2007 Annual Report - AIG.com

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American International Group, Inc. and Subsidiaries Management’s Discussion and Analysis of Financial Condition and Results of Operations Continued 5.75 percent to 5.90 percent on these amortizing ten-year corporate purposes and to provide backup for AGF’s commercial borrowings depending on the delivery date of the aircraft. At paper programs. December 31, 2007, ILFC had $664 million outstanding under In January 2007, AGF issued junior subordinated debentures in this facility. The debt is collateralized by a pledge of the shares of an aggregate principal amount of $350 million that mature in a subsidiary of ILFC, which holds title to the aircraft financed January 2067. The debentures underlie a series of trust preferred under the facility. securities sold by a trust sponsored by AGF in a Rule 144A/ In May 2004, ILFC entered into a similarly structured Export Regulation S offering. AGF can redeem the debentures at par Credit Facility for up to a maximum of $2.6 billion for Airbus beginning in January 2017. aircraft to be delivered through May 31, 2005. The facility was As of December 31, 2007, notes and bonds aggregating subsequently increased to $3.6 billion and extended to include $22.4 billion were outstanding with maturity dates ranging from aircraft to be delivered through May 31, 2008. The facility 2008 to 2031 at interest rates ranging from 1.94 percent to becomes available as the various European Export Credit Agen- 8.45 percent. To the extent deemed appropriate, AGF may enter cies provide their guarantees for aircraft based on a nine-month into swap transactions to manage its effective borrowing rates forward-looking calendar, and the interest rate is determined with respect to these notes and bonds. As a well-known seasoned through a bid process. At December 31, 2007, ILFC had issuer, AGF filed an automatic shelf registration statement with $1.9 billion outstanding under this facility. Borrowings with the SEC allowing AGF immediate access to the U.S. public debt respect to these facilities are included in ILFC’s notes and bonds markets. At December 31, 2007, AGF had remaining corporate payable in the preceding table of borrowings. The debt is authorization to issue up to $8.1 billion of debt securities under collateralized by a pledge of shares of a subsidiary of ILFC, which its shelf registration statements. holds title to the aircraft financed under the facility. AGF’s funding sources include a medium-term note program, From time to time, ILFC enters into funded financing agree- private placement debt, retail note issuances, bank financing and ments. As of December 31, 2007, ILFC had a total of $1.1 billion securitizations of finance receivables that AGF accounts for as onoutstanding, which has varying maturities through February 2012. balance-sheet secured financings. In addition, AGF has become an The interest rates are LIBOR-based, with spreads ranging from established issuer of long-term debt in the international capital 0.30 percent to 1.625 percent. markets. The proceeds of ILFC’s debt financing are primarily used to In addition to debt refinancing activities, proceeds from the purchase flight equipment, including progress payments during the collection of finance receivables are used to fund cash needs construction phase. The primary sources for the repayment of this including the payment of principal and interest on AGF’s debt. AIG debt and the interest expense thereon are the cash flow from does not guarantee any of the debt obligations of AGF. See also operations, proceeds from the sale of flight equipment and the Liquidity. rollover and refinancing of the prior debt. AIG does not guarantee the debt obligations of ILFC. See also Liquidity herein. AIGCFG AGF AIGCFG has a variety of funding mechanisms for its various markets, including retail and wholesale deposits, short and long- AGF fulfills most of its short-term cash borrowing requirements term bank loans, securitizations and intercompany subordinated through the issuance of commercial paper. The issuance of debt. AIG Credit Card Company (Taiwan), a consumer finance commercial paper is subject to the approval of AGF’s Board of business in Taiwan, and AIG Retail Bank PLC, a full service Directors and is not guaranteed by AIG. AGF maintains committed consumer bank in Thailand, have issued commercial paper for the syndicated revolving credit facilities which, as of December 31, funding of their respective operations. AIG does not guarantee any 2007, totaled $4.8 billion and which are summarized below under borrowings for AIGCFG businesses, including this commercial Revolving Credit Facilities. The facilities can be used for general paper. 92 AIG 2007 Form 10-K
American International Group, Inc. and Subsidiaries Revolving Credit Facilities AIG, ILFC and AGF maintain committed, unsecured revolving credit facilities listed on the table below in order to support their respective commercial paper programs and for general corporate purposes. AIG, ILFC and AGF expect to replace or extend these As of December 31, 2007 credit facilities on or prior to their expiration. Some of the facilities, as noted below, contain a ‘‘term-out option’’ allowing for the conversion by the borrower of any outstanding loans at expiration into one-year term loans. One-Year (in millions) Available Term-Out Facility Size Borrower(s) Amount Expiration Option AIG: 364-Day Syndicated Facility $ 2,125 AIG/AIG Funding (a) $2,125 July 2008 Yes AIG Capital Corporation (a) 5-Year Syndicated Facility 1,625 AIG/AIG Funding (a) 1,625 July 2011 No AIG Capital Corporation (a) 