American International Group Research Articles

Asian American Spies: How Asian Americans Helped Win the Allied Victory, by Brian Masaru Hayashi

Brian Hayashi has written a consistently informative and often frustrating study of Asian Americans and their wartime service with the Office of Strategic Services (OSS). While Hayashi’s deft writing makes his monograph read like an espionage thriller, it is no mere adventure tale as it offers a detailed examination of the OSS, Asian American communities, and the fluid nature of loyalty, especially in wartime. Here, in examining how loyalty is developed and understood by multiple communities, Hayashi excels, and his work eclipses even that of Masayo Umezawa Duus’s Unlikely Liberators (2006). These strengths notwithstanding, the book does not, as the subtitle promises, tell the story of how Asian Americans helped win the war; instead, it often leads readers down a winding path to a disappointing historical dead end. Hayashi begins with a thorough review of the historiography of the OSS and uses Chinese, English, Japanese and Korean language sources to bring to life the work of heretofore historically marginalised Asian American agents serving both stateside and overseas. Chapters One and Two examine the creation of the Office of Strategic Services, its basic structure and the functions of its various sections, as well as how the OSS became, by the standards of wartime America, ‘an ethnically and racially inclusive organization’ (p. 17). Here, Hayashi does an outstanding job of guiding readers through the labyrinthine process that William Donovan, head of the OSS, and others followed to identify and recruit agents from Chinese, Japanese, and Korean communities. These chapters offer a solid look at figures such as Donovan and Cornelius Vander Starr, whose wartime business, C.V. Starr and Company, grew into today’s multinational finance and insurance corporation, American International Group. These chapters also produce some highly useful and unexpected nuggets of information as, for example, when Hayashi concludes that Japan’s rapid conquest of British Burma and Malaya resulted in part from the Secret Intelligence Service’s preoccupation with ‘suppressing nationalist movements within their empire’ (p. 20). Equally impressive is his coverage of COMINTERN recruitment within the Asian American community and the contribution of Japanese leftists to the Allied victory.

A Post-Mortem of the Life Insurance Industry's Bid for Capital During the Financial Crisis

In this paper, we show that life insurance companies were under significant capital strain during the recent financial crisis. This was the case not just for the notable case of American International Group (AIG), or for life insurers within the largest life insurance groups that applied for government funds, but for life insurers across the entire industry. The ability to access government funds, the benefit of regulatory actions and the large internal capital transfers received by life insurers from their non-insurance parents during the crisis combined to contribute significant amounts of reported statutory capital to life insurance companies. Moreover, capital contributions to life insurers from their parents are not limited to crisis periods; they also exhibit a business cycle pattern. This study provides evidence suggesting two important policy recommendations and calls for additional research on these issues: 1) insurance supervisors should have the ability to assess capital adequacy and availability beyond the level of the insurance operating company, including the ability to assess the capital adequacy of, and availability of capital from, holding companies not currently supervised by state insurance regulators, and these supervisors should take a consolidated view in monitoring the size, type and direction of internal capital transfers when evaluating the viability of entity-level life insurers; and 2) life insurance supervisors would benefit from staff with expertise in understanding and forecasting the impact of macroeconomic and financial conditions on life insurers’ balance sheets.

American International Group Inc.

Corporate Philanthropy ReportVolume 37, Issue 12 p. 10-11 Corporate Profiles American International Group Inc. First published: 09 November 2022 https://doi.org/10.1002/cprt.31453Read the full textAboutPDF ToolsRequest permissionExport citationAdd to favoritesTrack citation ShareShare Give accessShare full text accessShare full-text accessPlease review our Terms and Conditions of Use and check box below to share full-text version of article.I have read and accept the Wiley Online Library Terms and Conditions of UseShareable LinkUse the link below to share a full-text version of this article with your friends and colleagues. Learn more.Copy URL Share a linkShare onFacebookTwitterLinkedInRedditWechat No abstract is available for this article. Volume37, Issue12December 2022Pages 10-11 RelatedInformation

