2007 0611 - OTS - Office of Thrift Supervison Holding Company Report Of Examination of AIG - 52p

  • 2007 0611 - OTS - Office of Thrift Supervison Holding Company Report Of Examination of AIG - 52p

 

 

⇒ (p12) -

Based on revenues,

  • domestic general insurance (30.7 percent) and
  • foreign life insurance and retirement services (31.2 percent) are the largest operating segments of the company.

The other segments of the conglomerate include:

  • domestic life and retirement services (14.3 percent),
  • foreign general (10.8percent),
  • financial services (8.0 percent), and
  • asset management (5.0 percent).  

⇒ (p14)

AIG insurance companies and AIGFP invest in Mortgage Backed Securities (MBS) and Collateralized Debt Obligations (CDOs), in which the underlying collateral includes pools of subprime mortgages.

......

AIG provided significant public disclosure of its subprime mortgage exposure with its second quarter 2007 earnings release. Management is comfortable with the size of the exposures and the quality of the respective investment portfolios and operations.

⇒ (p24)

The Financial Services segment had negative earnings trends due to changes in accounting rules rather than core fundamentals.

⇒ (p26)

Liquidity
Dividends from the company's insurance and financial services subsidiaries are the principal source of funding for its top tier operations.

  • Dividends are a sound funding source because the subsidiaries have proven earnings and cash flow records.

In addition, AIG issues commercial paper to fund short-term cash needs, medium term notes to fund its matched investment program (MIP), and long-term debt securities to capitalize subsidiaries and repurchase common stock.

It has established back-up credit facilities with financial institutions to support its liquidity needs should it lose access to the commercial paper facility.

AIG also has access to a $2 billion inter-company line of credit with its insurance subsidiaries.

  • AIG uses funds mainly to service debt obligations, pay dividends to shareholders, allocate capital to subsidiaries, and repurchase outstanding common stock.

⇒ (p33)

Cash Analysis

Changes in operating assets and liabilities:

  • General and life insurance reserves
    Period Ended - 03/31/2007 Fiscal Year Ended
    12/31/2006
    Fiscal Year Ended
    12/31/2005

    $4,190

    $13,173 $27,299
  • p37 - The following table lists AIG's significant intra-group transactions (IGT) as of March 31, 2007.
    • $6.1 billion in Loans: From American General Life Insurance Co to AIG Financial Products Corp