Page last updated at 11:48 GMT, Wednesday, 18 March 2009

AIG: What does this US giant do?

AIG's New York headquarters
AIG has been saved by billions of dollars from the US government

American International Group (AIG) is one of the world's biggest insurance firms, but it has fallen spectacularly from grace in recent months.

Although it provides services to millions of people across the world, it recently announced the biggest quarterly loss in corporate history.

It has received billions of dollars of US state aid, and is now embroiled in a row with the government over bonuses.

AIG boss Ed Liddy is appearing before a Congressional hearing on Wednesday.

He will be answering questions about $165m (119m) of bonuses due to be paid to executives despite the fact that the US taxpayer has effectively saved the company from collapse.

Global reach

AIG provides insurance and financial services in more than 130 countries.

The group and its subsidiaries employ more than 100,000 people around the world, including 2,000 in the UK, and it is listed on the New York Stock Exchange, as well as stock exchanges in Ireland and Tokyo.

It provides a range of insurance services to a variety of commercial, institutional and individual customers.

It also provides retirement and asset management services around the world.

The insurer has 30 million US policy holders and provides insurance to more than 100,000 companies and other entities.

It is known across the world as a major sponsor of the football team Manchester United.

However, recent financial troubles mean the insurer will not be renewing its sponsorship agreement with the football club when the deal expires in 2010.

Long history

The company was founded in 1919 in Shanghai, China by the American businessman Cornelius Vander Starr.

In 1949 he moved the company's headquarters to New York where it remains today.

The company was listed on the New York stock exchange in 1969, and has grown through acquisitions.

In 2005 it became embroiled in a row with the US Securities and Exchange Commission over the way the company was operating.

In the wake of the controversy, Hank Greenberg - who had been the company's chief executive since 1967 - resigned and was replaced by Martin Sullivan.

At the beginning of 2008 it was ranked the 18th biggest company in the world in the Forbes Global 2000 list.

In June 2008, after two consecutive quarters of record losses, Martin Sullivan left the company and was succeeded by former Citigroup chief executive Robert Willumstad.

Mr Willumstad was awarded a $1m annual salary, and a potential bonus and incentive package worth $21m.

Hard times

But the timing could not have been worse for Mr Willumstad, as the credit crunch soon hit AIG hard.

The company soon racked up billions of dollars of losses related to the problems afflicting the housing and credit markets. AIG played a key role in insuring risk for financial institutions around the world.

On 16th September 2008, the US Federal Reserve announced an $85bn rescue package for AIG to save it from collapse.

Under the two-year agreement, the central bank took a 79.9% stake in the insurer.

Mr Willumstad had hoped to stay at the company for several years, but as part of the company's rescue deal he was replaced by the former boss of Allstate Corporation, Edward Liddy.

The government was soon forced to put a further $40bn into the company in November to save it from collapse.

Under the new deal, the existing $85bn government rescue package was restructured, cutting the $85bn to $60bn.

AIG was back in the news earlier this month when it reported losses for the final three months of 2008 of $61.7bn - the largest quarterly loss in corporate history.

It then hit the front pages when President Barack Obama expressed outrage at the $165m of bonuses that the insurer had agreed to pay to executives.

US Treasury Secretary Timothy Geithner has said that the $165m will be deducted from government funds due to be paid to AIG.

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SEE ALSO
US to force AIG to repay bonuses
18 Mar 09 |  Business
Obama 'outraged' at AIG bonuses
17 Mar 09 |  Business
AIG reports record $61.7bn loss
02 Mar 09 |  Business
AIG ends Man Utd sponsorship deal
21 Jan 09 |  Business
Q&A: US bails out AIG
17 Sep 08 |  Business

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