AIG 2015 Annual Report Download - page 159

ITEM 7 / LIQUIDITY AND CAPITAL RESOURCES
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Liquidity and Capital Resources of AIG Parent and Subsidiaries
AIG Parent
As of December 31, 2015, AIG Parent had approximately $13.7 billion in liquidity sources. AIG Parent’s liquidity sources are
primarily held in the form of cash, short-term investments and publicly traded, investment grade rated fixed maturity securities.
Fixed maturity securities primarily include U.S. government and government sponsored entity securities, U.S. agency
mortgage-backed securities, corporate and municipal bonds and certain other highly rated securities. AIG Parent actively
manages its assets and liabilities in terms of products, counterparties and duration. Based upon an assessment of funding
needs, the liquidity sources can be readily monetized through sales, repurchase agreements or contributed as admitted assets
to regulated insurance companies. AIG Parent liquidity is monitored through the use of various internal liquidity risk measures.
AIG Parent’s primary sources of liquidity are dividends, distributions, loans and other payments from subsidiaries and credit
facilities. AIG Parent’s primary uses of liquidity are for debt service, capital and liability management, operating expenses and
subsidiary capital needs.
We generally manage capital flows between AIG Parent and its subsidiaries through internal, Board-approved policies and
standards. In addition, AIG Parent has unconditional capital maintenance agreements (CMAs) in place with certain
subsidiaries. Nevertheless, regulatory and other legal restrictions could limit our ability to transfer capital freely, either to or
from our subsidiaries.
We believe that we have sufficient liquidity and capital resources to satisfy our reasonably foreseeable future requirements and
meet our obligations to our creditors, debt-holders and insurance company subsidiaries. We expect to access the debt markets
from time to time to meet funding requirements as needed.
We utilize our capital resources to support our businesses, with the majority of capital allocated to our insurance operations.
Should we have or generate more capital than is needed to support our business strategies (including organic growth or
acquisition opportunities) or mitigate risks inherent to our business, we may develop plans to distribute such capital to
shareholders via dividends or share repurchase authorizations or deploy such capital towards liability management.
In the normal course, it is expected that a portion of the capital released by our insurance operations or through the utilization
of AIG’s deferred tax assets may be available for distribution to shareholders. Additionally, it is expected that capital associated
with businesses or investments that do not directly support our insurance operations may be available for distribution to
shareholders or deployment towards liability management upon its monetization.
In developing plans to distribute capital, AIG considers a number of factors, including, but not limited to: the capital resources
available to support our insurance operations and business strategies, AIG’s funding capacity and capital resources in
comparison to internal benchmarks, expectations for capital generation, rating agency expectations for capital, as well as
regulatory standards for capital and capital distributions.
In January 2016, AIG Parent made a capital contribution of approximately $2.9 billion to our Non-Life Insurance Companies as
a result of our fourth quarter reserve strengthening.
The following table presents AIG Parent's liquidity sources:
As of As of
(In millions) December 31, 2015 December 31, 2014
Cash and short-term investments
(
a
)
$ 3,497 $ 5,085
Unencumbered fixed maturity securities(b) 5,723 4,727
Total AIG Parent liquidity 9,220 9,812
Available capacity under syndicated credit facility(c) 4,500 4,000
Available capacity under contingent liquidity facility(d) -500
Total AIG Parent liquidity sources $ 13,720 $ 14,312