anniversary. The company's history, traces the development of an organisation that has become a world leader in insurance and financial services with a global network and business franchise second to none. But the AIG story is more than just the history of an international commercial enterprise. It's a record of how people with vision and determination built a worldwide business organisation based on the talents and skills of local people. That entrepreneurial spirit still pervades AIG today. The year was 1919. The place, Shanghai, a bustling international crossroads and the commercial centre of China and East Asia. There, a young American entrepreneur, C.V. Starr, opened a small insurance agency called American Asiatic Underwriters (AAU).

Initially, AAU represented a number of American insurance companies in Shanghai, offering fire and marine coverage. Not long thereafter, Mr. Starr identified another opportunity and entered the life insurance market in a way no other Western company had done. He set up Asia Life Insurance Company to market life insurance to the indigenous Chinese population. Although both Asia Life and AAU operated with few precedents and very little knowledge of loss experience, the business nonetheless prospered. Within ten years, they had established offices and agencies across China and in Hong Kong, Indochina, Jakarta, Kuala Lumpur and the Philippines. This growth was fuelled in part by Mr. Starr's focus on hiring, training and promoting local people to managerial positions, a practice that remains a hallmark of the AIG culture. It was 1926 when Mr. Starr first opened an office on American soil, setting up American International Underwriters (AIU) in New York to write insurance on American risks outside the United States, again as general agent for US insurers. This `home foreign' business was modest at first, but provided the Starr enterprises with their first important diversification of business risk. An even more significant diversification move came in the 1930's, as Mr. Starr turned his attention to Latin America, long the province of European insurers.

In 1940, as the war in Europe forced these companies to curtail their Western Hemisphere operations, AIU established a regional headquarters in Havana and set out to fill the void. Offices in half a dozen Latin American countries followed in succession, and by 1945, AIU's premium income in Latin America surpassed that in Asia. As political unrest spread in China and East Asia, Starr moved to his companies' headquarters to New York in 1939. Two years later virtually the entire Far Eastern operation was brought to a halt by the Pacific war. At war's end, Mr. Starr set as his first priority the re-establishment of the Far Eastern business, and both the Shanghai and Manila offices reopened even before the Japanese surrender. American International was, in fact, the first foreign company to resume business in Shanghai, where operations continued until 1950 when the office was closed. The regional headquarters had been transferred to Hong Kong a year earlier. While the operation in China did not regain its prewar status and importance, the rest of the Far Eastern business recovered extremely well. In 1946, AIU first entered Japan by invitation of the American military, initially to insure the property of US troops. By 1951, the ban on foreign companies underwriting general insurance was lifted, and the AIU in Japan began a period of significant growth. Today, Japan is AIG's largest overseas property-casualty market. AIU began in Germany in 1946 in much the same way, to serve American troops. Before the war, AIU's European operations had been confined to small agencies in Belgium, France and the Netherlands. But World War II transformed the market in ways favourable to AIU's expansion. The tight financial conditions of the large European insurers left them short of capacity and, at the same time, American overseas business expansion created enormous opportunities for AIU's home foreign business. During the 1950's, AIU expanded across Western Europe, and also established operations in the Middle East, North Africa and Australia. Simultaneously, a life insurance network spread Growth accelerated through company's innovative ideas Philippines, an old Asia Life territory. In 1947, Mr. Starr incorporated Philippine American Life Insurance Company. Philamlife's growth in the early years was extraordinary, and within ten years, the company had 60 offices throughout the country. In the 1950's, Philamlife received international attention for developing middle income housing during a period of acute housing shortages. Philamlife's endowment policies mobilised savings from the local population and provided funds to promote national development. Today, Philamlife is the largest life insurance company in the Philippines, and a household name. A similar strategy brought success in Southeast Asia. American International Assurance Company, Ltd. (AIA), began in 1931. Through a programme of postwar expansion from its Hong Kong Base, life operations were extended to Malaysia, Singapore and Thailand, marking the beginning of more than 40 years of growth. Today, AIA stands as the Number One life insurer in Southeast Asia. Asia Life, Mr. Starr's oldest life company, in 1951 changed its name to American Life Insurance Company (ALICO) and turned its sights on the Middle East and Africa, offering life insurance to local nationals, again a business strategy. In 1972, ALICO was granted a license in Japan, where it broke new ground as the first foreign life insurer admitted to that market.

Today ALICO has life operations in approximately 50 countries. In 1952, the American International organisation took an important step into the US domestic insurance market by acquiring a majority interest in the Globe & Rutgers Fire Insurance Company and its subsidiaries, including American Home Assurance Company. Two years later, Globe & Rutgers merged with American Home and took its name. By the 1960's, it was clear that American Home needed a new management direction. Its system was not working, so in 1962, under its new president, Maurice R. Greenberg, American Home's agency business was sold and the company restructured into a commercial insurer selling through brokers.

