AIG 2008 Annual Report Download - page 126

Asset Management Results
Asset Management results were as follows:
2008 2007 2006 2008 vs. 2007 2007 vs. 2006
Years Ended December 31, Percentage Increase/(Decrease)
(In millions)
Revenues:
Spread-Based Investment business . . . $(6,918) $2,023 $2,713 —% (25)%
Institutional Asset Management ..... 1,938 2,900 1,240 (33) 134
Brokerage Services and Mutual
Funds ...................... 273 322 293 (15) 10
Other Asset Management .......... 181 380 297 (52) 28
Total ........................... $(4,526) $5,625 $4,543 —% 24%
Operating income (loss):
Spread-Based Investment business . . . $(8,543) $ (89) $ 732 —% —%
Institutional Asset Management ..... (848) 784 438 — 79
Brokerage Services and Mutual
Funds ...................... 28 100 87 (72) 15
Other Asset Management .......... 176 369 281 (52) 31
Total ........................... $(9,187) $1,164 $1,538 —% (24)%
2008 and 2007 Comparison
Asset Management recognized an operating loss in 2008 compared to operating income in 2007, primarily due
to higher other-than-temporary impairment charges on fixed maturity securities, higher mark-to-market losses on
unhedged derivatives, significantly lower partnership income, higher equity losses and realized losses on real estate
investments, and lower net carried interest revenues. Partially offsetting these declines were increases in net foreign
exchange gains on foreign currency denominated GIC and MIP liabilities. Included in the Institutional Asset
Management operating income during 2007 was a gain on the sale of a portion of AIG’s investment in The
Blackstone Group L.P. (Blackstone) in connection with its initial public offering.
As noted in the Asset Disposition section of Management’s Discussion and Analysis of Financial Condition
and Results of Operations, certain businesses within the Asset Management segment are being divested. The
$9.2 billion operating loss for 2008 includes approximately $4.5 billion in net operating losses related to businesses
which are expected to be retained by AIG, including the MIP. AIG will retain the businesses that manage the short
duration asset and liability management and traditional fixed income investment services for the insurance
companies.
2007 and 2006 Comparison
Asset Management revenues increased in 2007 compared to 2006 primarily due to increased partnership
income, management fees, and carried interest.
Asset Management operating income decreased in 2007 compared to 2006, due to foreign exchange, interest
rate and credit-related mark-to-market losses and other-than-temporary impairment charges on fixed income
investments. These other-than-temporary impairment charges were due primarily to changes in market liquidity and
spreads. Partially offsetting these decreases were higher partnership income, increased gains on real estate
investments and a gain of $398 million on the sale of a portion of AIG’s investment in Blackstone in connection
with its initial public offering. Revenues increased in 2007 compared to 2006 periods as a result of consolidating
several warehoused investments. AIG consolidates the operating results of warehoused investments until such time
as they are sold or otherwise divested. A portion of these amounts is offset in minority interest expense, which is not
a component of operating income (loss).
120 AIG 2008 Form 10-K
American International Group, Inc., and Subsidiaries