AIG 2008 Annual Report Download - page 266

In certain instances, AIG Investments acts as the investment manager of an investment fund, private equity
fund or hedge fund and is responsible for carrying out the investment mandate of the VIE. AIG’s insurance
operations participate as passive investors in the equity issued primarily by third-party-managed hedge and private
equity funds and some AIG Investments managed funds. AIG’s insurance operations typically are not involved in
the design or establishment of VIEs, nor do they actively participate in the management of VIEs.
Commercial Paper Conduit
AIGFP is the primary beneficiary of Curzon Funding LLC, an asset-backed commercial paper conduit to third
parties, the assets of which serve as collateral for the conduit’s obligations. During 2008, the entity issued
$6.8 billion of commercial paper and participated in the CPFF.
CLOs/CDOs
AIGFP has invested in CDOs, and similar structures, which can be cash-based or synthetic and are actively or
passively managed. AIGFP’s role is generally limited to that of an investor. It does not manage such structures.
In certain instances, AIG Investments acts as the collateral manager of a CDO or collateralized loan obligation
(CLO). In CDO and CLO transactions, AIG establishes a trust or other special purpose entity that purchases a
portfolio of assets such as bank loans, corporate debt, or non-performing credits and issues trust certificates or debt
securities that represent interests in the portfolio of assets. These transactions can be cash-based or synthetic and are
actively or passively managed. The management fees that AIG Investments earns as collateral manager are not
material to AIG’s consolidated financial statements. Certain AIG insurance companies also invest in these CDOs
and CLOs. AIG combines variable interests (e.g. management, performance fees and debt or equity securities) held
through its various operating subsidiaries in evaluating the need for consolidation. The CDOs in which AIG holds
an ownership interest are further described in Note 5.
Affordable Housing Partnerships
SunAmerica Affordable Housing Partners, Inc. (SAAHP) organizes and invests in limited partnerships that
develop and operate affordable housing qualifying for federal tax credits, and a few market rate properties across the
United States. The general partners in the operating partnerships are almost exclusively unaffiliated third-party
developers. AIG does not consolidate an operating partnership if the general partner is an unaffiliated person.
Through approximately 1,200 partnerships, SAAHP has invested in developments with approximately 157,000
apartment units nationwide, and has syndicated over $7 billion in partnership equity since 1991 to other investors
who will receive, among other benefits, tax credits under certain sections of the Internal Revenue Code. The
operating income of SAAHP is reported, along with other SunAmerica partnership income, as a component of
AIG’s Asset Management segment.
Maiden Lane Interests
ML II
On December 12, 2008, certain AIG wholly owned life insurance companies sold all of their undivided
interests in a pool of $39.3 billion face amount of RMBS to ML II, whose sole member is the NY Fed. AIG has a
significant variable economic interest in ML II, which is a VIE. See Note 5 for details of AIG’s agreement regarding
ML II.
ML III
On November 25, 2008, AIG entered into the ML III Agreement with the NY Fed, ML III, and The Bank of
New York Mellon, which established arrangements, through ML III, to fund the purchase of multi-sector CDOs
underlying or related to CDS written by AIG Financial Products Corp. in connection with the termination of such
CDS. Concurrently, AIG Financial Products Corp’s counterparties to such CDS transactions agreed to terminate
260 AIG 2008 Form 10-K
American International Group, Inc., and Subsidiaries
Notes to Consolidated Financial Statements — (Continued)