AIG 2005 Annual Report Download - page 57

AMERICAN INTERNATIONAL GROUP, INC. AND SUBSIDIARIES
The AIG Worldsource Division introduces and coordinates
General Insurance Operations
AIG’s products and services to U.S.-based multinational clients
AIG’s General Insurance subsidiaries are multiple line compa- and foreign corporations doing business in the U.S.
nies writing substantially all lines of property and casualty Transatlantic subsidiaries offer reinsurance capacity on both
insurance both domestically and abroad. Domestic General a treaty and facultative basis both in the U.S. and abroad.
Insurance operations are comprised of the Domestic Brokerage Transatlantic structures programs for a full range of property
Group (DBG), which includes the operations of HSB; Transat- and casualty products with an emphasis on specialty risk.
lantic Holdings, Inc. (Transatlantic); Personal Lines, including AIG’s Personal Lines operations provide automobile insur-
21st Century Insurance Group (21st Century); and United ance through AIG Direct, the mass marketing operation of
Guaranty Corporation (UGC). AIG, Agency Auto Division and 21st Century, as well as a
AIG’s primary domestic division is DBG. DBG’s business in broad range of coverages for high net-worth individuals
the United States and Canada is conducted through its through the AIG Private Client Group.
General Insurance subsidiaries including American Home, The main business of the UGC subsidiaries is the issuance
National Union, Lexington and certain other General Insur- of residential mortgage guaranty insurance on conventional first
ance company subsidiaries of AIG. lien mortgages for the purchase or refinance of 1-4 family
DBG writes substantially all classes of business insurance, residences. This type of insurance protects lenders in both
accepting such business mainly from insurance brokers. This domestic and international markets against loss if borrowers
provides DBG the opportunity to select specialized markets and default. Other UGC subsidiaries write second lien and private
retain underwriting control. Any licensed broker is able to student loan guaranty insurance. The second lien coverage
submit business to DBG without the traditional agent-company protects lenders against loss from default on home equity and
contractual relationship, but such broker usually has no closed-end second mortgages used to finance home improve-
authority to commit DBG to accept a risk. ments, repairs or other expenses not directly related to the
In addition to writing substantially all classes of business purchase of a borrower’s home. Private student loan guaranty
insurance, including large commercial or industrial property insurance protects lenders against loss if the student, or in
insurance, excess liability, inland marine, environmental, work- many cases the student’s parent, defaults on their education
ers compensation and excess and umbrella coverages, DBG loan. UGC had approximately $23 billion of guaranty risk in
offers many specialized forms of insurance such as aviation, force at December 31, 2005.
accident and health, equipment breakdown, directors and AIG’s Foreign General Insurance group accepts risks prima-
officers liability (D&O), difference-in-conditions, kidnap-ran- rily underwritten through American International Underwriters
som, export credit and political risk, and various types of (AIU), a marketing unit consisting of wholly owned agencies
professional errors and omissions coverages. The AIG Risk and insurance companies. The Foreign General Insurance
Management operation provides insurance and risk manage- group also includes business written by AIG’s foreign-based
ment programs for large corporate customers. The AIG Risk insurance subsidiaries. The Foreign General group uses various
Finance operation is a leading provider of customized struc- marketing methods and multiple distribution channels to write
tured insurance products. Also included in DBG are the both commercial and consumer lines insurance with certain
operations of AIG Environmental, which focuses specifically on refinements for local laws, customs and needs. AIU operates in
providing specialty products to clients with environmental Asia, the Pacific Rim, the United Kingdom, Europe, Africa,
exposures. Lexington writes surplus lines, those risks for which the Middle East and Latin America. See also Note 2 of Notes
conventional insurance companies do not readily provide to Consolidated Financial Statements.
insurance coverage, either because of complexity or because During 2005, DBG and the Foreign General Insurance
the coverage does not lend itself to conventional contracts. group accounted for 55 percent and 24 percent, respectively, of
Certain of the products of the DBG companies include AIG’s General Insurance net premiums written.
funding components or have been structured in a manner such
that little or no insurance risk is actually transferred. Funds
received in connection with these products are recorded as
deposits, included in other liabilities, rather than premiums and
incurred losses.
AIG m Form 10-K 5