World Library  
Flag as Inappropriate
Email this Article

American International Group

Article Id: WHEBN0000521884
Reproduction Date:

Title: American International Group  
Author: World Heritage Encyclopedia
Language: English
Subject: Bob Benmosche, Subprime mortgage crisis, Yussur A.F. Abrar, People's Insurance Company of China, American International Group
Collection: 1919 Establishments in China, American Brands, American International Group, Companies Based in Manhattan, Companies Established in 1919, Companies Listed on the New York Stock Exchange, Financial Services Companies Based in New York City, Former Components of the Dow Jones Industrial Average, Insurance Companies Based in New York City, Life Insurance Companies, Multinational Companies Based in New York City, Publicly Traded Companies Based in New York City, Reinsurance Companies
Publisher: World Heritage Encyclopedia

American International Group

American International Group, Inc.
Type Public
Traded as NYSE: AIG
S&P 500 Component
Industry Insurance, Financial services
Founded Shanghai, China (1919)[1]
Founders Cornelius Vander Starr
Headquarters New York, New York, U.S.
Area served Worldwide
Key people Peter Hancock
(President & CEO)
Robert S. Miller (Chairman)[2]
Products Insurance, Property Casualty: Commercial & Consumer, Life & Retirement, Mortgage Insurance, Aircraft Leasing
Revenue Decrease US$ 68.6 billion (2013)[3]
Operating income Increase US$ 9.08 billion (2013)[3]
Net income Increase US$ 6.7 billion (2013)[3]
Total assets Decrease US$ $541.3 billion (2013)[3]
Total equity Increase US$ $100.5 billion (2013)[3]
Employees IncreaseApproximately 64,000 (2013)[4]
Website .comAIG

American International Group, Inc. – also known as AIG – is an American multinational insurance corporation with more than 88 million customers in 130 countries. AIG companies employ over 64,000 people in 90 countries. The company operates through three core businesses: AIG Property Casualty, AIG Life and Retirement and United Guaranty Corporation(UGC). AIG Property Casualty provides insurance products for commercial, institutional and individual customers. AIG Life and Retirement provides life insurance and retirement services in the United States. and UGC focus on mortgage guaranty insurance and mortgage insurance. AIG also focuses on global capital markets operations, direct investment and retained interests.

AIG’s corporate headquarters are in New York City, its British headquarters are in London, continental Europe operations are based in La Défense, Paris, and its Asian headquarters are in Hong Kong. The company serves 98% of the Fortune 500 companies, 96% of Fortune 1000, and 90% of Fortune Global 500, and insures 40% of Forbes 400 Richest Americans. AIG was ranked 40th largest company in the 2014 Fortune 500 list.[5] According to the 2014 Forbes Global 2000 list, AIG is the 42nd-largest public company in the world.[6] As of June 1, 2014, it had a market capitalization of $78.48 billion, per Google Finance.


  • History 1
    • The Early Years: 1919 to 1945 1.1
    • International and Domestic Expansion: 1946 to 1959 1.2
    • Reorganization and Specialization: 1960 to 1979 1.3
    • New Opportunities and Directions: 1980 to 1999 1.4
    • Further expansion and decline: 2000 to now 1.5
      • Growth 1.5.1
      • Accounting scandal 1.5.2
      • Expansion to the credit default insurance market 1.5.3
      • Liquidity crisis and government bailout 1.5.4
  • Corporate governance 2
    • Board of directors 2.1
  • Business 3
  • See also 4
  • References 5
  • Further reading 6
  • External links 7


North China Daily News Building on the Bund, Shanghai (elevation): the original home of what became AIG; now the AIA building.
70 Pine Street was known as the American International Building.
The American International Building on 175 Water Street, New York City.

