American International Group Inc. - Stocks

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AIG- American International Group

American International Group also popularly called AIG is one of the world’s leading insurance company that is headquartered in New York, USA. AIG offers a wide range of insurance services such as life insurance, mortgage insurance, property-casualty, retirement, asset management, and aircraft leasing.

AIG provides its diversified services to individuals along with retail, consumer, and institutional customers in more than 80 countries of the world. The word ‘International’ in AIG means the company offers global insurance services to prospective clients and customers. AIG has three core business functions that include General Insurance, Life Insurance, and Retirement Products, and a separate unit ‘Blackboard’ that focuses on using technology.

AIG is streamlining its business operations to allow the company to work more closely with clients and customers, provide value proposition, and ensure transparency. The company also put up the statement stating, ‘We are becoming leaner, more focused, and more profitable’ in 2018 on its official website. AIG is the leading underwriter firm of many commercial and industrial companies. In fact, AIG is a partner of 87% of companies in the Fortune Global 500 and around 83% of companies from the Fortune 2000.

AIG is operational in more than 80 countries, and it has over 56,400 employees. AIG has offices in 29 leading economies of the world in places such as China, Japan, India, all across Europe, Australia, New Zealand, South Korea, in the Middle East, and also in South Africa, Egypt, Uganda, and Kenya.

History of AIG

Cornelius Vander Starr founded AIG in 1919, and the inception of the company came with American Asiatic Underwriters (AAU), which was an insurance agency formed in Shanghai, China. The first office of AIG was opened in New York in 1926 by Starr with the name ‘American International Underwriters,’ which later became the headquarters in 1939. AIG expanded its reach post-world war, and it opened an office in the UK in 1953, and an office in Australia in 1957. The company became incorporated in 1967 in Delaware, and Maurice Greenberg became President and CEO of AIG. In 1968, founding member Vander Starr died and in 1969, the company started trading publicly.

In 1984, AIG began trading on the New York Stock Exchange (NYSE). AIG acquired different financial companies over the years, and the notable ones include Sun America Inc. in 1999 for $18.3 billion, which was a leading provider of insurances, and American General Corporation in 2001 for $23 billion. The events of September 11, 2001, saw AIG losing staggering $820 million. In 2006, AIG also acquired Travel Guard, which was a company that offered emergency travel assistance and travel insurance programs.

In 2008, when the world suffered a global recession, AIG was one of the company that was bailed out by the government and was given $180 billion. But a later inquiry showed that AIG financially failed because it sold a huge amount of insurance without hedging or properly managing its investments. However, AIG got back to business and restructured its operations in 2012, it also repaid almost $205 billion to the government for its financial assistance, and launched its brand with new purpose and vision. Also, in 2012, AIG launched ‘CyberEdge’ which was designed to overcome the challenges and problems of the cyber breach that affected financial and legal services.

Current Business and Investment of AIG

AIG is a prominent business company that provides a wide assortment of insurance and financial services to individual and commercial customers. The popular financial products of AIG consist of residential mortgages, consumer loans, and retail sales finance. The company mostly works in four main segments that are

  1. General Insurance; that consist of insurance businesses in International countries and the U.S
  2. Life and Retirement; this includes Life insurance, Individual Retirement, and Group Retirement
  3. Legacy Portfolio; this segment consists of legacy investments, and run-off insurance lines
  4. Other Operations; this involves corporate subsidiaries and includes income from assets that the company owns

The General Insurance of AIG includes Domestic Brokerage Group (DBG), which originates from brokers in the United States and Canada. The subsidiaries of General Insurance includes Natural Union, America Home, and Lexington. Most of the General Insurance is offered in casualty classes, which results in a longer period of reporting and settling of claims. AIG Risk Management is responsible for providing insurance and risk management programs for big corporate clients and customers.

The Life insurance division of AIG provides a variety of insurance and financial services and investment options for domestic and international clients and customers. The conventional insurance products include individual or group life insurance, endowment, annuity, accidents, and health policies. The investment products include fixed and variable annuities along with contracts and pensions.

The financial services of AIG comprise of various services such as aircraft leasing, consumer insurance premium financing, and asset management, and capital market transactions.

Risk and Potential in AIG Business Environment

One of the fundamental techniques used by business companies for strategic planning is SWOT Analysis, which refers to Strengths, Weaknesses, Opportunities, and Threats. The SWOT Analysis help company such as AIG to benchmark its growth and compare it with industry standards. AIG is the leading brand in the insurance and financial services sector.

  • Strengths

AIG celebrated 100 years of service last year, which shows the profound struggle and growth of the company in the financial sector. AIG has a wide commercial client base, and it also provides services to ordinary customers. The strengths of AIG include its global presence and delivery of a wide range of services regarding life, job, and mortgage, health, and retirement.

  • Weaknesses

AIG’s performance and growth are susceptible to the economic crisis, as seen with the global recession of 2008. The ever-changing global residential market also impacts the services of AIG.

  • Opportunities

The opportunity for AIG lies in expanding its reach and services to more developing economies, offering diversified services to clients and customers, and doing profitable mergers and acquisitions.

  • Threats

The threats to AIG come from the economic decline and recession, government restrictions and regulations, and natural disasters. Another source of threat is from competing firms, which includes Allianz, AXA Group, AON, Allstate, MetLife, and Delphi Financial Group.

Stock Analysis of AIG

AIG is listed and actively trades on the New York Stock Exchange (NYSE) and Tokyo Stock Exchange (TSE), under the ‘Finance’ Sector and the industry is ‘Multi-Line Insurance.’

The share price of AIG has shown improvement and growth over the years. The share price in April 2013 was $38 and reached $54 in March 2018. However, the company posted a net loss of almost $6.7 billion in the fourth quarter of 2017 as compared to a net loss of $3 billion in the fourth quarter of 2016.

The information above is for education purposes only and cannot be considered as investment advice. Past performance is not reliable indicator of future results.

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