerica Life Insurance Company; American General Finance, Inc.; American General Life Companies; American Home Assurance Company; American Life Insurance Company; The Hartford Steam Boiler Inspection and Insurance Company; International Lease Finance Corporation; Lexington Insurance Company; National Union Fire Insurance Company of Pittsburgh, Pa.; New Hampshire Insurance Company; SunAmerica Asset Management Corp.; SunAmerica Life Insurance Company; Transatlantic Reinsurance Company; United Guaranty Residential Insurance Company; The Variable Annuity Life Insurance Company; American International Assurance Company (Bermuda) Limited; American International Reinsurance Company Limited (Bermuda); American International Underwriters Overseas, Ltd. (Bermuda); American International Assurance Company, Limited (Hong Kong); AIG Star Life Insurance Co., Ltd. (Japan); Nan Shan Life Insurance Company, Ltd. (Taiwan).

Principal Competitors

Allianz AG; AXA; ING Groep N.V.; Zurich Financial Services; Prudential Financial, Inc.; Metropolitan Life Insurance Company; State Farm Insurance Companies; The Allstate Corporation; Travelers Property Casualty Corp.

Further Reading

Brady, Diane, "Like Father, Like Sons," Business Week, March 1, 1999, pp. 112-13.

Campanella, Frank W., "Global Insurer: American International Group's Heavy Foreign Stake Proves Sound Policy," Barron's, September 27, 1982, pp. 50+.

Chen, Kathy, Tom Hamburger, and Christopher Oster, "AIG's Chief Executive Gets His Way in Washington: Greenberg Uses Personal Touch for Airline and Insurance Bills, China Trade," Wall Street Journal, December 7, 2001, p. A20.

History of AIG, New York: American International Group, Inc., 1985.

Jennings, John P., "AIG Moves to Make It a Smaller World," National Underwriter, June 22, 1987, pp. 15+.

Laing, Jonathan R., "A Father-Son Rift," Barron's, September 25, 2000, p. 15.

------, "Mr. Irreplaceable: Hank Greenberg Made AIG a Powerhouse; Could Any Successor Do As Well?," Barron's, November 29, 1999, pp. 33-34, 36, 38.

Lipin, Steven, and Deborah Lohse, "AIG to Buy SunAmerica for $18 Billion," Wall Street Journal, August 20, 1998, p. A3.

"Local Hero: AIG," Economist, July 4, 1992, pp. 71-72.

Lohse, Deborah, "AIG's Deal for SunAmerica Signals Faith in Annuities," Wall Street Journal, August 21, 1998, p. A3.

Loomis, Carol J., "AIG: Aggressive. Inscrutable. Greenberg.," Fortune, April 27, 1998, pp. 106-08+.

Mack, Toni, "The Vince Lombardi of Insurance," Forbes, October 24, 1983, pp. 60+.

McLeod, Douglas, "Heir Apparent Leaves AIG," Business Insurance, June 12, 1995, p. 1.

Meakin, Thomas K., "AIG Hits Home Run with 20th Century, Analysts Say," National Underwriter Property and Casualty-Risk & Benefits, October 17, 1994, pp. 29-30.

Milligan, John W., "Can Hank Greenberg Keep the Magic Alive at AIG?," Institutional Investor, January 1986, pp. 286+.

------,"Maurice Greenberg, Chairman, American International Group," Institutional Investor, June 1987, pp. 206+.

"Risky Business," Chief Executive, June 1993, pp. 34-37.

Scism, Leslie, and Christopher Oster, "AIG Heir Apparent Abruptly Quits Posts," Wall Street Journal, September 20, 2000, p. A3.

Scism, Leslie, and Deborah Lohse, "AIG's Steady Chief at Last Kicks Up Heels with a Deal: SunAmerica Fits with Greenberg's Aim of Making Firm a Household Name," Wall Street Journal, August 25, 1998, p. B4.

Treaster, Joseph B., "Warren Buffett Gets All the Attention, but Hank Greenberg Is Posting Better Returns," New York Times, July 23, 2000, sec. 3, p. 1.

Wells, Chris, "Insurers Under Siege," Business Week, August 21, 1989, pp. 72-79.

— Updated by David E. Salamie

"AIG" redirects here. For other uses, see AIG (disambiguation).

American International Group, Inc.

Type	Public (NYSE: AIG)
Founded	1919 in Shanghai, China
Founder(s)	Cornelius Vander Starr
Headquarters	American International Building New York City, New York, U.S., AIG Travel Guard Stevens Point, Wisconsin, U.S.
Area served	Worldwide
Key people	Harvey Golub (Chairman)[1] Robert Benmosche (President and CEO) David L. Herzog (CFO and EVP)
Industry	Insurance, financial services
Products	Insurance annuities, mutual funds
Revenue	▲ US$ 29.525 billion (July 2009)[2]
Operating income	▲ US$ 1.319 billion (July 2009)[2]
Net income	▲ US$ 1.822 billion (July 2009)[2]
Total assets	▼ US$ 830.412 billion (July 2009)[2]
Total equity	▲ US$ 57.958 billion (July 2009)[2]
Employees	▼ 116,000 (2009)[2]
Website	AIG.com

American International Group, Inc. (AIG) (NYSE: AIG) is an American insurance corporation. Its corporate headquarters are located in the American International Building in New York City. The British headquarters office is on Fenchurch Street in London; continental Europe operations are based in La Défense, Paris, and its Asian headquarters office is in Hong Kong. According to the 2008 Forbes Global 2000 list, AIG was once the 18th-largest public company in the world. It was listed on the Dow Jones Industrial Average from April 8, 2004 to September 22, 2008.

