American International Group, Inc. (AIG) is an American multinational finance and insurance corporation with operations in more than 200 countries and jurisdictions. As of 2023, AIG employed 25,200 people. The company primarily provides commercial and personal insurance products, including property and casualty insurance, liability coverage, accident and health insurance, and specialty insurance products. The company also provides risk management, multinational, and related insurance services to businesses and individuals. AIG is the title sponsor of the AIG Women's Open golf tournament. In 2023, for the sixth consecutive year, DiversityInc named AIG among the Top 50 Companies for Diversity list.
AIG has offices around the world, with corporate headquarters in New York City. It serves 87% of the Fortune Global 500 and 83% of the Forbes 2000. AIG was ranked 60th on the 2018 Fortune 500 list. According to the 2016 Forbes Global 2000 list, AIG was the 87th-largest public company in the world. On December 31, 2017, AIG had US$65.2 billion (about $ in ) in shareholder equity.
During the 2008 financial crisis, the Federal Reserve bailed out the company for $180 billion and assumed a controlling ownership stake. The Financial Crisis Inquiry Commission attributed AIG's failure to the mass sales of unhedged insurance. AIG repaid $205 billion (about $ in ) to the United States government in 2012.
History
1919–1945: early years
AIG was founded December 19, 1919 when American Cornelius Vander Starr (1892–1968) established a general insurance agency, American Asiatic Underwriters (AAU), in Shanghai, China. Business grew rapidly, and two years later, Starr formed a life insurance operation. By the late 1920s, AAU had branches throughout China and Southeast Asia, including the Philippines, Dutch East Indies, and Malaya. In 1926, Starr opened his first office in the United States, American International Underwriters Corporation (AIU). He also focused on opportunities in Latin America and, in the late 1930s, AIU entered Havana, Cuba. 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. In 1939, Starr moved his headquarters from Shanghai to New York City.
1945–1959: international and domestic expansion
After World War II, American International Underwriters (AIU) entered Japan and Germany, 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, and the United Kingdom. In 1952, Starr began to focus on the American market by acquiring Globe & Rutgers Fire Insurance Company and its subsidiary, American Home Fire Assurance Company. 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.
1959–1979: reorganization and specialization
In 1960, C.V. Starr hired Hank Greenberg to develop an international accident and health business. Two years later, Greenberg reorganized one of C.V. Starr's U.S. holdings into a successful multiple line carrier. Greenberg focused on selling insurance through independent brokers rather than agents to eliminate agent salaries. Using brokers, AIU 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 1967, American International Group, Inc. (AIG) was incorporated as a unifying umbrella organization for most of C.V. Starr's general and life insurance businesses. In 1968, Starr named Greenberg his successor. The company went public in 1969.
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.
1979–2000: new opportunities and directions
During the 1980s, AIG continued expanding its market distribution and worldwide network by offering a wide range of specialized products, including pollution liability and political risk. AIG was still characterized as a holding company in the financial press. There continued to be an ongoing trend within the industry for insurers to offer coverage through different but interrelated groups, something that could be especially beneficial when it came to consolidating and managing effective insurance underwriting practices, which were the underpinning of any successful insurance business. In 1983, a spokesman for AIG criticized other companies for "sloppy underwriting", saying those companies did not fully comprehend the policies they were offering and often were mostly interested in writing policies quickly to bring in premiums in order to fund the investment side of their business, without regard for the risks being taken. In 1984, AIG listed its shares on the New York Stock Exchange (NYSE).
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. In 1992, AIG received the first foreign insurance license granted in over 40 years by the Chinese government. Within the U.S., AIG acquired SunAmerica Inc. a retirement savings company managed by Eli Broad, in 1999.
2000–2012: further expansion and decline
Growth
The early 2000s saw a marked period of growth as AIG acquired American General Corporation, a leading domestic life insurance and annuities provider, and AIG entered new markets including India. 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". 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 2008 financial crisis.
In March 2003 American General merged with Old Line Life Insurance Company.
In the early 2000s, AIG made significant investments in Russia as the country recovered from the 1998 Russian financial crisis. In July 2003, Maurice Greenberg met with Putin to discuss AIG's investments and improving U.S.-Russia economic ties, in anticipation of Putin's meeting with U.S. President George W. Bush later that year."
In November 2004, AIG reached a $126 million (~$ in ) settlement with the U.S. Securities and Exchange Commission and the Justice Department partly resolving a number of regulatory matters, and the company needed to continue to cooperate with investigators continuing to probe the sale of a non-traditional insurance product.
Accounting scandal
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. The New York Attorney General's investigation led to a $1.6 billion fine for AIG and criminal charges for some of its executives.
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. On November 9, 2005, the company was said to have delayed its third-quarter earnings report because it had to restate earlier financial results, to correct accounting errors.
Expansion to the credit default insurance market
Martin J. Sullivan became CEO of the company in 2005. He began his career at AIG as a clerk in its London office in 1970. 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.Maurice R. Greenberg and Lawrence A. Cunningham, The AIG Story (2013)
AIG purchased the remaining 39% that it did not own of online auto insurance specialist 21st Century Insurance in 2007 for $749 million. With the failure of the parent company and the continuing recession in late 2008, AIG rebranded its insurance unit to 21st Century Insurance.
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.
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 Ed Liddy on September 17, 2008. AIG's board of directors named Bob Benmosche CEO on August 3, 2009, to replace Liddy, who earlier in the year announced his retirement.
2008 liquidity crisis and government bailout
During the 2008 financial crisis, the United States federal government bailed out AIG for $180 billion, and technically assumed control, because many stated a belief that its failure would endanger the financial integrity of other major firms that were its trading partners--Goldman Sachs, Morgan Stanley, Bank of America and Merrill Lynch, as well as dozens of European banks.On The Brink, Henry M. Paulson, Jr., 2010, p. 233,"Tuesday, September 16, 2008 . . . Peer Steinbrück, the German finance minister, called to say that it was unthinkable AIG could go down. Christine Lagarde, the French finance minister, echoed his view: everyone was exposed to AIG, and its failure would be catastrophic." In January 2011, the Financial Crisis Inquiry Commission issued one of many critical governmental reports, deciding that AIG failed and was rescued by the government primarily because its enormous sales of credit default swaps were made without putting up the initial collateral, setting aside capital reserves, or hedging its exposure, which one analyst considered a profound failure in corporate governance, particularly its risk management practices. Other analysts believed AIG's failure was possible because of the sweeping deregulation of over-the-counter (OTC) derivatives, including credit default swaps, which effectively eliminated federal and state regulation of these products, including capital and margin requirements that would have lessened the likelihood of AIG's failure.
Illustrating the danger of an AIG bankruptcy, a September 17, 2008, CNN Money article stated, "But in AIG's case, the situation is even more serious. The company is much larger and complex than Lehman Brothers and its assets hitting the market all at once would likely cause worldwide chaos and send values plummeting. Experts question whether there are even enough qualified buyers out there to digest the company and its subsidiaries."Why the Fed pulled the trigger on AIG: What did the government get for its $85 billion? Time to try to unwind a company with $1 trillion in assets. CNN Money, Tami Luhby, Sept. 17, 2008.