Ijaw Dictionary Online

How Automobiles Work

Modularity is a continuation of the direction that we have been going and it will
lead to increased transparency because under the modular construct, you’ll have better end-to-end accountability and transparency of results. For example, certain of our businesses, their earnings seem to be well known, but how we allocate equity to those businesses and the relative cost of their capitals will
be more transparent in the modular structure. We’re planning different operating actions in each business module to improve profitability. First, the individual retirement and
group retirement businesses are very well positioned in what we consider the
world’s largest consumer market and its fastest growing. We have the Department of Labor
initiative to overcome and we have investment plans to do so and maintain a
successful position and whatever part of the value chain is most appropriate
following the implementation of the DOL rules, which are still unclear. In the
life insurance business, our new business is already priced to achieve our returns
but we have a large back book and there are redundant reserves which we have an
opportunity to refinance with a series of reinsurance transactions that will
improve the returns in that portfolio. Japan is a large operation for us and
complex. A few things are restraining its returns right now. First, the life insurance business, Fuji
Life, is a very fast-growing business. We made the decision to consume
operating earnings in the growth of the new business in the capital surplus
strain so that masks and underlying pricing of new business which is very
attractive and it is our fastest growing life insurance business outside the U.S. We worked hard to rehabilitate that
business since its acquisition along with Fuji Fire and Marine a few years
ago. Now along with Fuji Fire and Marine, came the responsibility to merge AIU and Fuji Fire and Marine into
a single property casualty entity and we’re about halfway to two-thirds of the
way through that process. Again, the investments necessary for that merger
and integration are masking a strong underlying business performance. We’ve
improved the automobile loss ratio by over 500 basis points and the personal
accident loss ratio over 900 basis points and Fuji since its acquisition. And in 2015, our automobile business grew for the first time in almost fifteen
years. So, in Japan will continue to focus on
merging our businesses, improving our expenses by doing so and we’ll see early benefits from that merger as we
continue to improve our business as usual position. I get the question about whether there are potential divestiture candidates and
consumer quite a lot. And of course, under the modular construct, we will be able to
create transparency with respect to what each of those modules is, in terms of the
capital allocated to it, and the returns from it and as Peter has said clearly
there are no sacred cows. That being said, consumer businesses are very important to AIG. AIG needs strong, well-performing businesses and our
consumer businesses are complementary to our other businesses. There’s a strong diversification benefit
from the stable cash flows. The earnings generally grow sustainably and in
addition to that, we are well positioned in some of the world’s fastest growing
markets in the world’s largest markets, such as the U.S. retirement business. So, whilst we keep all of our options
open, consumers are really important to AIG. In October 2014, we introduced something called the market maturity model and it maps AIG’s existing operations against the
products and channels that we should be serving in a market according to its
status in its evolution. Through this process, we’ve realized that there are
quite a few places where while that may have made sense before
currently we have non scale operations that are not profitable. In many cases
this is related to the fact that we used to have large life insurance businesses
and their customer bases, but no longer have access to those as we have divested
those companies.

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