AIG 2007 Annual Report Download - page 68

American International Group, Inc. and Subsidiaries
surplus by applying certain factors to various asset, premium and Competition
reserve items. Higher factors are applied to more risky items and AIG’s Insurance, Financial Services and Asset Management
lower factors are applied to less risky items. Thus, the target level businesses operate in highly competitive environments, both
of statutory surplus varies not only as a result of the insurer’s domestically and overseas. Principal sources of competition are
size, but also based on the risk profile of the insurer’s operations. insurance companies, banks, investment banks and other non-
The RBC Model Law provides for four incremental levels of bank financial institutions.
regulatory attention for insurers whose surplus is below the The insurance industry in particular is highly competitive.
calculated RBC target. These levels of attention range in severity Within the United States, AIG’s General Insurance subsidiaries
from requiring the insurer to submit a plan for corrective action to compete with approximately 3,400 other stock companies, spe-
placing the insurer under regulatory control. cialty insurance organizations, mutual companies and other
The statutory surplus of each of AIG’s Domestic General underwriting organizations. AIG’s subsidiaries offering Life Insur-
Insurance and Life Insurance subsidiaries exceeded their RBC ance & Retirement Services compete in the United States with
target levels as of December 31, 2007. approximately 2,100 life insurance companies and other partici-
To the extent that any of AIG’s insurance entities would fall pants in related financial services fields. Overseas, AIG subsidiar-
below prescribed levels of statutory surplus, it would be AIG’s ies compete for business with foreign insurance operations of the
intention to provide appropriate capital or other types of support larger U.S. insurers, global insurance groups and local companies
to that entity. in particular areas in which they are active.
A substantial portion of AIG’s General Insurance business and
a majority of its Life Insurance business is carried on in foreign Directors and Executive Officers of AIG
countries. The degree of regulation and supervision in foreign
jurisdictions varies. Generally, AIG, as well as the underwriting All directors of AIG are elected for one-year terms at the annual
companies operating in such jurisdictions, must satisfy local meeting of shareholders. All executive officers are elected to one-
regulatory requirements. Licenses issued by foreign authorities to year terms, but serve at the pleasure of the Board of Directors.
AIG subsidiaries are subject to modification or revocation by such Except as hereinafter noted, each of the executive officers has,
authorities, and these subsidiaries could be prevented from for more than five years, occupied an executive position with AIG
conducting business in certain of the jurisdictions where they or companies that are now its subsidiaries. Other than the
currently operate. In the past, AIG has been allowed to modify its employment contracts between AIG and Messrs. Sullivan and
operations to conform with new licensing requirements in most Bensinger, there are no other arrangements or understandings
jurisdictions. between any executive officer and any other person pursuant to
In addition to licensing requirements, AIG’s foreign operations which the executive officer was elected to such position. From
are also regulated in various jurisdictions with respect to currency, January 2000 until joining AIG in May 2004, Dr. Frenkel served as
policy language and terms, advertising, amount and type of Chairman of Merrill Lynch International, Inc. Prior to joining AIG in
security deposits, amount and type of reserves, amount and type September 2006, Ms. Kelly served as Executive Vice President
of capital to be held, amount and type of local investment and the and General Counsel of MCI/WorldCom. Previously, she was
share of profits to be returned to policyholders on participating Senior Vice President and General Counsel of Sears, Roebuck and
policies. Some foreign countries regulate rates on various types of Co. from 1999 to 2003. From June 2004 until joining AIG in May
policies. Certain countries have established reinsurance institu- 2007, Mr. Kaslow was a managing partner of QuanStar Group,
tions, wholly or partially owned by the local government, to which LLC (an advisory services firm), and, from January 2002 until May
admitted insurers are obligated to cede a portion of their 2004, Mr. Kaslow was Senior Executive Vice President of Human
business on terms that may not always allow foreign insurers, Resources for Vivendi Universal (an entertainment and telecommu-
including AIG subsidiaries, full compensation. In some countries, nications company).
regulations governing constitution of technical reserves and
remittance balances may hinder remittance of profits and repatria-
tion of assets.
See Management’s Discussion and Analysis of Financial
Condition and Results of Operations — Capital Resources and
Liquidity — Regulation and Supervision and Note 15 to Consoli-
dated Financial Statements.
14 AIG 2007 Form 10-K