AIG 2010 Annual Report Download - page 69

American International Group, Inc., and Subsidiaries
The Capital Markets wind-down and other segment developments affecting pre-tax income (loss) described
above are discussed further in Management’s Discussion and Analysis of Financial Condition and Results of
Operations — Liquidity of Parent and Subsidiaries — Financial Services — Capital Markets Wind-down.
Accrued compounding interest and fees (reflected as non-cash expenses) were paid in kind in 2010 and 2009
under the provisions of the FRBNY Credit Facility and, accordingly, did not reduce operating cash flow in any
period. Debt under the FRBNY Credit Facility includes total accrued compounding interest and fees of
$6.4 billion at December 31, 2010. This amount was fully repaid in cash on January 14, 2011 as part of the
Recapitalization.
Net cash used in investing activities in 2010 primarily resulted from net purchases of fixed maturity securities,
resulting from AIG’s investment of cash generated from operating activities, and the redeployment of liquidity
that had been accumulated by the insurance companies in 2008 and 2009. In these years, Net cash provided by
investing activities resulted from the net proceeds from the sale and maturity of investments.
Net cash used in financing activities was significantly lower in 2010 than in 2009, primarily as a result of declines
in policyholder contract withdrawals, reflecting improved conditions for the life insurance and retirement services
businesses was partially offset by the issuance of long-term debt by ILFC, which is discussed in Liquidity of Parent
and Subsidiaries — Financial Services — ILFC. Net cash used in financing activities was significantly lower in
2009 than in 2008, also primarily as a result of declines in policyholder contract withdrawals, reduction of
payments and the FRBNY Credit Facility and a reduction in repayments of other borrowings. See Contractual
Obligations herein for additional information.
Liquidity of Parent and Subsidiaries
AIG Parent
Sources of Liquidity
As a result of the Closing of the Recapitalization, AIG has established and maintains substantial sources of
actual and contingent liquidity. The following table presents AIG Parent’s sources of liquidity in addition to
liquidity that is expected to result from cash flows from operations:
As of
(In millions) December 31, 2010 February 16, 2011
Cash(a) $49 $-
Short-term investments(a) 5,602 8,953
Available capacity under Syndicated Credit Facility(b) -3,000
Available capacity under Contingent Liquidity Facility 500 500
Available capacity under the Department of the Treasury Commitment (Series G)(b) -2,000
Available borrowing under the FRBNY Credit Facility(c) 9,890 -
Available capacity under the Department of the Treasury Commitment (Series F)(c) 22,292 -
Total AIG Parent liquidity sources(d) $38,333 $14,453(e)
(a) Includes total Cash and Short-term investments for AIG Parent. See Note 25 to the Consolidated Financial Statements.
(b) The Syndicated Credit Facility and the Series G Drawdown Right became effective January 14, 2011, the closing date of the Recapitalization.
(c) The FRBNY Credit Facility was fully repaid and terminated, and the Department of Treasury Commitment (Series F) was drawn down on the
closing of the Recapitalization.
(d) Excludes Cash and Short-term Investments held by AIGFP (excluding Banque AIG S.A.) which are considered to be unrestricted and available
for use by AIG Parent; these balances totaled $421 million at December 31, 2010 and $494 million at February 16, 2011.
(e) Does not give effect to reduction for a $3.7 billion capital contribution made by AIG Parent to Chartis after February 16, 2011.
FRBNY Credit Facility: At December 31, 2010, a total of $21.0 billion was outstanding under the FRBNY
Credit Facility, a net decrease of $2.5 billion from December 31, 2009. The amount outstanding at December 31,
2010 included $6.4 billion of accrued compounding interest and fees. On January 14, 2011, AIG used cash
proceeds from the AIA initial public offering and the sale of ALICO to fully repay and terminate the FRBNY
AIG 2010 Form 10-K 53