American International Group facts for kids
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AIG headquarters, 1271 Avenue of the Americas, New York
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| Public | |
| Traded as |
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| Industry | Financial services |
| Founded | December 19, 1919 in Shanghai, China |
| Founder | Cornelius Vander Starr |
| Headquarters | 1271 Avenue of the Americas,
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U.S.
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Area served
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Worldwide |
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Key people
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Peter Zaffino (chairman and CEO) |
| Products |
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| Revenue |  US$46.80 billion (2023) |
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Operating income
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US$3.858 billion (2023) |
| US$3.614 billion (2023) |
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| AUM |  US$365 billion (March 31, 2023) |
| Total assets | US$539.3 billion (2023) |
| Total equity | US$45.35 billion (2023) |
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Number of employees
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c. 25,200 (2023) |
| Subsidiaries | TATA AIG |
American International Group, Inc. (AIG) is a large American company that provides financial services and insurance around the world. It operates in more than 80 countries. As of 2023, AIG had about 25,200 employees.
AIG helps people and businesses with different types of insurance. Its main services include general insurance (like for businesses or personal belongings), life insurance, and retirement plans. AIG also has a special technology-focused business.
AIG is a major sponsor of the AIG Women's Open golf tournament. The company has also been recognized for its efforts in diversity, being named among the Top 50 Companies for Diversity for several years.
AIG's main office is in New York City, and it has many other offices globally. Many of the world's largest companies use AIG's services.
During a big financial crisis in 2008, the United States government helped AIG with a large amount of money to prevent its collapse. This was because AIG was so big that its failure could have caused major problems for many other companies. AIG fully repaid the government in 2012.
Contents
- History
- Business
- Sponsorships
- Subsidiaries
- Bailout Litigation
- Corporate Governance
- See Also
History
1919–1945: Early Years
AIG started on December 19, 1919. An American named Cornelius Vander Starr (1892–1968) opened an insurance agency in Shanghai, China. He called it American Asiatic Underwriters (AAU).
His business quickly grew. Two years later, Starr added life insurance services. By the late 1920s, AAU had offices across China and Southeast Asia, including the Philippines, Indonesia, and Malaysia.
In 1926, Starr opened his first office in the United States, called American International Underwriters Corporation (AIU). He also looked for opportunities in Latin America. In the late 1930s, AIU opened an office in Havana, Cuba. The growth in Latin America became very important, helping the company when business in Asia slowed down due to World War II. In 1939, Starr moved his main office from Shanghai, China, to New York City.
1945–1959: Growing Internationally and in the U.S.
After World War II, American International Underwriters (AIU) expanded into Japan and Germany. They offered insurance to American military personnel there. Throughout the late 1940s and early 1950s, AIU continued to grow in Europe, opening offices in France, Italy, and the United Kingdom.
In 1952, Starr started focusing more on the American market. He bought two insurance companies, Globe & Rutgers Fire Insurance Company and its subsidiary, American Home Fire Assurance Company. By the end of the 1950s, C.V. Starr's insurance group had a large network of agents and offices in over 75 countries.
1959–1979: New Structure and Focus
In 1960, C.V. Starr hired Hank Greenberg to help grow the company's international accident and health insurance business. Two years later, Greenberg reorganized one of C.V. Starr's U.S. companies, making it very successful.
Greenberg changed how the company sold insurance. He focused on using independent brokers instead of agents, which helped save on salaries. This allowed AIU to set insurance prices based on how much profit they expected, even if sales of some products were low for a while.
In 1967, American International Group, Inc. (AIG) was created. It became the main company for most of C.V. Starr's insurance businesses. In 1968, Starr chose Greenberg to take over from him. The company became publicly owned in 1969, meaning its shares could be bought and sold on the stock market.
The 1970s brought challenges for AIG. Its operations in the Middle East and Southeast Asia had to be reduced or stopped because of political changes. However, AIG kept growing by offering special insurance products for industries like energy, transportation, and shipping.