The Early Years: 1919 to 1945

AIG traces its roots back to 1919, when American Cornelius Vander Starr (1892-1968) established a general insurance agency, American Asiatic Underwriters (AAU), in Shanghai, China.[7] Business grew rapidly, and two years later, Starr formed a life insurance operation.[8] By the late 1920s, AAU had branches throughout China and Southeast Asia, including the Philippines, Indonesia, and Malaysia.[9] In 1926, Mr. Starr opened his first office in the United States, American International Underwriters Corporation (AIU).[10] He also focused on opportunities in Latin America and, in the late 1930s, AIU entered Havana, Cuba.[11] The steady growth of the Latin American agencies proved significant as it would offset the decline in business from Asia due to the impending World War II.[7] In 1939, Mr. Starr moved his headquarters from Shanghai, China, to New York City.[12][13]

International and Domestic Expansion: 1946 to 1959

After World War II, American International Underwriters (AIU) entered Japan[7] and Germany,[14] to provide insurance for American military personnel. Throughout the late 1940s and early 1950s, AIU continued to expand in Europe, with offices opening in France, Italy,[9] and the United Kingdom.[15] In 1952, Mr. Starr began to focus on the American market by acquiring Globe & Rutgers Fire Insurance Company and its subsidiary, American Home Fire Assurance Company.[16] By the end of the decade, C.V. Starr's general and life insurance organization included an extensive network of agents and offices in over 75 countries.[16]

Reorganization and Specialization: 1960 to 1979

In 1960, C.V. Starr hired

  • Official website
  • Aig Sigorta Türkiye
  • List of AIG subsidiary companies
  • AIG at Google Finance
  • AIG at Yahoo! Finance
  • The New York TimesAIG topics at .

External links

  • Maurice R. Greenberg and Lawrence A. Cunningham, The AIG Story (2013)
  • Sjostrom, Jr., William K. "The AIG Bailout".  (2009)
  • "An Insurance Giant, Brought Down". New York Times. September 27, 2008. Archived from the original on September 30, 2008. Retrieved September 27, 2008.  (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 (September 28, 2008). "A Tally of Federal Rescues". New York Times. Archived from the original on October 1, 2008. Retrieved September 28, 2008. 
  • Schneiderman, R.M; Philip Caulfield, Celena Fang, Elisabeth Goodridge and Vikas Bajaj (September 15, 2008). "How a Market Crisis Unfolded: Some of the key events in the upheaval". The New York Times. Archived from the original on September 16, 2008. Retrieved September 17, 2008.  (Graphic and interactive timeline.)
  • For a list of counterparties receiving U.S. taxpayer dollars, see: Business Week – List of Counterparties and Payouts

