AIG 2009 Annual Report Download - page 127

American International Group, Inc., and Subsidiaries
In December 2009, UGC entered into two stock purchase agreements for the sale of its Canadian and Israel
operations. The Israel transaction closed on January 21, 2010 and the Canadian transaction is expected to close during
the first half of 2010.
UGC’s domestic first-lien mortgage risk in force totaled $26.4 billion as of December 31, 2009 and the 60+day
delinquency ratio was 17.8 percent (based on number of policies, consistent with mortgage industry practice)
compared to domestic first-lien mortgage risk in force of $27.1 billion and a delinquency ratio of 10.7 percent at
December 31, 2008.
The second-lien risk in force at December 31, 2009 totaled $2.5 billion compared to $2.9 billion of risk in force at
December 31, 2008. Risk in force represents the full amount of second-lien loans insured reduced for contractual
aggregate loss limits on certain pools of loans, usually 10 percent of the full amount of loans insured in each pool.
Certain second-lien pools have reinstatement provisions.
Other Noncore Insurance Businesses
Other noncore insurance businesses include the operating results of the following divested businesses through the
date of their sale.
• Transatlantic
Transatlantic offers reinsurance capacity on both a treaty and facultative basis both in the U.S. and abroad.
Transatlantic structures programs for a full range of property and casualty products with an emphasis on
specialty risk.
On June 10, 2009, AIG closed a secondary public offering of 29.9 million shares of Transatlantic common
stock owned directly and indirectly by AIG for aggregate gross proceeds of $1.1 billion. At the close of the
public offering, AIG indirectly retained 13.9 percent of the Transatlantic common stock issued and
outstanding. As a result, AIG deconsolidated Transatlantic, which resulted in a $1.4 billion reduction in
Noncontrolling interests, a component of Total equity.
• 21st Century
On July 1, 2009, AIG closed the sale of 21st Century Insurance Group and the Agency Auto Division
(excluding AIG Private Client Group).
•HSB
On March 31, 2009, AIG closed the sale of HSB, the parent company of the Hartford Steam Boiler
Inspection and Insurance Company.
Change in Fair Value of ML III
Gains in 2009 resulted from improvements in valuation, primarily resulting from the shortening of weighted average
life from 10.9 years to 9.6 years, and the narrowing of credit spreads by approximately 100 basis points. Adversely
affecting the fair value was the decrease in cash flows primarily due to an increase in projected credit losses in the
underlying collateral securities.
Other Noncore Asset Management Operations
AIG’s Noncore Asset Management operations include the results of the MIP program and Institutional Asset
Management businesses.
The revenues and pre-tax income (loss) for these operations are affected by the general conditions in the equity and
credit markets. In addition, net realized gains and carried interest are contingent upon investment maturity levels and
market conditions. In the Institutional Asset Management business, carried interest, computed in accordance with
each fund’s governing agreement, is based on the investment’s performance over the life of each fund. Unrealized
119 AIG 2009 Form 10-K