1979–2000: New Opportunities
During the 1980s, AIG continued to expand its reach and global network. It offered many new specialized products, including insurance for pollution risks. In 1984, AIG listed its shares on the New York Stock Exchange (NYSE).
Throughout the 1990s, AIG found new ways to make money through different investments. This included buying International Lease Finance Corporation (ILFC), a company that leased aircraft to airlines. In 1992, AIG received the first foreign insurance license from the Chinese government in over 40 years. In the U.S., AIG bought SunAmerica Inc., a retirement savings company, in 1999.
2000–2012: Growth and Challenges
Growth
The early 2000s were a time of significant growth for AIG. The company acquired American General Corporation, a major provider of life insurance and retirement plans in the U.S. AIG also entered new markets, including India. In 2000, AIG teamed up with the Blackstone Group and Kissinger Associates to offer financial advice to other companies. AIG was an investor in Blackstone for many years.
In March 2003, American General merged with Old Line Life Insurance Company. AIG also made big investments in Russia in the early 2000s as that country's economy recovered.
In 2004, AIG reached an agreement with the U.S. Securities and Exchange Commission and the Justice Department. This settled some regulatory issues, and the company agreed to keep working with investigators.
Challenges and Government Help
Martin J. Sullivan became CEO in 2005. AIG then took on a lot of financial risk related to mortgages. The company insured many financial products against default but did not fully protect itself from these risks. When the housing market faced problems in 2007–2008, AIG had to pay out many insurance claims.
In 2007, AIG bought the rest of an online car insurance company called 21st Century Insurance. Later, during the financial crisis, AIG changed the name of this unit to 21st Century Insurance.
In 2008, some major shareholders wanted CEO Martin Sullivan to leave. He resigned on June 15, 2008, and Robert B. Willumstad took over. The U.S. government later asked Willumstad to step down, and Ed Liddy became CEO on September 17, 2008. Bob Benmosche replaced Liddy in August 2009.
2008 Financial Crisis and Government Bailout
In late 2008, the federal government provided AIG with a large amount of money, about $180 billion. The government took a controlling ownership stake in AIG. This was done because many believed that if AIG failed, it would cause serious problems for many other major financial companies and the entire global financial system.
A government report later explained that AIG got into trouble because it had sold a lot of insurance against defaults on certain financial products without setting aside enough money or protecting itself from the risks. This was seen as a big failure in how the company managed its risks.
To show how dangerous an AIG collapse would be, a news article in September 2008 said that AIG was much larger and more complex than other failing companies. Its assets flooding the market all at once would likely cause chaos worldwide.
AIG had sold protection against defaults on mortgage-related securities. By 2008, the value of these securities had dropped. AIG's Financial Products division had insured hundreds of billions of dollars worth of these securities. As a result, AIG's credit rating was lowered, and it had to provide more money to its trading partners. This led to a severe cash shortage on September 16, 2008, which almost bankrupted AIG.
The New York Federal Reserve Bank (led by Timothy Geithner) stepped in, offering up to $85 billion to prevent the company's collapse. This allowed AIG to give more money to its trading partners. AIG's board accepted this rescue package, making it the largest government bailout of a private company in U.S. history at that time.
In March 2009, AIG announced it would pay its executives large bonuses, which caused public concern, especially since the company had just received government help. Many politicians and people were upset by this.
AIG began selling some of its assets to repay the government loans. In December 2009, AIG created two international life insurance companies, American International Assurance Company, Limited (AIA) and American Life Insurance Company (ALICO). These were transferred to the Federal Reserve Bank of New York, to help reduce AIG's debt by $25 billion. AIG sold its Hartford Steam Boiler unit on March 31, 2009, to Munich Re for $742 million. On April 16, 2009, AIG announced plans to sell its 21st Century Insurance subsidiary to Farmers Insurance Group for $1.9 billion. In June 2009 AIG sold its majority ownership of reinsurer Transatlantic Re.