Further reading

  1. ^ "AIG and China: Could A "Special Relationship" Translate into Cash?".  
  2. ^ AIG Names Peter D. Hancock President and CEO effective 1 Sept 2014
  3. ^ a b c d e "2013 Annual Report" (PDF). p. 5. Retrieved May 1, 2013. 
  4. ^ "AIG 2013 Annual Report". 
  5. ^ "Fortune 500". Retrieved June 2, 2014. 
  6. ^ "Global 2000 Leading Companies". Forbes. May 2014. Retrieved June 2, 2014. 
  7. ^ a b c Laing, Jonathan R. (July 8, 1991). "Are the Glory Years Over? – Much Slower Growth Seems in the Offing for AIG". Barron's. 
  8. ^ Tracer, Zachary (December 18, 2012). "Benmosche Exits Greenberg Jewel Linked to AIG Founding.". Bloomberg Businessweek. Retrieved February 21, 2013. 
  9. ^ a b "AIG Europe – History". Marketline. February 18, 2004. 
  10. ^ Bandler, James (October 7, 2008). "Hank's Last Stand". Fortune. Retrieved February 21, 2013. 
  11. ^ "American International Group Inc (New York Stock Exchange)". Company profile (New York:  
  12. ^ "AIG: What does this US giant do?". BBC News. September 17, 2008. Archived from the original on March 20, 2009. Retrieved March 18, 2009. 
  13. ^ "Foreign Office Files for China, 1949–1976". Part 1: Complete Files for 1949: Publisher's Note. Adam Matthew Publications. Retrieved March 18, 2009. 
  14. ^ "80 Years of Growth and Diversification; the AIG Story". Business Insurance. April 12, 1999. 
  15. ^ Collins, Stuart (May 28, 2003). "Greenberg Hails London Role". Insurance Day. 
  16. ^ a b c Ehrbar, Al (2006). Fallen Giant The Amazing Story of Hank Greenberg and the History of AIG. Hoboken, New Jersey: John Wiley & Sons, Inc. pp. 82–83 and 91.  
  17. ^ "Greenberg Joining C.V. Starr & Co. in Development Capacity". Insurance Advocate. December 17, 1960. 
  18. ^ Bowers, Barbara (August 1998). "Building a Global Platform". Best’s Review/Life-Health Edition. 
  19. ^ Hoover's Handbook of American Business (9th ed.). Austin, TX:  
  20. ^ a b c d Cunningham, Lawrence A (2013). The AIG Story. Hoboken, New Jersey: John Wiley & Sons, Inc. pp. 14–15.  
  21. ^ Barreto, Elzio (December 16, 2012). "AIG marks end of era with $6.45 billion AIA stake sale". Reuters. Retrieved March 7, 2013. 
  22. ^ Laing, Jonathan A. (July 8, 1991). "Are the Glory Years Over? – Much Slower Growth Seems in the Offing for AIG". Barron's. 
  23. ^ "AIG, SunAmerica to Merge on New Year's Day". AMBest. December 30, 1998. 
  24. ^ "AIG Closes American General Acquisition". National Underwriter Life & Health. August 30, 2001. 
  25. ^ "Tata-AIG to Kick off with IT Products". Business Line Internet Edition. February 11, 2001. 
  27. ^ De La Merced, Michael J. (March 2, 2002). "A.I.G. Sheds Stake in Blackstone". New York Times DealBook. 
  28. ^ "AIG Forks Up $126 million to SEC on PNC Deals". Insurance Journal. November 24, 2004. Archived from the original on August 29, 2008. Retrieved September 18, 2008. 
  29. ^ "MSNBC". MSNBC. Archived from the original on June 28, 2011. Retrieved July 11, 2011. 
  30. ^ Zuill, Lilla (March 3, 2009). "Reuters". Reuters. Retrieved July 11, 2011. 
  31. ^ "The". 
  32. ^ "AIG executive sentenced to 4 years in prison". The Seattle Times. Retrieved 2014-05-22. 
  33. ^ "AIG Nears Completion of Internal Review; Will Restate Results Provides Update on Internal Review and Timing". 
  34. ^ "AIG to Again Restates Previous Results". 
  35. ^ Andrews, Edmund L.; Michael J. de la Merced and Mary Williams Walsh (September 16, 2008). "Fed's $85 billion Loan Rescues Insurer". New York times. Archived from the original on September 17, 2008. Retrieved September 17, 2008. 
  36. ^ Maurice R. Greenberg and Lawrence A. Cunningham, The AIG Story (2013)
  37. ^ "AIG buys 21st Century Insurance". Los Angeles Times. September 28, 2007. 
  38. ^ "AIG rebrand US auto insurance unit 21st Century Insurance, and cut jobs". November 26, 2008. Retrieved Dec 3, 2008. 
  39. ^ "AIG renaming auto insurance division, cutting jobs". November 26, 2008. Retrieved Dec 3, 2008. 
  40. ^ "AIG Investors Seek Ouster of Chief Executive Sullivan". Bloomberg. June 11, 2008. Retrieved July 21, 2008. 
  41. ^ Zuill, Lilla (December 30, 2008). "Former AIG CEO Willumstad foregoes some stock awards". New York:  
  42. ^ Dennis, Brady (August 3, 2009). """The Washington Post, "AIG Names Robert Benmosche New President and CEO. The Washington Post. Retrieved July 11, 2011. 
