AIG 2010 Annual Report Download - page 132

American International Group, Inc., and Subsidiaries
During 2010, AIG reclassified aircraft asset impairment charges and operating lease-related charges from Other
income to Other expenses and reclassified the provision for overhauls from Other expenses to Other income. Prior
periods have been revised to conform to the current period presentation.
Aircraft Leasing
AIG’s Aircraft Leasing operations are the operations of ILFC, which generates its revenues primarily from
leasing new and used commercial jet aircraft to foreign and domestic airlines. Aircraft Leasing operations also
include gains and losses that result from the remarketing of commercial jet aircraft for ILFC’s own account, and
remarketing and fleet management services for airlines and other aircraft fleet owners.
Capital Markets
AIGFP has continued to unwind its portfolios, including those associated with credit protection written through
credit default swaps on super senior risk tranches of diversified pools of loans and debt securities. As a
consequence of its wind-down strategy, AIGFP is entering into new derivative transactions only to hedge its
current portfolio, reduce risk and hedge the currency, interest rate and other market risks associated with its
affiliated businesses. See Management’s Discussion and Analysis of Financial Condition and Results of
Operations — Liquidity of Parent and Subsidiaries — Financial Services — Capital Markets Wind-down. Prior to
the wind-down, AIGFP engaged as principal in a wide variety of financial transactions, including standard and
customized financial products involving commodities, credit, currencies, energy, equities and interest rates.
Historically, AIGFP derived a significant portion of its revenues from hedged financial positions entered into in
connection with counterparty transactions. Prior to the wind-down, AIGFP also participated as a dealer in a wide
variety of financial derivatives transactions.
Financial Services Results
Financial Services results were as follows:
Percentage Increase/(Decrease)
Years Ended December 31,
(in millions) 2010 2009 2008 2010 vs. 2009 2009 vs. 2008
Revenues:
Aircraft Leasing $ 4,718 $ 4,992 $ 4,810 (5)% 4%
Capital Markets 527 1,166 (30,559) (55) (104)
Other, including intercompany adjustments 412 572 323 (28) 77
Total $ 5,657 $ 6,730 $ (25,426) (16)% (126)%
Pre-tax income (loss):
Aircraft Leasing $ (729) $ 1,385 $ 1,116 -% 24%
Capital Markets 209 684 (30,697) (69) (102)
Other, including intercompany adjustments (116) (63) (205) - -
Total $ (636) $ 2,006 $ (29,786) -% (107)%
2010 and 2009 Comparison
Financial Services reported a pre-tax loss in 2010 compared to pre-tax income in 2009 due to the following:
• ILFC reported a pre-tax loss in 2010 compared to pre-tax income in 2009 primarily due to impairment
charges recorded on aircraft in its fleet. During the fourth quarter of 2010, new engine options were
announced by one of the aircraft manufacturers which promise significant improvements in fuel economy
and / or payload capacity. ILFC management expects that this announcement will negatively impact the
demand for certain aircraft in its fleet, and as a result recorded impairment charges of $602 million. Also
during 2010, ILFC recorded asset impairment losses of $505 million on certain aircraft in its fleet reflecting
116 AIG 2010 Form 10-K