AIG suffered from a liquidity crisis when its credit ratings were downgraded below "AA" levels in September 2008. The United States Federal Reserve Bank on September 16, 2008, created an $85 billion credit facility to enable the company to meet increased collateral obligations consequent to the credit rating downgrade, in exchange for the issuance of a stock warrant to the Federal Reserve Bank for 79.9% of the equity of AIG. The Federal Reserve Bank and the United States Treasury by May 2009 had increased the potential financial support to AIG, with the support of an investment of as much as $70 billion, a $60 billion credit line and $52.5 billion to buy mortgage-based assets owned or guaranteed by AIG, increasing the total amount available to as much as $182.5 billion.^[3][4] AIG subsequently sold a number of its subsidiaries and other assets to pay down loans received, and continues to seek buyers of its assets. In March 2009, AIG faced public outrage and media and political backlash for its retention payments of $165 million. During this time period, many AIG employees endured hate mail and death threats.^[5][6][7]

Contents 1 History 2 Business 2.1 Auto insurance 2.2 Holdings 3 Financial crisis 3.1 Chronology of September 2008 liquidity crisis 3.2 Federal Reserve bailout 3.3 Additional Bailouts of 2008 3.4 Counterparty Controversy 3.5 Post-bailout expenditures 3.6 Settlement of credit default swaps 3.7 Sales of assets 3.8 Record losses 3.9 2009 employee bonus payments 3.10 Manchester United Sponsorship 4 Litigation 4.1 Accounting fraud claims 5 Corporate governance 5.1 Board of directors 6 See also 7 Notes 8 References and further reading 9 External links

History

The American International Building in lower Manhattan

AIG history dates back to 1919, when Cornelius Vander Starr established an insurance agency in Shanghai, China. Starr was the first Westerner in Shanghai to sell insurance to the Chinese, which he continued to do until AIG left China in early 1949—as Mao Zedong led the advance of the Communist People's Liberation Army on Shanghai.^[8][9] Starr then moved the company headquarters to its current home in New York City.^[10] The company went on to expand, often through subsidiaries, into other markets, including other parts of Asia, Latin America, Europe, and the Middle East.^[11]

In 1962, Starr gave management of the company's lagging U.S. holdings to Maurice R. "Hank" Greenberg, who shifted its focus from personal insurance to high-margin corporate coverage. Greenberg focused on selling insurance through independent brokers rather than agents to eliminate agent salaries. Using brokers, AIG could price insurance according to its potential return even if it suffered decreased sales of certain products for great lengths of time with very little extra expense. In 1968, Starr named Greenberg his successor. The company went public in 1969.^[12]

Beginning in 2005, AIG became embroiled in a series of fraud investigations conducted by the Securities and Exchange Commission, U.S. Justice Department, and New York State Attorney General's Office. Greenberg was ousted amid an accounting scandal in February 2005; he is still fighting civil charges being pursued by New York state.^[13][14] The New York Attorney General's investigation led to a $1.6 billion fine for AIG and criminal charges for some of its executives.^[15] Greenberg was succeeded as CEO by Martin J. Sullivan, who had begun his career at AIG as a clerk in its London office in 1970.^[16]

On June 15, 2008, after disclosure of financial losses and subsequent to a falling stock price, Sullivan resigned and was replaced by Robert B. Willumstad, Chairman of the AIG Board of Directors since 2006. Willumstad was forced by the US government to step down and was replaced by Edward M. Liddy on September 17, 2008.^[17]

Business

In the United States, AIG is the largest underwriter of commercial and industrial insurance, and AIG acquired American General Life Insurance in August 2001.^[18]

Auto insurance

AIG sold auto insurance policies through its subsidiary unit, AIG Direct (aka aigdirect.com). The policies they offered included insurance for private automobiles, motorcycles, recreational vehicles and commercial vehicles.

AIG purchased the remaining 39% that it did not own of online auto insurance specialist 21st Century Insurance in 2007 for $749 million.^[19] With the failure of the parent company and the continuing recession in late 2008, AIG rebranded its insurance unit to 21st Century Insurance.^[20][21] In April 2009 it was announced that AIG was selling the 21st Century Insurance subsidiary to Farmers Insurance Group for $1.9 billion.^[22]

Holdings

Further information: Holdings of American International Group

Financial crisis

Further information: Subprime mortgage crisis, Financial crisis of 2007–2009, and Liquidity crisis of September 2008

Chronology of September 2008 liquidity crisis

On September 16, 2008, AIG suffered a liquidity crisis following the downgrade of its credit rating. Industry practice permits firms with the highest credit ratings to enter swaps without depositing collateral with its trading counter-parties. When its credit rating was downgraded, the company was required to post additional collateral with its trading counter-parties, and this led to an AIG liquidity crisis. AIG's London unit sold credit protection in the form of credit default swaps (CDSs) on collateralized debt obligations (CDOs) that had by that time declined in value.^[23] The United States Federal Reserve Bank announced the creation of a secured credit facility of up to US$85 billion, to prevent the company's collapse by enabling AIG to meet its obligations to deliver additional collateral to its credit default swap trading partners. The credit facility provided a structure to loan as much as US$85 billion, secured by the stock in AIG-owned subsidiaries, in exchange for warrants for a 79.9% equity stake, and the right to suspend dividends to previously issued common and preferred stock.^[16][24][25] AIG announced the same day that its board accepted the terms of the Federal Reserve Bank's rescue package and secured credit facility.^[26] This was the largest government bailout of a private company in U.S. history, though smaller than the bailout of Fannie Mae and Freddie Mac a week earlier.^[27][28]

AIG's share prices had fallen over 95% to just $1.25 by September 16, 2008, from a 52-week high of $70.13. The company reported over $13.2 billion in losses in the first six months of the year.^[29][30] The AIG Financial Products division headed by Joseph Cassano, in London, had entered into credit default swaps to insure $441 billion worth of securities originally rated AAA. Of those securities, $57.8 billion were structured debt securities backed by subprime loans.^[31] CNN named Cassano as one of the "Ten Most Wanted: Culprits" of the 2008 financial collapse in the United States.^[32]

