AIG 2009 Annual Report Download - page 45

American International Group, Inc., and Subsidiaries
With the announced sale of AIG’s investment advisory and third party Institutional Asset Management business
(excluding the Global Real Estate investment management business), AIG will no longer benefit from the
management fee and carried interest cash flows from these businesses, but the sale will reduce operating costs related
to AIG’s asset management activities. Asset Management is no longer considered a reportable segment, and the
results for the Institutional Asset Management businesses and the Matched Investment Program (MIP), which is in
run-off, are presented as a Noncore business in AIG’s Other operations category. In addition, results for certain
brokerage service, mutual fund, GIC and other asset management activities previously reported in the Asset
Management segment are now included in the Domestic Life Insurance & Retirement Services segment. Results for
prior periods have been revised accordingly.
AIG has entered into several important transactions and relationships with the FRBNY, the AIG Credit Facility
Trust (together with its trustees, acting in their capacity as trustees, the Trust) and the Department of the Treasury. As
a result of these arrangements, AIG is controlled by the Trust, which was established for the sole benefit of the United
States Treasury.
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.
The discussion that follows should be read in conjunction with the Consolidated Financial Statements and
accompanying notes included elsewhere herein.
Priorities for 2010
AIG is focused on the following priorities for 2010:
• continued stabilization and strengthening of AIG’s businesses;
• realize additional progress in restructuring and asset disposition initiatives to enable repayment of amounts
outstanding under the FRBNY Credit Facility provided by the FRBNY under the Credit Agreement, dated as
of September 22, 2008 (as amended, the FRBNY Credit Agreement), between AIG and the FRBNY;
• execute plans to realize value from dispositions of interests in American International Assurance Company, Ltd.
(AIA) and American Life Insurance Company (ALICO);
• further wind-down of AIG’s exposure to certain financial products and derivatives trading activities; and
• address funding needs of International Lease Finance Corporation (ILFC) and American General Finance, Inc.
(AGF) and explore alternative restructuring opportunities.
2009 Financial Overview
Global financial markets continued their recovery in the second half of 2009, as investors returned to equity and
bond markets. This optimism, not yet accompanied by a robust economic recovery, produced a strong rally in bond,
equity and commodity markets. Cash accumulated by investors in 2008 and early 2009 continued to flow out of
short-term money market accounts and into higher yielding assets, creating investment demand in excess of available
new supply in many sectors. While securitized mortgage products participated to a degree in the rally, particularly in
desirable tranches of well-collateralized transactions, the commercial mortgage and equity real estate sectors continue
to lag.
The improved market environment noted above contributed to the substantial reduction in the loss from continuing
operations before income taxes, which declined to $13.6 billion in 2009 compared to $106.5 billion in 2008. The
following significant drivers also contributed to this improvement:
• the 2008 period included non-credit impairments (i.e., severity losses) throughout the year that are no longer
required for fixed maturity securities due to the adoption of the new other-than-temporary impairments
accounting standard commencing in the second quarter of 2009. Additionally, other-than-temporary
37 AIG 2009 Form 10-K