The Rescue of American International Group Module Z: Overview

In September 2008, in the midst of the broader financial crisis, the Federal Reserve Board of Governors used its emergency authority under Section 13(3) of the Federal Reserve Act to authorize the largest loan in its history, a $85 billion collateralized credit line to American International Group (AIG), a $1 trillion insurance and financial company that was experiencing severe liquidity strains. In connection with the loan, the government received an equity interest representing 79.9% of the company’s ownership. AIG continued to experience a depressed stock price, asset devaluations, and the risk of ratings downgrades leading to questions about its solvency. To stabilize the company, the government committed additional assistance, including equity investments under the Troubled Assets Relief Program and asset purchases, for a total commitment of $182.3 billion. AIG survived as a smaller entity and repaid all amounts owed to the government, which, along with the government’s sale of its AIG equity stake, resulted in a profit of $22.7 billion for the government and taxpayers (Treasury 2013, 14). In this case we discuss the government’s actions on an aggregate basis and analyze how the rescue was conceived and executed in order to better understand the unique lessons to be learned and possibly applied to future crisis events.

Multiple breaks detection in financial interval-valued time series

Multiple structural breaks detection for Interval-Valued Time Series (IVTS) is undoubtedly relevant under practical perspectives and challenging under the point of view of the analysis of expert systems. In this respect, financial time series usually show high variability and outliers; moreover, they often exhibit the property of being of high frequency nature; thus, it is naturally advisable to consider them as IVTS type for a given time unit. Despite this relevance, scarce effort has been spent by scholars to apply the methodological advancements in breaks detection for IVTS to the crucial environment of financial time series. This paper contributes to fill this gap. It employs the Atheoretical Regression Trees framework – a very recent tool that is able to automatically locale multiple breaks occurring to unknown dates – to stock prices. Such a procedure is able to estimate in an efficient way the structural breaks of the considered series; at the same time, it keeps into account the main characteristics of the intervals describing the IVTS. For our purposes, we adopt a theoretical proposal of reading daily stock prices as intervals whose bounds are defined through the closing prices. Empirical experiments on the American International Group – whose daily prices have experienced structural breaks in the past – validate the theoretical model and show the usefulness of the proposed procedure.

Pricing bounds and bang-bang analysis of the Polaris variable annuities

This paper studies the no-arbitrage pricing of the ‘Polaris Income Plus Daily’ structured in the ‘Polaris Choice IV’ variable annuities recently issued by the American International Group. Distinct from the withdrawal benefits studied in the literature, Polaris allows the income base to ‘lock in’ the high water mark of the investment account over a certain monitoring period which is related to the timing of the policyholder's first withdrawal. By prudently introducing certain auxiliary state and decision variables, we manage to formulate the pricing model under a Markovian stochastic optimal control framework. By a slight modification of the fee structure, we show the existence of a bang-bang solution to the stochastic control problem: the optimal withdrawal strategy is among a few explicit choices. We consequently design a novel Least Squares Monte Carlo (LSMC) algorithm to approach the optimal solution. Convergence results are established for the algorithm by applying the theory of nonparametric sieve estimation. Compared with existing LSMCs, our algorithm possesses a number of advantages such as memory reduction, preservation of convexity and monotonicity of the continuation value, reducing computational cost of the tuning parameter selection, and evading extrapolation of the value function estimate. Finally, we prove that the obtained pricing result works as an upper bound of the no-arbitrage price of Polaris with the real fee structure. Numerical experiments show that this upper bound is fairly tight.

Pricing Bounds and Bang-Bang Analysis of the Polaris Variable Annuities

This paper studies the no-arbitrage pricing of the Income Plus Daily structured the Choice IV variable annuities recently issued by the American International Group. Distinct from the withdrawal benefits studied the literature, Polaris allows the income base to lock in the high water mark of the investment account over a certain monitoring period which is related to the timing of policyholder's first withdrawal. By prudently introducing certain auxiliary state and decision variables, we manage to formulate the pricing model under a Markovian stochastic optimal control framework. By a slight modification of the fee structure, we show the existence of a bang-bang solution to the stochastic control problem: the optimal withdrawal strategy is among a few explicit choices. We consequently design a novel Least Squares Monte Carlo (LSMC) algorithm to approach the optimal solution. Convergence results are established for the algorithm by applying the theory of nonparametric sieve estimation. Compared with existing LSMCs, our algorithm possesses a number of advantages such as memory reduction, preserving convexity and monotonicity of the continuation value, reducing the computational cost of the tuning parameter selection, and evading extrapolating value function estimate. Finally, we prove that the obtained pricing result works as an upper bound of the no-arbitrage price of Polaris with the real fee structure. Numerical experiments show that this upper bound is fairly tight.

