AIG 2010 Annual Report Download - page 304

American International Group, Inc., and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
interests and in the majority of the debt issued by these entities. AIG and its subsidiaries collectively maintain the
power to direct the activities of the VIEs that most significantly impact the entities’ economic performance, and
bear the obligation to absorb economic losses or receive economic benefits that could potentially be significant to
the VIEs. As result, AIG has determined that it is the primary beneficiary and fully consolidates these entities.
The debt of these entities is not an obligation of, or guaranteed by, AIG or any of its subsidiaries. Under a
servicing agreement, ILFC acts as servicer for the aircraft owned by these entities
Consumer Loans Vehicles
AIG sponsors one VIE that has issued a variable funding note backed by a consumer loan collateralized by
individual life insurance assets. As of December 31, 2010, AIG’s maximum exposure, representing the carrying
value of the consumer loan, was $502 million. The total VIE assets and liabilities for this entity were $535 million
and $338 million, respectively. AIG consolidates the assets and liabilities of this entity.
Commercial Paper Conduit
AIG Financial Products Corp., AIG Trading Group Inc. and their respective subsidiaries (collectively, AIGFP)
are the primary beneficiary of Curzon Funding LLC, an asset-backed commercial paper conduit to third parties,
the assets of which serve as collateral for the conduit’s obligations.
RMBS, CMBS, Other ABS and CDOs
AIG, through its insurance company subsidiaries, is a passive investor in RMBS, CMBS, other ABS and CDOs
primarily issued by domestic special-purpose entities. AIG generally does not sponsor or transfer assets to, or act
as the servicer to these asset-backed structures, and was not involved in the design of these entities.
AIG, through its Direct Investment business, also invests in CDOs and similar structures, which can be
cash-based or synthetic and are managed by third parties. The role of Direct Investment subsidiaries is generally
limited to that of a passive investor; it does not manage such structures.
AIG’s maximum exposure in these types of structures is limited to its investment in securities issued by these
entities. Based on the nature of AIG’s investments and its passive involvement in these types of structures, AIG
has determined that it is not the primary beneficiary of these entities. The fair values of AIG’s investments in
these structures are reported in Notes 6 and 7 herein.
Financing Vehicles
ILFC has created wholly owned subsidiaries for the purpose of purchasing aircraft and obtaining financing
secured by such aircraft. A portion of the secured debt has been guaranteed by the European Export Credit
Agencies. These entities meet the definition of a VIE because they do not have sufficient equity to operate
without ILFC’s subordinated financial support in the form of intercompany notes which serve as equity even
though they are legally debt instruments. ILFC fully consolidates the entities, controls all the activities of the
entities and guarantees the activities of the entities. AIG has not included these entities in the above table as they
are wholly owned and there are no other variable interests other than those of ILFC and the lenders. See Note 15
herein for further information.
Leasing Entities
ILFC has created wholly owned subsidiaries for the purpose of facilitating aircraft leases with airlines. The
entities meet the definition of a VIE because they do not have sufficient equity to operate without ILFC’s
subordinated financial support in the form of intercompany notes which serve as equity. ILFC fully consolidates
the entities, controls all the activities of the entities and fully guarantees the activities of the entities. AIG has not
288 AIG 2010 Form 10-K