Mr. Greenberg also developed substantial re-insurance facilities, enabling American Home to write large shares of major risks and thus control the pricing. Other aspects of the plan included innovations in product and services, such as difference in conditions coverage for non-traditional perils, and emphasising deductibles rather than first-dollar coverage. He also introduced personal accident insurance through American Home. The bottom line for Mr. Greenberg was insisting on underwriting profits and installing an underwriting and management team that could accomplish this goal. As a result of the Greenberg strategy, American Home gained credibility in the marketplace with brokers and their large corporate customers. American International was now positioned for the next phase of its domestic growth. Mr. Greenberg's formula worked. Within two years, American Home's results improved dramatically. As American Home's reputation as an aggressive and

17 As company profit rises, domestic holdings increase other domestic companies. During the 1960's, American International's acquisitions included most of the companies that now make up AIG's Domestic Brokerage Group. First to join was New Hampshire Insurance Company, followed by National Union Fire Insurance Company of Pittsburgh, Pa., its subsidiary Lexington Insurance Company, and Commerce and Industry Insurance Company.

Transatlantic Re-insurance Company was also acquired during this period. Mr.

Greenberg's strategy was to identify troubled companies or ones facing unwanted takeover threats, then buy controlling interests and integrate them into the American International family. By the late 1960's, when Mr. Starr died and Mr. Greenberg was elected president, the structure of the domestic property-casualty network was in place. But its years of strong profit growth and expansion under Mr. Greenberg's leadership still lay ahead. American International Group Inc. was formed in 1967 to hold the shares of the domestic companies. Two years later, shortly after Mr. Starr's death, AIG went public with Mr. Greenberg as CEO. AIU and most of its affiliated agencies and companies became AIG subsidiaries in 1970. At that point, the modern structure of AIG was established, and in 1984, AIG shares were listed on the New York Stock Exchange, where today AIG has the largest market capitalisation of any listed insurance and financial services organisation. Under Mr. Greenberg's leadership, the decades of the 1970's and 1980's marked a period of exceptional growth for AIG. The company was transformed into a leading global insurance organisation. AIG's capital base and strong brokerage community relationships enabled the domestic operating companies to underwrite more significant risks and become major players in new markets requiring high capacity and specialised underwriting expertise. Management emphasised tailoring products and services to specific market segments, and stressed deep technical expertise in underwriting, engineering, risk management and other 18 Successfully responding to corporations' needs large companies, providing another source of significant growth. A number of specialised units were also organised or acquired in the 1970's and 1980's to respond to the changing needs of corporate America. These included companies focused on aviation insurance, mortgage guaranty insurance, claims management, vocational and rehabilitation services and managed health care. Innovation and market leadership continued to characterise AIG internationally. In 1979, AIG was the first Western insurance organisation to establish joint ventures with Hungary, Poland and Romania. In 1980, a joint venture with the People's Insurance Company of China marked another first and was a precursor of its return to China a decade later. Targeted diversification into specialised financial services was another catalyst for AIG's recent growth. The formation of AIG Financial Products Corp. and AIG Trading Corporation, and the acquisition in 1990 of International Lease Finance Corporation were the key elements of this strategy. AIG's Financial Services Group, which also includes international asset management and financial advisory services, now contributes approximately 15 percent of total pretax operating income. As AIG entered its 75th year, it looked with great pride on a key achievement: its return to China, where in late 1992 AIA was granted the first foreign insurance license in 40 years by the Chinese Government. But China is only part of the story. AIG's new companies in Poland, Hungary, the Czech Republic and Romania are footholds in the emerging market economies of Central and Eastern Europe. On the horizon are Russia, India and Vietnam. This expanding global franchise, combined with our strong position in the US commercial insurance market, its growing and profitable financial services businesses, and a domestic life insurance business that holds considerable promise, give us confidence that AIG's best years lie ahead. PHOTO C.V. Starr A picture from AIG archives shows Mr. Starr (left) with one of his first employees, K.K. Tse AIU president Jimmy Manton (left) and branch manager Henry Beekman (right) with military officials in Germany. The agreement signed enabled access to a previously European dominated market AIG Trading Group's state-of-the-art headquarters in Greenwich, Connecticut is the hub of its global trading activities Archival picture taken as AIG listed its shares on the New York Stock Exchange, a move watched by chairman, Maurice Greenberg (front), and AIG comptroller Peter Dalia Ernest Stempel AIG executives Joe Johnson (centre), Maurice Greenberg (right), and Ernest Stempel in the company's newly renovated building