364-Day Bilateral Facility (b) 3,200 AIG/AIG Funding 210 December 2008 Yes 364-Day Intercompany Facility (c) 5,335 AIG 5,335 September 2008 Yes Total AIG $12,285 $9,295 ILFC: 5-Year Syndicated Facility $ 2,500 ILFC $2,500 October 2011 No 5-Year Syndicated Facility 2,000 ILFC 2,000 October 2010 No 5-Year Syndicated Facility 2,000 ILFC 2,000 October 2009 No Total ILFC $ 6,500 $6,500 AGF: 364-Day Syndicated Facility $ 2,625 American General Finance Corporation $2,625 July 2008 Yes American General Finance, Inc. (d) 5-Year Syndicated Facility 2,125 American General Finance Corporation 2,125 July 2010 No Total AGF $ 4,750 $4,750 (a) Guaranteed by AIG. (b) This facility can be drawn in the form of loans or letters of credit. All drawn amounts shown above are in the form of letters of credit. (c) Subsidiaries of AIG are the lenders on this facility. (d) American General Finance, Inc. is an eligible borrower for up to $400 million only. Credit Ratings The cost and availability of unsecured financing for AIG and its subsidiaries are generally dependent on their short- and long-term debt ratings. The following table presents the credit ratings of AIG and certain of its subsidiaries as of February 15, 2008. In parentheses, following the initial occurrence in the table of each rating, is an indication of that rating’s relative rank within the agency’s rating categories. That ranking refers only to the generic or major rating category and not to the modifiers appended to the rating by the rating agencies to denote relative position within such generic or major category. Short-term Debt Senior Long-term Debt Moody’s S&P Fitch Moody’s (a) S&P (b) Fitch (c) AIG P-1 (1st of 3) A-1+ (1st of 6) F1+ (1st of 5) Aa2 (e) (2nd of 9) AA (2nd of 8) (f) AA (2nd of 9) (h) AIG Financial Products Corp. (d) P-1 A-1+ — Aa2 (e) AA (f) — AIG Funding, Inc. (d) P-1 A-1+ F1+ — — — ILFC P-1 A-1+ F1 (1st of 5) A1 (3rd of 9) AA- (2nd of 8) (g) A+ (3rd of 9) (h) American General Finance Corporation P-1 A-1 (1st of 6) F1 A1 A+ (3rd of 8) A+ (h) American General Finance, Inc. P-1 A-1 F1 — — A+ (h) (a) Moody’s Investors Service (Moody’s) appends numerical modifiers 1, 2 and 3 to the generic rating categories to show relative position within rating categories. (b) Standard & Poor’s, a division of the McGraw-Hill Companies (S&P) ratings may be modified by the addition of a plus or minus sign to show relative standing within the major rating categories. (c) Fitch Ratings (Fitch) ratings may be modified by the addition of a plus or minus sign to show relative standing within the major rating categories. (d) AIG guarantees all obligations of AIG Financial Products Corp. and AIG Funding, Inc. (e) Negative rating outlook on Senior Unsecured Debt Ratings. A negative outlook by Moody’s indicates that a rating may be lowered but is not necessarily a precursor of a ratings change. (f) Negative rating outlook on Counterparty Credit Ratings. A negative outlook by S&P indicates that a rating may be lowered but is not necessarily a precursor of a ratings change. (g) Negative rating outlook on Corporate Credit Rating. A negative outlook by S&P indicates that a rating may be lowered but is not necessarily a precursor of a ratings change. (h) Issuer Default and Senior Unsecured Debt Ratings on Rating Watch Negative. Rating Watch Negative indicates that a rating has been placed on active rating watch status. AIG 2007 Form 10-K 93
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AMERICAN INTERNATIONAL GROUP, INC.
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FINANCIAL HIGHLIGHTS (in millions,
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overall financial condition, althou
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Group Executive Committee We are ad
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AIG’s life insurance network is t
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We have also begun to address the e
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WHAT WE SEE The ability to see and
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The Major Accounts Practice within
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Around the world, the middle class
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WE SEE GROWTH OPPORTUNITIES IN EMER
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To grow the strength of the AIG glo
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Since 2003, the AIG Disaster Relief
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RESPECT Respect encompasses how we
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Life Insurance & Retirement Service
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Domestic Brokerage Group— Gross P
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In the summer of 2007, widespread f
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in gross premiums written. It launc
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It grew new business premiums from
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emerging markets for its services,
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ILFC—Revenues by Region Total = $
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AIG Investments acquired a 94 perce
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and changing interest rates, as wel
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American International Group, Inc.
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UNITED STATES SECURITIES AND EXCHAN
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SHAREHOLDER INFORMATION Corporate H
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