AIG 2006 Annual Report Download - page 75

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 by
Item 7.
insurance regulatory authorities because these are standard
Management’s Discussion and Analysis of
measures of performance used in the insurance industry and thus
Financial Condition and Results of Operations
allow more meaningful comparisons with AIG’s insurance competi-
Throughout this Management’s Discussion and Analysis of Finan- tors. AIG has also incorporated into this discussion a number of
cial Condition and Results of Operations, AIG presents its cross-references to additional information included throughout this
operations in the way it believes will be most meaningful. Annual Report on Form 10-K to assist readers seeking additional
Statutory underwriting profit (loss) and combined ratios are information related to a particular subject.
Management’s Discussion and Analysis of Financial Condition and Results of Operations is designed to provide the reader
a narrative explanation of AIG’s operations, financial condition and liquidity and certain other significant matters.
Index Page Page
Cautionary Statement Regarding Asset Management Operations 67
Projections and Other Information About Other Operations 68
Future Events 25 Capital Resources and Liquidity 69
Overview of Operations and Business Results 26 Borrowings 69
Outlook 26 Shareholders’ Equity 76
Consolidated Results 27 Liquidity 77
Segment Results 29 Invested Assets 79
Capital Resources 30 Risk Management 86
Liquidity 30 Overview 86
Critical Accounting Estimates 30 Corporate Risk Management 86
Operating Review 31 Credit Risk Management 87
General Insurance Operations 31 Market Risk Management 88
General Insurance Results 32 Operational Risk Management 89
Reserve for Losses and Loss Expenses 37 Insurance Risk Management 90
Life Insurance & Retirement Services Segment Risk Management 91
Operations 51 Insurance Operations 91
Life Insurance & Retirement Services Results 52 Financial Services 94
Deferred Policy Acquisition Costs Asset Management 97
Financial Services Operations 63 Economic Capital 97
Financial Services Results 63 Recent Accounting Standards 98
Aircraft Leasing 63
Capital Markets 64
Consumer Finance 65
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 credit rating changes on AIG’s businesses and
competitive position, the unwinding and resolving of various relationships between AIG 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 Item 1A. Risk Factors 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.
Form 10-K 2006 AIG 25