AIG 2013 Annual Report Download - page 152

our operations, nationalization, catastrophic terrorist acts, pandemics or other events causing economic or political
upheaval.
AIG Parent and Ascot Corporate Name Limited (ACNL), an AIG Property Casualty subsidiary, are parties to a
$625 million letter of credit facility. ACNL, as a member of the Lloyd’s of London insurance syndicate (Lloyd’s), is
required to hold capital at Lloyd’s, known as Funds at Lloyds (FAL). Under the facility, which supports the 2013,
2014 and 2015 years of account, the entire FAL requirement of $600 million, as of December 31, 2013, was satisfied
with a letter of credit issued under the facility.
AIG Parent, AIG Property Casualty Inc. and certain AIG Property Casualty domestic insurance subsidiaries are
parties to a consolidated CMA. Among other things, the CMA provides that AIG Parent will maintain the total
adjusted capital of these AIG Property Casualty insurance subsidiaries, measured as a group (the Fleet), at or above
the specified minimum percentage of the Fleet’s projected total authorized control level Risk-Based Capital (RBC). In
addition, the CMA provided that if the total adjusted capital of the Fleet exceeds that same specified minimum
percentage of the Fleet’s total authorized control level RBC, subject to approval by their respective boards, and
compliance with applicable insurance laws, the AIG Property Casualty insurance subsidiaries would declare and pay
ordinary dividends to their respective equity holders up to an amount necessary to reduce the Fleet’s projected or
actual total adjusted capital to a level equal to or not materially greater than such specified minimum percentage. On
February 18, 2014, the CMA was recharacterized as a capital support agreement and amended to remove the
exclusion of deferred tax assets from the calculation of total adjusted capital and remove the dividend requirement of
the Fleet. The specified minimum percentage in the CMA was also reduced from 325 percent to 300 percent. AIG
will continue to manage capital flows between AIG Parent and the AIG Property Casualty insurance subsidiaries
through internal, Board-approved policies and guidelines.
AIG Property Casualty paid cash and non-cash dividends totaling $4.3 billion to AIG Parent in 2013, including
$2.6 billion of cash dividends in the fourth quarter of 2013. For the years ended December 31, 2013 and 2012, AIG
Parent received approximately $4.3 billion and $2.3 billion, respectively, in dividends from AIG Property Casualty Inc.
that were made under the CMAs then in place, and AIG Parent was not required to make any capital contributions in
either period pursuant to the CMAs then in place.
We expect that AIG Life and Retirement subsidiaries will be able to continue to satisfy reasonably foreseeable future
liquidity requirements and meet their obligations, including those arising from reasonably foreseeable contingencies
or events, through cash from operations and, to the extent necessary, monetization of invested assets. AIG Life and
Retirement subsidiaries’ liquidity resources are held in the form of cash, short-term investments and publicly traded,
investment grade rated fixed maturity securities.
Certain AIG Life and Retirement insurance subsidiaries are members of the FHLBs in their respective districts. As of
December 31, 2013, AIG Life and Retirement had outstanding borrowings of $50 million from the FHLBs. Borrowings
from the FHLBs are used to supplement liquidity or for other general corporate purposes.
The need to fund product surrenders, withdrawals and maturities creates a potential liquidity requirement for AIG Life
and Retirement’s insurance subsidiaries. We believe that because of the size and liquidity of our investment
portfolios, AIG Life and Retirement does not face a significant liquidity risk due to normal deviations from projected
claim or surrender experience. Furthermore, AIG Life and Retirement’s products contain certain features that mitigate
surrender risk, including surrender charges. As part of its risk management framework, AIG Life and Retirement
continues to evaluate and, where appropriate, pursue strategies and programs to improve its liquidity position and
facilitate AIG Life and Retirement’s ability to maintain a fully invested asset portfolio. AIG Life and Retirement also
has developed a robust contingent liquidity plan to address any unforeseen liquidity needs.
AIG Life and Retirement executes programs, which began in 2012, that lend securities from its investment portfolio to
supplement liquidity or for other uses as deemed appropriate by management. Under these programs, AIG Life and
Retirement insurance subsidiaries lend securities to financial institutions and receive collateral equal to 102 percent
of the fair value of the loaned securities. Reinvestment of cash collateral received is restricted to liquid investments.
Additionally, the aggregate amount of securities that an AIG Life and Retirement insurance company may lend under
its program at any time is limited to five percent of its general account admitted assets. AIG Life and Retirement’s
liability to borrowers for collateral received was $4.0 billion as of December 31, 2013.
AIG Life and Retirement
..................................................................................................................................................................................................................................
AIG 2013 Form 10-K134
ITEM 7 / LIQUIDITY AND CAPITAL RESOURCES
..................................................................................................................................................................................
............................................................................................................................................................................................