As Lehman Brothers (the largest bankruptcy in U.S. history at that time) suffered a catastrophic decline in share price, investors began comparing the types of securities held by AIG and Lehman, and found that AIG had valued its Alt-A and sub-prime mortgage-backed securities at 1.7 to 2 times the values used by Lehman which weakened investors' confidence in AIG.^[29] On September 14, 2008, AIG announced it was considering selling its aircraft leasing division, International Lease Finance Corporation, to raise cash.^[29] The Federal Reserve hired Morgan Stanley to determine if there are systemic risks to a financial failure of AIG, and asked private entities to supply short-term bridge loans to the company. In the meantime, New York regulators allowed AIG to borrow $20 billion from its subsidiaries.^[33][34]

At the stock market's opening on September 16, 2008, AIG's stock dropped 60 percent.^[35] The Federal Reserve continued to meet that day with major Wall Street investment firms, hoping to broker a deal for a non-governmental $75 billion line of credit to the company.^[36] Rating agencies Moody's and Standard and Poor downgraded AIG's credit ratings on concerns over likley continuing losses on mortgage-backed securities. The credit rating downgrade forced the company to deliver collateral of over $10 billion to certain creditors and CDS counter-parties.^[37] The New York Times later reported that talks on Wall Street had broken down and AIG may file for bankruptcy protection on Wednesday, September 17.^[38] Just before the bailout by the US Federal Reserve, AIG former CEO Maurice (Hank) Greenberg sent an impassioned letter to AIG CEO Robert B. Willumstad offering his assistance in any way possible, ccing the Board of Directors. His offer was rebuffed.^[39]

Federal Reserve bailout

On the evening of September 16, 2008, the Federal Reserve Bank's Board of Governors announced that the Federal Reserve Bank of New York had been authorized to create a 24-month credit-liquidity facility from which AIG could draw up to $85 billion. The loan was collateralized by the assets of AIG, including its non-regulated subsidiaries and the stock of "substantially all" of its regulated subsidiaries, and with an interest rate of 850 basis points over the three-month London Interbank Offered Rate (LIBOR) (i.e., LIBOR plus 8.5%). In exchange for the credit facility, the U.S. government received warrants for a 79.9 percent equity stake in AIG, with the right to suspend the payment of dividends to AIG common and preferred shareholders.^[16][25] The credit facility was created under the auspices of Section 13(3) of the Federal Reserve Act.^[25][40][41] AIG's board of directors announced approval of the loan transaction in a press release the same day. The announcement did not comment on the issuance of a warrant for 79.9% of AIG's equity, but the AIG 8-K filing of September 18, 2008, reporting the transaction to the Securities and Exchange Commission stated that a warrant for 79.9% of AIG shares had been issued to the Board of Governors of the Federal Reserve.^[16][26][42] AIG drew down US$ 28 billion of the credit-liquidity facility on September 17, 2008.^[43] On September 22, 2008, AIG was removed from the Dow Jones Industrial Average.^[44] An additional $37.8 billion credit facility was established in October. As of October 24, AIG had drawn a total of $90.3 billion from the emergency loan, of a total $122.8 billion.^[45]

Maurice Greenberg, former CEO of AIG, on September 17, 2008, characterized the bailout as a nationalization of AIG. He also stated that he was bewildered by the situation and was at a loss over how the entire situation got out of control as it did.^[46] On September 17, 2008, Federal Reserve Bank chair Ben Bernanke asked Treasury Secretary Henry Paulson join him, to call on members of Congress, to describe the need for a congressionally authorized bailout of the nation's banking system. Weeks later, Congress approved the Emergency Economic Stabilization Act of 2008. Bernanke said to Paulson on September 17:^[47]

Additional Bailouts of 2008

On October 9, 2008, the company borrowed an additional $37.8 billion via a second secured asset credit facility created by the Federal Reserve Bank of New York (FRBNY).^[48] From mid September till early November, AIG's credit-default spreads were steadily rising, implying the company was heading for default.^[49] On November 10, 2008, the U.S. Treasury announced it would purchase $40 billion in newly issued AIG senior preferred stock, under the authority of the Emergency Economic Stabilization Act's Troubled Asset Relief Program.^[50][51][52] The FRBNY announced that it would modify the September 16th secured credit facility; the Treasury investment would permit a reduction in its size from $85 billion to $60 billion, and that the FRBNY would extend the life of the facility from three to five years, and change the interest rate from 8.5% plus the three-month London interbank offered rate (LIBOR) for the total credit facility, to 3% plus LIBOR for funds drawn down, and 0.75% plus LIBOR for funds not drawn, and that AIG would create two off- balance-sheet Limited Liability Companies (LLC) to hold AIG assets: one will act as an AIG Residential Mortgage-Backed Securities Facility and the second to act as an AIG Collateralized Debt Obligations Facility.^[50][52] Federal officials said the $40 billion investment would ultimately permit the government to reduce the total exposure to AIG to $112 billion from $152 billion.^[50] On December 15, 2008, the Thomas More Law Center filed suit to challenge the Emergency Economic Stabilization Act of 2008, alleging that it unconstitutionally promotes Islamic law (Sharia) and religion. The lawsuit was filed because AIG provides Takaful Insurance Plans, which, according to the company, avoid investments and transactions that are"un-Islamic".^[53][54]

Counterparty Controversy

AIG was required to post additional collateral with many creditors and counter-parties, touching off controversy when over $100 billion was paid out to major global financial institutions that had previously received TARP money. While this money was legally owed to the banks by AIG (under agreements made via credit default swaps purchased from AIG by the institutions), a number of Congressmen and media members expressed outrage that taxpayer money was going to these banks through AIG.^[55]

Had AIG been allowed to fail in a controlled manner through bankruptcy, bondholders and derivative counterparties (major banks) would have suffered significant losses, limiting the amount of taxpayer funds directly used. Fed Chairman Ben Bernanke argued: "If a federal agency had [appropriate authority] on September 16 [2008], they could have been used to put AIG into conservatorship or receivership, unwind it slowly, protect policyholders, and impose haircuts on creditors and counterparties as appropriate. That outcome would have been far preferable to the situation we find ourselves in now."^[56] The "situation" to which he is referring is that the claims of bondholders and counterparties were paid at 100 cents on the dollar by taxpayers, without giving taxpayers the rights to the future profits of these institutions. In other words, the benefits went to the banks while the taxpayers suffered the costs.

