AIG 2008 Annual Report Download - page 22

AIG expects to divest its Institutional Asset Management businesses consisting of investment services that are
offered to third-party clients. The businesses offered for sale exclude those investment services providing traditional
fixed income and shorter duration asset and liability management for AIG’s insurance company subsidiaries. AIG
expects to continue relationships with the divested businesses for other investment management services used by
those subsidiaries.
AIG Investments previously acquired alternative investments, primarily consisting of direct private equity and
private equity fund investments, with the intention of “warehousing” such investments until the investment or
economic benefit thereof could be transferred to a fund or other AIG-managed investment product. However, AIG
Investments’ intended launch of such new products and funds has been indefinitely postponed. As a result of this
decision, AIG will retain these investments with a net asset value of $1.1 billion at December 31, 2008 as
proprietary investments until they can be divested. Unaffiliated investment commitments associated with these
investments were approximately $720 million at December 31, 2008 and are expected to be funded over the next
five years. AIG accounts for these investments based on the attributes of the investment using consolidation, equity
or cost accounting methods, as appropriate.
Other Operations
AIG’s Other operations include interest expense, restructuring costs, expenses of corporate staff not attrib-
utable to specific business segments, expenses related to efforts to improve internal controls, corporate initiatives,
certain compensation plan expenses and the settlement costs more fully described in Note 14(a) to the Consolidated
Financial Statements.
Certain AIG subsidiaries provide insurance-related services such as adjusting claims and marketing special-
ized products. Several wholly owned foreign subsidiaries of AIG operating in countries or jurisdictions such as
Ireland, Bermuda, Barbados and Gibraltar provide insurance and related administrative and back office services to
affiliated and unaffiliated insurance and reinsurance companies, including captive insurance companies unaffiliated
with AIG.
For additional information regarding the business of AIG on a consolidated basis, the contributions made to
AIG’s consolidated revenues and operating income and the assets held by its General Insurance, Life Insurance &
Retirement Services, Financial Services and Asset Management operations and Other operations, see Selected
Financial Data, Management’s Discussion and Analysis of Financial Condition and Results of Operations and
Notes 1 and 3 to the Consolidated Financial Statements.
Locations of Certain Assets
As of December 31, 2008, approximately 39 percent of the consolidated assets of AIG were located in foreign
countries (other than Canada), including $7.7 billion of cash and securities on deposit with foreign regulatory
authorities. Foreign operations and assets held abroad may be adversely affected by political developments in
foreign countries, including tax changes, nationalization and changes in regulatory policy, as well as by conse-
quence of hostilities and unrest. The risks of such occurrences and their overall effect upon AIG vary from country
to country and cannot easily be predicted. If expropriation or nationalization does occur, AIG’s policy is to take all
appropriate measures to seek recovery of such assets. Certain of the countries in which AIG’s business is conducted
have currency restrictions which generally cause a delay in a company’s ability to repatriate assets and profits. See
also Item 1A. Risk Factors — Foreign Operations and Notes 1 and 3 to the Consolidated Financial Statements.
Regulation
AIG’s operations around the world are subject to regulation by many different types of regulatory authorities,
including insurance, securities, investment advisory, banking and thrift regulators in the United States and abroad.
AIG’s operations have become more diverse and consumer-oriented, increasing the scope of regulatory supervision
and the possibility of intervention. In light of AIG’s liquidity problems in the third and fourth quarters of 2008, AIG
and its regulated subsidiaries have been subject to intense review and supervision around the world. Regulators have
taken significant steps to protect the businesses of the entities they regulate. These steps have included:
• restricting or prohibiting the payment of dividends to AIG;
16 AIG 2008 Form 10-K
American International Group, Inc., and Subsidiaries