AIG 2010 Annual Report Download - page 32

American International Group, Inc., and Subsidiaries
Financial Services Operations
Aircraft Leasing
International Lease Finance Corporation (ILFC), one of the world’s leading aircraft lessors, acquires
commercial jet aircraft from various manufacturers and other parties and leases those aircraft to airlines around
the world.
As of December 31, 2010, ILFC managed a lease portfolio of over 1,000 aircraft, including an owned fleet of
933 aircraft with a net book value of approximately $38.5 billion. Additionally, ILFC had contracted with Boeing
and Airbus to purchase 115 new aircraft through 2019, with an estimated purchase price of approximately
$13.5 billion.
ILFC believes its scale, the breadth and mix of its aircraft portfolio and its long-standing relationships with a
global customer base that includes the majority of the world’s leading airlines allow it to lease aircraft under
favorable terms and maximize utilization.
As part of its ongoing fleet strategy, ILFC may pursue potential aircraft sales or opportunities to sell parts of
aircraft. In evaluating its fleet strategies, ILFC is balancing the need for funding with the long-term value of
holding aircraft and other financing alternatives.
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.
Other Operations
AIG’s Other operations include results from Parent & Other operations, after allocations to AIG’s business
segments, Mortgage Guaranty operations, Asset Management operations and results from those divested
businesses not included in Discontinued operations.
Parent & Other
AIG’s Parent & Other operations consist primarily of interest expense, intercompany interest income that is
eliminated in consolidation, restructuring costs, expenses of corporate staff not attributable to specific reportable
segments, expenses related to efforts to improve internal controls and the financial and operating platforms,
corporate initiatives, certain compensation plan expenses, corporate level net realized capital gains and losses,
certain litigation related charges and net gains and losses on sale of divested businesses and properties that did
not qualify for discontinued operations accounting treatment. In addition, fair value gains or losses on AIG’s
remaining interest in AIA and in the MetLife, Inc. (MetLife) securities received as consideration from the sale of
ALICO are recorded as Net investment income and are included in Parent & Other operations.
Mortgage Guaranty
The main business of the subsidiaries of UGC is the issuance of residential mortgage guaranty insurance, both
domestically and internationally, that covers mortgage lenders for the first loss for credit defaults on high
loan-to-value conventional first-lien mortgages for the purchase or refinance of one- to four-family residences.
16 AIG 2010 Form 10-K