AIG then sold its American Life Insurance Co. (ALICO) to MetLife Inc. for $15.5 billion in cash and MetLife stock in March 2010. On March 29, 2010, AIG completed the $500 million sale of a portion of its asset management business, branded PineBridge Investments, to the Asia-based Pacific Century Group. Fortress Investment Group purchased 80% of the interest in financing company American General Finance in August 2010. In September 2010 AIG sold AIG Starr and AIG Edison, two of its Japan-based companies, to Prudential Financial for $4.2 billion in cash and $600 million in assumption of third party AIG debt by Prudential. On November 1, 2010, AIG raised $36.71 billion from both the sale of ALICO and its IPO of AIA. Proceeds went to repay some of the aid it received from the government during the financial crisis.
AIG sold its Taiwanese life insurance company Nan Shan Life to a group of buyers for $2.16 billion in January 2011. Despite some financial ups and downs, AIG continued to work towards full repayment. Nine years after the initial bailout, in 2017, the U.S. Financial Stability Oversight Council determined that AIG was no longer considered a "too-big-to-fail" institution.
2012–2016: Modern Era
The United States Department of the Treasury announced an offering of 188.5 million shares of AIG for a total of $5.8 billion on May 7, 2012. The sale reduced Treasury's stake in AIG to 61 percent. Four months later, on September 6, 2012, AIG sold $2 billion of its investment in AIA to repay government loans. The board also approved a $5 billion stock repurchase of government-owned shares in AIA. The next week, on September 14, 2012, the Department of Treasury completed its fifth sale of AIG common stock, with proceeds of approximately $20.7 billion, reducing the Treasury's ownership stake in AIG to approximately 15.9 percent. Government commitments were fully recovered, and Treasury and the FRBNY had received a combined positive return of approximately $15.1 billion.
On October 12, 2012, AIG announced a five and a half year agreement to sponsor six New Zealand-based rugby teams, including the world champion All Blacks. The AIG logo and the Adidas logo were displayed on the team jerseys.
The U.S. Department of the Treasury in December 2012 published a list of the loans, stock purchases, and other investments made with AIG. The Treasury said that it and the Federal Reserve Bank of New York provided a total $182.3 billion to AIG, which paid back a total $205 billion, for a total positive return, or profit, to the government of $22.7 billion. In addition, AIG sold off a number of its own assets to raise money to pay back the government. On December 14, 2012, the Treasury Department sold the last of its AIG stock for a total of approximately $7.6 billion. In total, the Treasury Department gained more than $22 billion from the sale of AIG common stock and $0.9 billion from the sale of AIG preferred stock. The same month, Robert Benmosche announced that he would be stepping down from his position as president and CEO due to his advancing lung cancer.
AIG began an advertising campaign on January 1, 2013, called "Thank You America," in which several company employees, including AIG President and CEO Robert Benmosche, talked directly to the camera and offered their thanks for the government assistance. Peter Hancock succeeded Benmosche as president and CEO of AIG in September 2014. While Benmosche stayed on in an advisory role, he died in February the following year.
In June 2015, Taiwan's Nan Shan Life Insurance acquired a stake in AIG's subsidiary in Taiwan for a fee of $158 million. Later that year, activist investor Carl Icahn called for a breakup of AIG, describing the company as "too big to succeed." AIG announced plans for an initial public offering of 19.9 percent of United Guaranty Corp., a provider of mortgage insurance for lenders in January 2016. Later that year, Icahn won a seat on the board of directors and continued to pressure the company to split up its major divisions. AIG also began a joint venture with Hamilton Insurance Group and Two Sigma Investments to serve the insurance needs of small- to medium-sized businesses. Industry veteran Brian Duperreault became the chairman of the new entity. In August 2016, AIG sold off United Guaranty, its mortgage-guarantee unit, to Arch Capital Group, a Bermuda-based insurer, for $3.4 billion.
2017: New Leadership and Focus
Brian Duperreault was appointed CEO of AIG on May 15, 2017. Duperreault, who previously worked at AIG from 1973 until 1994, was hired as CEO from Hamilton Insurance Group following Hancock's announcement in March 2017 that he would step down as AIG CEO after a period of disappointing financial results. Due to previous calls in 2015 and 2016 to shrink or break up AIG, Duperreault announced his intention to grow AIG and maintain its multiline structure as a provider of life and retirement solutions and non-life insurance, outlining a strategy to focus on technology, "underwriting discipline," and diversification.