Post-bailout expenditures

The following week (of September bailout), AIG employees and distributors participated in a California retreat which cost $444,000 and featured spa treatments, banquets, and golf outings.^[57][58]

It was reported that the trip was a reward for top-performing life-insurance agents planned before the bailout.^[59] Less than 24 hours after the news of the party was first reported by the media, it was reported that the Federal Reserve had agreed to give AIG an additional loan of up to $37.8 billion.^[60] AP reported on October 17 that AIG executives spent $86,000 on a previously scheduled English hunting trip. News of the lavish spending came just days after AIG received an additional $37.8 billion loan from the Federal Reserve, on top of a previous $85 billion emergency loan granted the month before. Regarding the hunting trip, the company responded, "We regret that this event was not canceled."^[61] An October 30, 2008 article from CNBC reported that AIG had already drawn upon $90 billion of the $123 billion allocated for loans.^[62] On November 10, 2008, just a few days before renegotiating another bailout with the US Government for $40 billion, ABC News reported that AIG spent $343,000 on a trip to a lavish resort in Phoenix, Arizona. ^[63]

Settlement of credit default swaps

On October 22, 2008, those creditors of Lehman Brothers who bought credit default swaps to hedge them against Lehman bankruptcy settled those accounts. The net payments were $5.2 billion^[64] even though initial estimates of the amount of the settlement were between $100 billion and $400 billion.^[65]

On March 15, 2009, under mounting pressure from Congress and after consultation with the Federal Reserve, AIG disclosed a list of major recipients of collateral postings and payments under credit default swaps, guaranteed investment plans, and securities lending agreements.^[66] During December 2008, AIG paid $18.7 billion to various financial institutions, including Goldman Sachs and Société Générale to retire obligations related to credit default swaps (CDS). As much as $53.5 billion related to swap payouts are part of the bailout.^[67]

Sales of assets

AIG since September 2008 has marketed its assets to pay off its government loans. A global decline in the valuation of insurance businesses, and the weakening financial condition of potential bidders, has challenged its efforts. If the U.S. government decides to continue to protect the company from falling into bankruptcy, it may have to take the assets itself in exchange for the loans, or offer further direct financial support.^[68]

As of Sept 6th, 2009, the Wall Street Journal has reported that Pacific Century Group has agreed to pay US$500M for a part of American International Group Inc.'s asset-management business, and that they also expect to pay an additional $200 million to AIG in carried interest and other payments linked to future performance of the business.^[69]

Record losses

On March 2, 2009, AIG reported a fourth quarter loss of $61.7bn (£43bn) and revenue of -$23.7bn (-£16.2bn) for the final three months of 2008. This was the largest quarterly loss in corporate history at that time.^[70] The announcement of the loss had an impact on morning trading in Europe and Asia, with the FTSE100, DAX and Nikkei all suffering sharp falls. In the US the Dow Jones Industrial Average fell to below 7000 points, a twelve-year low.^[71][72] The news of the loss came the day after the U.S. Treasury Department had confirmed that AIG was to get an additional $30 billion in aid, on top of the $150 billion it has already received.^[73] The Treasury Department suggested that the potential losses to the US and global economy would be 'extremely high' if it were to collapse^[74] and has suggested that if in future there is no improvement, it will invest more money into the company, as it is unwilling to allow it to fail.^[75] The firm's position as not just a domestic insurer, but also one for small businesses and many listed firms, has prompted US officials to suggest its demise could be 'disastrous' and the Federal Reserve said that AIG posed a 'systemic risk' to the global economy.^[70] The fourth quarter result meant the company made a $99.29 billion loss for the whole of 2008,^[74] with five consecutive quarters of losses costing the company well over $100 billion.^[75] In a testimony before the Senate Budget Committee on March 3, 2009, the Federal Reserve Chairman Ben Bernanke stated that "AIG exploited a huge gap in the regulatory system,” ... and "to nobody’s surprise, made irresponsible bets and took huge losses".^[76]

2009 employee bonus payments

Main article: AIG bonus payments controversy

In March 2009, AIG announced that they were paying out $165 million in executive bonuses. Total bonuses for the financial unit could reach $450 million and bonuses for the entire company could reach $1.2 billion.^[77] President Barack Obama, who voted for the AIG bailout as a Senator^[78] responded to the planned payments by saying "[I]t’s hard to understand how derivative traders at AIG warranted any bonuses, much less $165 million in extra pay. How do they justify this outrage to the taxpayers who are keeping the company afloat?" and "In the last six months, AIG has received substantial sums from the U.S. Treasury. I’ve asked Secretary Geithner to use that leverage and pursue every legal avenue to block these bonuses and make the American taxpayers whole."^[79]

Protester outside of AIG's headquarters in the wake of the bonus controversy is interviewed by news media.

