AIG companies

American International Group Inc.
AIG: NYSE; Financials/Insurance - Multiline

AIG companies serve commercial, institutional and individual customers through the most extensive worldwide property-casualty and life insurance networks of any insurer. In addition, AIG companies are leading providers of retirement services, financial services and asset management in the United States.


American International Group was the largest insurance company in the United States before it suddenly collapsed in September 2008 under the weight of bad bets it made insuring mortgage-backed securities. The company was bailed out by the Federal Reserve, but even after that $85 billion infusion, losses continued to mount and in November the Treasury announced a new rescue package that brought the total cost to $150 billion.

On March 1, 2009, the federal government agreed to provide an additional $30 billion to A.I.G. and loosen the terms of its huge loan to the insurer, even as the insurance giant reported a $61.7 billion loss, the biggest quarterly loss in history.

The intervention would be the fourth time the United States has had to help the giant insurer avert bankruptcy. The government already owns nearly 80 percent of the A.I.G.'s holding company as a result of earlier interventions, which included a $60 billion loan, a $40 billion purchase of preferred shares and $50 billion to soak up the company’s toxic assets.

Much of the company, an assortment of businesses that run the gamut from aircraft leasing to life insurance for Indians to retirement plans for elementary schoolteachers, remained profitable. But that could not offset losses, primarily from one London based unit, that reached $25 billion for the third quarter of 2008. Given A.I.G.'s size and the complexity of its deals, federal officials decided that a bailout was preferable to the havoc in international markets that would likely follow bankruptcy.

The company's complex structure and aggressive approach reflects the determination of the man who built A.I.G., Maurice R. Greenberg, to create a global empire operating in complementary businesses. Not even the company’s annual reports to shareholders or its regulatory filings offer a chart of its complex corporate structure.

Though its name is American, the company is rooted in Asia. According to company lore, its founder, Cornelius Vander Starr, a World War I veteran, traveled to Asia with only 300 Japanese yen (less than $3 today) in his pocket and started the firm in Shanghai in 1919. With a partner, he sold marine and fire insurance and expanded rapidly throughout the Philippines, Indonesia and China by hiring locals as agents and managers, a business strategy A.I.G. uses today. Nearly half of A.I.G.’s 116,000 direct employees — about 62,000 people — are in Asia.

Mr. Greenberg, who joined A.I.G. in 1960, focused on making giant commercial deals, increasing the company's share of the life insurance business and writing what were, decades ago, unusual types of coverage, like insurance against kidnapping and protection from suits against a company’s officers and directors.

A.I.G.’s problems rest in its London-based financial products unit, part of its financial services group, which is exposed to securities tied to the value of home loans — the same kind of securities that forced Lehman Brothers into bankruptcy proceedings the day before A.I.G. was bailed out. The financial products group sold credit-default swaps, complex financial contracts allowing buyers to insure securities backed by mortgages. Many of the buyers were European banks. As home values have fallen, the value of the underlying mortgages has declined, and A.I.G. has had to reduce the value of the securities on its books.

The company's distress followed an unusual period of turmoil at the company. Early in 2005, questions arose about financial transactions that had the effect of making the company’s earnings look better. Mr. Greenberg resigned as chief executive after regulators sent a wave of subpoenas to A.I.G.; eventually it restated earnings covering a five-year period. His successor's efforts to restore confidence did not meet with investor approval and he was replaced after the company announced that it lost $7.8 billion in 2008's first quarter.