AIG - SunAmerica

  • 1997 0728 - Rating Action: Moody's Assigns Credit Ratings To Shelf Of Sunamerica Inc. (Senior At (P)Baa1) And Its Subsidiaries; Confirms Existing Ratings - [link]
  • 1998 0821 - Los Angeles Times - AIG to Buy SunAmerica : Insurance Giant Makes $16.5-Billion Deal for Annuity Marketer - [link]
  • 1999 0104 - Rating Action: Moody's Assigns Credit Ratings To Shelf Of Sunamerica Inc. (Senior At (P)Baa1) And Its Subsidiaries; Confirms Existing Ratings Aaa) - [link]
  • (p43) - 99 See, e.g., SunAmerica Annuity and Life Assurance Company, Annual Statement for the Year 2009, at 19.1, 19.18 (Dec. 31, 2009) (hereinafter “SunAmerica 2009 Annual Statement”). The program was managed by an affiliated lending agent (AIG Securities Lending Corp.) and an affiliated investment advisor (e.g., AIG Institutional Asset Management). AIG Form 10-Q for Third Quarter 2008, supra note 23, at 104, 143-44. 
  • (p45) - 110 Panel call with Texas Department of Insurance (May 24, 2010); see AIG Form 10-Q for Third Quarter 2008, supra note 23, at 49 (“Historically, AIG had received cash collateral from borrowers of 100-102 percent of the value of the loaned securities. In light of more favorable terms offered by other lenders of securities, AIG accepted cash advanced by borrowers of less than the 102 percent historically required by insurance regulators. Under an agreement with its insurance company subsidiaries participating in the securities lending program, AIG parent deposited collateral in an amount sufficient to address the deficit”); see also SunAmerica 2009 Annual Statement, supra note 99, at 19.1 (“The Company‟s lending agent received primarily cash collateral in an amount in excess of the market value of the securities loaned. Such collateral was held by the lending agent for the benefit of the Company and [was] not available for the general use of the Company. Since the collateral was restricted, it was not reflected in the Company's balance sheet as an asset and offsetting liability”). This restricted collateral could be used to pay the securities lending counterparties or reinvested. Had the AIG parent filed for bankruptcy, the subsidiaries would have had access to the collateral in order to pay the counterparties. 
  • (p50) - Beyond the insurance subsidiaries, AIGFP had liabilities across AIG, both to the parent and other subsidiaries. AIGFP had “intercompany payables” of $54 billion owed to the parent.134  FRBNY considered the systemic risk of these obligations to be high, as “the failure of FP to perform on obligations to other AIG entities may create an event of default for the company,” and the “[f]ailure of FP may put at risk the financial condition of other AIG operating subsidiaries.” The insurance and financing subsidiaries also had $1.85 billion in derivatives exposure to AIGFP. The subsidiaries with the largest exposures were ILFC ($695 million), AIG Matched Investment Program ($441.5 million), SunAmerica LIC ($240.3 million), and American General ($225.4 million). Lastly, as discussed in Section B.6, all of Banque AIG‟s risk was back-to-back with AIGFP, meaning that AIGFP was liable for all of Banque AIG‟s obligations.  An FRBNY staff document describes that a default by AIGFP would have “a catastrophic impact on Banque AIG.” 135 
  • (p144) - It would have thus pushed the parent itself into bankruptcy since it did not have cash to meet these obligations. That bankruptcy might have triggered the immediate seizure of many of AIG‟s insurance subsidiaries (which represented any value that existed in the AIG franchise) by state regulators.553
    • 553 Panel staff conversation with Jay Wintrob, CEO of the SunAmerica Financial Group (May 17, 2010). As discussed in Annex IV, insurance companies are subject to their own resolution process in lieu of bankruptcy; the term “bankruptcy” as used here is intended to encompass that process at the state level.
  • (p154-155) - SunAmerica Financial, AIG‟s umbrella for its life and retirement insurance companies, has estimated that it lost between $2 and $3 billion in sales during this time period.595 This demonstrates that AIG's insurance subsidiaries incurred some loss even after the government's rescue, but the amount would likely have been much larger had a bankruptcy occurred. Third, it is unclear how the bankruptcy of the AIG parent would have affected the ratings of the insurance company subsidiaries.596