AIG 2009 Annual Report Download - page 61

American International Group, Inc., and Subsidiaries
its 364-day Syndicated Facility into one-year term loans. These termed-out loans must be repaid by July 9, 2010. AIG
provides a capital support agreement to AGF in connection with these loans.
AIGCFG
AIG believes that the funding needs of AIGCFG have stabilized but it is possible that renewed customer and
counterparty concerns could increase AIGCFG’s liquidity needs in 2010. During 2009 and through February 17, 2010,
AIG has completed the sale of the AIGCFG operations in China, Thailand, the Philippines, Mexico, Hong Kong,
Brazil, Russia and Taiwan. AIG has also entered into contracts to sell the AIGCFG operations in Argentina,
Colombia and Poland.
Noncore Businesses
The principal cash requirements of AIG’s noncore asset management operations are to fund general working
capital needs, investment commitments related to proprietary investments in private equity and real estate as well as
any liquidity mismatches in the MIP. Management continues to work closely with partners and counterparties to
manage future funding requirements on proprietary investments through various strategies including through
relinquishing rights in certain properties and funds, the restructuring of investment relationships and sales to third
parties. Through early 2010, AIG has made significant progress in reducing contractual investment commitments of its
proprietary private equity investment portfolio.
Cash requirements related to Institutional Asset Management are funded through general operating cash flows
from management and performance fees, proceeds from events in underlying funds (capital calls to third parties, sales
of portfolio companies, etc.) as well as intercompany funding provided by AIG. Consequently, Institutional Asset
Management’s ability to fund certain of its needs may depend on advances from AIG under various intercompany
borrowing facilities. Restrictions on these facilities would have adverse consequences on the ability of the business to
satisfy its obligations. With respect to the Global Real Estate investment management business, investing activities are
also funded through third-party financing arrangements which are secured by the relevant properties.
UGC
In 2009, pursuant to an excess of loss reinsurance agreement, AIG made capital contributions into a trust to secure
statutory credit for ceded losses from UGC’s insurance subsidiaries to a wholly owned AIG subsidiary. UGC’s
insurance subsidiaries have maintained adequate capital and liquidity levels during the year, primarily due to this
reinsurance agreement and expect to cede additional losses to the affiliate in 2010.
Matched Investment Program
The Matched Investment Program is in run-off. AIG expects to fund its obligations under this program through
cash flows generated from invested assets (principal and interest) as well as the sale or financing of the asset portfolios
in the program. However, market illiquidity and diminished values within the investment portfolios may impair AIG’s
ability to sell the program assets or sell such assets for a price adequate to settle the corresponding liabilities when
they come due. In such a case, AIG parent would need to fund the obligations. In addition, as a result of AIG’s
restructuring activities AIG expects to utilize assets from its non-core businesses and subsidiaries to provide future
cash flow enhancement and debt repayment ability for the MIP. AIG did not issue any additional debt to fund the MIP
in 2009 or 2008 and does not intend to issue any additional debt for the foreseeable future.
The following table presents the contractual maturities of debt issued under the MIP:
At December 31, 2009
(in billions) 2010 2011 - 2012 2013 - 2014 Thereafter Total
MIP liabilities $2.2 $5.4 $1.3 $4.5 $13.4
The MIP invests in various fixed income asset classes which include corporate debt, both public and private, and
structured fixed income products consisting of residential mortgage-backed securities (RMBS), commercial mortgage-
backed securities (CMBS) and CDOs. The majority of these investments were rated investment grade at February 17,
2010. In addition, the MIP invests in bank loans, commercial mortgage loans and single name credit default swaps.
53 AIG 2009 Form 10-K