Back in 1919, when Cornelius Vander Starr founded AIG in Shanghai, he could scarcely have imagined that the firm that began in two little offices in China would one day become one of the world's top 10 insurance companies, only to face the setback of the 2008 crisis, overcome it, and stage a vigorous recovery in 2012. He would probably have imagined he had been dreaming if he were to see the major expansion plans the company has for Latin America this year.
The 2008 crisis was no minor bump in the road. AIG had to borrow from the US Federal Reserve and Treasury in order to overcome the setback. It even had to change its name to Chartis, sold part of its assets--including some of its Latin American operations--staged a recovery, and once again kept its competitors awake at night in order to follow its progress.
"Latin America is very important to us," said Ed Mena, AIG's leading executive for Latin America and the Caribbean. The numbers prove his point. AIG's Latin American operation is growing at a rate of 20 percent, boosted by greater access to credit and growth of a middle class whose younger members are now joining the labor market.
But Latin America is a very profitable place to be. Insurers are receiving a return on their assets that Franklin Santarelli of Moody's reckons to be 2.5 percent. The return in Brazil is slightly over 2 percent, but in Central America it is more than 5 percent.
In addition, Mena says, the future holds a rich bounty of growth thanks to the continuance of controls on inflation combined with multimillion investments in infrastructure. And there is plenty of room to grow in the insurance industry; cover in the region is very scarce. On average, Moody's estimates that premiums in Latin America amount to 2 percent of GDR The proportion rises to 3 percent in countries such as Chile, but it falls well short of the 10 percent of GDP in Spain.
With its former name restored, AIG aims to make the most of its opportunities by concentrating...