AIG 2015 Annual Report Download - page 66

ITEM 7 / EXECUTIVE OVERVIEW

66
Strategic Outlook
Industry Trends
Our business is affected by industry and economic factors such as interest rates, currency exchange rates, credit and equity
market conditions, catastrophic claims events, regulation, tax policy, competition, and general economic, market and political
conditions. We continued to operate under difficult market conditions in 2015, characterized by factors such as historically low
interest rates, instability in the global equity markets, volatile energy markets and slowing growth in emerging markets, China
and Euro-Zone economies.
Interest rates remain low relative to historical levels, which has affected our industry by reducing investment returns and
unfavorably affecting loss reserve discounting, primarily related to our workers’ compensation reserves. In addition, current
market conditions may not necessarily permit insurance companies to increase pricing across all our product lines.
Currency volatility in 2015 was particularly acute compared to recent years, as the three major foreign currencies (Japanese
yen, euro, and British pound) that we transact in weakened considerably against the U.S. dollar. Such volatility affected line
item components of income for those businesses with substantial international operations. In particular, growth trends in net
premiums written reported in U.S. dollars can differ significantly from those measured in original currencies. The net effect on
underwriting results, however, is significantly mitigated, as both revenues and expenses are similarly affected.
These currencies may continue to fluctuate, in either direction, and such fluctuations will affect net premiums written growth
trends reported in U.S. dollars, as well as financial statement line item comparability.
See Results of Operations – Foreign Currency Impact; Results of Operations – Segment Results – Pre-Tax Income
Comparison for 2015 and 2014; Results of Operations – Commercial Insurance – Property Casualty Net Premiums Written by
Region; and Results of Operations – Consumer Insurance – Personal Insurance Net Premiums Written by Region.
AIG Priorities for 2016
AIG is focused on the following priorities for 2016:
 Improving our Return on Equity (ROE)
 Creating a leaner, more profitable and focused insurer by reorganizing our operating model into “modular”, more self-
contained business units to enhance transparency and accountability, including through the introduction of a new
Legacy Portfolio that aims to maximize value and release capital from run-off of non-strategic assets
 Reducing general operating expenses
 Improving the Commercial Insurance Property Casualty accident year loss ratio
 Returning excess capital to shareholders
 Growing book value per common share
Outlook for Our Operating Businesses
The outlook for each of our businesses and management initiatives to improve growth and performance in 2016 and over the
longer term is summarized below.