AIG 2009 Annual Report Download - page 58

American International Group, Inc., and Subsidiaries
which was experienced from mid-September 2008 through the first quarter of 2009, and expect to be able to do so in
the foreseeable future. A significant increase in policy surrenders and withdrawals, which could be triggered by a
variety of factors, including AIG specific concerns, could result in a substantial liquidity strain. Other potential events
causing a liquidity strain could include economic collapse of a nation or region significant to Domestic and Foreign
Life Insurance & Retirement Services operations, nationalization, catastrophic terrorist acts, pandemics or other
economic or political upheaval. See Investments — Investment Strategy herein for further information.
Domestic Life Insurance & Retirement Services
During 2009, AIG contributed capital totaling $2.4 billion to certain of its Domestic Life Insurance & Retirement
Services subsidiaries (of which $165 million was retained in the Domestic Life Insurance holding company and not
contributed to the operating companies) to replace a portion of the capital lost as a result of net realized capital losses
(primarily resulting from other-than-temporary impairment charges) and other investment-related items. Of this
amount, $1.2 billion was funded by drawdowns under the Department of the Treasury Commitment in May 2009. AIG
believes that its Domestic Life Insurance & Retirement Services companies currently have adequate capital to support
their business plans. Further capital contributions may be required to maintain desired levels of capital to the extent
there are future declines in the investment portfolios of the Domestic Life Insurance & Retirement Services
companies.
The most significant potential liquidity needs of AIG’s Domestic Life Insurance & Retirement Services companies
are the funding of surrenders and withdrawals. A substantial increase in these needs could place stress on the liquidity
of these companies. However, management believes that these companies have sufficient short-term liquidity to meet
such demands.
Beginning in 2009, results for the GIC program are recorded in the Domestic Life Insurance & Retirement Services
reportable segment and results for prior periods have been revised accordingly.
The GIC program is in run-off with no new GICs issued subsequent to 2005. The following table summarizes the
anticipated run-off of the domestic GIC portfolio:
At December 31, 2009
(in billions) 2010 2011 - 2012 2013 - 2014 Thereafter Total
Domestic GICs $- $2.5 $2.5 $3.5 $8.5
These GIC liabilities are expected to be funded by investment income and maturities of assets supporting the
Domestic Retirement Services companies’ liabilities.
Foreign Life Insurance & Retirement Services
During 2009, AIG provided funding of $624 million to Foreign Life Insurance & Retirement Services subsidiaries.
AIG believes that its Foreign Life Insurance & Retirement Services companies currently have adequate capital to
support their business plans. However, to the extent there are future declines in the investment portfolios of the
Foreign Life Insurance & Retirement Services companies, AIG may need to lend or contribute additional capital to
these companies.
In connection with the AIA and ALICO SPV transactions, on December 1, 2009, AIG, the FRBNY and each SPV
entered into limited liability company agreements, which set forth the terms and conditions of the respective parties’
ownership and governance rights in each SPV. Under the terms of these agreements, the AIA SPV and the ALICO
SPV may only distribute funds to AIG (prior to the payment of the preferred returns and liquidation preferences on
the preferred interests in each respective SPV and, in the case of the AIA SPV, a payment of 1 percent of the net
income of the AIA SPV to the holders of the preferred interests in the AIA SPV for all fiscal years prior to payment
of the preferred return and liquidation preference) in an aggregate amount not to exceed $200 million and
$400 million, respectively, per fiscal year.
Financial Services
AIG’s major Financial Services operating subsidiaries consist of ILFC, AIGFP, AGF and AIG Consumer Finance
Group, Inc. (AIGCFG). Traditional sources of funds to meet the liquidity needs of these operations are generally no
AIG 2009 Form 10-K 50