  43. ^ a b Morgenson, Gretchen (September 29, 2008). "Behind Insurer's Crisis, Blind Eye to a Web of Risk". New York Times. Retrieved September 29, 2008. 
  44. ^ Ng, Serena, and Mollenkamp, Carrick “Goldman Fueled AIG’s Gambles”, Wall Street Journal, December 12, 2009
  45. ^ Pittman, Mark (September 29, 2008). "Goldman, Merrill Collect Billions After Fed's AIG Bailout Loans". Bloomberg News. Retrieved October 12, 2008. 
  46. ^ Andrews, Edmund L (September 16, 2008). "Fed's $85 billion Loan Rescues Insurer". New York times. Retrieved September 28, 2008. 
  47. ^ Kaiser, Emily (September 17, 2008). "After AIG rescue, Fed may find more at its door". Reuters. Retrieved September 17, 2008. 
  48. ^ "Federal Reserve Board, 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)". United States Federal Reserve Board of Governors. Retrieved September 16, 2008. 
  49. ^ "". July 11, 2011. Retrieved July 11, 2011. 
  50. ^ "U.S. Senate vote on Emergency Economic Stabilization Act of 2008". June 29, 2011. Retrieved July 11, 2011. 
  51. ^ "AIG Posts Loss on Writedowns Tied to AIA, Mortgage Declines". November 4, 2011. 
  52. ^ "Investment in AIG". US Department of Treasury. Retrieved February 5, 2013. 
  53. ^ Bansal, Paritosh (February 24, 2009). "AIG may rethink asset sales in tough markets". Reuters UK. Archived from the original on February 28, 2009. Retrieved March 2, 2009. 
  54. ^ Munich Re buys AIG's Hartford Steam Boiler for $742m
  55. ^ Munich Re concludes purchase of Hartford Steam Boiler
  56. ^ Lifsher, Marc (April 17, 2009). "AIG selling 21st Century Insurance to Farmers Insurance". Los Angeles Times. Retrieved February 6, 2013. 
  57. ^ AIG confirms sale of Transatlantic Re shares
  58. ^ Carew, Rick (September 7, 2009). "Li Is Back In Game With AIG Purchase". The Wall Street Journal. Retrieved July 11, 2011. 
  59. ^ Ellis, Blake (March 8, 2010). "AIG in $15.5 billion unit sale to MetLife". CNNMoney. Retrieved February 6, 2013. 
  60. ^ Son, Hugh (March 29, 2010). "AIG Completes Sale of PineBridge Investments to Pacific Century". Bloomberg. Retrieved July 11, 2011. 
  61. ^ "UPDATE: American General Finance sold to Fortress Investment Group » Evansville Courier & Press". Retrieved 2013-12-16. 
  62. ^ a b "AIG to sell Star, Edison to Prudential".  
  63. ^ Bernard, Stephen (November 1, 2010). "AIG set to repay $37 billion in bailout money". The Washington Post. Retrieved February 6, 2013. 
  64. ^ Judge Allows 'Death Bet' Case, Leslie Scism and Mark Maremont, Wall Street Journal, 2010 10 5
  65. ^ Wassener, Bettina (January 12, 2011). "A.I.G. to Sell Taiwan Unit for $2.16 Billion". The New York Times. Retrieved February 6, 2013. 
  66. ^ Buhayar, Noah (May 7, 2012). "U.S. Treasury Sells $5.8 Billion of AIG Stock". Bloomberg. Retrieved February 6, 2013. 
  67. ^ "AIG to sell $2 billion in AIA shares, repay US government". New York Post. September 6, 2012. Retrieved February 6, 2013. 
  68. ^ Tara LaCapra, Lauren (September 11, 2012). "Treasury sells big chunk of AIG stock at a profit". Reuters. Retrieved February 6, 2013. 
  69. ^ "Investment in AIG". US Department of Treasury. Retrieved February 6, 2013. 
  70. ^ "Treasury Sells Final Shares of AIG Common Stock, Positive Return on Overall AIG Commitment Reaches $22.7 Billion". Department of Treasury. Retrieved February 6, 2013. 
  71. ^ Irwin, Neil (December 31, 2012). "AIG to America: Thanks, guys!". Washington Post. Retrieved June 4, 2013. 
  72. ^ "AIG May Join Suit Over US Bailout".  
  73. ^ "AIG will not join lawsuit against US". BBC News. January 9, 2013. 
  74. ^ "AIG says will not join lawsuit against U.S. government". Reuters. Retrieved February 6, 2013. 
  75. ^ "As public fumes, AIG says will not sue US over bailout". Reuters. Retrieved February 6, 2013. 
  76. ^ Stempel, Jonathan. "AIG drops a lawsuit versus New York Fed related to bailout". Reuters. Retrieved 2013-12-16. 
  77. ^ "Board of Directors". Retrieved September 17, 2014. 
  78. ^ "History of American General Life Companies". Archived from the original on July 7, 2011. Retrieved July 11, 2011. 
  79. ^ a b "AIG 2012 Annual Report 10-K". American International Group. Retrieved October 14, 2013. 
  80. ^ Ng, Serena (June 28, 2012). "AIG Brand Revived". Wall Street Journal. Retrieved October 14, 2013. 
  81. ^ Baynes, Dan (12 October 2012). "AIG Sponsors Jersey of Rugby World Champion All Blacks Team". Bloomberg. Retrieved 27 February 2014. 


