AIG 2010 Annual Report Download - page 80

American International Group, Inc., and Subsidiaries
Contractual Obligations
The following table summarizes contractual obligations in total, and by remaining maturity:
Payments due by Period
At December 31, 2010 Total 2012 - 2014 -
(in millions) Payments 2011 2013 2015 Thereafter
Borrowings(a) $ 82,862 $ 10,323 $ 16,031 $ 9,223 $ 47,285
FRBNY Credit Facility(b) 20,985 - 20,985 - -
Interest payments on borrowings 51,940 4,531 9,532 5,963 31,914
Loss Reserves 91,151 20,235 25,157 14,074 31,685
Insurance and investment contract liabilities 462,496 18,743 32,916 30,706 380,131
Aircraft purchase commitments 13,533 282 1,742 3,523 7,986
Operating leases 2,054 429 657 422 546
Other long-term obligations(c) 365 61 95 80 129
Total(d) $ 725,386 $ 54,604 $ 107,115 $ 63,991 $ 499,676
(a) Reflects completion of an offer to exchange Equity Units (and therefore the underlying subordinated debt) for AIG Common Stock and cash.
(b) The FRBNY Credit Facility was fully repaid and terminated on January 14, 2011, the closing date of the Recapitalization.
(c) Primarily includes contracts to purchase future services and other capital expenditures.
(d) Does not reflect unrecognized tax benefits of $5.3 billion, the timing of which is uncertain. In addition, the majority of Capital Markets’ credit
default swaps require AIGFP to provide credit protection on a designated portfolio of loans or debt securities. At December 31, 2010, the fair
value derivative liability was $3.5 billion relating to AIGFP’s super senior multi-sector CDO credit default swap portfolio, net of amounts
realized in extinguishing derivative obligations. Due to the long-term maturities of these credit default swaps, AIG is unable to make reasonable
estimates of the periods during which any payments would be made. However, at December 31, 2010 AIGFP had posted collateral of
$3.0 billion with respect to these swaps (prior to offsets for other transactions).
Borrowings
AIG’s borrowings exclude those incurred by consolidated investments and include hybrid financial instrument
liabilities recorded at fair value. The repayment of long-term debt maturities and interest accrued on borrowings
by AIG and its subsidiaries is expected to be made through maturing investments and asset sales, future cash
flows from operations, cash flows generated from invested assets, future debt issuance and other financing
arrangements, as more fully described in Liquidity of Parent and Subsidiaries.
Loss Reserves
Loss reserves relate primarily to Chartis business, but also include Mortgage Guaranty reserves, and represent
future loss and loss adjustment expense payments estimated based on historical loss development payment
patterns. Due to the significance of the assumptions used, the payments by period presented above could be
materially different from actual required payments.
Management believes that adequate financial resources are maintained by the individual Chartis and UGC
subsidiaries to meet the actual required payments under these obligations. These subsidiaries maintain substantial
liquidity in the form of cash and short-term investments. Further, these businesses maintain significant levels of
investment-grade fixed income securities, including substantial holdings in government and corporate bonds (see
Investments herein), which Chartis and UGC could seek to monetize in the event operating cash flows are
insufficient. See Capital Resources and Liquidity — Liquidity — Analysis of Sources and Uses of Cash and
Capital Resources and Liquidity — Liquidity — Liquidity of Parent and Subsidiaries for matters that could affect
operating cash flows and liquidity of the subsidiaries.
64 AIG 2010 Form 10-K