2017 through early 2019 saw AIG hire a number of new upper level executives. In 2017, Duperreault named Peter Zaffino as AIG COO, later also naming him CEO of AIG's General Insurance business. Zaffino succeeded Duperreault as president of AIG in January 2020, with Duperreault remaining AIG's CEO. The company announced plans in 2017 to reorganize its Commercial and Consumer segments into General Insurance and Life & Retirement, respectively. In September 2017, the Financial Stability Oversight Council determined that AIG was no longer considered a nonbank systemically important financial institution (SIFI). Duperreault commented in response that the development reflected "the progress made since 2008 to de-risk the company."
2018–2023: Acquisitions and Changes
AIG made a number of acquisitions in 2018. That July, AIG acquired Validus Holdings Ltd., a provider of reinsurance based in Bermuda. The company was also a Lloyd's of London syndicate, involved in insurance-linked securities, a specialist in US small commercial excess and surplus underwriting, and a provider of crop insurance. The deal "brought in fresh underwriting talent," particularly in property risk and catastrophe risk. Also in 2018 AIG acquired Ellipse, a UK life insurance business, from Munich Re. In 2018, AIG established Fortitude Re to hold most of its run-off portfolios and late in 2018 sold a minority stake to The Carlyle Group. In November 2019, a Carlyle-managed fund and T&D Holdings acquired a majority interest in Fortitude Re, leaving AIG with a 3.5% stake.
Duperreault and Zaffino set out a turnaround strategy for the General Insurance business in 2017 and began execution. In 2019, Duperreault stated that the new executive team had restructured the business, implemented new risk and underwriting guidelines, and "overhauled its reinsurance buying strategy."
In 2019, Duperreault and Zaffino announced "AIG 200", a multi-year program to improve operations by shedding legacy processes and excess manual interventions, modernizing and digitizing workflows, and unifying operations. Also during that month, AIG reported its second consecutive quarter of underwriting profits, and AIG's Life and Retirement business, led by CEO Kevin Hogan, delivered "solid growth" and returns despite a volatile credit and equity market. In January 2020, AIG announced it was ending its decade-long sponsorship of the All Blacks in 2021.
On March 1, 2021, Peter Zaffino succeeded Brian Duperreault as AIG's CEO, with Duperreault becoming executive chairman of the board. Then, in January 2022, Zaffino also became chairman of the AIG board.
As part of AIG's 2020 plan to form an independent company of its life and retirement insurance business with a 2022 IPO, the company announced, in July 2021, that Blackstone Group would acquire 9.9% of the new unit for $2.2 billion cash. Blackstone and AIG also entered a long-term asset management agreement for about one quarter of AIG's life and retirement portfolio, set to increase in subsequent years. After the spin-off, Corebridge Financial became an independent entity, raising $1.68 billion in the largest U.S. IPO of 2022.
In February 2023, AIG and Stone Point Capital entered into an agreement to establish an independent managing general agency and relocate AIG's current private client group to the independent new company, Private Client Select Insurance Services (PCS). That May, AIG agreed to sell subsidiary Crop Risk Services to American Financial Group for $240 million, as well as Validus Re, including AlphaCat and the Talbot Treaty reinsurance business, to RenaissanceRe for $2.985 billion, in cash and RenaissanceRe common shares.
2024
In March 2024, British regulators cleared the sale of the UK arm of AIG Life Ltd to British insurer Aviva for £460 million.
Business
In Australia and China, AIG is identified as a large financial institution and provider of financial services including credit security mechanisms. In the United States, AIG is the largest underwriter of commercial and industrial insurance.
AIG offers property casualty insurance, life insurance, retirement products, mortgage insurance and other financial services. In the third quarter of 2012, the global property-and-casualty insurance business, Chartis, was renamed AIG Property Casualty. SunAmerica, life-insurance and retirement-services division, was renamed AIG Life and Retirement; other existing brands continue to be used in certain geographies and market segments.
