American International Group, Inc. (AIG), a world leader in insurance and financial services, is the leading international insurance organization, with operations in more than 130 countries and jurisdictions.

AIG companies serve commercial, institutional and individual customers through the most extensive worldwide property-casualty and life insurance networks of any insurer. In addition, AIG companies are leading providers of retirement services, financial services and asset management around the world.

AIG’s common stock is listed on the New York Stock Exchange, as well as the stock exchanges in Ireland and Tokyo.

DEAR FELLOW SHAREHOLDERS:

After a promising start, 2007 had a disappointing conclusion, both in terms of our results and share price performance. The U.S. credit crisis, recession fears and record-high oil prices caused economic disruption and uncertainty.

In addition, some of our businesses did not meet expectations. Nevertheless, the fundamental strength of our core operations is intact, and we made important advances in key markets. We remain confident in our strategy to leverage our financial strength and global franchise to continue our growth in both emerging and developed markets. Although it appears economic conditions will not be any better in 2008, we continue to see many opportunities to deliver quality insurance and financial products and services to customers around the world.

2007 Results
AIG reported net income of $6.20 billion, or $2.39 per diluted share for 2007, compared to $14.05 billion, or $5.36 per diluted share for 2006.

Full year 2007 adjusted net income, excluding the effect of economically effective hedging activities that did not qualify for hedge accounting treatment under FAS 133, and the related foreign exchange gains and losses, was $9.31 billion, or $3.58 per diluted share, compared to $15.41 billion, or $5.88 per diluted share for 2006.

Included in 2007 net income and adjusted net income was a charge of $11.47 billion pretax ($7.46 billion after tax) for unrealized market valuation losses related to the AIG Financial Products Corp. (AIGFP) super senior credit default swap portfolio. Based upon its most current analysis, AIG believes any losses that are realized over time on the super senior credit default swap portfolio of AIGFP will not be material to AIG’s overall financial condition, although it is possible that realized losses could be material to AIG’s consolidated results of operations for an individual reporting period.

Full year results also include pretax net realized capital losses of $3.59 billion. Consolidated assets increased in 2007 to $1.061 trillion, up from $979.41 billion in 2006. At year end, book value per share stood at $37.87, down from $39.09 at the end of 2006. Shareholders’ equity also declined to $95.80 billion from $101.68 billion at the end of 2006. AIG recorded total revenues during the year of $110.06 billion, 2.9 percent below 2006 revenues. Revenues, shareholders’ equity and book value per share were adversely affected by realized capital losses and the net unrealized market valuation loss recorded by AIGFP.

2007 Highlights
We overcame the challenges of 2007 to make progress on several fronts. We were pleased when the China Insurance Regulatory Commission approved our application to establish a Wholly Owned Foreign Enterprise (WOFE) under the name AIG General Insurance Company China Limited (AIG General). Soon after, we opened a new AIG General headquarters in Shanghai and consolidated our Chinese general insurance operations there to capture efficiencies and provide a platform to establish new branches in other areas of China. AIA China continued to expand on the provincial licenses granted in 2006, opening 29 new sales and service centers in 2007, for a total of 104 centers in 19 cities. In addition, AIG InvestmentsSM received approval to set up a representative office in Tianjin, our first operation in China’s third-largest city.

In Korea, we obtained preliminary approval from the Financial Supervisory Service to offer mortgage reinsurance through AIG United Guaranty Insurance (Asia) Limited. We signed a memorandum of understanding with the Bank of Investment and Development of Vietnam for the expansion of our business cooperation agreement in that rapidly growing country. The agreement will allow us to expand beyond our existing relationship in life insurance to include a wide range of areas such as general insurance, consumer finance, asset management and banking services.

We are rapidly building a consumer finance franchise in India to complement our Tata AIG Life and General Insurance partnership. In 2007, we established a presence in housing finance and consumer durable finance. In addition, we are strengthening our presence in asset management and real estate development.

In the Middle East, American Life Insurance Company (ALICO) received a license to operate a retail life insurance business in the Qatar Financial Centre.

ALICO is the first life insurance company to receive an expanded license, which is in addition to a wholesale life insurance license first obtained in February 2007.

Our acquisition of the German insurer Württembergische und Badische Versicherungs-AG (WüBa) reaffirmed our commitment to growth in the German marketplace, and greatly enhanced our insurance offerings to small and midsize companies.

We advanced our strategy in the auto insurance sector when we acquired the outstanding shares of 21st Century Insurance Group that we did not already own.

We then consolidated 21st Century with AIG’s existing auto platform. The combined operation, aigdirect.comSM, is an organization with the reach and expertise needed to compete more effectively in the U.S. auto insurance marketplace.

Through AIG-managed funds, we are a leading investor in the infrastructure business. In 2007, our investments in P&O Ports North America, AMPORTS and MTC Holdings were organized under one management structure.

We believe the new entity, Ports America, constitutes the largest and most experienced independent port operator and automotive import/export processor in the United States.

In addition to these accomplishments, we made good progress on several other fronts.

