Even to this day American International Group (AIG) is one of the world's largest insurance firms. While it held the spotlight for staggering losses and government bailouts, the company's subsidiaries have steadily provided general property/casualty insurance, life insurance and retirement services, financial services, and residential mortgage guaranty insurance to commercial, institutional, and individual customers in the US and more than 130 countries around the world. In exchange for $161.3 billion in bailouts, at one point the US government held more than 90% of AIG. An exit plan of repayments and stock sales gradually shrunk that number, with the US Treasury announcing the final sale of AIG shares in late 2012.
Using cash earned from sales of subsidiaries big and small, by the end of 2011 the company had paid back the US government all but $8.4 billion. The Federal Reserve Bank of New York sold its remaining AIG mortgage bonds in November 2012, and the Treasury department announced the sale of its last holdings in the company, consisting of $7.6 billion in stock, in December 2012. In total, the company returned some $182.3 to the federal government, as well as some $22.7 billion in positive returns for taxpayers.
AIG and its subsidiaries have about 400 offices in the US, as well as 600 offices in 75 international countries in the Americas, Europe, Africa, the Middle East, and the Asia/Pacific region. About 70% of AIG's annual revenues come from sales in the domestic market.
Having crawled its way back from the edge of an abyss, AIG is leaner than before and has nice black ink on its ledgers. After selling off piles of non-core businesses and quietly disposing of some riskier operations, the company has tidied up its remaining subsidiaries into two main divisions: AIG Property Casualty (formerly Chartis) and AIG Life and Retirement (SunAmerica Financial).
The AIG Property Casualty business accounts for about 60% of annual revenues and offers products including workers' compensation, home, auto, travel, accident, and specialty insurance policies. The AIG Property Casualty division serves commercial and individual clients in the US and around the world and has continued to be a solid source of growth for AIG, even during years of financial strife. The smaller AIG Life and Retirement division includes AIG's domestic life insurance and retirement services businesses, including VALIC and American General Life.
Other operations include the AIG Benefit Solutions unit, which was formed in early 2012 when AIG collected all of the workplace benefits products from AIG Property Casualty and American General Life and placed them into a new division. The business operates through two segments: U.S. Employee Benefits (including employer-funded and voluntary products) and U.S. Affinity Benefits (to serve affinity groups).
AIG's United Guaranty Corporation was one of the few mortgage guaranty insurance businesses to survive the subprime mortgage meltdown. With tighter guidelines, the business is now polished up and faces fewer competitors in its domestic and international markets.
Sales and Marketing
AIG Property Casualty and AIG Life and Retirement distribute their products every way possible -- from specialty brokers, independent agents, financial advisors, banks, direct to the consumer, and through affinity groups. AIG maintains direct sales groups consisting of about 4,000 representatives affiliated with its VALIC and American General subsidiaries. It also operates the AIG Direct distribution group, and it has relationships with 6,000 independent financial advisors, 69,000 financial institution agents, and 1,700 independent marketing organizations (with 150,000 licensed independent agents). It also has access to 120,000 broker dealers, as well as other benefit administrators.
AIG reported a 10% increase in revenues in 2012 to some $65.6 billion, which was attributed to increased earnings from policy fees, net investment income, and net realized capital gains, despite a decline in insurance premium income. The earnings marked the first year of sales growth for AIG following declining results in 2010 and 2011. After reporting staggering losses in 2008 and 2009, AIG has successfully reported profits from 2010 to 2012. Net income in 2012 declined 80%, however, to some $3.4 billion due to weather event-related losses, litigation expenses, and credit facility charges.
As it wraps up reorganization efforts and sheds its government ownership, AIG is beginning to slowly move towards growth through organic measures, including the launch of new product offerings and distribution channels in its core operating segments. The company's primary goals for the Life and Retirement segment include growth of assets under management, increasing life insurance in-force, and enhancing return on equity by simplifying the legal entity structure and improving operational efficiencies. Within the AIG Property Casualty division, goals include shifting the business mix to high-value lines, balancing risk to improve loss ratios, enhancing claims and analysis tools, and controlling operational expenses.
The company has divested nearly all of its non-insurance operations. AIG formed a new subsidiary, ILFC Holdings, through which it planned to conduct an IPO of the last major non-insurance holding, aircraft leasing business International Lease Finance Corporation (ILFC). However, in 2012 it instead agreed to sell a 90% stake in the ILFC operations to a private Chinese investment group for some $5.3 billion. In 2010 Australia's Macquarie Group paid $1.9 billion for some 60 aircraft leaving over 1,000 in the company's portfolio.
AIG is winding down the operations of its AIG Financial Products subsidiary, the unit whose astonishing losses brought the company to its knees. The unit has quit writing new business and has sold several key investments. AIG has also sold off all but 20% of Springleaf Finance (formerly known as American General Finance) -- the subprime lending unit whose losses amounted to a boat anchor on the company's recovery.
AIG has also sold all of its international life insurance operations. Historically, the company's life insurance operations in Asia were key assets, and their piecemeal disposal ended a long story. After selling American Life Insurance Company (ALICO) to MetLife in 2010 and taking its China-based AIA Group Ltd. public in 2010, the company closed the sale of its Taiwan unit Nan Shan Life in 2011. The Ruen Chen investment consortium paid $2.16 billion in cash for what is Taiwan's third-largest insurer. Earlier in 2011 it sold its Japanese life insurance companies, AIG Star Life Insurance and AIG Edison Life Insurance, to Prudential Financial. The sale of the two units brought in some $4.8 billion which went to repay its debts. AIG announced plans to sell off the last of its AIA Group shares (representing a 14% stake) for up to $6.5 billion in late 2012.
During its darkest days when the AIG name still carried a strong scent of instability, the company had rebranded all of its insurance operations under the Chartis and SunAmerica names; however, after its outlook stabilized, in late 2012 AIG brought the Chartis and the SunAmerica umbrella organizations back into the AIG-branded fold.