See also

On October 12, 2012, AIG announced a 5 ½ year agreement to sponsor six New Zealand-based rugby teams, including world champion All Blacks. The AIG logo and the Adidas logo, the league’s primary sponsor, will be displayed on the league’s team jerseys.[81]

Mortgage Guaranty (United Guaranty Corporation or UGC)

AIG Life and Retirement

AIG Property Casualty

AIG offers property casualty insurance, life insurance, retirement products, mortgage insurance and other financial services.[79] 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.[79][80]

In the United States, AIG is the largest underwriter of commercial and industrial insurance.[78]


As of September 1, 2014[77]

Board of directors

Corporate governance

The specific issue was whether the New York Federal Reserve transferred $18 billion in litigation claims on troubled mortgage debt to Maiden Lane II, an entity created by the Fed in 2008, and thus prevented AIG from recouping losses from insured banks. On May 7, 2013, Los Angeles U.S. District Judge, Mariana Pfaelzer, ruled that $7.3 billion of the disputed claims had, in fact, not been assigned. AIG withdrew the case "with prejudice" on May 28, 2013. Praelzer was overseeing a suit between AIG and Bank of America (BAC-US) concerning possible misrepresentations by Merrill Lynch and Countrywide as to the quality of the mortgage portfolio. In signing the order closing the case, U.S. District Judge Lewis Kaplan who also adjudicated the Maiden Lane case, American International Group Inc. et al. v. Maiden Lane II LLC, U.S. District Court, Southern District of New York, No. 13-00951 admonished the Fed saying, "On the face of it" some of its actions "perhaps are unattractive and, indeed, wrongful.”[76]

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.[71] In January 2013, AIG's board discussed joining a lawsuit against the United States government because the bailout they received was unfair to their investors.[72] The idea was rejected.[73] AIG was criticized, however, when news stories soon appeared that it was considering joining a lawsuit brought by AIG shareholders and former CEO Maurice Greenberg against the New York Federal Reserve Bank for what the plaintiffs considered unfair terms imposed on AIG by the New York Fed. The AIG board announced on January 9, 2013, that the company would not join the lawsuit, and on January 9, 2013, Bob Benmosche told CNBC’s Maria Bartiromo that it would not be “socially acceptable” for AIG to sue the government, continuing that while people may be angry, "a deal’s a deal."[74][75]

December 14, 2012. Treasury sold the last of its AIG stock in its sixth stock stale for a total of approximately $7.6 billion. In total, the Treasury Department realized a gain of more than $22 billion from the sale of AIG common stock and $0.9 billion from the sale of AIG preferred stock.[69][70]

September 14, 2012. The 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 from 53 percent. Government commitments were fully recovered, and Treasury and the FRBNY to date had received a combined positive return of approximately $15.1 billion.[68]

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.[67]

May 7, 2012. Treasury announced an offering of 188.5 million shares of AIG for a total of $5.8 billion. The sale reduced Treasury’s stake in AIG to 61 percent, from 70 percent before the transaction.[66]

Reported in January 2011, AIG sold its Taiwanese life insurance company, Nan Shan Life, to a consortium of buyers for $2.16 billion.[65]

In October 2010 the WSJ reported that a family sued AIG for alleged complicity in a 'stranger-originated life insurance' scheme, whereby AIG managers allegedly welcomed people without an insurable interest to take out life insurance policies against others. The case involved JB Carlson and Germaine Tomlinson, and was one of many similar lawsuits in the US at the time.[64]

