AIG 2011 Annual Report Download - page 68

continuing through the fourth quarter of 2011, Chartis observed continuing positive pricing trends, particularly in
its U.S. commercial business for the first time since 2009. In certain growth economies such as Brazil, Turkey,
India, and Asia Pacific countries, Chartis continues to expect improved growth.
Strategy
Chartis continues to make strides in its strategy to further grow its higher value and less capital intensive lines
of business, and to implement corrective actions on underperforming businesses. Management continues to review
the businesses to ensure that they meet overall performance measures.
Chartis seeks to provide value for people and businesses worldwide through the identification and efficient
management of risk. In pursuing this mission and in growing its intrinsic value, Chartis has established strategic
initiatives in several key areas. Initiatives in these areas are helping Chartis to direct its capital and resources to
optimize financial results, while acknowledging that performance in these areas may vary from quarter to quarter
depending upon local market conditions, such as pricing and the effects of foreign exchange rates or changes in
the investment environment.
Business Mix Changes
Chartis is pursuing initiatives to grow in higher value, less volatile lines of business and geographies. In
Commercial Insurance, Chartis is leveraging its significant geographic footprint and multinational capabilities to
serve large and mid-sized businesses with cross-border operations. Commercial Insurance is also expanding its
presence in the growth economy nations (which primarily includes nations in Asia Pacific, the Middle East and
Latin America). Chartis’ new global organizational design will enable Commercial Insurance to more effectively
leverage underwriting and product best practices to enhance customer and channel management. In the Americas
and the Europe, Middle East and Africa (EMEA) regions, Commercial Insurance expects to improve the quality
of its portfolio and to capitalize on market opportunities. In the Asia Pacific region, management expects to
leverage the additional distribution and customer base acquired in connection with the purchase of Fuji Fire &
Marine Insurance Company Limited (Fuji).
Since 2009, Consumer Insurance has increased net premiums written by 47 percent, primarily driven by the Fuji
acquisition. In 2011, Consumer Insurance represented 38 percent of Chartis’ net premiums written, compared to
30 percent in 2009. Consumer Insurance continues to grow its net premiums written in key markets and to expand
internationally. Consumer Insurance has well-established global franchises and operations, existing growth
strategies in multiple distribution channels which include direct to consumer, agent, broker and affinity groups,
and a focus on the growth economy nations. In the Asia Pacific region, the acquisition of Fuji enables the
continued expansion of its distribution and customer base across a breadth of products. In the Americas region,
Consumer Insurance continues to focus its growth in key areas, such as the high net worth and affluent markets,
and will implement a group benefits strategy with American General. In the EMEA region, management expects
modest growth and will continue to focus on solid underwriting performance.
Loss Ratio Improvement
Chartis expects that by implementing selective pricing, underwriting and distribution strategies, net premiums
written will grow without increasing the relative volatility of losses. In addition, Chartis expects to continue to
focus on reducing the costs associated with adjusting claims by improving efficiency in servicing its customers, thus
improving its loss ratio. In the commercial casualty lines, underwriting changes have been made to address
historical experience with respect to adverse development. Changes include increased actuarial involvement in
product aggregate pricing and attachments, increased utilization of pricing and predictive models with actuarial
support, policy form changes, increased policy exclusions and fewer multi-year policies being offered. During 2011,
as part of its on-going initiatives to reduce exposure to capital intensive long-tail lines, Chartis determined to
cease writing excess workers’ compensation business as a stand-alone product.
In 2011, management took remedial actions related to certain Consumer Insurance programs that did not meet
internal performance or operating targets. Accident & Health (A&H) improved in key markets such as Far East,
54 AIG 2011 Form 10-K