AIG - Matched Investment Program - (MIP)

2006 1117- MarketWatch.com - AIG and Genworth subpoenaed by DOJ, SEC: Regulators probe big-rigging in guaranteed investment contracts, By Alistair Barr

  • AIG used to sell GICs through its SunAmerica unit.
  • But the company has replaced that with a new, so-called matched investment program run by the parent company AIG.
  • AIG Matched Funding Corp.?
  • AIG Matched Funding Corp., a wholly-owned subsidiary of AIG Financial Products Corp., was established for the purpose of issuing debt securities (including bonds, notes and debentures) and other instruments the proceeds of which are lent to other members of the AIG Financial Products Corp.
    • 2004 0930 - FORM D - NOTICE OF SALE OF SECURITIES - PURSUANT TO REGULATION D - UNIFORM LIMITED OFFERING EXEMPTION - 5p
Spread-Based Investment Business
  • AIG’s Spread-Based Investment business includes the results of AIG’s proprietary Spread-Based Investment operations, the Matched Investment Program (MIP), which was launched in September of 2005 to replace the Guaranteed Investment Contract (GIC) program, which is in runoff whereby no new GIC contracts are being written.
  • The MIP is an investment strategy that involves investing in various asset classes with financing provided through third parties.
  • This business uses various risk mitigating strategies designed to hedge interest rate and currency risk associated with underlying investments and related liabilities.

 2008 06 - AIG 10Q - [link]

AIG’s securities lending program is a centrally managed program by AIG Investments for the benefit of certain of AIG’s insurance companies and the Asset Management segment.

  • Securities are loaned to various financial institutions, primarily major banks and brokerage firms. Cash collateral generally ranging from 100 to 102 percent of the fair value of the loaned securities is received and is invested in fixed maturity securities to earn a net spread.
  • To the extent that the collateral received is less than 102 percent, AIG has agreed with its insurance companies to deposit funds to the collateral pool for the benefit of the insurance company participants.

2008 06 - AIG 10Q - [link]

2008 - AIG 10k, For the fiscal year ended December 31 - SEC-link-345p

(p15) - Spread-Based Investment Business

AIG’s Spread-Based Investment business includes the results of AIG’s proprietary spread-based investment operations, the Matched Investment Program (MIP) and the Guaranteed Investment Contracts (GIC), which the MIP replaced.

  • Due to the extreme market conditions experienced in 2008 and the downgrades of AIG’s credit ratings, the MIP is currently in run-off.
  • As previously disclosed, the GIC has been in run-off since the inception of the MIP in 2006.
  • No additional debt issuances are expected for either the MIP or GIC for the foreseeable future.

(p121) - The increase in net realized capital losses for 2008 primarily consists of an increase of $6.4 billion in other-than-temporary impairment charges on fixed maturity securities for both the GIC and MIP, higher net mark-to-market losses of $1.2 billion on interest rate and foreign exchange hedges not qualifying for hedge accounting treatment for both the GIC and MIP and higher net mark-to-market losses of $374 million on credit default swap investments held by the MIP due to the widening of corporate credit spreads.

  • The MIP credit default swaps are comprised of single-name investment grade corporate exposures.

(p121) - The MIP recognized an operating loss, due to net realized capital losses, of $4.8 billion in 2008, and an operating loss of $794 million in 2007.

  • AIG did not issue any additional debt to fund the MIP in 2008 and does not intend to issue any additional debt for the foreseeable future. Through December 31, 2008, the MIP had cumulative debt issuances of $13.4 billion.
  • During 2007, AIG issued the equivalent of $8.1 billion of securities to fund the MIP in the Euromarkets and the U.S. public and private markets. See Note 13 to the Consolidated Financial Statements for a schedule of maturities of the MIP debt.