AIG 2005 Annual Report Download - page 4

2Letter to Shareholders
Dear Fellow Shareholders:
into the future. In February, 2006, we
announced that AIG would take a fourth
quarter 2005 after-tax charge to net
income related to an increase in our
General Insurance net reserve for losses
and loss expenses. This charge was the
result of a careful review of our actuarial
analyses and the results of an outside
study conducted by Milliman Inc.
Despite many distractions, the AIG
family remained intensely focused on
our business objectives, continuing to
innovate with new products and services
to meet our customers’ needs around the
world. No other insurance and financial
services organization has the combination
of depth of talented staff, entrepreneurial
culture, leading worldwide market posi-
tions, extensive distribution capabilities
and diversity of major businesses that AIG
has built over the years. In all of our
principal business sectors, we have strong
growth opportunities. As an example of
our global leadership and emerging market
focus, in 2005 AIG announced new li-
censes and operations in Lithuania, Latvia,
the Republic of Georgia and Vietnam.
In a presentation to the financial
community in September, 2005, I laid out
a series of AIG priorities and key growth
strategies. They were: staying customer
focused; continuing our geographic expan-
sion; expanding distribution; identifying
new business opportunities; developing
additional acquisitions or strategic
alliances; focusing on driving down costs
through the use of technology; emphasiz-
ing new product development; and
investing for growth. These priorities seek
to achieve growth in our franchise by cap-
italizing on the unmatched global network
and capabilities that already distinguish
AIG from our competitors. I believe we
made significant progress in each of these
areas during the past year.
In this letter, I will review AIG’s
financial performance for 2005, discuss our
successes in addressing the regulatory,
corporate governance and accounting
issues and talk about the opportunities and
challenges facing us in the coming year.
I will also focus on what I believe to be
AIG’s most important asset – our talented,
dedicated and professional group of 97,000
employees around the world. They were
critical to our performance and accom-
plishments in 2005, and they are the key
to our future.
In what has been a most eventful and
challenging year for AIG, I am pleased
to report that your company is finan-
cially very strong and well positioned for
the future. Through the dedication and
hard work of thousands of AIG employees,
we have accomplished a great deal since
my last letter to you in June, 2005. We
finished the year with solid earnings and a
strong balance sheet, despite the most
devastating series of catastrophes our
industry has ever suffered. We entered
a number of important new overseas
markets that will provide good growth
opportunities in the years ahead; we made
major advances in our corporate gover-
nance and management practices; and we
conducted an extensive internal review
of our accounting and reporting policies
and procedures. Most importantly, in
early 2006, we resolved our regulatory
issues with the Securities and Exchange
Commission, the United States
Department of Justice, the Office of the
New York Attorney General and the New
York State Department of Insurance.
We also added experienced and talented
individuals to our Board of Directors, and
we have in place the strategies for our
major businesses that will serve AIG well