AIG 2013 Annual Report Download - page 83

We expect that the current low interest rate environment, currency volatility, and ongoing uncertainty in global
economic conditions will continue to challenge the growth of net investment income and limit growth in some
markets. Due to these conditions, coupled with overcapacity in the property casualty insurance industry, we have
sought to modify terms and conditions, grow profitable segments of the business, exit unprofitable business and
develop advanced data analytics to improve profitability.
We have observed improving trends in certain key indicators that may offset the effect of current economic
challenges. Commencing in the second quarter of 2011, we have benefitted from favorable pricing trends, particularly
in our U.S. commercial business. The property casualty insurance industry is experiencing modest growth as a result
of this positive rate trend and an increase in overall exposures in some markets. We also expect that expansion in
certain growth economies will occur at a faster pace than in developed countries, although at levels lower than those
previously expected due to revised economic assumptions.
In the U.S., our exposure to terrorism risk is mitigated by the Terrorism Risk Insurance Program Reauthorization Act
of 2007 (TRIPRA) in addition to limited private reinsurance protections. TRIPRA is set to expire on December 31,
2014. We are closely monitoring the legislative developments related to the TRIPRA renewal or expiration, and have
implemented appropriate business strategies for potential legislation outcomes, including non-renewal of the law. For
additional information on TRIPRA, see Item 1A. Risk Factors — Reserves and Exposures and Item 7. MD&A —
Enterprise Risk Management — Insurance Operations Risks — AIG Property Casualty Key Insurance Risks —
Terrorism Risk.
We continue efforts to better segment our business by industry, geography and type of coverage, to enhance our
decision making about risk acceptance and pricing. For example, within workers’ compensation we have observed
different experience and trends based on this segmentation, which helps inform our risk appetite, pricing and loss
mitigation decisions.
As part of our strategy to expand our consumer operations in growth economies, on May 29, 2013, we entered into a
joint venture agreement with PICC Life, a subsidiary of PICC Group, to form an agency distribution company in
China. Products under consideration to be distributed by the joint venture company include jointly developed life and
retirement insurance products, existing PICC Life products, PICC P&C insurance products, AIG Property Casualty
products, as well as other products aimed at meeting the needs of this developing market. We will own 24.9 percent
of the joint venture company with PICC Life holding the remaining 75.1 percent. Our participation in the joint venture
will be managed by AIG Property Casualty. The joint venture is planned to commence operations in 2014 subject to
regulatory approval.
We continue to explore other potential life insurance and accident and health opportunities internationally.
We continue to further enhance our risk selection process and refine technical pricing and producer management,
through enhanced tools and analytics. In addition, we remain focused on reducing exposure to capital intensive
long-tail lines. We believe that accident year loss ratios will continue to improve due to these actions.
We continue to reduce loss costs by realizing greater efficiencies in servicing customer claims, introducing improved
claims analytics and services, developing knowledge of the economic drivers of losses which collectively are
expected to mitigate reserve development and legal costs, and improve customer insights and pricing.
Market Conditions and Industry Trends
Strategic Initiatives
Growth and Business Mix
Underwriting Excellence
Claims Best Practices
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AIG 2013 Form 10-K 65
ITEM 7 / EXECUTIVE SUMMARY
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