Shadow banking, insurance and financial sector stability

Motivated by the recent financial crisis and the near collapse of the insurance giant American International Group (AIG), we empirically study the link between the insurance sector, the size of the shadow system and financial stability across countries. Using the Z-score as a measure of financial stability and the ratio of insurance assets to GDP for 26 countries during the period 1998–2011, this paper shows that: (i) the insurance sector is negatively and significantly related to financial stability, and that (ii) using the shadow banking system as a channel, the insurance sector is detrimental to financial stability for countries with a high level of shadow banking assets.

AN EXAMINATION OF AMERICAN INTERNATIONAL GROUP�S TROUBLED ASSET RELIEF PROGRAMS

ABSTRACT This study examines American International Group’s (AIG) Troubled Asset Relief Programs (TARP). Specifically, the traditional agency theory predictions versus managerial power predictions are examined in association with distressed firms and their CEO leadership structures and incentives. While the political and macroeconomic impetus of TARP banks has been examined widely in the banking research; however, a rigorous examination of stakeholder issues facing TARPs participating banks long term agency theory predictions and TARP repayments, remains an unexamined topic. Keywords Agency issues, banking, distressed firms, insurance, managerial power, regulation, restructuring

Corporate Profiles

Spirit AeroSystems Holdings Inc. The Kong Company LLC Yakima Products Inc. American International Group Inc. Netgear Inc. Smithfield Foods Inc. Charter Communications Inc. Legrand SA Hampton Lumber Sales Co. Rheem Manufacturing Co. Inc.

American International Group, Inc.—The Financial Crisis

The case details the history of AIG, its organizational structure, and involvement in the market for credit default swaps and the financial crisis. Edward Liddy has been appointed by Treasury Secretary Henry Paulson as CEO and chairman of AIG during the government's bailout of the insurance giant. He is preparing to address the U.S. House of Representatives' Financial Services Subcommittee on Capital Markets, Insurance, and Government-Sponsored Enterprises to provide testimony related to AIG's payment of $165 million in bonuses to several of its managers at the same time the government had been injecting billions of dollars into the company to help keep it afloat. Students are asked to reflect on the bonus payments, what factors in the organization might have contributed to the issues AIG faced in the financial crisis, and how to ensure the company did not face similar issues again in the future. Excerpt UVA-C-2322 June 7, 2011 AMERICAN INTERNATIONAL GROUP, INC.—THE FINANCIAL CRISIS Edward Liddy was preparing to address the U.S. House of Representatives' Financial Services Subcommittee on Capital Markets, Insurance, and Government-Sponsored Enterprises. It was March 2009, just six months after Liddy was appointed by Treasury Secretary Henry Paulson as CEO and Chairman of American International Group, Inc. (AIG), during the government's bailout of the insurance giant. He was being asked to provide testimony related to AIG's payment of $ 165 million in bonuses to several of its managers at the same time the government had been injecting billions of dollars into the company to help keep it afloat. For an annual salary of $ 1 and no bonus, he had returned from retirement to lead the efforts in restructuring the company and paying back the government. Although he was receiving equity compensation, it remained to be seen if it would be worth anything by the time this was over. Regardless, Liddy was now in charge of the company and had to assume responsibility for the employee bonus payments. He was facing an emotional yet powerful committee and needed to be prepared. As he both reflected on what had happened and pondered his upcoming testimony, he undoubtedly considered several questions. How could a company such as AIG find itself in this position? It was unable to remain solvent on its own and had received billions of dollars in aid from the U.S. government as a result. The head of its Financial Products Group had been cited as one of the people most responsible for the recent financial crisis. And now, it was the subject of widespread publicity and heavy scrutiny related to the payment of millions of dollars in bonuses at the same time. How could this have been prevented? Where did things go wrong, and how could the company ensure it did not end up in a similar situation again in the future? . . .

