AIG 2010 Annual Report Download - page 70

American International Group, Inc., and Subsidiaries
Credit Facility in connection with the closing of the Recapitalization. See Note 1 to the Consolidated Financial
Statements for additional information.
Department of the Treasury Commitment: At December 31, 2010, a total of $7.5 billion was outstanding under
the Department of the Treasury Commitment (Series F), an increase of $2.2 billion from December 31, 2009. On
January 14, 2011 AIG drew down approximately $20.3 billion under this (Series F) Commitment to purchase a
portion of the SPV Preferred Interests that were exchanged with the Department of the Treasury. In connection
with the closing of the Recapitalization, $2 billion under the (Series F) Commitment was exchanged for the
Series G Drawdown Right, and the Series G Drawdown Right became effective on that date. See Note 1 to the
Consolidated Financial Statements for additional information.
Syndicated and Contingent Facilities: Bank credit facilities totaling $3 billion became available upon the closing
of the Recapitalization on January 14, 2011 and AIG had previously established a $500 million contingent liquidity
facility in December 2010. AIG’s ability to borrow under the facilities is not contingent on its credit ratings. For
further discussion of the terms and conditions relating to the bank credit facilities, see Credit Facilities below. For
additional information on the contingent liquidity facility see Debt below.
AIG Parent’s primary sources of cash flow are dividends, distributions, and other payments from subsidiaries. In
2010, AIG Parent collected $1.9 billion in dividends and other payments from subsidiaries (primarily from
insurance company subsidiaries), which included $1.4 billion in dividends from Chartis U.S. In addition, AIG has
been able to generate significant liquidity through capital markets activities. In November 2010, AIG issued an
aggregate of $2 billion in senior unsecured notes, comprised of $500 million in three-year notes and $1.5 billion in
ten-year notes. The proceeds from these issuances have been retained by AIG Parent for liquidity. Additional
details are set forth in Debt below.
Uses of Liquidity
AIG’s primary uses of cash flow are for debt service, operating expenses and subsidiary capital needs. In 2010,
AIG Parent retired $1.4 billion of debt and made interest payments totaling $1.8 billion, excluding MIP and Series
AIGFP debt. AIG Parent made $2.6 billion in net capital contributions to subsidiaries in 2010, of which the
majority was contributed to AIG Capital Corporation, enabling AIG Capital Corporation to redeem its preferred
securities held by a Chartis U.S. subsidiary. In connection with the sale of a majority interest in AGF in November
2010, AIG Parent paid AGF $750 million under a demand note in addition to making net repayments of
$800 million prior to the fourth quarter of 2010. At December 31, 2010, AIG Parent owed AGF $469 million
under a promissory note related to a tax sharing agreement between AIG Parent and AGF.
After February 16, 2011, AIG Parent provided capital support to Chartis by making a $3.7 billion capital
contribution. This transaction was funded from the retention of $2 billion of net cash proceeds from the sale of
AIG Star and AIG Edison (which the Department of the Treasury provided a waiver to use for this purpose
instead of using the amount to repay SPV Preferred Interests) and available cash at AIG Parent.
AIG believes that it has sufficient liquidity at the AIG Parent level to satisfy future liquidity requirements and
meet its obligations, including reasonably foreseeable contingencies or events. However, no assurance can be given
that AIG’s cash needs will not exceed projected amounts. Additional collateral calls, deterioration in investment
portfolios or reserve strengthening affecting statutory surplus, higher surrenders of annuities and other policies,
further downgrades in AIG’s credit ratings, catastrophic losses or a further deterioration in the super senior credit
default swap portfolio may result in significant additional cash needs, loss of some sources of liquidity or both.
Regulatory and other legal restrictions could limit AIG’s ability to transfer funds freely, either to or from its
subsidiaries.
Several Chartis U.S. insurance subsidiaries have deferred tax assets on a separate company basis, including
those resulting from net operating losses incurred. Chartis intends to rely on prudent and feasible effective tax
planning actions and/or strategies to preserve admissibility of such deferred tax assets for insurance regulatory
reporting purposes. In the event that Chartis cannot execute such actions, if required, and the related deferred tax
assets become non-admitted for insurance regulatory reporting purposes, such insurance companies would require
additional capital contributions of up to $2.3 billion from AIG, based on December 31, 2010 balances. The Chartis
54 AIG 2010 Form 10-K