AIG 2005 Annual Report Download - page 77

AMERICAN INTERNATIONAL GROUP, INC. AND SUBSIDIARIES
Management’s Discussion and Analysis of
Financial Condition and Results of Operations
presented in accordance with accounting principles prescribed
ITEM 7.
by insurance regulatory authorities because these are standard
Management’s Discussion and Analysis of Financial
measures of performance used in the insurance industry and
Condition and Results of Operations thus allow more meaningful comparisons with AIG’s insurance
Throughout this Management’s Discussion and Analysis of competitors. AIG has also incorporated into this discussion a
Financial Condition and Results of Operations, AIG presents number of cross-references to additional information included
its operations in the way it believes will be most meaningful. throughout this Annual Report on Form 10-K to assist readers
Statutory underwriting profit (loss) and combined ratios are seeking related information on a particular subject.
Management’s Discussion and Analysis of Financial Condition and
Results of Operations
Management’s Discussion and Analysis of Financial Condition and Results of Operations is designed to provide the reader a
narrative with respect to AIG’s operations, financial condition and liquidity and certain other significant matters.
Index Page Index, continued Page
Asset Management Operations 56
Cautionary Statement Regarding Asset Management Results 57
Projections and Other Information About Future Other Operations 57
Events 25
Capital Resources 58
Overview of Operations and Business Results 26 Borrowings 58
Consolidated Results 26 Contractual Obligations and Other Commercial
Critical Accounting Estimates 29 Commitments 61
Shareholders’ Equity 62
Operating Review 30 Stock Purchase 62
General Insurance Operations 30 Dividends from Insurance Subsidiaries 62
General Insurance Results 31 Regulation and Supervision 62
Reinsurance 33
Reserve for Losses and Loss Expenses 34 Liquidity 63
Asbestos and Environmental Reserves 40 Special Purpose Vehicles and Off Balance Sheet
Life Insurance & Retirement Services Operations 43 Arrangements 64
Life Insurance & Retirement Services Results 44
Underwriting and Investment Risk 47 Derivatives 65
Insurance and Asset Management Invested Assets 48 Managing Market Risk 65
Credit Quality 49 Insurance 65
Valuation of Invested Assets 49 Financial Services 66
Financial Services Operations 51 Recent Accounting Standards 67
Financial Services Results 54
Financial Services Invested Assets 55
Cautionary Statement Regarding Projections and Other Information About Future Events
This Annual Report on Form 10-K and other publicly available documents may include, and AIG’s officers and representatives
may from time to time make, projections concerning financial information and statements concerning future economic
performance and events, plans and objectives relating to management, operations, products and services, and assumptions
underlying these projections and statements. These projections and statements are not historical facts but instead represent only
AIG’s belief regarding future events, many of which, by their nature, are inherently uncertain and outside AIG’s control. These
projections and statements may address, among other things, the status and potential future outcome of the current regulatory and
civil proceedings against AIG and their potential effect on AIG’s businesses, financial position, results of operations, cash flows
and liquidity, the effect of the credit rating downgrades on AIG’s businesses and competitive position, the unwinding and
resolving of various relationships between AIG and Starr and SICO and AIG’s strategy for growth, product development, market
position, financial results and reserves. It is possible that AIG’s actual results and financial condition may differ, possibly
materially, from the anticipated results and financial condition indicated in these projections and statements. Factors that could
cause AIG’s actual results to differ, possibly materially, from those in the specific projections and statements are discussed
throughout this Management’s Discussion and Analysis of Financial Condition and Results of Operations and in ‘‘Risk Factors’’ in
Item 1A, Part I of this Annual Report on Form 10-K. AIG is not under any obligation (and expressly disclaims any such
obligations) to update or alter any projection or other statement, whether written or oral, that may be made from time to time,
whether as a result of new information, future events or otherwise.
AIG m Form 10-K 25