American International Group Inc.
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Case Code: BSTR115 Case Length: 34 Pages Period: 2002 Pub Date: 2002 Teaching Note: Not Available |
Price: Rs.500 Organization: American International Group Inc. Industry: Financial Services Countries: USA Themes: Corporate Strategy |
Abstract Case Intro 1 Case Intro 2 Excerpts
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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