AIG 2005 Annual Report Download - page 39

AIG ■2005 Annual Report 37
pany’s performance throughout the year.
AIG Annuity’s focus on maintaining the
industry’s lowest operating expenses
provides a competitive advantage in any
economic environment and a strong
platform for future growth.
AIG VALIC had good results in 2005. It is
a leader in the U.S. group retirement plan
business – number one in the primary and
secondary education market, number two
among healthcare groups and third largest
in higher education. AIG VALIC’s
focus on deposit growth, asset retention
and changing client needs resulted in an
expanded product portfolio, a new focus on
retirement income solutions for its client
base and a client asset retention program
that has generated strong initial results.
The company also formed a large group
acquisition division to identify new busi-
ness opportunities within its targeted mar-
kets. AIG VALIC’s Guided Portfolio
Services platform’s growth in assets under
management reflects an increasing demand
for independent professional advice in
preparing for retirement.
Despite a difficult operating environ-
ment and a decline in sales, AIG SunAmerica
Retirement Markets, Inc. (AIG SunAmerica)
reported record fee income and assets
under management in 2005. The company
experienced unforeseen regulatory delays
in the introduction of new living benefit
options at a time when such options were
critical to variable annuity sales. By year
end, AIG SunAmerica had successfully
launched MarketLock, an innovative
guaranteed minimum withdrawal benefit
feature in its Polaris and Seasons variable
annuity products, which helped boost
sales. In addition, AIG SunAmerica con-
tinued to strengthen its sales organization,
further penetrate the bank channel, and
improve customer service and operational
efficiencies.
in the last 24 months. AIG American
General’s deferred annuity unit has grown
significantly since its launch in 2004.
In 2005, for the second year in a row,
AIG American General was the top-
ranked U.S. life insurer as measured in
term life sales and the leader in total
individual life insurance issued. These
results were achieved while overall indus-
try sales declined in both categories.
A key competitive advantage for AIG
American General continues to be its
extensive distribution network of inde-
pendent producers, career agents and
various other third parties including banks,
accountants and financial planners. The
home services operation, staffed by career
agents, is a modest growth business, but
continues to generate strong cash flow. In
2005, AIG American General consolidated
its independent distribution channels into
one platform to more efficiently serve
its customers while leveraging new business
and insurance operations capabilities.
In 2005, AIG Annuity Insurance Company
(AIG Annuity) maintained its dominant mar-
ket share in fixed annuities sold through
banks, despite a decline in sales consistent
with trends in the marketplace. The com-
pany accounted for nearly 30 percent of all
bank fixed annuity sales for the year,
reflecting the quality of its product portfo-
lio, disciplined pricing strategy and respon-
sive customer service. Over 80,000 bank
representatives at 735 financial institutions
offered fixed annuity products issued by
AIG Annuity in 2005. Product enhance-
ments and continued success in expanding
distribution also contributed to the com-
Domestic Life Insurance
& Retirement Services
AIG’s Domestic Life Insurance & Retirement
Services businesses distribute a broad range of
life insurance, annuity, and accident and health
products and services through independent and
career agent networks and brokers, as well as
alternative distribution channels, including
banks. Extensive product offerings, expanding
distribution and financial strength provide
key competitive advantages in the consumer
and institutional markets.
(in millions) 2005 2004
Premiums, deposits and
other considerations(a) $23,736 $26,978
GAAP premiums 6,384 6,171
(a) Represents aggregate business activity during
the respective periods presented on a non-GAAP
basis.
Since joining the AIG franchise in
2001, AIG American General has consistently
grown its business – even in the most
challenging of markets. During this period,
retail periodic life sales have grown at a
compound rate of 16 percent. In 2005, the
U.S. life insurance market was character-
ized by fierce competition and low interest
rates, with many carriers cutting prices
in pursuit of market share. Despite these
obstacles, AIG American General pro-
duced solid results and strengthened its
position as the premier U.S. life insurer
by upholding its long-standing tradition of
high product quality and disciplined
underwriting.
AIG American General expanded
its product portfolio in traditional lines of
business, as well as newer ones designed for
the worksite and accident and health
markets. In the independent distribution
network, 72 percent of 2005 paid sales were
derived from products created or revised
R. Kendall Nottingham
Chairman and CEO
ALICO
Rodney O. Martin, Jr.
Chairman
AIG American General and
Chief Operating Officer
Worldwide Life Insurance
Jay S. Wintrob
President and CEO
AIG Retirement Services
Gerald W. Wyndorf
President and COO
AIA