Customer Focus—We devoted a great deal of attention to our customers as we broadened the implementation of our “Deliver the Firm” strategy. Specifically, we examined how to realign the way AIG does business so we can deploy our products and services in ways that allow us to meet multiple needs of customers around the world. For our customers, it means more convenience, more choices and even better services.

For our employees, it means broader engagement with other AIG businesses and colleagues. For our shareholders, it means tapping the vast potential for new growth and higher returns.

Capital Management—The implementation of our economic capital model provides us with a tool to help us allocate our capital efficiently. The tool provides one of the metrics we will use with increasing frequency to allocate capital to promising growth areas, judge performance on a consistent basis across our business segments and help us set compensation policy. AIG’s capital position is excellent and we have the flexibility to take advantage of growth opportunities.

Innovation—Our reputation as an industry innovator gained widespread recognition when AIG Private Client Group’s Wildfire Protection Unit acted swiftly to protect client homes from raging wildfires in the western United States.

The unit’s response teams treated client homes with a fire retardant in advance of the flames, reducing losses and claims. Meanwhile, AIG Product Development maintained a steady flow of new products, launching one every 14 days on average, with individual businesses launching even more. New offerings ranged from Family Protector, an urban protection package launched in South Africa, to AIG Oilfield Services Insurance, a one-stop coverage solution designed specifically for independent oil and gas clients.

Building our Brand—We made substantial progress in 2007 in strengthening worldwide recognition of the AIG brand.

Our success is attributable to greater consistency in the implementation of our brand and judicious investments in brand advertising and sponsorship opportunities. Our sponsorship of the Manchester United Football Club has helped tremendously to increase our recognition worldwide, particularly in key Asian markets. Of course, it has helped build recognition in the United Kingdom as well. The consolidation of our New Hampshire and Landmark businesses under the name AIG UK Limited will allow us to further leverage our Manchester United sponsorship.

In Australia and New Zealand, all of our businesses now market under the AIG brand name. We launched a vigorous branding campaign in India to support our business growth there. National Union Fire Insurance Company of Pittsburgh, Pa., now markets under the name AIG Executive LiabilitySM and AIG VALIC, a leader in the K-12, healthcare and higher education markets, has re-branded as AIG Retirement. It was gratifying to see the growing strength of our brand recognized when BusinessWeek magazine included AIG in its annual list of the world’s top brands, ranking us at 47, the highest rank of any insurer, in our first-ever appearance on the list.

While we are proud of these successes, we clearly need to improve in several areas. There is no disputing the severity of the U.S. residential mortgage crisis and the dislocation in the credit markets, but that cannot be an excuse for poor performance.

We need to reverse higher losses and expenses and work through product and distribution shortcomings in several other businesses. Even though we have made progress increasing the average number of products sold per customer, there is still room for improvement.

We are addressing these weaknesses through operational and structural investments and improvements, and I can assure you we are doing so with a sense of urgency.

Vision and Values
While financial strength, quality assets and a solid strategy are critical elements of success, it is also important to synthesize those elements with a set of core values that are shared by all employees.

In 2007, we engaged a sampling of employees around the world and formalized a vision and set of values for AIG that will serve as our touchstone for future progress:

Our Vision is to be the world’s first-choice provider of insurance and financial services.

Our Values are People, Customer Focus, Performance, Integrity, Respect and Entrepreneurship.

Our Vision and Values define and unite us as an organization. You can read more about our Vision and Values further on in this report. ...

View AIG 2007 Annual Report

CONTENTS:
Financial Highlights 1
Letter to Shareholders 2
AIG: What We See 11
AIG at a Glance 24
Review of Operations 26
Reconciliation in Accordance with Regulation G 42
Five Year Summary of Consolidated Operations 43
Five Year Summary of Selected Financial Information 44
Supplemental Financial Information 46
Board of Directors 50
Corporate Directory 51
Annual Report on Form 10-K
Inside
Shareholder Information Back Cover

Download AIG 2007 Annual Report

PDF format, 5MB, 276Pages.

What We See...
The ability to see and seize opportunities in the markets we serve has always differentiated AIG from its peers. Where others may see little or no potential, we see new ways to deliver solutions to our 74 million customers worldwide.

AIG has many strengths in markets around the world. Our 116,000 employees and over 700,000 agents, brokers and sales representatives strive to exceed client expectations with market-leading products and services.

ABOUT AIG:

American International Group, Inc. (AIG) is a holding company which, through its subsidiaries, is engaged in a range of insurance and insurance-related activities in the United States and abroad.

AIG’s primary activities include both General Insurance and Life Insurance & Retirement Services operations. Other significant activities include Financial Services and Asset Management. AIG’s major product and service groupings are General Insurance, Life Insurance & Retirement Services, Financial Services and Asset Management.

Through these operating segments, AIG provides insurance, financial and investment products and services to both businesses and individuals in more than 130 countries and jurisdictions.

In September 2007, AIG announced that it has completed the merger of a wholly owned subsidiary of AIG with 21st Century Insurance Group (21st Century). Upon consummation of the merger, AIG acquired remaining 39.3% interest in 21st Century, which AIG did not previously own. (Google Finance)

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