AIG 2010 Annual Report Download - page 228

American International Group, Inc., and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
On December 23, 2010, AIG entered into 364-day and three-year bank credit facilities totaling $3 billion and
Chartis entered into a one-year $1.3 billion letter of credit facility.
During 2010, ILFC significantly increased its liquidity position through a combination of new secured and
unsecured debt issuances of approximately $9.8 billion and an extension of the maturity date of $2.16 billion of its
$2.5 billion revolving credit facility from October 2011 to October 2012. Approximately $4.0 billion of the
$9.8 billion in debt issued in 2010 was used to repay loans and accrued interest due to AIG. AIG used the
$4.0 billion received from ILFC to reduce the principal amount outstanding under the FRBNY Credit Facility. In
addition, during 2010, ILFC agreed to sell 66 aircraft to third parties, of which 60 aircraft, with an aggregate net
book value of approximately $2.6 billion, met the criteria to be classified as held for sale. Fifty-seven of the 66
aircraft were sold, of which 51 had been classified as held for sale. These sales generated approximately
$2.1 billion in gross proceeds during 2010. At December 31, 2010, nine aircraft were recorded in Assets held for
sale on the Consolidated Balance Sheet. The sales of the remaining individual aircraft are expected to be
consummated during the first quarter of 2011.
Financial Flexibility Assessment
In assessing AIG’s current financial flexibility and developing operating plans for the future, management has
made significant judgments and estimates with respect to the potential financial and liquidity effects of AIG’s risks
and uncertainties, including but not limited to:
• the potential for declines in bond and equity markets;
• the potential effect on AIG if the capital levels of its regulated and unregulated subsidiaries prove
inadequate to support current business plans;
• AIG’s continued ability to generate cash flow from operations;
• the potential adverse effects on AIG’s businesses that could result if there are further downgrades by rating
agencies; and
• the potential for regulatory limitations on AIG’s business in one or more countries.
While AIG remains subject to potential financial and liquidity risks and uncertainties, AIG believes the impact
of these risks and uncertainties has decreased significantly compared to 2009.
AIG believes that it has sufficient liquidity to satisfy future liquidity requirements and meet its obligations,
including reasonably foreseeable contingencies and events.
2. Summary of Significant Accounting Policies
(a) Revenue recognition and expenses:
Premiums and other considerations: Premiums for short duration contracts and considerations received from
retailers in connection with sales of extended service contracts are earned primarily on a pro rata basis over the
term of the related coverage. The reserve for unearned premiums includes the portion of premiums written and
other considerations relating to the unexpired terms of coverage.
Premiums for long duration insurance products and life contingent annuities are recognized as revenues when
due. Estimates for premiums due but not yet collected are accrued. Consideration for universal life and
investment-type products consists of policy charges for the cost of insurance, administration and surrenders during
the period. Policy charges collected with respect to future services are deferred and recognized in a manner
similar to DAC related to such products.
212 AIG 2010 Form 10-K