American International Group Inc.

 
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Case Details:

Case Code : BSTR115
Case Length : 34 Pages
Period : 1875 - 2002
Organization : American International Group Inc.
Pub Date : 2002
Teaching Note :Not Available
Countries : USA
Industry : Financial Services

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Introduction Contd...

Maurice R Greenberg (Greenberg), the chairman of the company had not announced his retirement nor a succession plan, although he was 77 years old in 2002, and had spent 35 years as chairman. AIG's annual reports were said to lack transparency, as they did not disclose directors' fees and other required details.

In response to the mounting criticism. Greenberg finally unveiled a succession strategy in May 2002. It included the appointment of two co-Chief Operating Officers (COO), and a chairman of the executive committee. The plan also included the creation of a new seven-member office to assist the chairman of the executive committee.

History

EARLY HISTORY

In 1919, an American entrepreneur, Cornelius Vander Starr (Starr), started a small insurance agency called American Asiatic Underwriters (AAU), in Shanghai. In its early years, AAU underwrote business for other insurers. It underwrote for many American insurance companies in China and also offered fire and marine insurance. In 1921, AAU started selling life insurance policies to the Chinese population when it incorporated the Asia Life Insurance Company (Asia Life). Soon, Asia Life was prospering. By the late 1920s, Asia Life opened its offices and agencies in China, Hong Kong, Indochina, Jakarta, Kuala Lumpur and Philippines. Starr's efficient management fueled the growth of Asia Life's business.

He hired and trained local people, who were later promoted to managerial positions. This practice later became the hallmark of AIG's work culture. In 1926, AAU entered the US and established American International Underwriters (AIU) in New York.

AIU functioned as a general agent for US insurers and specialized in foreign risks incurred by American companies. Though the business witnessed very little growth in the initial years, it was the first important diversification for AAU. In the 1930s, AIU entered the Latin American insurance market, which was then dominated by European insurers. AIU established itself in these markets over a period of time. The war in Europe in 1940 also helped the company to grow. As a result of the war, European insurers were forced to stop operating in Latin America, and AIU soon became a major player in the market. AIU established offices in many Latin American countries. The company's premium income from Latin American surpassed the income from its Asian operations...

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