AIG 2013 Annual Report Download - page 323

Nonvoting, callable, junior preferred interests held by the Department of Treasury represented preferred
interests in the AIA SPV and ALICO SPV. In connection with the execution of our orderly asset disposition plan, as
well as the repayment of the FRBNY Credit Facility, we transferred two of our wholly-owned businesses, AIA and
ALICO, to two newly created SPVs in exchange for all the common and preferred interests (the SPV Preferred
Interests) of those SPVs. On December 1, 2009, AIG transferred the SPV Preferred Interests to the FRBNY in
consideration for a $25 billion reduction of the outstanding loan balance and of the maximum amount of credit
available under the FRBNY Credit Facility and amended the terms of the FRBNY Credit Facility. As part of the
closing of the Recapitalization, the remaining SPV Preferred Interests, with an aggregate liquidation preference of
approximately $20.3 billion at January 14, 2011, were purchased from the FRBNY by AIG and transferred to the
Department of the Treasury as part of the consideration for the exchange of Series F Preferred Stock.
The common interests, which we retained, entitled us to 100 percent of the voting power of the SPVs. The voting
power allowed us to elect the boards of managers of the SPVs, who oversaw the management and operation of the
SPVs. Primarily due to the substantive participation rights of the SPV Preferred Interests, the SPVs were determined
to be VIEs. As the primary beneficiary of the SPVs, we consolidated the SPVs.
As a result of the closing of the Recapitalization on January 14, 2011, the SPV Preferred Interests held by the
Department of the Treasury were no longer considered permanent equity on our Consolidated Balance Sheets, and
were classified as redeemable noncontrolling interests. As part of the Recapitalization, we used approximately
$6.1 billion of the cash proceeds from the sale of ALICO to pay down a portion of the liquidation preference of the
SPV Preferred Interests. The liquidation preference of the SPV Preferred Interests was further reduced by
approximately $12.4 billion using proceeds from the sale of AIG Star, AIG Edison, Nan Shan, and MetLife securities
received in the sale of ALICO. During the first quarter of 2011, the remaining liquidation preference of the ALICO
SPV Preferred Interests was paid in full.
The SPV Preferred Interests were measured at fair value on their issuance date. The SPV Preferred Interests initially
had a liquidation preference of $25 billion and had a preferred return of five percent per year compounded quarterly
through September 22, 2013 and nine percent thereafter. The preferred return is reflected in Net income from
continuing operations attributable to noncontrolling interests — Nonvoting, callable, junior and senior preferred
interests in the Consolidated Statements of Income. The difference between the SPV Preferred Interests’ fair value
and the initial liquidation preference was amortized and included in Net income from continuing operations
attributable to noncontrolling interests — Nonvoting, callable, junior and senior preferred interests.
During the first quarter of 2012, the liquidation preference of the AIA SPV Preferred Interests was paid down in full.
Non-redeemable noncontrolling interests include the equity interests of third-party shareholders in our
consolidated subsidiaries and includes the preferred shareholders’ equity in outstanding preferred stock of ILFC, a
wholly-owned subsidiary that is held for sale at December 31, 2013 and 2012. The preferred stock in ILFC consists
of 1,000 shares of market auction preferred stock (MAPS) in two series (Series A and B) of 500 shares each. Each
of the MAPS shares has a liquidation value of $100,000 per share and is not convertible. Dividends on the MAPS
are accounted for as a reduction of the noncontrolling interest. The dividend rate, other than the initial rate, for each
dividend period for each series is reset approximately every seven weeks (49 days) on the basis of orders placed in
an auction, provided such auctions are able to occur. At December 31, 2013, there is no ability to conduct such
auctions; therefore, the MAPS certificate of determination dictates that a maximum applicable rate, as defined in the
certificate of determination, be paid on the MAPS. At December 31, 2013, the dividend rate for each of the Series A
and Series B MAPS was 0.50 percent and 0.36 percent respectively.
For the years ended December 31, 2013 and 2012, the Noncontrolling interests balance declined by $56 million and
$188 million, respectively, primarily caused by distributions to noncontrolling interest and, in 2012, an adjustment for
the reclassification of noncontrolling interest from permanent to temporary and acquisitions of noncontrolling interests.
In 2011, the decline in noncontrolling interest balance was primarily due to the acquisition of Fuji’s noncontrolling
interest.
Redeemable noncontrolling interest
Non-redeemable noncontrolling interests
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AIG 2013 Form 10-K 305
ITEM 8 / NOTE 17. NONCONTROLLING INTERESTS
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