AIG 2008 Annual Report Download - page 21

currencies, energy, equities and interest rates. AIGFP also invests in a diversified portfolio of securities and
principal investments and engages in borrowing activities that involve issuing standard and structured notes and
other securities and entering into guaranteed investment agreements (GIAs). Due to the extreme market conditions
experienced in 2008, the downgrades of AIG’s credit ratings by the rating agencies, as well as AIG’s intent to
refocus on its core businesses, AIGFP has begun to unwind its businesses and portfolios including those associated
with credit protection written through credit default swaps on super senior risk tranches of diversified pools of loans
and debt securities. See Management’s Discussion and Analysis of Financial Condition and Results of Operations
— Outlook — Financial Services.
Consumer Finance
AIG’s Consumer Finance operations in North America are principally conducted through AGF. AGF derives
most of its revenues from finance charges assessed on real estate loans, secured and unsecured non-real estate loans
and retail sales finance receivables. In the second quarter of 2008, AGF ceased its wholesale originations
(originations through mortgage brokers). In light of severe stress in the U.S. housing sector, AGF also closed
179 branch offices and reduced new loan originations in the fourth quarter of 2008.
AIG’s foreign consumer finance operations are principally conducted through AIGCFG. AIGCFG operates
primarily in emerging and developing markets. AIGCFG has operations in Argentina, China, Brazil, Hong Kong,
Mexico, the Philippines, Poland, Taiwan, Thailand, India and Colombia. Through February 18, 2009, AIGCFG had
entered into contracts to sell certain of its operations in Taiwan, Thailand and the Philippines.
Asset Management Operations
AIG’s Asset Management operations comprise a wide variety of investment-related services and investment
products. These services and products are offered to individuals, pension funds and institutions (including AIG
subsidiaries) globally through AIG’s Spread-Based Investment business, Institutional Asset Management, and
Brokerage Services and Mutual Funds business. Also included in Asset Management operations are the results of
certain SunAmerica sponsored partnership investments.
Revenues and operating income (loss) for Asset Management are affected by the general conditions in the
equity and credit markets. In addition, net realized gains (losses) and performance fee (carried interest) revenues are
contingent upon various fund closings, maturity levels, investment management performance and market
conditions.
Spread-Based Investment Business
AIG’s Spread-Based Investment business includes the results of AIG’s proprietary spread-based investment
operations, the Matched Investment Program (MIP) and the Guaranteed Investment Contracts (GIC), which the
MIP replaced. Due to the extreme market conditions experienced in 2008 and the downgrades of AIG’s credit
ratings, the MIP is currently in run-off. As previously disclosed, the GIC has been in run-off since the inception of
the MIP in 2006. No additional debt issuances are expected for either the MIP or GIC for the foreseeable future.
Institutional Asset Management
AIG’s Institutional Asset Management business, conducted through AIG Investments, provides an array of
investment products and services globally to institutional investors, pension funds, AIG subsidiaries, AIG affiliates
and high net worth investors. These products include traditional equity and fixed maturity securities, and a wide
range of real estate, private banking and alternative asset classes. Services include investment advisory and sub-
advisory services, investment monitoring and transaction structuring. Within the equity and fixed maturity asset
classes, AIG Investments offers various forms of structured investments. Within the alternative asset class, AIG
Investments offers hedge and private equity funds and fund-of-funds, direct investments and distressed debt
investments. AIG Global Real Estate provides a wide range of real estate investment, development and management
services for AIG subsidiaries, as well as for third-party institutional investors, pension funds and high net worth
investors. AIG Global Real Estate also maintains a proprietary real estate investment portfolio through various joint
venture platforms.
AIG 2008 Form 10-K 15
American International Group, Inc., and Subsidiaries