AIG agreed in March 2010 to sell its American Life Insurance Co. (ALICO) to MetLife Inc. for $15.5 billion in cash and MetLife stock.[59] Bloomberg L.P. reported on March 29 that after almost three months of delays, AIG had completed the $500 million sale of a portion of its asset management business, branded PineBridge Investments, to the Asia-based Pacific Century Group.[60] Fortress Investment Group purchased 80% of the interest in financing company American General Finance in August 2010.[61] AIG in September 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.[62][62] On November 1, AIG announced it has raised $36.71 billion from both the sale of ALICO and its IPO of AIA. Proceeds go specifically to pay off FRB of New York loan.[63]

AIG since September 2008 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, challenged its efforts.[53] AIG closed on the sale of its Hartford Steam Boiler unit on March 31, 2009 to Munich Re for $742 million, which was announced December 22, 2008.[54][55] On April 16, 2009, AIG announced plans to sell 21st Century Insurance subsidiary to Farmers Insurance Group for $1.9 billion.[56] June 10, 2009. AIG sold down its majority ownership of reinsurer Transatlantic Re.[57] The Wall Street Journal reported on September 7, 2009 that Pacific Century Group had agreed to pay $500 million for a part of American International Group's asset management business, and that they also expected to pay an additional $200 million to AIG in carried interest and other payments linked to future performance of the business.[58]

The U.S. Department of the Treasury in December 2012 published an itemized list of the loans, stock purchases, special purpose vehicles (SPVs) and other investments engaged in with AIG, the amount AIG paid back and the positive return on the loans and investments to the government.[52] 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.

Due to the Q3 2011 net loss widening, on November 3, 2011, AIG shares plunged 49 percent year to date. The insurer's board approved a share buyback of as much as $1 billion.[51]

On March 17, 2009, AIG announced that they were paying $165 million in executive bonuses, according to news reports. Total bonuses for the financial unit could reach $450 million and bonuses for the entire company could reach $1.2 billion.[49] President Barack Obama, who voted for the AIG bailout as a Senator[50] 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 Timothy Geithner to use that leverage and pursue every legal avenue to block these bonuses and make the American taxpayers whole." Politicians on both sides of the Congressional aisle reacted with outrage to the planned bonuses. Political commentators and journalists expressed an equally bipartisan outrage.

AIG faced the most difficult financial crisis in its history when a series of events unfolded in late 2008. The insurer had sold credit protection through its London unit in the form of credit default swaps (CDSs) on collateralized debt obligations (CDOs) but they had declined in value.[43][44] 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.[43][45] As a result, AIG’s credit rating was downgraded and it was required to post additional collateral with its trading counter-parties, leading to a liquidity crisis that began on September 16, 2008 and essentially bankrupted all of AIG. The United States Federal Reserve Bank stepped in, announcing the creation of a secured credit facility of up to US$85 billion to prevent the company's collapse, enabling AIG to deliver additional collateral to its credit default swap trading partners. The credit facility was secured by the stock in AIG-owned subsidiaries in the form of warrants for a 79.9% equity stake in the company and the right to suspend dividends to previously issued common and preferred stock.[46][47][48] The AIG board accepted the terms of the Federal Reserve rescue package that same day, making it the largest government bailout of a private company in U.S. history.

Liquidity crisis and government bailout

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.[41] AIG's board of directors named Robert Benmosche CEO on August 3, 2009 to replace Mr. Liddy, who earlier in the year announced his retirement.[42]

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 called a "public spat" between the company's board and management, on the one hand, and its key stockholders, and former CEO Maurice Greenberg on the other hand.[40]

AIG purchased the remaining 39% that it did not own of online auto insurance specialist 21st Century Insurance in 2007 for $749 million.[37] With the failure of the parent company and the continuing recession in late 2008, AIG rebranded its insurance unit to 21st Century Insurance.[38][39]

