AIG 2006 Annual Report Download - page 29

Annual Report 2006 AIG 27
United Guaranty Corporation
United Guaranty Corporation (UGC) operating income declined in
2006 as the softening U.S. housing market resulted in a deteriora-
tion in loss experience and also adversely impacted third-party-origi-
nated second lien business with a credit quality lower than typical for
UGC. UGC has discontinued writing this particular class of second
lien business as of year end 2006.
UGC continues to diversify its sources of income to provide
growth opportunities to offset the challenges of a maturing U.S. first-
lien residential mortgage market. In recent years, UGC has expanded
into 12 international markets, entered the private education loan
guaranty business, expanded its own second lien operation to
include new customers and product lines and invested in or acquired
several businesses complementary to the domestic credit market. In
2006, UGC had a strong increase in net premiums written and con-
tinues to grow market share in the domestic first lien business while
maintaining a strong credit and pricing discipline.
Transatlantic Holdings, Inc.
Transatlantic Holdings, Inc. had record results in 2006. The
combination of a fundamentally solid reinsurance underwriting
environment and an absence of significant catastrophe losses was
the key to the year’s results. Transatlantic also benefited from an
environment where market pricing overall remained disciplined, with
reinsurance terms and conditions holding firm —reflecting, in part,
greater market recognition of the capital requirements of reinsur-
ance. Geographic expansion is a key Transatlantic strategy and in
2006, a representative office was opened in Panama to capitalize on
the increased economic activity related to the Panama Canal expan-
sion and Panama’s growing role as a Latin American commercial
hub. Majority-owned by AIG, Transatlantic has a network of offices
located in the Americas, Europe, Asia and Australia.
Foreign General Insurance
The international property-casualty market is a source of tremen-
dous opportunity for AIG. Foreign General net premiums written
rose 13.7 percent to $11.37 billion, compared to $10.00 billion in
2005. The successful implementation of strategies focused
on new business and new distribution channels in both commercial
and consumer lines fueled strong premium growth. AIG strengthened its long-standing presence in the Middle East through the
launch of AIG MEMSA Insurance Company, which will focus on providing general
insurance to commercial, institutional and individual customers in the Middle
East, Mediterranean and South Asia region. The company is based in the Dubai
International Financial Centre, one of the world’s newest financial hubs.
AIG’s Foreign General business and its marketing unit American
International Underwriters (AIU) have enormous scope with opera-
tions in more than 85 countries. This international network, struc-
tured by region, is the most extensive of any property-casualty
organization in the world. Through this network, a broad range of
products and services are provided to a mix of both business and
individual customers. To reach its clients more effectively in markets
around the world, Foreign General employs a multidistribution strat-
egy successfully utilizing brokers, agents, direct marketing, associa-
tions and bancassurance. For example, in accident and health,
one of the most important distribution initiatives in recent years
has been worksite marketing, which has the potential to be a very
important sales channel. On the commercial side, a customer
segmentation strategy helps maximize efficiency in meeting client
specific product, service and distribution needs. This customer