Sponsorships
AIG was the shirt sponsor of the English football club Manchester United F.C. between 2006 and 2010. AIG was the first American shirt sponsor of the club and AIG shirts were worn for one of the most concentrated periods of success in the club's history, coinciding with Sir Alex Ferguson's third great United team, which won three Premier League titles, as well as the Champions League, in the space of four seasons.
In 2019, AIG signed a five-year contract to be the title sponsor of Women's British Open, its first deal in golf. In 2020, the contract was extended to 2025 and the championship was rebranded as the AIG Women's Open, with the largest major women's golf prize fund in 2021, totaling $US5.8 million. The AIG Women's Open set a new benchmark in 2022 of $7.3 million for women's major championship golf prize payouts, increasing the tournament's purse 125% since 2018. In 2023, AIG announced it will continue as the title sponsor of the event through 2030, along with another increase in the total purse to $9 million.
Subsidiaries
- AIG Europe S.A.
- American General Life Insurance Company
- American Home Assurance Company
- Lexington Insurance Company
- National Union Fire Insurance Company of Pittsburgh, PA
- The United States Life Insurance Company in the City of New York
- The Variable Annuity Life Insurance Company (VALIC)
- American International Group UK Ltd.
- AIG General Insurance Co. Ltd.
- Validus Reinsurance, Ltd.
Bailout Litigation
- Starr International Co v U.S. Federal Circuit Court of Appeals
Hank Greenberg, a former CEO, sued the U.S. Government in 2011, claiming the government's actions during the bailout were illegal. AIG itself chose not to join this lawsuit. After many days of testimony, a judge ruled that the Federal Reserve's payment to AIG was an illegal action because the Federal Reserve Act did not allow the New York Fed to take ownership of a company by owning its stock. However, the judge did not award money to Greenberg, saying that if the government had done nothing, the shareholders would have lost everything anyway. Both Greenberg and the U.S. Government appealed this decision. The Court of Appeals later ruled that Greenberg did not have the legal right to challenge the bailout because that right belonged to AIG, which had decided not to sue.
- AIG Inc. et al. v. Maiden Lane II LLC
AIG filed a lawsuit against the Federal Reserve Bank of New York in January 2013. AIG wanted to keep its right to sue Bank of America and other companies that had sold bad mortgage debt. The issue was whether the Federal Reserve Bank of New York had transferred $18 billion in legal claims related to troubled mortgage debt through special entities it created in 2008. AIG argued that this prevented them from getting back money from insured banks. AIG later withdrew this case "without prejudice" on May 28, 2013.
- AIG Inc. v. Bank of America Corporation LLC
On May 7, 2013, Los Angeles U.S. District Judge, Mariana Pfaelzer, ruled in a case between AIG and Bank of America concerning possible misrepresentations by Merrill Lynch and Countrywide as to the quality of the mortgage portfolio. The two parties settled in July 2014, with Bank of America paying out $650 million to AIG, who in turn dismissed their litigation.
Corporate Governance
Board of Directors
In July 2023, the AIG board includes:
- Paola Bergamaschi – former executive at State Street, Credit Suisse and Goldman Sachs
- James Cole Jr. – chairman and CEO, The Jasco Group
- John Rice – former vice chairman of GE, former president and CEO of the GE Global Growth Organization
- W. Don Cornwell – former chairman and CEO, Granite Broadcasting Corporation
- Linda A. Mills – former vice president of operations, Northrop Grumman Corporation
- Diana M. Murphy – managing director, Rocksolid Holdings; former president, USGA
- Peter R. Porrino – former executive vice president and CFO, XL Group Ltd
- Therese M. Vaughn – former CEO, the National Association of Insurance Commissioners
- Vanessa A. Wittman – former CFO, Glossier, Dropbox, Marsh McLennan
- Peter Zaffino – chairman and CEO, AIG
See Also
In Spanish: American International Group para niños
- Bailout
- Late-2000s financial crisis
- List of United States insurance companies
