AIG 2008 Annual Report Download - page 230

Annuity Life Insurance Company (VALIC) and AIG Retirement Services, Inc (AIG SunAmerica and, collectively
with AIG Annuity and VALIC, the Domestic Retirement Services internal reporting unit).
American International Reinsurance Company Limited (AIRCO) acts primarily as an internal reinsurance
company for AIG’s insurance operations.
Life Insurance & Retirement Services is comprised of two major groupings of products and services:
insurance-oriented products and services and retirement savings products and services.
Financial Services: AIG’s Financial Services subsidiaries engage in diversified activities including aircraft
leasing, capital markets, consumer finance and insurance premium finance. Together, the Aircraft Leasing, Capital
Markets and Consumer Finance operations generate the majority of the revenues produced by the Financial
Services operations. A.I. Credit also contributes to Financial Services income principally by providing insurance
premium financing for both AIG’s policyholders and those of other insurers.
AIG’s Aircraft Leasing operations represent the operations of ILFC, which generates its revenues primarily
from leasing new and used commercial jet aircraft to foreign and domestic airlines. Revenues also result from the
remarketing of commercial jet aircraft for ILFC’s own account, and remarketing and fleet management services for
airlines and financial institutions.
Capital Markets represents the operations of AIGFP, which engaged as principal in a wide variety of financial
transactions, including standard and customized financial products involving commodities, credit, 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 GIAs. Given the extreme market conditions experienced in 2008, 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.
Historically, AIG’s Capital Markets operations derived a significant portion of their revenues from hedged
financial positions entered into in connection with counterparty transactions. AIGFP has also participated as a
dealer in a wide variety of financial derivatives transactions. Revenues and operating income of the Capital Markets
operations and the percentage change in these amounts for any given period are significantly affected by changes in
the fair value of AIGFP’s assets and liabilities and by the number, size and profitability of transactions entered into
during that period relative to those entered into during the comparative period.
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. During 2008, AGF ceased its wholesale originations (originations through
mortgage brokers).
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.
Asset Management: AIG’s Asset Management operations comprise a wide variety of investment-related
services and investment products. Such services and products are offered to individuals, pension funds and
institutions globally through AIG’s Spread-Based Investment business, Institutional Asset Management, and
Brokerage Services and Mutual Funds business. Revenues in the Asset Management segment represent investment
income with respect to spread-based products and management, advisory and incentive fees.
Other Operations: AIG’s Other operations include interest expense, restructuring costs, expenses of cor-
porate staff not attributable 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.
224 AIG 2008 Form 10-K
American International Group, Inc., and Subsidiaries
Notes to Consolidated Financial Statements — (Continued)