AIG 2009 Annual Report Download - page 5

AIG 2009 Annual Report 3
During this past year, AIG made
substantial progress in refocusing
our major businesses on growth
and pro tability, set in place the
framework for repaying U.S. taxpayers for
their support of our company during its
darkest days, and signi cantly wound down
and de-risked the AIG Financial Products
Corp. (AIGFP) derivatives portfolio. We
also revised our employee compensation
programs in order to motivate and reward
AIG’s cadre of
outstanding profes-
sionals, who will
form the center of
our business success
going forward. We
have signi cantly stabilized the company
over the past year. Now it is up to us to get
back to producing good business results.
The fundamental purpose of our
company is to serve our clients profession-
ally and fairly. We are also a company that
honors its obligations. We have survived
our major crisis of the past few years and
are now on our way to regaining our stat-
ure as one of the world’s largest and most
successful property casualty insurance op-
erations, with strong
U.S. life and annuity
companies and sev-
eral other businesses
that enhance our
nucleus. Clearly, we
will be a smaller and
more focused company than in the past.
The only way we can repay taxpayers is to
divest parts of the organization, and we are.
Over the course of my  rst seven
months as AIG’s CEO, I have been
impressed by many things about our
worldwide business portfolio and the
To Our
Shareholders
Robert H. Benmosche
President and
Chief Executive Offi cer
The fundamental purpose of our
company is to serve our clients profes-
sionally and fairly. We are also a
company that honors its obligations.
great organization built over many years.
But nothing has impressed me more than
observing  rsthand the skilled and dedi-
cated employee base of this company. It is
only because of their hard work, experi-
ence, and depth of knowledge that we have
succeeded in stabilizing our businesses and
setting the strategies for moving forward.
It is these strategies and achievements that
I want to discuss in this letter.
Before doing so, however, let me review
our  nancial performance in 2009. We
operated under very dif cult economic and
market conditions, particularly in the  rst
part of the year, and we are proud that
we have started to recover. Business reten-
tion has improved. Employee retention has
improved. And revenues have improved.
Overall, we reported losses totaling
$10.9 billion in 2009, compared with
losses of $99.3 billion in 2008, a substantial
improvement.
Let me spend a minute explaining
$5.2 billion of the pre-tax losses we sus-
tained in the fourth quarter. When the Fed-
eral Reserve Bank of New York (FRBNY)
provided AIG with $85 billion in support
in September 2008, AIG was required to
turn over a 79.9 percent ownership stake in
the company to a trust established for the
sole bene t of the U.S. Department of the
Treasury. This ownership stake represented
in effect a pre-paid commitment fee that
AIG valued at $23 billion as an asset on
its balance sheet to be amortized over the
life of the facility. In the fourth quarter of
2009, we accelerated the amortization
of $5.2 billion, pre-tax, of this asset in
connection with reducing the amount we
could borrow from
the FRBNY by
$25 billion. This
reduction was
achieved when we
placed two of our
international life
insurers in special purpose vehicles (SPVs)
in which the FRBNY took preferred inter-
ests in exchange for reducing $25 billion of
the outstanding amount that AIG owed the
Clearly, we will be a smaller and more
focused company than in the past.
The only way we can repay taxpayers
is to divest parts of the organization,
and we are.