AIG 2013 Annual Report Download - page 85

Executive Overview
Product Diversity and Capacity for Growth — Continue to expand our comprehensive portfolio with superior,
differentiated product solutions that meet consumer needs for financial and retirement security, using our scale
and capital strength to pursue growth opportunities.
Integrated Distribution — Grow assets under management by leveraging our extensive distribution organization
of over 300,000 financial professionals and expanding relationships with key distribution partners to effectively
market our diverse product offerings across multiple channels under a more unified branding strategy.
Investment Portfolio — Maintain a diversified, high quality portfolio of fixed maturity securities that largely match
the duration characteristics of liabilities with assets of comparable duration, and pursue yield-enhancement
opportunities that meet our liquidity, risk and return objectives.
Operational Initiatives — Continue to streamline our life insurance and annuity operations and systems into a
lower-cost, more agile model that provides superior service and ease of doing business.
Effective Risk and Capital Management — Deliver solid earnings through disciplined pricing and diversification
of risk and increase capital efficiency within our life insurance entities to enhance return on equity.
Baby boomers reaching retirement age expect to live longer in retirement and place less reliance on traditional
pensions and government retirement benefits than previous generations. These demographic trends, combined with
strong equity markets and low volatility, provide a favorable environment for sales of individual variable annuities, and
have contributed to growth in separate account assets under management in both our Retirement Income Solutions
and Group Retirement product lines. Opportunities to continue growing our position in the individual variable annuities
market are being provided by an increasing demographic of Americans approaching retirement and seeking
guaranteed income features, combined with changes in the competitive landscape.
The interest rate environment has a significant impact on the life and annuity industry. Low long-term interest rates
put pressure on long-term investment returns, negatively affect sales of interest rate sensitive products such as fixed
annuities, and reduce future profits on certain existing fixed rate products. Low interest rates may also affect future
investment margins, and may affect the recoverability and amortization rate of DAC assets in our variable annuity,
fixed annuity and universal life businesses. While long-term interest rates remain low relative to historical levels, the
increase in rates since the second half of 2013 has caused demand for fixed annuities products to improve, and
continued stable or modestly rising interest rates provide favorable market conditions for our fixed annuity sales and
future profitability.
We will continue to actively manage renewal crediting rates and use a disciplined approach to pricing new sales of
interest rate sensitive products, including minimum rate guarantees. Also, as market conditions change, we manage
our asset and liability interest rate exposures and strategic asset allocation to emphasize lower or higher durations in
our investment portfolio.
The life insurance marketplace continues to be highly competitive and driven by price and service, with key players in
this market acquiring an increasing market share. Industry sales of universal life have slowed, particularly sales of
guaranteed universal life products, which was expected following the implementation of regulatory changes that
increased minimum reserving requirements for these guaranteed products.
AIG LIFE AND RETIREMENT STRATEGIC INITIATIVES AND OUTLOOK
Market Conditions and Industry Trends
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AIG 2013 Form 10-K 67
ITEM 7 / EXECUTIVE SUMMARY
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