AIG 2006 Annual Report Download - page 190

American International Group, Inc. and Subsidiaries
Notes to Consolidated Financial Statements Continued
9. Debt Outstanding
Continued
(j) Interest Expense for All Indebtedness: Total interest 11. Shareholders’ Equity and Earnings Per
expense for all indebtedness, net of capitalized interest, aggre- Share
gated $6.95 billion in 2006, $5.7 billion in 2005 and $4.4 billion Shareholders’ Equity
in 2004. Capitalized interest was $59 million in 2006, $64 million
in 2005 and $59 million in 2004. Cash distributions on the AIG parent depends on its subsidiaries for cash flow in the form
preferred shareholders’ equity in subsidiary companies of ILFC of loans, advances, reimbursement for shared expenses, and
and liabilities connected to trust preferred stock of AGC subsidiar- dividends. AIG’s insurance subsidiaries are subject to regulatory
ies are accounted for as interest expense in the consolidated restrictions on the amount of dividends which can be remitted to
statement of income. The cash distributions for ILFC were AIG parent. These restrictions vary by state. For example, unless
approximately $5 million, $5 million and $4 million for the years permitted by the New York Superintendent of Insurance, general
ended December 31, 2006, 2005 and 2004, respectively. The insurance companies domiciled in New York may not pay dividends
cash distributions for AGC subsidiaries were approximately to shareholders which in any twelve month period exceed the
$107 million, $112 million and $123 million for the years ended lesser of ten percent of the company’s statutory policyholders’
December 31, 2006, 2005 and 2004, respectively. surplus or 100 percent of its ‘‘adjusted net investment income,’’
as defined. Generally, less severe restrictions applicable to both
10. Preferred Shareholders’ Equity in Subsidiary General and Life Insurance companies exist in most of the other
Companies states in which AIG’s insurance subsidiaries are domiciled.
Certain foreign jurisdictions have restrictions which could delay or
As of December 31, 2006, preferred shareholders’ equity in limit the remittance of dividends. There are also various local
subsidiary companies represents preferred stocks issued by ILFC, restrictions limiting cash loans and advances to AIG by its
a wholly owned subsidiary of AIG. subsidiaries. Largely as a result of the restrictions, approximately
At December 31, 2006, the preferred stock consists of 1,000 90 percent of consolidated shareholders’ equity was restricted
shares of market auction preferred stock (MAPS) in two series from immediate transfer to AIG parent at December 31, 2006.
(Series A and B) of 500 shares each. Each of the MAPS shares At December 31, 2006, there were 6,000,000 shares of AIG’s
has a liquidation value of $100,000 per share and is not $5 par value serial preferred stock authorized, issuable in series,
convertible. The dividend rate, other than the initial rate, for each none of which were outstanding.
dividend period for each series is reset approximately every seven
weeks (49 days) on the basis of orders placed in an auction.
During 2006, ILFC extended each of the MAPS dividend periods
for three years. At December 31, 2006, the dividend rate for
Series A MAPS was 4.70 percent and the dividend rate for
Series B MAPS was 5.59 percent.
140 AIG 2006 Form 10-K