AIG 2005 Annual Report Download - page 177

AMERICAN INTERNATIONAL GROUP, INC. AND SUBSIDIARIES
commissions to Starr and its subsidiaries for the production and
17. Leases
management of insurance business. There are no significant
(a) AIG and its subsidiaries occupy leased space in many receivables from/payables to related parties at December 31,
locations under various long-term leases and have entered into 2005. Payment for the production of insurance business to
various leases covering the long-term use of data processing Starr aggregated approximately $214 million in 2005,
equipment. $205 million in 2004, and $173 million in 2003, from which
Starr generally is required to pay commissions due to originat-
At December 31, 2005, the future minimum lease payments ing brokers and its operating expenses. AIG also received
under operating leases were as follows: approximately $23 million in 2005, $24 million in 2004, and
$24 million in 2003 from Starr and paid approximately
(in millions)
$20,000 in 2005, $39,000 in 2004, and $114,000 in 2003 to
2006 $ 573 Starr in rental fees and for services none in 2005, $262,000 in
2007 436 2004 and 2003. AIG also received approximately $2 million in
2008 325
2005, $1 million in 2004, and $2 million in 2003, respectively,
2009 253
from SICO and paid approximately $1 million in each of the
2010 215
years 2005, 2004 and 2003 to SICO as reimbursement for
Remaining years after 2010 932
services rendered at cost. AIG also paid to SICO $3 million in
Total $2,734 2005, $4 million in 2004, and $4 million in 2003 in rental
fees.
Rent expense approximated $597 million, $568 million, and
$524 million for the years ended December 31, 2005, 2004, 19. Variable Interest Entities
and 2003 respectively.
In January 2003, FASB issued FIN46. FIN46 changed the
(b) Minimum future rental income on noncancelable operating
method of determining whether certain entities should be
leases of flight equipment which have been delivered at
consolidated in AIG’s consolidated financial statements. An
December 31, 2005 was as follows: entity is subject to FIN46 and is called a Variable Interest
(in millions) Entity (VIE) if it has (i) equity that is insufficient to permit
the entity to finance its activities without additional subordi-
2006 $ 3,227
nated financial support from other parties, or (ii) equity
2007 2,813
investors that cannot make significant decisions about the
2008 2,296
entity’s operations, or that do not absorb the expected losses or
2009 1,820
receive the expected returns of the entity. A VIE is consoli-
2010 1,490
Remaining years after 2010 3,740 dated by its primary beneficiary, which is the party that has a
majority of the expected losses or a majority of the expected
Total $15,386 residual returns of the VIE, or both. All other entities not
considered VIEs are evaluated for consolidation under other
Flight equipment is leased, under operating leases, with
guidance. In December 2003, FASB issued a revision to
remaining terms ranging from 1 to 16 years.
Interpretation No. 46 (FIN46R).
The provisions of FIN46R had to be applied immediately to
18. Ownership and Transactions With
VIEs created after January 31, 2003, and to VIEs in which
Related Parties AIG obtains an interest after that date. For VIEs in which
(a) Ownership: According to the Schedule 13D filed on AIG held a variable interest that it acquired before February 1,
March 7, 2006 by Starr, SICO, Edward E. Matthews, Maurice 2003, FIN46R was applied as of December 31, 2003. For any
R. Greenberg, the Maurice R. and Corinne P. Greenberg VIEs that were consolidated under FIN46R that were created
Family Foundation, Inc. and the Universal Foundation, Inc., before February 1, 2003, the assets, liabilities and noncontrol-
these reporting persons may be deemed to beneficially own ling interest of the VIEs were initially measured at their fair
396,124,637 shares of common stock. Based on the shares of values with any difference between the net amount added to
common stock outstanding as of December 31, 2005, this the balance sheet and any previously recognized interest being
ownership represents approximately 15 percent of the voting recognized as the cumulative effect of an accounting change.
stock of AIG. In accordance with the transition provisions of FIN46R, AIG
recorded a gain of $9 million ($14 million before tax) reported
(b) Transactions with Related Parties: During the ordinary as a cumulative effect of an accounting change for the fourth
course of business during 2005, AIG and its subsidiaries paid
AIG m Form 10-K 125