AIG 2005 Annual Report Download - page 6

4Letter to Shareholders
strength and claims management expertise
enabled us to respond to a catastrophe of
this magnitude. I am extremely proud of
AIG’s actions, including our employees’
outstanding and generous response to the
victims of Hurricane Katrina and the other
disasters. Their financial support through
the AIG Disaster Relief Fund was
matched by personal commitment through
volunteer efforts and personal sacrifices on
behalf of AIG colleagues and customers in
need. AIG matched our employees’ contri-
butions to the Fund on a dollar-for-dollar
basis, and, in sum, the AIG Disaster Relief
Fund collected a total of $8.6 million in
2005. In addition, AIG’s claims personnel
turned in excellent performance in coming
to the aid of our policyholders along the
Gulf Coast.
AIG’s total shareholders’ equity at
December 31, 2005 was $86.32 billion, an
increase of 8.3 percent from year-end
2004. AIG remains among the most
strongly capitalized organizations in our
industry. Cash flow from our insurance
operations and our balance sheet remain
very strong. AIG invests an average of
$200 million a day, and the majority of
our portfolio consists of high quality fixed
income assets. Worldwide revenues in
2005 were $108.91 billion. For 2005, AIG
achieved a return on equity of 12.3 percent.
AIG’s ability to report solid earnings
and cash flow in the face of difficult
external and internal issues reflects the
diversity and strength of our major busi-
nesses – General Insurance, Life Insurance
& Retirement Services, Financial Services
and Asset Management. All are global
businesses, and all are well positioned in
their domestic and overseas markets.
AIG’s franchise is unmatched. Our entre-
preneurial culture also sets AIG apart from
others – something that has characterized
the organization from its earliest days –
and this will not change. Our network of
714,000 agents and brokers around the
world produce business from a worldwide
customer base of some 65 million cus-
tomers. Finally, our financial strength,
which is the bedrock of this company, pro-
vides us with a multitude of opportunities
around the globe.
In recent months, we have made
progress in stabilizing AIG’s ratings.
Currently, Standard & Poor’s rates AIG’s
long-term debt “AA”, and most of our
financial strength ratings are “AA+”.
Moody’s rates AIG’s long-term debt “Aa2”,
and our financial strength ratings are
either “Aa1” or “Aa2”. Fitch rates AIG’s
long-term debt “AA” and our financial
strength ratings are “AA+”. A.M. Best
rates AIG’s insurance companies “A+”.
At these levels, AIG’s ratings are among
the highest of any insurance and financial
services organization in the world.
Accounting Issues and Corporate Governance
As has been widely reported
during the past year, AIG con-
ducted an extensive internal
review, carried out in conjunction with
outside counsel and our independent
accounting firm. With the filing of our
2004 Annual Report on Form 10-K/A, we
restated our financial statements for the
years ended December 31, 2004, 2003 and
2002, along with affected Selected
Consolidated Financial Data for 2001 and
2000, and quarterly financial information
for 2004 and 2003. We also restated the
first three quarters of 2005. These actions
are consistent with AIG’s commitment to
correct all material errors and to provide
greater transparency in the company’s
financial statements and accounting in
the future.
Other important changes have
occurred in our corporate governance
procedures. Our Board of Directors has
adopted a majority voting guideline and a
mandatory retirement age of 73. The
Board has also put in place another
guideline to reflect its view that at least
two-thirds of AIG’s Board should be
independent, as defined by the New York
Stock Exchange, and approved a change
in AIG’s bylaws to provide that the role
of Chairman should be separate from that
of the CEO, and that the Chairman
should be selected from the independent
Directors. We are also providing greater
information in our financial statements
and continue to build an open and
Our total shareholders’ equity
at year-end 2005
was $86.32 billion.