Martin J. Sullivan became CEO of the company. He began his career at AIG as a clerk in its London office in 1970.[35] AIG then took on tens of billions of dollars of risk associated with mortgages. It insured tens of billions of dollars of derivatives against default, but did not purchase reinsurance to hedge that risk. Secondly, it used collateral on deposit to buy mortgage-backed securities. When losses hit the mortgage market in 2007-2008, AIG had to pay out insurance claims and also replace the losses in its collateral accounts.[36]

Expansion to the credit default insurance market

On May 1, 2005, investigations conducted by outside counsel at the request of AIG's Audit Committee and the consultation with AIG's independent auditors, PricewaterhouseCoopers LLP resulted in AIG's decision to restate its financial statements for the years ended December 31, 2003, 2002, 2001 and 2000, the quarters ended March 31, June 30 and September 30, 2004 and 2003 and the quarter ended December 31, 2003.[33] On November 9, 2005, the company was reported of delaying its third-quarter earnings report because it must restate earlier financial results to correct accounting errors.[34]

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.[29][30][31] The New York Attorney General's investigation led to a $1.6 billion fine for AIG and criminal charges for some of its executives.[32]

Accounting scandal

In November 2004, AIG reached a 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 must still cooperate with investigators continuing to probe the sale of a non-traditional insurance product.[28]

The early 2000s saw a marked period of growth as AIG acquired American General Corporation, a leading domestic life insurance and annuities provider,[24] and AIG entered new markets including India.[25] In February 2000, AIG created a strategic advisory venture team with the Blackstone Group and Kissinger Associates "to provide financial advisory services to corporations seeking high level independent strategic advice."[26] AIG was an investor in Blackstone from 1998 to March 2012, when it sold all of its shares in the company. Blackstone acted as an adviser for AIG during the 2007-2008 financial crisis.[27]


Further expansion and decline: 2000 to now

During the 1980s, AIG continued expanding its market distribution and worldwide network by offering a wide range of specialized products, including pollution liability[20] and political risk.[20] In 1984, AIG listed its shares on the New York Stock Exchange (NYSE).[21] Throughout the 1990s, AIG developed new sources of income through diverse investments, including the acquisition of International Lease Finance Corporation (ILFC), a provider of leased aircraft to the airline industry.[22] In 1992, AIG received the first foreign insurance license granted in over 40 years by the Chinese government. Within the U.S., AIG acquired Sun America Inc. a retirement savings company, in 1999.[23]

New Opportunities and Directions: 1980 to 1999

The 1970s presented many challenges for AIG as operations in the Middle East and Southeast Asia were curtailed or ceased altogether due to the changing political landscape. However, AIG continued to expand its markets by introducing specialized energy, transportation, and shipping products to serve the needs of niche industries.[20] By 1979, with a growing workforce and a worldwide network of offices, AIG offered clients superior technical and risk management skills in an increasingly competitive marketplace.[20]

[19] In 1968, Starr named Greenberg his successor. The company went public in 1969.[18]

This article was sourced from Creative Commons Attribution-ShareAlike License; additional terms may apply. World Heritage Encyclopedia content is assembled from numerous content providers, Open Access Publishing, and in compliance with The Fair Access to Science and Technology Research Act (FASTR), Wikimedia Foundation, Inc., Public Library of Science, The Encyclopedia of Life, Open Book Publishers (OBP), PubMed, U.S. National Library of Medicine, National Center for Biotechnology Information, U.S. National Library of Medicine, National Institutes of Health (NIH), U.S. Department of Health & Human Services, and, which sources content from all federal, state, local, tribal, and territorial government publication portals (.gov, .mil, .edu). Funding for and content contributors is made possible from the U.S. Congress, E-Government Act of 2002.
Crowd sourced content that is contributed to World Heritage Encyclopedia is peer reviewed and edited by our editorial staff to ensure quality scholarly research articles.
By using this site, you agree to the Terms of Use and Privacy Policy. World Heritage Encyclopedia™ is a registered trademark of the World Public Library Association, a non-profit organization.

Copyright © World Library Foundation. All rights reserved. eBooks from Project Gutenberg are sponsored by the World Library Foundation,
a 501c(4) Member's Support Non-Profit Organization, and is NOT affiliated with any governmental agency or department.