Job embeddedness as a modulation

Purpose– Based on job embeddedness (JE) theory, the purpose of this paper is to explore the impact of goal orientation (GO) and JE on job stress for financial service salespersons in the indeterminate situation.Design/methodology/approach– Participants were 298 insurance salespersons employed at two major life insurance institutions in Taiwan: Nan Shan and Fubon – which were formerly the subsidiaries of two international financial groups, American International Group and International Netherland Group, respectively. The models were tested using the two-step structural equation procedure.Findings– Findings indicated that, compared with salespersons in the newly merged Fubon, those in Nan Shan, which was undergoing mergers and acquisitions, were found to be subject to higher job stress with lower JE. In the process of reducing stress, JE is an important mechanism. However, the modulating influence of embeddedness is dependent on salespersons’ GO. In situations of higher stress, learning-oriented salespersons (in Nan Shan) were unable to significantly reduce job stress until JE was introduced as a full mediator. However, in a lower stress context, performance-oriented salespersons (in Fubon) fully applied JE in order to relieve job stress.Research limitations/implications– Managers endeavor to help salespersons effectively improve stability and reduce job stress by exploiting salespersons’ dispositions.Originality/value– The contribution of this study includes identifying the role of JE on the relationship between GO and job stress for the contingency of an indeterminate state.

Pretrade and risk-based clearing

Purpose Risk-based clearing has been proposed by Rausser et al. (2010) for over-the-counter (OTC) derivatives. This paper aims to illustrate the application of risk-based margins to a case study of the mortgage-backed securities derivative portfolio of the American International Group (AIG) during the period 2005-2008. There exists sufficient publicly available information to examine AIG’s derivative portfolio and how that portfolio would depend on conjectural changes in margin requirements imposed on its OTC derivative positions. Generally, such data on OTC derivative portfolio positions are unavailable in the public domain, and thus, the AIG data provide a unique opportunity for an objective evaluation. Design/methodology/approach This paper uses modern financial methodology to evaluate risk-based margining and collateralization for the major OTC derivative portfolio of the AIG. Findings This analysis reveals that a risk-based margin procedure would have led to earlier margin calls of greater magnitude initially than the collateral calls actually faced by AIG Financial Products (AIGFP). The total margin ultimately required by the risk-based procedure, however, is similar in magnitude to the collateral calls faced by AIGFP by August 2008. It is likely that a risk-based clearing procedure applied to AIG’s OTC contracts would have led to the AIG undertaking significant hedging and liquidation of their OTC positions well before the losses built up to the point they had, perhaps avoiding the federal government’s orchestrated restructuring that occurred in September 2008. Originality/value There has been no published risk-based evaluations of a major OTC portfolio of derivatives for any company, let alone the AIG.

Technology Focus: Natural Gas Processing and Handling (April 2016)

