AIG 2007 Annual Report Download - page 38

REVIEW OF OPERATIONS—
FINANCIAL SERVICES
In 2007, ILFC executed lease agreements covering 138 aircraft,
including 15 new customers, across Asia, North America, South
America, Europe and the Middle East. Additionally, to advance
AIG’s Deliver the Firm strategic initiative, ILFC provided multiple
referrals and contacts from its supplier and customer base to various
AIG companies worldwide.
Reflecting its longstanding commitment to offer the most fuel-
efficient, cost-effective and environmentally friendly aircraft available,
ILFC significantly increased its order base of new-generation aircraft.
ILFC ordered 50 additional new Boeing 787 Dreamliner aircraft for
a total firm order of 74 aircraft, with deliveries beginning in 2010.
This order has propelled ILFC as Boeing’s single largest customer
to date for the new 787 aircraft. ILFC also ordered 10 additional
Boeing 737-800 aircraft to meet growing customer demand.
Further, ILFC revised its original order for 16 Airbus A350s to
20 new A350XWB aircraft. First deliveries of the A350XWB are
scheduled for 2014.
AIG Financial Products Corp. (AIGFP) is at the forefront of
AIG’s global capital market activities. It acts as a principal in nearly
all of its transactions, providing corporate finance, financial risk
management and investment solutions to a wide array of counterpar-
ties, including banks and investment banks, pension funds, corpora-
tions, foundations and endowments, insurance companies, hedge
funds, money managers, high-net-worth individuals, municipali-
ties, sovereigns and supranational entities.
From offices in the world’s leading financial centers, AIGFP
focuses on a variety of over-the-counter derivative and structured
finance transactions, and has an established track record of develop-
ing innovative financial products involving rates, currencies, com-
modities, energy, credit and equities. This is consistent with AIGFP’s
Established in 1995, AIG Consumer Finance Group, Inc. (CFG) now has four
million customers worldwide, offering products that include personal loans, auto
loans, credit cards, sales finance and mortgages. 2007 was both a year of
organic growth and global expansion. CFG made several strategic acquisitions,
added branches and introduced products in many key markets, including
Poland, where the credit card business shows significant potential (pictured,
the Market Square in Kraków city center).
AIG’s Financial Services businesses specialize in aircraft and
equipment leasing, capital markets, consumer finance and
insurance premium finance. These businesses complement
AIG’s core insurance operations and achieve a competitive
advantage by capitalizing on opportunities throughout AIG’s
global network.
Financial Services Financial Results
(in millions) 2007 2006
Revenues(a)(b) $(1,309) $7,777
Operating income (loss) excluding FAS 133,
other-than-temporary impairments,
and net realized capital gains (losses)(a) (8,983) 2,338
FAS 133 gains (losses) 211 (1,822)
Other-than-temporary impairments(c) (643) —
Net realized capital gains (losses) (100)(133)
Total operating income (loss)(a) (9,515) 383
(a) In 2007, both revenues and operating income (loss) include an unrealized market
valuation loss of $11.5 billion on AIGFP’s super senior credit default swap portfolio and
an other-than-temporary impairment charge of $643 million on AIGFP’s available-for-sale
investment securities.
(b) Includes gains (losses) from hedging activities that did not qualify for hedge accounting
treatment under FAS 133 in 2007 and 2006, respectively; the effect was $104 million
and $(1.97) billion.
(c) Represents an other-than-temporary impairment charge on AIGFP’s available-for-sale
investment securities.
The excellent results of International Lease Finance Corporation
(ILFC) in 2007 reflect the strength of the airline industry on a
global basis and the underlying strong demand for ILFC’s aircraft.
Lease rates continued to increase throughout the year across ILFC’s
lease placements of new and used aircraft.