AIG 2009 Annual Report Download - page 119

American International Group, Inc., and Subsidiaries
Single premium sales in 2009 decreased significantly compared to 2008 primarily due to lower sales of the
guaranteed income bond product in the U.K. resulting from poor market conditions and the effect of the adverse AIG
publicity. In Japan, single premium sales declined primarily due to the temporary suspension of sales by banks of AIG
products. Single premium sales also decreased in Asia reflecting customers concerns about equity markets
performance earlier in the year.
Annuity deposits decreased significantly in 2009 compared to 2008 primarily due to the decline in individual
variable annuity deposits in the U.K. and individual fixed annuity deposits in Japan. Investment-linked deposits in the
U.K. decreased significantly in 2009 resulting from declines in the U.K. Premier Access Bond product following
significant surrender activity as a result of AIG events. Adverse AIG publicity and the uncertainty of AIG’s Japan life
operations restructuring continued to negatively affect deposits in Japan during 2009 due to the suspension of sales by
banks of AIG products.
2008 and 2007 Comparison
First year premium sales in 2008 improved slightly compared to 2007 primarily due to increases in group product
sales, particularly in Japan, Australia and the Middle East, partially offset by decreases in life insurance and personal
accident sales. In Japan, life insurance sales were lower due to reduced levels of increasing term sales and lower sales
in the fourth quarter of 2008 related to negative publicity regarding AIG. Also in Japan, personal accident sales
declined in the direct marketing distribution channel due to lower response rates resulting from market saturation.
Single premium sales in 2008 declined compared to 2007 primarily due to lower sales of the guaranteed income
bond product in the U.K. which fell as customers shifted to variable annuity products during the first three quarters of
2008 and then were significantly negatively affected in the fourth quarter by negative publicity regarding AIG. Single
premium sales in Asia also dropped as customers became concerned about declining equity markets, particularly in
Hong Kong, Singapore and China.
Annuity deposits decreased in 2008 compared to 2007 as the decline in individual variable annuity deposits more
than offset the increase in individual fixed annuity deposits. Investment-linked deposits in the U.K. decreased
significantly in the fourth quarter of 2008 due to negative publicity regarding AIG. In Japan, individual fixed annuity
deposits increased in 2008 compared to 2007 due primarily to a favorable exchange rate environment for non-yen
denominated products. However, negative publicity regarding AIG and the planned disposition of AIG’s Japan life
operations negatively affected deposits in the fourth quarter of 2008 as banks suspended the distribution of AIG
products.
Financial Services Operations
AIG’s Financial Services subsidiaries engage in diversified activities including aircraft leasing, capital markets, and
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.
Aircraft Leasing
AIG’s Aircraft Leasing operations are 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 other
aircraft fleet owners.
Capital Markets
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 engaged 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 and AIG’s
111 AIG 2009 Form 10-K