(AIG)American international group is an American insurance company that has offices in many places around the world. AIG is one of the largest insurance companies in the world and it's domestically known as the number one provider in insuring casualty and specialty. Outside America AIG also provides strong life insurance operations as well as financial services and asset management (Chiranjevi C & Kumar S. 2008 p79. Basing in the market capitalization as of Dec. 2007, this company is the second largest insurance company in the world after the china life insurance. AIG has a good record in provision of retirement services, asset management as well as financial services. Currently the AIGs domestic brokerage group is the largest organization in property and casualty services in United States of America.
Up 2006 the performance of AIG in the global insurance and financial services market was doing very well though the trend appeared to change in the year when its revenues from the domestic market declined. In 2007 the sub prime crisis led a further decline in the performance of AIG. This was illustrated by the low credit derivative portfolio of the American international group which amounted to $ 513 Billion as of sep.2007. However the company's corporate advertising as well as brand building sponsorship like the sponsorship of the Manchester united football club, has enhanced the worldwide recognition of the AIG brand. This resulted to the appearance of AIG in the "Top 100 Brands survey" of the Americas business week in 2007. In September 2008 the company suffered threats of being liquidated when its credit rating were downgraded below the recommended levels but the federal reserve bank of the united states loaned the company to enable it meet the collateral obligations (Chiranjevi C & Kumar S. 2008 p. 76). Later in 2009 AIG subsequently sold a number of its assets so as to pay its loans. In March 2009, the American International Group experienced a lot of public outrage and political backlash due to its retention of payments. At this time the AIG employees' endured hate and threat messages from clients due to the inconveniences caused to them by the company.
Organizational Behavior Analysis of AIG
AIG is which is the commercial insurances Mother Company is facing challenges related to unusual developments in the financial markets. The company has consequently established measures to improve liquidity so as to alleviate the problem it's facing from these difficult financial times. Its commercial insurance companies have substantial capital position such that they don't depend on the mother company. They are also well regulated to ensure that the interest of the policyholders is given the first consideration a feature that gives AIG strength over other companies. The AIG commercial Insurance liquidity has remained strong while its statutory surplus has increased by about 50% to $ 26.7 billion since 2005. Its ability to settle customer's claims as well as its commitment to insuring challenging risks is still strong. This unique willingness by AIG gives it much advantage over other insurance companies who are never willing to write challenging risks (Chiranjevi C & Kumar S. 2008 p. 77). The company is has a wavering commitment to serve its customers and its brokers by managing their needs effectively and also communicating developments as they occur.
In March 2008 the American International Group identified some of its problem areas that have led to its tremendous decline. Some of these weaknesses were transactions with some alleged independent companies that were actually controlled by the company. Other misleading transactions that led to its problems were the bond transactions that may have allowed the company to claim gains without actually selling the bonds (Fernando Á & Fridson Mp.245). AIG had also certain misclassified losses that and incredible estimates on certain deferred acquisition costs. The company's employees and managers had also developed a culture of secrecy that made most of deals to be carried out in un transparent manner. These transactions as well as other possible accounting problems weakened the company financial situation.
Conclusion and recommendations
The financial services committee should give priority to the unattended public questions about the policies of the company instead of wasting more time on the legislation dealing with the Americas financial crisis that was voted against by all the republicans in the house. Investigations show that the company may have goosed its financial performance with dubious transactions and improper accounting leading to its problems. For instance the company $ 126 million in fines to the securities and exchange commission department which worsened its financial situation(Fernando Á & Fridson M p.243)All this mismanagement was as a result of poor leaders who were engaged in corrupt deals within the company.
In order to come from these problems the company should install new managers and name independent directors and chairman. In addition the company should launch its independent investigations to reveal the arrangements and deals that were not properly accounted for and take the responsible people to court. The company should also change its system of accounting for compensations that are paid to the senior executives. According to (Chiranjevi C & Kumar S. 2008 p.84) the America International Group board of directors was scandalously clubby and close to Greenberg, for a number of years. However due to the pressure from shareholders and the new governance regulations the board has become more independent in the recent times. This has also been achieved through the recent investigations that have made the directors responsible of their own liabilities and therefore they have taken necessary actions to keep themselves away from any scandal.
In order to completely get out of the current problems and not to experience them again the company should stop all the business dealings with the public and independent companies or force its officials to end dealings in those companies. The company should also transform the secretive culture of its employees that has been engraved for a long time. This would be a difficult task for any executive officer or even impossible for any leader who forces his career there(Fernando Á & Fridson M. 2002 ) In spite of all the problems AIG still remains a powerhouse in the industry as it has a diverse mix of industries that are leading in insurance and financial services businesses. Moreover the company is a global force that has strong holds in some of the fast growing Asian markets like China. However the company share index may never get to the limits that it had set before the crisis.
On the other side the actual extent of the company's liability is not known which implies that there could be higher charges and debts awaiting the company. According to Mackenzie S & Podsakoff, P 1995 If a federal agency had been put in place by sep 2008, the American international group could have been put into receivership, and the agency could have unwind it slowly while protecting the policyholders as well as imposing haircuts on the creditors and counterparts. If this could have been done the company could not have suffered the bankruptcy that it's now suffering.