Politicians on both sides of the Congressional aisle reacted with outrage to the planned bailouts. Senator Chuck Grassley (R-Iowa) said "I would suggest the first thing that would make me feel a little bit better toward them if they'd follow the Japanese example and come before the American people and take that deep bow and say, I'm sorry, and then either do one of two things: resign or go commit suicide."^[80] Senator Chuck Schumer (D-New York) accused AIG of "Alice in Wonderland business practices" and said "It boggles the mind." He has threatened to tax the bonuses at up to 100%.^[81] Senator Richard Shelby (R-Alabama) said "These people brought this on themselves. Now you're rewarding failure. A lot of these people should be fired, not awarded bonuses. This is horrible. It's outrageous."^[82] Senator Mitch McConnell (R-Kentucky) echoed his comments, saying "This is an outrage."^[83] Senator Jon Tester (D-Montana) said "This is ridiculous." and AIG executives "need to understand that the only reason they even have a job is because of the taxpayers."^[84] Senator Dick Durbin (D-Illinois) said "I've had it." and "The fact that they continue to do it while we pour in billions of dollars is undefensible."^[85]

Wikinews has related news: US president Obama, Congress call for blocking of executive bonuses at AIG insurance company

Representative Barney Frank (D-Massachusetts), Chairman of the House Financial Services Committee, said paying these bonuses would be "rewarding incompetence"^[84] and "These people may have a right to their bonuses. They don't have a right to their jobs forever."^[82]

Representative Mark Kirk (R-Illinois) said "AIG should not be on welfare from Uncle Sam, and yet paying bonuses and transferring a considerable amount of taxpayer funds to entities overseas."^[85] Federal Reserve Chairman Ben Bernanke said "It makes me angry. I slammed the phone more than a few times on discussing AIG."^[82] Lawrence Summers, Director of the National Economic Council, said "The easy thing would be to just say, you know, ‘Off with their heads,’ and violate the contracts."^[86] Austan Goolsbee, of the Council of Economic Advisers said "I don't know why they would follow a policy that's really not sensible, is obviously going to ignite the ire of millions of people." and "You worry about that backlash."^[87]

Political commentators and journalists expressed an equally bipartisan outrage.^{[80][88][89][90][90][91][92][93][94][95][96]}

On March 24, 2009, The New York Times printed the resignation letter of Jake DeSantis, executive vice president of AIG’s financial products unit, to Edward M. Liddy, the chief executive of AIG. DeSantis stated he had nothing to do with the credit default swaps, he lost much of his life savings in the form of deferred compensation invested in the capital of AIG Financial Products; he had agreed to work for an annual salary of $1 out of a sense of duty, that he was assured many times the bonuses would be paid in March 2009, and that he believed he and others were let down by Liddy's lack of support. He also stated he was going to donate his bonus to those suffering from the global economic downturn.^[97]

It was reported that Senator Christopher Dodd (D-Con) (who first denied, then admitted to amending the legislation to allow the AIG bonuses), received $160,000 from employees of AIG.^{[98][99][100][101]} A memo issued in 2006 by Joseph Cassano, AIG Financial Products chief executive, urged AIG employees to donate to Dodd, saying that as "next in line to become chairman of the Senate Banking, Housing, and Urban Affairs Committe... Senator Dodd will now have the opportunity to set the committee's agenda on issues critical to the financial services industry."^[102]

Manchester United Sponsorship

AIG is the principal sponsor of English football giants Manchester United, and as part of the sponsorship deal, their logo is displayed on the front of the club's shirts and a plethora of other merchandise. The AIG deal was announced by Manchester United chief executive David Gill (executive) on 6 April 2006, for a British shirt sponsorship record £56.5 million, to be paid over four years (£14.1 million a year). The deal became the most valuable sponsorship deal in the world in September 2006, after the renegotiation and subsequent degrading of the £15 million-a-year deal Italian giants Juventus had with oil firm Tamoil. During AIG's sponsorship, Manchester United enjoyed one of its most successful periods in history, winning the Premier League three consecutive years, the Football League Cup, the UEFA Champions League, and the FIFA Club World Cup.

On 21 January 2009, it was announced that AIG would not be renewing their sponsorship of the club at the end of the deal in May 2010. It is not clear, however, whether or not AIG's agreement to run MU Finance will continue. American reinsurance company Aon Corporation, was named the club's new principal sponsor on 3 June 2009, with their sponsorship of the club taking effect from the beginning of the 2010–11 season. The terms of the deal were not revealed, but it has been reported to be worth approximately £80 million over four years, which would make it the biggest sponsorship deal in football history.

Litigation

This section needs additional citations for verification. Please help improve this article by adding reliable references. Unsourced material may be challenged and removed. (September 2008)

In November 2004, AIG reached US$126 million settlement with the U.S. Securities and Exchange Commission and the Justice Department partly resolving a number of regulatory matters, but the company still must cooperate with investigators continuing to probe the sale of a non-traditional insurance product^[103].

On June 11, 2008, three stockholders, collectively owning 4% of the outstanding stock of AIG, delivered a letter to the Board of Directors of AIG seeking to oust CEO Martin Sullivan and make certain other management and Board of Directors changes. This letter was the latest volley in what the Wall Street Journal deemed a "public spat" between the Company's Board and management, on the one hand, and its key stockholders, and former CEO Maurice "Hank" Greenberg on the other hand.^[104]

Accounting fraud claims

On October 14, 2004 the New York State Office of Attorney General Eliot Spitzer announced that it had commenced a civil action against Marsh & McLennan Companies for steering clients to preferred insurers with whom the company maintained lucrative payoff agreements, and for soliciting rigged bids for insurance contracts from the insurers. The Attorney General announced in a release that two AIG executives pleaded guilty to criminal charges in connection with this illegal course of conduct. In early May 2005, AIG restated its financial position and issued a reduction in book value of USD $2.7 billion, a 3.3 percent reduction in net worth.

