AIG 2014 Annual Report Download - page 79

ITEM 2 / EXECUTIVE OVERVIEW
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COMMERCIAL INSURANCE STRATEGIC INITIATIVES AND OUTLOOK
Executive Overview
Customer — Strive to be our customers’ most valued insurer by offering innovative products, superior service and access
to an extensive global network.
Strategic Growth — Grow our higher-value businesses while investing in transformative opportunities.
Underwriting Excellence —Improve our business portfolio through better pricing and risk selection by using enhanced
data, analytics and the application of science to deliver superior risk adjusted returns.
Claims Excellence — Improve claims processes, analytics and tools to deliver superior customer service and decrease
our loss ratio.
Operational Effectiveness —Continue initiatives to modernize our technology and infrastructure; implement best
practices to improve speed and quality of service.
Capital Efficiency — Increase capital fungibility and diversification, streamline our legal entity structure, optimize
reinsurance and improve tax efficiency.
Investment Strategy — Increase asset diversification and take advantage of yield enhancement opportunities to meet our
capital, liquidity, risk and return objectives.
Market Conditions and Industry Trends
Commercial Insurance expects the current low interest rate environment relative to historical levels, 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 and overcapacity in the property casualty insurance industry, Commercial
Insurance has sought to modify terms and conditions, grow profitable segments of the business, exit unprofitable businesses
and develop advanced data analytics to improve profitability.
Property Casualty
Property Casualty has observed improving trends in certain key indicators that may offset the effect of current economic
challenges. In recent years, Property Casualty has benefitted from favorable pricing trends, particularly in the U.S. However,
such trends have tapered off in recent quarters. The property casualty insurance industry is experiencing modest growth as a
result of this positive rate trend and an increase in overall exposures in certain markets. Property Casualty also expects 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.
Since the second quarter of 2014, within the U.S. commercial property business, Property Casualty observed continued rate
pressure in the U.S. Excess and Surplus lines market, particularly with respect to its natural catastrophe exposed business.
Property Casualty continues to differentiate its capacity from its peers through leveraging management’s significant experience
with catastrophic events, providing loss prevention expertise and maintaining discipline in pricing to internal targets despite
intense competition.
In the U.S., Property Casualty’s exposure to terrorism risk is mitigated by the Terrorism Risk Insurance Act (TRIA) in addition
to limited private reinsurance protections. For additional information on TRIA, see Item 1A. Risk Factors — Reserves and
Exposures and Item 7. MD&A — Enterprise Risk Management — Insurance Operations Risks — Non-Life Insurance
Companies Key Insurance Risks — Terrorism Risk.