AIG 2006 Annual Report Download - page 56

American International Group, Inc. and Subsidiaries
and services to U.S.-based multinational clients and foreign
General Insurance Operations
corporations doing business in the U.S.
AIG’s General Insurance subsidiaries are multiple line companies Certain of the products of the DBG companies include funding
writing substantially all lines of commercial property and casualty components or have been structured so that little or no insurance
insurance and various personal lines both domestically and risk is actually transferred. Funds received in connection with
abroad. Domestic General Insurance operations are comprised of these products are recorded as deposits and included in other
the Domestic Brokerage Group (DBG), Reinsurance, Personal liabilities, rather than premiums and incurred losses.
Lines, and Mortgage Guaranty.
AIG is diversified both in terms of classes of business and Reinsurance
geographic locations. In General Insurance, workers compensation
The subsidiaries of Transatlantic Holdings, Inc. (Transatlantic) offer
business is the largest class of business written and represented
reinsurance on both a treaty and facultative basis to insurers in the
approximately 15 percent of net premiums written for the year ended
U.S. and abroad. Transatlantic structures programs for a full range of
December 31, 2006. During 2006, 8 percent and 7 percent of the
property and casualty products with an emphasis on specialty risk.
direct General Insurance premiums written (gross premiums less
Transatlantic is a public company owned 59.2 percent by AIG and
return premiums and cancellations, excluding reinsurance assumed
therefore is included in AIG’s consolidated financial statements.
and before deducting reinsurance ceded) were written in California
and New York, respectively. No other state accounted for more Personal Lines
than five percent of such premiums.
The majority of AIG’s General Insurance business is in the AIG’s Personal Lines operations provide automobile insurance
casualty classes, which tend to involve longer periods of time for through AIG Direct, a mass marketing operation, the Agency Auto
the reporting and settling of claims. This may increase the risk Division and 21st Century Insurance Group (21st Century), as well
and uncertainty with respect to AIG’s loss reserve development. as a broad range of coverages for high net-worth individuals
through the AIG Private Client Group. 21st Century is a public
DBG company owned 61.9 percent by AIG and therefore is included in
AIG’s consolidated financial statements. During the first quarter of
AIG’s primary Domestic General Insurance division is DBG. DBG’s
2007, AIG offered to acquire the outstanding shares of 21st
business in the United States and Canada is conducted through
Century not already owned by AIG and its subsidiaries.
American Home, National Union, Lexington, HSB and certain other
General Insurance company subsidiaries of AIG. During 2006, Mortgage Guaranty
DBG accounted for 54 percent of AIG’s General Insurance net
premiums written. The main business of the subsidiaries of United Guaranty
DBG writes substantially all classes of business insurance, Corporation (UGC) is the issuance of residential mortgage guar-
accepting such business mainly from insurance brokers. This anty insurance, both domestically and internationally, on conven-
provides DBG the opportunity to select specialized markets and tional first lien mortgages for the purchase or refinance of one to
retain underwriting control. Any licensed broker is able to submit four family residences. UGC subsidiaries also write second lien
business to DBG without the traditional agent-company contractual and private student loan guaranty insurance.
relationship, but such broker usually has no authority to commit
DBG to accept a risk. Foreign General Insurance
In addition to writing substantially all classes of business
insurance, including large commercial or industrial property insur- AIG’s Foreign General Insurance group accepts risks primarily
ance, excess liability, inland marine, environmental, workers underwritten through American International Underwriters (AIU), a
compensation and excess and umbrella coverages, DBG offers marketing unit consisting of wholly owned agencies and insurance
many specialized forms of insurance such as aviation, accident companies. The Foreign General Insurance group also includes
and health, equipment breakdown, directors and officers liability business written by AIG’s foreign-based insurance subsidiaries. The
(D&O), difference-in-conditions, kidnap-ransom, export credit and Foreign General Insurance group uses various marketing methods
political risk, and various types of professional errors and and multiple distribution channels to write both commercial and
omissions coverages. The AIG Risk Management operation pro- consumer lines insurance with certain refinements for local laws,
vides insurance and risk management programs for large corpo- customs and needs. AIU operates in Asia, the Pacific Rim, Europe,
rate customers. The AIG Risk Finance operation is a leading including the U.K., Africa, the Middle East and Latin America. During
provider of customized structured insurance products. Also in- 2006, the Foreign General Insurance group accounted for 25 per-
cluded in DBG are the operations of AIG Environmental, which cent of AIG’s General Insurance net premiums written.
focuses specifically on providing specialty products to clients with
environmental exposures. Lexington writes surplus lines for risks Discussion and Analysis of Consolidated Net
which conventional insurance companies do not readily provide Losses and Loss Expense Reserve Development
insurance coverage, either because of complexity or because the The reserve for net losses and loss expenses represents the
coverage does not lend itself to conventional contracts. The AIG accumulation of estimates for reported losses (case basis
Worldsource Division introduces and coordinates AIG’s products reserves) and provisions for losses incurred but not reported
6 AIG 2006 Form 10-K