On February 9, 2006, AIG and the New York State Attorney General's office agreed to a settlement in which AIG would pay a fine of $1.6 billion.^[105]

Corporate governance

Board of directors

• Harvey Golub – Non-Executive Chairman of the Board of Directors, American International Group
• Robert Benmosche - President and CEO, American International Group
• Dennis D. Dammerman - Former Vice Chairman of the Board, General Electric Company
• Harvey Golub - Former Chairman and Chief Executive Officer, American Express Company
• Laurette T. Koellner - Former Senior Vice President, The Boeing Company
• Christopher S. Lynch - Former Partner, KPMG LLP
• Arthur C. Martinez – Former Chairman of the Board, President and Chief Executive Officer, Sears, Roebuck and Co.
• George L. Miles, Jr. - President and Chief Executive Officer, WQED Multimedia
• Robert S. Miller - Executive Chairman, Delphi Corporation
• Suzanne Nora Johnson – Former Vice Chairman, The Goldman Sachs Group, Inc.
• Morris W. Offit - Chairman, Offit Capital Advisors LLC
• Douglas M. Steenland - Former President and Chief Executive Officer, Northwest Airlines Corporation

See also

Companies portal

• AIG Advisor Group
• AIG Retirement
• Bailout (finance)
• Global financial crisis of 2008-2009
• Lemon socialism
• List of United States insurance companies
• MBIA - very large insurer of bonds which has similarly faced major credit downgrades