Technology Focus Despite the currently deteriorating oil and gas prices (at the time of writing, West Texas intermediate crude was at USD 32.38/bbl and Henry Hub natural gas was at USD 2.25/million Btu), natural gas, the “least carbon-intensive” fossil fuel, is still projected by Exxon- Mobil, the International Energy Agency, and other sources to grow by 65% from 2010 to 2040, with the majority of the increasing demand coming from the Asia Pacific region. According to the BP Statistical Review of World Energy, in 2014, total world natural-gas production was 3460.6 billion m3 and 43.2% of it was from the United States (728.3 billion m3, 21.4%), the Russian Federation (578.7 billion m3, 16.7%), and Qatar (177.2 billion m3, 5.1%). On the consumption side, the total global natural-gas consumption was 3393 billion m3 and accounted for 23.7% of the total world energy makeup. The top three leading consumers were the US (759.4 billion m3, 22.7%), the Russian Federation (409.2 billion m3, 12%), and China (185.5 billion m3, 5.4%), and they consumed 40.1% of the total world natural gas. Considering the current oil and gas market conditions and that processing and handling are part of the natural-gas supply chain, ensuring that gas processing and handling are cost efficient and safe becomes even more imperative. Currently, total gas trades were 997.2 billion m3 (in 2014), slightly less than in 2013 (1032.8 billion m3). Pipelines and liquefied natural gas (LNG) remain the primary gas-transportation means, with shares of 66.6 and 33.4% in 2014, respectively. While pipelines remain the traditional means of transportation, LNG technology provides an effective alternative for long distances and offshore environments. The design philosophy has gone from simple to sophisticated to more sophisticated, without compromising safety and operability. The advancements of LNG technologies enable the operators to operate their plants with lower specific-energy consumption, shorter downtime, safer environments, and generally higher profits. The following papers and additional readings focus on LNG front-end design, safety topics associated with natural-gas transportation through LNG and pipelines, new improvements around the well-known Fischer-Tropsch process for enhanced gas-to-diesel conversion, flare-gas management, and carbon-adsorbed natural gas as an option for automotive fuel. Recommended additional reading at OnePetro: www.onepetro.org. SPE 177861 Challenges and Complexity of World’s Largest Flares-Reduction Project by Christopher Howell, Basrah Gas Company, et al. OTC 26020 Terminal and Transportation Risk Assessment for LNG Export in North America by H. Hamedifar, DNV GL, et al. SPE 176129 Storage of Natural Gas by Adsorption Process by Anshul Arora, American International Group, et al.

Guarantees and Capital Infusions in Response to Financial Crises A: Haircuts and Resolutions

After the mortgage market meltdown in mid-2007 and during the financial crisis in 2008, major financial institutions around the world were on the verge of collapsing one after another. Faced with these troubles, the government had to respond quickly to contain the crisis as efficiently as possible. It was, however, limited in resources, time and experience. To make matters worse, the complexity and opaqueness of the financial market and these institutions greatly affected the governments’ ability to design an efficient and consistent method to contain the crisis. Shortly after Lehman Brothers filed for bankruptcy on September 15, 2008, American International Group (AIG) was also in deep trouble and close to failure when the Federal Reserve decided to bailout the institution. Washington Mutual (WaMu) and Wachovia were also facing collapse due to their exposure in risky mortgage products around the same time. WaMu closed and the Federal Deposit Insurance Corporation (FDIC), appointed as a receiver. When the FDIC was appointed, the FDIC was able to arrange a transaction that protected all depositors in the bank and transferred all ongoing operations to JP Morgan Chase without any cost to the FDIC Deposit Insurance Fund. In contrast to WaMu, in the case of Wachovia the FDIC Board of Directors initially approved a sale of Wachovia through a closed bank resolution to Citigroup under the FDIC’s systemic risk authority. However, Wachovia’s Board of Directors subsequently decided to approve a sale – with no FDIC assistance – to Wells Fargo. This case provides details on the background and government response for each troubled financial institution during the financial crisis, and the rationale behind the design of each response.

The Indirect Ethics of AIG\u2019s \u2018Backdoor Bailout\u2019

We experimentally assess the ethics of the U.S. government’s indirect bailout of the bank counterparties of American International Group during the 2008 financial crisis. When the indirect bailout is jointly compared with a counterfactual where the government directly bails out the banks, subjects judge the indirect bailout to be far more unethical. On the other hand, when the two scenarios are judged separately, subjects consider a direct bailout of banks to be more unethical. This suggests that ethical judgments of indirect versus direct action exhibit a type of preference reversal that is dependent upon whether the evaluation mode is joint or separate. The pedagogical and policy implications of this preference reversal are discussed.

Closed Claims Analysis of Medical Malpractice Lawsuits Involving Midwives: Lessons Learned Regarding Safe Practices and the Avoidance of Litigation.

