AIG 2009 Annual Report Download - page 7

AIG 2009 Annual Report 5
uncertainty and are seeking more  nancial
guarantees about their future. In addition,
companies have cut back dramatically
on traditional retirement plans and lifetime
bene ts, and even on 401(k) plans. We
are well-positioned to help relieve the
tremendous burden
on these individu-
als, who can look to
insurance and an-
nuity companies to
help them prepare
for, and manage,
their retirement.
Our Advisor Group, which we decided to
retain, provides independent, face-to-face
 nancial advice to thousand of clients, and
plays a key role in our ability to provide
investment and life insurance products.
I appreciate the patience and con dence of
this group, which is excited to remain
part of AIG. Our team at VALIC, another
part of SunAmerica Financial Group, acts
as a leading provider of retirement
plan services to higher education, public
K-12 schools, and healthcare institutions.
VALIC performed well in 2009 and will
continue to play an important role going
forward. American General, a provider of
life insurance for over 150 years, will con-
tinue to help protect the hopes and dreams
of American families. Finally, Western
National has helped Americans achieve
 nancial security with innovative  xed
annuity products for more than 50 years.
We are very proud that Western National,
one of the  rst insurance companies to
develop  xed annuity products speci cally
for sale through banks, successfully
regained its number one position in that
market in the third quarter of 2009.
One of our specialty businesses that
has suffered through the  nancial crisis
is United Guaranty Corporation (UGC),
which provides residential mortgage
guaranty insurance. The company tight-
ened underwriting guidelines in the fourth
quarter of 2008, resulting in a far superior
risk pro le on new business written in
2009. In addition, the company increased
its resources to manage the large number
of claims submitted by mortgage lenders to
ensure appropriate loss mitigation.
At AIG Star Life and AIG Edison Life
in Japan, it became clear that we were
not going to be able to realize an accept-
able sale price that recognized full value
for these established franchises. So our
strategy changed, and we will work with
these companies to streamline their opera-
tions and processing. We believe they will
continue to produce strong results,
and that they will contribute positively to
AIG’s overall business portfolio.
On AIGFP, I am pleased to report that
our employees continued to make substan-
tial progress in reducing and de-risking the
portfolio—and in a very deliberate way.
AIGFP cut the number of positions in its
portfolio by 54 percent in 2009 to approxi-
mately 16,000, and the notional amount of
derivatives outstanding fell below $1 tril-
lion from $2.7 trillion in 2008. All key risk
measures are down signi cantly from last
year, and I expect continued progress in
2010. Our strategy remains to exit the vast
majority of the risk at AIGFP by the end
of 2010. Any remaining positions, which
will be largely de-risked and not require
active management, will either be managed
by AIG or third parties.
International Lease Finance Corpora-
tion (ILFC) is the international market
leader in its  eld—leasing and remarketing
commercial jet aircraft to airlines around
the world. Its leasing portfolio consists
of more than 1,000 aircraft. We remain
con dent in the future of ILFC as a market
leader, and we are working with the ILFC
Board to enhance its long-term poten-
tial and meet its funding requirements.
Likewise, American General Finance, Inc.
(AGF), which provides  rst lien mortgage
and other consumer loans to the middle in-
come segment, is a well-run business, and
we continue to explore a variety of options
to protect its value and meet its obligations.
Let me turn now to my priorities for
AIG going forward. I joined the company
last August to succeed Ed Liddy. Ed did
a terri c job under very dif cult and often
unfair circumstances to stabilize the com-
pany, and develop and begin to implement
Our strategy remains to exit the vast
majority of the risk at AIGFP by the
end of 2010. Any remaining positions,
which will be largely de-risked and not
require active management, will either
be managed by AIG or third parties.