Notes

1. ^ "AIG names former Amex CEO Golub as its chairman". Reuters. 6 August 2009. http://www.reuters.com/article/topNews/idUSN0635873620090806?feedType=RSS&feedName=topNews&sp=true. Retrieved 7 August 2009. 
2. ^ ^{a b c d e f} "Form 10-K". http://idea.sec.gov/Archives/edgar/data/5272/000095012309003734/y74794e10vk.htm. Retrieved 2009-03-06. 
3. ^ http://www.bloomberg.com/apps/news?pid=20601103&sid=aaog3i4yUopo&refer=us
4. ^ http://www.federalreserve.gov/newsevents/press/other/20090302a.htm
5. ^ http://www.huffingtonpost.com/david-rees/the-aig-death-threats_b_179192.html The AIG Death Threats. Retrieved 2009-September-15.
6. ^ http://www.huffingtonpost.com/2009/03/18/aig-wont-release-names-of_n_176465.html AIG Won't Release Names Of Executives, Citing Death Threats. Retrieved 2009-September-15.
7. ^ http://www.nbcconnecticut.com/news/local-beat/AIG-Threats-We-will-get-your-children.html Threats to AIG: "We Will Get Your Children". Retrieved 2009-September-15.
8. ^ Thompson, Clifford; Block, Maxine; Moritz, Charles; Rothe, Anna Herthe; Candee, Marjorie Dent (1941). Current Biography Yearbook. Current Biography (60th ed.). H. W. Wilson Company. p. 247. http://books.google.com/books?id=P4oYAAAAIAAJ&q=%22AIG+abandoned+China+completely+in+1949%22&pgis=1. Retrieved 2009-03-18. 
9. ^ "Foreign Office Files for China, 1949-1976". Part 1: Complete Files for 1949: Publisher's Note. Adam Matthew Publications. http://www.adam-matthew-publications.co.uk/digital_guides/fo_china_part_1/Publishers-Note.aspx. Retrieved 2009-03-18. 
10. ^ "AIG: What does this US giant do?". BBC News. 17 September 2008. http://news.bbc.co.uk/2/hi/business/7621574.stm. Retrieved 2009-03-18. 
11. ^ "American International Group Inc (New York Stock Exchange)". Company profile (New York City: Thomson Reuters). http://www.reuters.com/finance/stocks/companyProfile?symbol=AIG.N. Retrieved 2009-03-18. 
12. ^ Hoover's Handbook of American Business (9th ed.). Austin, Texas: Hoover's Business Press. 1999. p. 134. ISBN 9781573110457. http://books.google.com/books?id=0okYAAAAIAAJ&q=%22AIG+went+public+in+1969%22&pgis=1. Retrieved 2009-03-18. 
13. ^ MSNBC
14. ^ Reuters
15. ^ Yahoo
16. ^ ^{a b c d} Andrews, Edmund L.; Michael J. de la Merced and Mary Williams Walsh (2008-09-16). "Fed’s $85 Billion Loan Rescues Insurer". New York times. http://www.nytimes.com/2008/09/17/business/17insure.html?hp. Retrieved 2008-09-17. 
17. ^ "Former AIG CEO Willumstad foregoes some stock awards". New York City: Thomson Reuters. 30 December 2008. http://www.reuters.com/article/ousivMolt/idUSTRE4BT5CL20081230. Retrieved 2009-03-18. 
18. ^ http://www.aigag.com/life/life.nsf/contents/aboutus_whyaigag_history
19. ^ "AIG buys 21st Century Insurance". Los Angeles Times. 2007-09-28. http://articles.latimes.com/2007/sep/28/business/fi-aig28. 
20. ^ "AIG rebrand US auto insurance unit to 21st Century Insurance, and cut jobs". November 26, 2008. http://www.tradingmarkets.com/.site/news/Stock%20News/2053392/. Retrieved Dec. 3, 2008. 
21. ^ "AIG renaming auto insurance division, cutting jobs". November 26, 2008. http://www.ifawebnews.com/articles/2008/11/26/news/property/doc492c16082e4df440597990.txt. Retrieved Dec. 3, 2008. 
22. ^ Lifsher, Marc; Zimmerman, Martin (April 17, 2009). "AIG to sell 21st Century to Farmers Insurance". Los Angeles Times. http://www.latimes.com/business/la-fi-aig-21st-century17-2009apr17,0,81719.story?track=rss. 
23. ^ Gretchen, Morgenson (2008-09-27). "Behind Insurer’s Crisis, Blind Eye to a Web of Risk". NY Times. http://www.nytimes.com/2008/09/28/business/28melt.html. Retrieved 2008-09-17. 
24. ^ Kaiser, Emily (2008-09-17). "After AIG rescue, Fed may find more at its door". Reuters. http://www.reuters.com/article/idUKN1644235820080917. Retrieved 2008-09-17. 
25. ^ ^{a b c} United States Federal Reserve Board of Governors, Press release: Federal Reserve Board, met with full support of the Treasury Department, authorizes the Federal Reserve Bank of New York to lend up to $85 billion to the American International Group (AIG), September 16, 2008
26. ^ ^{a b} "AIG Statement on Announcement by Federal Reserve Board of $85 Billion Secured Revolving Credit Facility: Addresses Liquidity Issues and Policyholder Concerns". American International Group, Inc.. 2008-09-16. http://ir.aigcorporate.com/phoenix.zhtml?c=76115&p=irol-newsArticle&ID=1197918&highlight=. Retrieved 2008-09-16. 
27. ^ Clobbered: Dow Plummets 449 on Credit Fears Fox Business News
28. ^ "Adding to the Government's Books". New York Times. 2008-09-18. http://www.nytimes.com/imagepages/2008/09/18/business/20080918_FED_GRAPHIC.html. Retrieved 2008-09-18.  (Graphic comparing size of government credit facilities or asset guarantees)
29. ^ ^{a b c} Gretchen Morgensen; Mary Williams Walsh (2008-09-14). "Rush Is On to Prevent AIG From Failing". The New York Times. http://www.nytimes.com/2008/09/15/business/15aig.html?hp. Retrieved 2008-09-14. 
30. ^ Andrew Ross Sorkin (2008-09-14). "AIG to Plan Restructuring and Asset Sales". The New York Times. http://dealbook.blogs.nytimes.com/2008/09/14/aig-to-plan-massive-restructuring/. Retrieved 2008-09-14. 
31. ^ Mark Pittman (2008-09-29). ""Goldman, Merrill Collect Billions After Fed's AIG Bailout Loans"". Bloomberg News. http://www.bloomberg.com/apps/news?pid=newsarchive&sid=aTzTYtlNHSG8. Retrieved 2008-10-12. 
32. ^ Culprits of the Collapse - Joe Cassano
33. ^ "Fed Seeks At Least $70 Billion to Help AIG.". The New York Times DealBook. 2008-09-15. http://dealbook.blogs.nytimes.com/2008/09/15/fed-hires-morgan-stanley-to-evaluate-aig-options/. Retrieved 2008-09-15. 
34. ^ "Goldman, JPMorgan Try to Arrange $75 Billion AIG Loan". Bloomberg.com. 2008-09-15. http://www.bloomberg.com/apps/news?pid=20601087&sid=a8IBBQJiLJag. Retrieved 2008-09-15. 
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36. ^ Michael Grynbaum (2008-09-16). "Wall Street Holds Steady; Fed to Meet". The New York Times. http://www.nytimes.com/2008/09/17/business/worldbusiness/17markets.html?_r=1&hp&oref=slogin. Retrieved 2009-03-10. 
37. ^ "S&P: Ratings on American International Group Lowered and Kept on CreditWatch Negative". Yahoo News. 2008-09-16. http://marketplace.news.yahoo.net/pressrelease.aspx?id=96684. Retrieved 2009-04-10. 
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39. ^ Many blame the financial problems on the legal problems AIG began having as a result of a number of government investigations alleging fraud and other inproprieties which were approved by the office of its then chairman, Maurice Greenberg. These problems placed such a focus on AIG's activities that it created a level of required transparency and fear of getting caught, which many believe forced the company to be less active and willing to cheat its way out of these problems. A manner of doing business it learned with its core activity of denying legitimate insurance claims and then pressuring its insureds, their witnesses and anyone else coming to their support while trying to intimidate judges and insurance commissioners. So who began all this? In May 2001 an insurance claimant and shareholder, Cesar Balbin stepped into the annual shareholders meetings. For the first time ever in the company's history, AIG was publicly accused of criminal and civil racketeering activities including: extortion, blackmale, claims fraud, theft of company equity: it took with it the chairman, billions of dollars and led to a greater transparency and fear that possibly contributed to inaction by many at AIG to participate in its typically less that legal and proper activities required to keep the company afloat."Letter from Maurice Greenberg to AIG Ceo and Board of Directors" (PDF). WikiLeaks. 2008-09-16. https://secure.wikileaks.org/wiki/Image:AIG09162008.pdf. Retrieved 2008-09-17. 
40. ^ Federal Reserve Act: Section 13. Powers of Federal Reserve Banks Federal Reserve Board of Governors. Retrieved September 17, 2008.
41. ^ 12 U.S.C. ch.3 subch.IX
42. ^ FORM 8-K Current Report, American International Group (September 18, 2008). EDGAR United States Securities and Exchange Commission. Retrieved September 20, 2008.
43. ^ Son, Hugh (2008-09-20). "AIG Filing on Takeover Omits Reference to Shareholder Meeting". Bloomberg. http://www.bloomberg.com/apps/news?pid=20601087&sid=aqHdJVu3.4gY. Retrieved 2008-09-20. 
44. ^ "AIG booted out of the Dow". CNN Money. 2008-09-18. http://money.cnn.com/2008/09/18/news/companies/aig_dow/index.htm. 
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46. ^ Mark Ruquet, “Greenberg Pans AIG “Nationalization”, National Underwriter Life & Health, September 18, 2008
47. ^ Cassidy, John (2008-12-01). "Anatomy of a Meltdown: Ben Bernanke and the financial crisis.". The New Yorker. http://www.newyorker.com/reporting/2008/12/01/081201fa_fact_cassidy. Retrieved 2008-11-29. 
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49. ^ "How AIG got Uncle Sam over a barrel". The Economist. 2008-11-13. http://www.economist.com/finance/displaystory.cfm?story_id=12607251. Retrieved 2008-11-20. 
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51. ^ "Treasury to Invest in AIG Restructuring Under the Emergency Economic Stabilization Act". Press Release (United States Department of the Treasury). 2008-11-10. http://www.ustreas.gov/press/releases/hp1261.htm. Retrieved 2008-11-12. 
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53. ^ Kevin J. Murray v. Henry M. Paulson, filed 12/15/08, p. 9
54. ^ Frequently Asked Questions regarding AIG Takaful
55. ^ Bloomberg - Senators Dodd & Shelby Demand Information
56. ^ Bernanke-AIG Testimony
57. ^ Taylor, Andrew (2008-10-08). "AIG execs' retreat after bailout angers lawmakers". Associated Press. http://ap.google.com/article/ALeqM5iCBEplezRU4MUlI3wKRd0IZ9GCgQD93M2CP00. 
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59. ^ Lapidos, Juliet (2008-10-08). "Can Paulson Fire Naughty Executives? How much control does the Treasury have over personnel at AIG?". Slate. http://www.slate.com/id/2201853/. 
60. ^ Fed grants AIG $37.8 billion loan, International Herald Tribune, October 8, 2008
61. ^ AUGSTUMS, IEVA (2008-10-17). "AIG executives spent thousands during hunting trip". AP. http://ap.google.com/article/ALeqM5g3InVeHoYnmXZnM2ACXSgjG0-nIQD93R68VO0. 
62. ^ AIG Already Running Through Government Loans, CNBC, October 30, 2008
63. ^ Another AIG Resort "Junket": Top Execs Caught on Tape , ABC News, November 10, 2008
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67. ^ AIG CDS Payouts and Retirements
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73. ^ "Markets routed as AIG reveals $62B loss". CNN. 2009-03-02. http://edition.cnn.com/2009/BUSINESS/03/02/markets/index.html. Retrieved 2009-03-02. 
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References and further reading

