American International Group Inc.


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Case Details:

Case Code : BSTR115
Case Length : 34 Pages
Period : 1875 – 2002
Organization : American International Group Inc.
Pub Date : 2002
Teaching Note :Not Available
Countries : USA
Industry : Financial Services

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This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.

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EXCERPTS Contd...

Finance

In 2001, AIG generated revenues of $62.40 billion, an increase of 9.4% over its revenues of $57.06 billion in 2000. The company's assets increased by 15.5% to $492.98 billion in 2001, while shareholders' equity stood at $52.15 billion compared to $47.44 billion in 2000. AIG reported a return on equity (ROE) of 11.9% for the year 2001. However, excluding the losses due to the US terrorist attacks, and charges related to the acquisition and restructuring of American General, the ROE was 15.5 %(Refer Exhibits IV and V)...

Social Responsibility

Since its early years, AIG had participated actively in social welfare. In 1955, the company established the Starr Foundation in New York. The Foundation was created mainly to support education and projects in medicine and healthcare, public policy and culture. It offered scholarships to about 80 colleges, universities and secondary schools. The foundation also supported organizations that offered need-based financial aid to students attending secondary and post-secondary schools. It had a special scholarship programs for the children of AIG employees. The Foundation's support in medical and health care areas included aid for research, and for care to neglected communities. It also gave aid for meeting other human needs like literacy, housing and nutrition programs...

Corporate Governance

According to analysts, though AIG had a remarkable record of growth and profitability for more than two decades and was rated as one of the best insurance companies by many rating agencies, the company followed poor corporate governance practices. At AIG's AGM of 1999, three stockholder resolutions denouncing its corporate governance practices, were presented. The criticisms were mainly about the composition of AIG's board. They said that the board was composed largely of insiders...

Future Outlook

At the beginning of the new millenium, AIG had emerged as a global leader in the insurance and financial services industry. AIG was also a leader in asset management for individual and institutional markets in the US. The company had one of the largest retirement savings businesses in the US. After the IT boom in the late 1990s, there was a widely felt need in the IT industry for network security insurance like coverage for virus attacks, denial-of-service problems, disruption of a company's systems by hackers, and website defacements. Several IT companies opted for this type of insurance, and the e-insurance market witnessed significant growth in 2000-2001. In 2000, AIG entered the e-insurance market with the formation of AIG e-Business risk solutions...

The Global Insurance Industry

The global insurance industry was being influenced by external factors including emerging distribution channels to market insurance products, consolidation and globalization of insurance companies, rapidly developing technology and changing laws and regulations. In the late 1990s, insurance companies around the world believed that the size of the company influenced market power and helped in reaping the benefits of economies of scale in the insurance industry...

Exhibits

Exhibit I: AIG Consolidated Statements of Income
Exhibit II: AIG Subsidiaries Worldwide
Exhibit III: Basic Benefits to AIG Employees
Exhibit IV: AIG Consolidated Balance Sheets
Exhibit V: AIG Consolidated Statements of Cash Flows
Exhibit VI: E-Business Sites Accessible Through The AIG Internet Gateway
Exhibit VII: Stock Price Chart: April 1999 - July 2002

  

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