The risk of litigation remains of concern to midwives, their practice partners, employers, and malpractice insurance providers. Closed claims analysis is a method of examining risk patterns and behaviors in lawsuits, including those involving health care practices. The purpose of this investigation was to evaluate claims brought against midwives, with the intent of developing strategies to decrease the incidence of litigation. Data were collected in joint meetings with members of the American College of Nurse-Midwives (ACNM); the American Association of Birth Centers; the American International Group (AIG), a major malpractice insurer for certified nurse-midwives/certified midwives (CNMs/CMs); and Contemporary Insurance Services, an independent insurance agency that has worked with AIG to facilitate the writing of malpractice insurance policies for CNMs/CMs. The purpose of the meetings was to review 162 litigation cases that involved midwives insured by AIG and had been closed between the years 2002 and 2011. Follow-up analyses of data and reporting of results were performed by the authors, who are members of the Professional Liability Section of the ACNM Division of Standards and Practice. Findings reflected 7 major categories of liability risk ranging from the most prevalent (ie, fetal/newborn complications or death) to the least prevalent (ie, attending a vaginal birth after cesarean). Data also were examined regarding the highest amounts incurred in court decisions or pretrial settlements because they were related to types of adverse outcomes that occurred. Recommendations for improving clinical practice and avoiding litigation based on findings from the closed claims analysis include, but are not limited to, the need for thorough and accurate documentation in practice, appropriate and timely consultation and collaboration, and the presence of practitioners whose clinical skills match the level of care assessed to be necessary for each woman for whom care is offered.

AIG in Hindsight

The near-failure on September 16, 2008, of American International Group (AIG) was an iconic moment in the financial crisis. Two large bets on real estate made with funding vulnerable to bank-run-like dynamics pushed AIG to the brink of bankruptcy. AIG used securities lending to transform insurance company assets into residential mortgage-backed securities and collateralized debt obligations, ultimately losing at least $21 billion and threatening the solvency of the life insurance companies. AIG also sold insurance on multisector collateralized debt obligations, backed by real estate assets, ultimately losing more than $30 billion. These activities were apparently motivated by a belief that AIG's real estate bets would not suffer defaults and were “money-good.” We find that these securities have in fact suffered write-downs and that the stark “money-good” claim can be rejected. Ultimately, both liquidity and solvency were issues for AIG.

Lessons From The 2008 Global Financial Crisis: Imprudent Risk Management And Miss Calculated Regulation

Of the major shortcomings exposed during the 2008 global nancial crisis, there are two aspects that have attracted much interest among academics: the under-appreciation of the complexity of new operations at large nancial institutions and the inadequate oversight of basic prudential supervision by regulatory agencies. To provide a brief focus on elements of these aspects, this paper presents correspond- ing case studies involve the fall of two of the largest nance companies ever existed: American International Group and Lehman Brothers Holdings. A survey of related historical arguments shows that while AIG fails due largely to its extended involvement in the new Credit Default Swap contracts that enable gambling on defaults, the collapse of Lehman Brothers' may be attributable to the misguiding capital adequacy regulations implied by the Basel II Accord. Though perhaps overly simplied, the conclusions from these two cases oer insights into the fundamental weaknesses of some primary con- temporary risk management practices and regulations.

The Rating of Insurance Companies during the Financial Crisis

This article aims to study the impact of rating agencies during the financial crisis and the ratings’ role in insurance companies’ behavior in the operating market. Important in a rating agency's assessment of overall financial strength is the insurer's ability to meet policyholder obligations. In the first part of this article we will present the context in which the major rating agencies are being analyzed and the market's attitude towards the qualifications awarded by them. During the time period of this study there were four major rating agencies that provided financial strength ratings of insurance companies: Standard & Poor's, Moody's, Fitch and AM Best. Next, we will study the important role of rating agencies in the economic crisis, but also the overreliance of firms, some relying solely on the ratings granted by rating agencies, not having a proper risk assessment system of their own. Despite the fact that the industry encourages insurers to have their private risk assessment methods, investors and policyholders still expect that ratings provide a realistic reflection of the outstanding risks to the market participants. The case of American International Group is presented in the third part of this article, analyzing the reasons which led to the 2008 liquidity crisis and the involvement of rating agencies in the group's affairs. It is important to identify the link between the AIG failure and understanding the systemic risks of financial institutions and to draw the lessons for protecting the financial stability of the insurance sector. Next, according to Moody's model for rating insurance companies, we will present a case study of the applicability of this model for two of the most important Romanian insurance companies, starting with 2006 until the last closed fiscal year, 2012.