AIG 2008 Annual Report Download - page 160

resulted in a benefit to the surplus of the domestic and foreign General Insurance companies of $114 million and
$859 million, respectively, and did not affect compliance with minimum regulatory capital requirements.
As discussed under Item 3. Legal Proceedings, various regulators have commenced investigations into certain
insurance business practices. In addition, the OTS and other regulators routinely conduct examinations of AIG and
its subsidiaries, including AIG’s consumer finance operations. AIG cannot predict the ultimate effect that these
investigations and examinations, or any additional regulation arising therefrom, might have on its business. Federal,
state or local legislation may affect AIG’s ability to operate and expand its various financial services businesses, and
changes in the current laws, regulations or interpretations thereof may have a material adverse effect on these
businesses.
AIG’s U.S. operations are negatively affected under guarantee fund assessment laws which exist in most states.
As a result of operating in a state which has guarantee fund assessment laws, a solvent insurance company may be
assessed for certain obligations arising from the insolvencies of other insurance companies which operated in that
state. AIG generally records these assessments upon notice. Additionally, certain states permit at least a portion of
the assessed amount to be used as a credit against a company’s future premium tax liabilities. Therefore, the
ultimate net assessment cannot reasonably be estimated. The guarantee fund assessments net of credits recognized
in 2008, 2007 and 2006, respectively, were $8 million, $87 million and $97 million.
AIG is also required to participate in various involuntary pools (principally workers’ compensation business)
which provide insurance coverage for those not able to obtain such coverage in the voluntary markets. This
participation is also recorded upon notification, as these amounts cannot reasonably be estimated.
A substantial portion of AIG’s General Insurance business and a majority of its Life Insurance & Retirement
Services business are conducted in foreign countries. The degree of regulation and supervision in foreign
jurisdictions varies. Generally, AIG, as well as the underwriting companies operating in such jurisdictions, must
satisfy local regulatory requirements. Licenses issued by foreign authorities to AIG subsidiaries are subject to
modification and revocation. Thus, AIG’s insurance subsidiaries could be prevented from conducting future
business in certain of the jurisdictions where they currently operate. AIG’s international operations include
operations in various developing nations. Both current and future foreign operations could be adversely affected by
unfavorable political developments up to and including nationalization of AIG’s operations without compensation.
Adverse effects resulting from any one country may affect AIG’s results of operations, liquidity and financial
condition depending on the magnitude of the event and AIG’s net financial exposure at that time in that country.
Foreign insurance operations are individually subject to local solvency margin requirements that require
maintenance of adequate capitalization, which AIG complies with by country. In addition, certain foreign locations,
notably Japan, have established regulations that can result in guarantee fund assessments. These have not had a
material effect on AIG’s financial condition or results of operations.
Investments
Investments by Segment
The following tables summarize the composition of AIG’s investments by segment:
General
Insurance
Life
Insurance &
Retirement
Services
Financial
Services
Asset
Management Other Total
(In millions)
At December 31, 2008
Fixed maturity securities:
Bonds available for sale, at fair value . . . . . . . . . $ 85,791 $262,824 $ 1,971 $12,284 $ 172 $363,042
Bond trading securities, at fair value . . . . . . . . . . — 6,296 26,848 5 4,099 37,248
Securities lending invested collateral, at fair
value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 790 3,054 ———3,844
154 AIG 2008 Form 10-K
American International Group, Inc., and Subsidiaries