• Sjostrom, Jr., William K., The AIG Bailout, http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1346552  (2009)
• "An Insurance Giant, Brought Down". New York Times. 2008-09-27. http://www.nytimes.com/imagepages/2008/09/27/business/20080928_MELT_GRAPHIC.html. Retrieved 2008-09-27.  (Graphic)
• "Losses in Perspective" New York Times. September 17, 2008. (Graphic of AIG quarterly net profit & losses over five years, comparing Finance vs. Insurance activities.)
• Marsh, Bill (2008-09-28). "A Tally of Federal Rescues". New York Times. http://www.nytimes.com/imagepages/2008/09/28/weekinreview/20080928_MARSH_GRFK.html. Retrieved 2008-09-28. 
• Schneiderman, R.M; Philip Caulfield, Celena Fang, Elisabeth Goodridge and Vikas Bajaj (2008-09-15). "How a Market Crisis Unfolded: Some of the key events in the upheaval.". New York Times. http://www.nytimes.com/interactive/2008/09/15/business/20080915_TURMOIL_TIMELINE.html. Retrieved 2008-09-17.  (Graphic and interactive timeline.)
• Shelp, Ronald Kent (2006). Fallen Giant: The Amazing Story of Hank Greenberg and the History of AIG. Hoboken, NJ: Wiley. ISBN 047191696X. 
• For a list of counterparties receiving U.S. taxpayer dollars, see: Business Week - List of Counterparties and Payouts

External links

Wikinews has related news: Obama calls for blocking of bonuses issued at AIG insurance company

• AIG LIFE Indonesia Website
• AIG Pakistan website
• AIG Website
• AIA LIFE Korea Website
• Corporate information
• AIG UK Health Insurance
• AIG at Google Finance
• AIG at Yahoo! Finance
• AIG at New York Times.
• Reuters, Profile, American International Group Inc (New York Stock Exchange)
• 90% Tax on AIG & Others' Bonuses HR1586 passed the house 19Mar2009.

v • d • e American International Group Board of Directors Robert B. Willumstad - Stephen F. Bollenback - Marshall A. Cohen – Martin S. Feldstein – Ellen V. Futter - Richard C. Holbrooke - George L. Miles - Morris W. Offit - Michael H. Sutton - Frank G. Zarb - Stephen L. Hammerman - Fred H. Langhammer - Virginia M. Rometty - James F. Orr, III - Edmund S.W. Tse People Cornelius Vander Starr - Maurice R. Greenberg - Martin J. Sullivan - Edward M. Liddy - Joseph Cassano - Robert Benmosche - Harvey Golub Insurance AIG American General - VALIC - Chartis - ALICO - American International Assurance - People's Insurance Company of China - AIG Korea Insurance Buildings American International Building - AIA Central - American General Center - No.1 Croydon Aerospace International Lease Finance Corporation Financial Services AIG Financial Products - AIG Advisor Group - American General Finance Annual revenue: $110 billion USD · Employees: 116,000 · Stock Symbol: NYSE: AIG  · Website: AIG homepage · Headquarters:  70 Pine Street, New York, New York, United States

v • d • e Major insurance and reinsurance companies General Insurers Admiral Group · Aegon · AIG · Allianz · Allstate · Berkshire Hathaway · BNP Paribas · CNP Assurances · Fortis · Generali · IF P&C Insurance · ING · Mapfre · PICC · Swiss Life · Tokio Marine · Travelers · Zurich Financial Services · Life Insurers Aegon · AXA · Aviva · Bupa · China Life  · Hartford Life · ING  · Legal & General · Manulife  · MetLife  · New York Life  · Northwestern Mutual  · Old Mutual  · Prudential (US) · Prudential (UK) · Standard Life · State Farm · Scottish Widows  · Swiss Life · Reinsurers Hannover Re · Munich Re · Swiss Re · General Re

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