8-KMaterial AgreementsOther EventsExhibits & Filings

AMERICAN INTERNATIONAL GROUP, INC. 8-K Report, Material Agreement (Feb 9, 2011)

Filed February 9, 2011For Securities:AIG

Summary

This 8-K filing details two significant events for American International Group, Inc. (AIG) as of February 9, 2011. Firstly, AIG has completed the sale of its Japanese life insurance subsidiaries, Star and Edison, to Prudential Financial, Inc. for $4.8 billion. The proceeds are earmarked for repaying intercompany loans to special-purpose vehicles (SPVs) which, in turn, are to distribute funds to the U.S. Department of the Treasury. Secondly, AIG has entered into a letter agreement with the Department of the Treasury, allowing it to retain $2 billion of the sale proceeds to bolster the capital of its Chartis subsidiaries. This capital infusion is intended to support reserve strengthening efforts within Chartis's property and casualty insurance operations, a significant development for the company's core insurance business.

Key Highlights

  • 1AIG completed the sale of its Japanese life insurance subsidiaries (Star and Edison) to Prudential Financial for $4.8 billion on February 1, 2011.
  • 2The sale proceeds were initially designated to repay intercompany loans to SPVs, which would then remit funds to the U.S. Department of the Treasury.
  • 3A significant letter agreement with the Department of the Treasury allows AIG to retain $2 billion of the sale proceeds.
  • 4The retained $2 billion will be used to support the capital of AIG's Chartis subsidiaries.
  • 5This capital is intended to address reserve strengthening in Chartis's property and casualty insurance operations.
  • 6AIG expects to record a $4.1 billion charge for the fourth quarter of 2010 related to this reserve strengthening.

Frequently Asked Questions

AIG received total consideration of $4.8 billion, consisting of $4.2 billion in cash and $0.6 billion in the assumption of third-party debt by Prudential Financial, Inc.

Initially, the net cash proceeds were to be used to repay intercompany loans to special-purpose vehicles (SPVs), which would then distribute funds to the U.S. Department of the Treasury. However, a letter agreement allows AIG to retain $2 billion to support Chartis's capital, with the remainder to be used to repay the Department of the Treasury's preferred interests in the SPVs.

The $2 billion retained by AIG is crucial for supporting the capital of its Chartis, Inc. subsidiaries. This capital is specifically earmarked to address the reserve strengthening that AIG is undertaking in its property and casualty insurance operations.

AIG announced that it expects to record a $4.1 billion charge for the fourth quarter of 2010 due to this reserve strengthening in its Chartis property and casualty insurance subsidiaries.