AIG 2009 Annual Report Download - page 213

American International Group, Inc., and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
securities. Upon drawings under this commitment, the liquidation preference of the AIG Series F Preferred Stock
increases proportionately.
Sales of Businesses and Specific Asset Dispositions
Since September 2008, AIG has been working to protect and enhance the value of its key businesses, execute an
orderly asset disposition plan, and position itself for the future. AIG continually reassesses this plan to maximize value
while maintaining flexibility in its liquidity and capital, and expects to accomplish these objectives over a longer time
frame than originally contemplated.
Dispositions of certain businesses will be subject to regulatory approval. Unless a waiver is obtained from the
FRBNY, net proceeds from these dispositions, to the extent they do not represent capital of AIG’s insurance
subsidiaries required for regulatory or ratings purposes, are contractually required to be applied toward the
repayment of the FRBNY Credit Facility as mandatory prepayments.
During 2009 and through February 17, 2010, AIG entered into agreements to sell or completed the sale of
operations and assets, excluding assets held by AIG Financial Products Corp. and AIG Trading Group Inc. and their
respective subsidiaries (collectively, AIGFP), that had aggregate assets and liabilities with carrying values of
$88.1 billion and $71.3 billion, respectively, at December 31, 2009 or the date of sale or deconsolidation, in the case of
Transatlantic Holdings, Inc. (Transatlantic). These transactions are expected to generate approximately $5.6 billion of
aggregate net cash proceeds that will be available to repay outstanding borrowings and reduce the amount of the
FRBNY Credit Facility, after taking into account taxes, transaction expenses, settlement of intercompany loan
facilities, and capital required to be retained for regulatory or ratings purposes. Gains and losses recorded in
connection with the dispositions of businesses include estimates that are subject to subsequent adjustment. Based on
the transactions thus far, AIG does not believe that such adjustments will be material to future results of operations or
cash flows.
American General Finance, Inc. (AGF) Portfolio Sales and Securitization Transaction
During 2009, AGF received proceeds of $1.9 billion from real estate loan portfolio sales. In addition, on July 30,
2009, AGF issued mortgage-backed certificates in a private on-balance sheet securitization transaction of certain AGF
real estate loans and received cash proceeds of $967 million.
Management’s Assessment and Conclusion
In assessing AIG’s current financial position and developing operating plans for the future, management has made
significant judgments and estimates with respect to the potential financial and liquidity effects of AIG’s risks and
uncertainties, including but not limited to:
• the commitment of the FRBNY and the Department of the Treasury to the orderly restructuring of AIG and
their commitment to continuing to work with AIG to maintain its ability to meet its obligations as they come
due;
• the potential adverse effects on AIG’s businesses that could result if there are further downgrades by rating
agencies, including in particular, the uncertainty of estimates relating to the derivative transactions of AIGFP,
such as estimates of both the number of counterparties who may elect to terminate under contractual
termination provisions and the amount that would be required to be paid in the event of a downgrade;
• the potential delays in asset dispositions and reduction in the anticipated proceeds therefrom;
• the potential for declines in bond and equity markets;
• future sales of significant subsidiaries;
205 AIG 2009 Form 10-K