AIG 2006 Annual Report Download - page 195

American International Group, Inc. and Subsidiaries
Minimum future rental income on noncancelable operating
12. Commitments, Contingencies and
leases of flight equipment which have been delivered at
Guarantees
December 31, 2006 was as follows:
Continued
and permanent injunctive relief to enjoin the consummation of the (in millions)
proposed transaction. 2007 $ 3,663
SICO. In July, 2005, SICO filed a complaint against AIG in the 2008 3,220
Southern District of New York, claiming that AIG had refused to 2009 2,682
provide SICO access to certain artwork and asked the court to 2010 2,271
order AIG immediately to release the property to SICO. AIG filed 2011 1,800
an answer denying SICO’s allegations and setting forth defenses Remaining years after 2011 4,011
to SICO’s claims. In addition, AIG filed counterclaims asserting Total $17,647
breach of contract, unjust enrichment, conversion, breach of
Flight equipment is leased, under operating leases, with
fiduciary duty, a constructive trust and declaratory judgment,
remaining terms ranging from 1 to 13 years.
relating to SICO’s breach of its commitment to use its AIG shares
only for the benefit of AIG and AIG employees. Fact and expert
Lease Commitments
discovery has been substantially concluded and briefing on SICO’s
motion for summary judgment is underway. AIG and its subsidiaries occupy leased space in many locations
Regulatory Investigations. Regulators from several states have under various long-term leases and have entered into various
commenced investigations into insurance brokerage practices leases covering the long-term use of data processing equipment.
related to contingent commissions and other industry-wide prac-
At December 31, 2006, the future minimum lease
tices as well as other broker-related conduct, such as alleged bid-
payments under operating leases were as follows:
rigging. In addition, various federal and state regulatory agencies
are reviewing certain transactions and practices of AIG and its (in millions)
subsidiaries in connection with industry-wide and other inquiries. 2007 $ 626
AIG has cooperated, and will continue to cooperate, in producing 2008 461
documents and other information in response to subpoenas and 2009 341
other requests. 2010 274
Wells Notices. AIG understands that some of its employees 2011 307
have received Wells notices in connection with previously dis- Remaining years after 2011 754
closed SEC investigations of certain of AIG’s transactions or
Total $2,763
accounting practices. Under SEC procedures, a Wells notice is an
indication that the SEC staff has made a preliminary decision to Rent expense approximated $657 million, $597 million, and
recommend enforcement action that provides recipients with an $568 million for the years ended December 31, 2006, 2005, and
opportunity to respond to the SEC staff before a formal 2004, respectively.
recommendation is finalized. It is possible that additional current
and former employees could receive similar notices in the future Other Commitments
as the regulatory investigations proceed. On June 27, 2005, AIG entered into an agreement pursuant to
which AIG agrees, subject to certain conditions, to make any
Effect on AIG payment that is not promptly paid with respect to the benefits
In the opinion of AIG management, AIG’s ultimate liability for the accrued by certain employees of AIG and its subsidiaries under
unresolved litigation and investigation matters referred to above is the SICO Plans (as discussed in Note 16 herein).
not likely to have a material adverse effect on AIG’s consolidated (c) Contingencies
financial condition, although it is possible that the effect would be
Loss Reserves
material to AIG’s consolidated results of operations for an
individual reporting period. Although AIG regularly reviews the adequacy of the established
reserve for losses and loss expenses, there can be no assurance
(b) Commitments
that AIG’s ultimate loss reserves will not develop adversely and
Flight Equipment materially exceed AIG’s current loss reserves. Estimation of
At December 31, 2006, ILFC had committed to purchase 254 new ultimate net losses, loss expenses and loss reserves is a
aircraft deliverable from 2007 through 2015 at an estimated complex process for long-tail casualty lines of business, which
aggregate purchase price of $19.0 billion. ILFC will be required to include excess and umbrella liability, directors and officers liability
find customers for any aircraft acquired, and it must arrange (D&O), professional liability, medical malpractice, workers compen-
financing for portions of the purchase price of such equipment. sation, general liability, products liability and related classes, as
well as for asbestos and environmental exposures. Generally,
actual historical loss development factors are used to project
Form 10-K 2006 AIG 145