American International Group, Inc. New · NYSE:AIG
American International Group, Inc. New — American International Group — Q1 2008 Earnings Presentation
160 slides from American International Group, Inc. New's earnings presentation, May 9, 2008
Slide 1: Conference Call Credit Presentation
Conference Call Credit Presentation Financial Results for the Quarter Ended March 31, 2008 May 9, 2008 (Revised as to slides 30 and 34) 1
Slide 2: Forward-looking statements
It should be noted that this presentation and the remarks made by AIG representatives may contain projections concerning financial information and statements concerning future economic performance and events, plans and objectives relating to management, operations, products and services, and assumpt
Slide 3: Outline
OUTLINE • Capital Markets - AIG Financial Products • Insurance Investment Portfolios • Mortgage Insurance - United Guaranty • Consumer Finance - American General Finance 3
Slide 4: Capital Markets
Capital Markets THE STRENGTH TO BE THERE:
Slide 5: Capital Markets Outline
Capital Markets Outline • Business Rationale, Portfolio Composition & Underwriting Standards • Fundamental Risk Assessment & Stress Testing • Accounting, Valuation Fundamentals & Economic Capital • Conclusions 5
Slide 6: AIG Financial Products
AIG Financial Products “Super Senior” Credit Default Swap (CDS) Business • No uniform definition for “Super Senior” risk across the market. • AIGFP defines “Super Senior” risk as a risk where there is no expected loss at contract inception, even under its stress scenario assumptions. • Due diligence
Slide 7: Objectives for Counterparties in Super Senior CDS Transactions
Objectives for Counterparties in “Super Senior” CDS Transactions • Regulatory capital relief • Facilitate securitization • Arbitrage 7
Slide 8: Summary Statistics Super Senior Credit Derivatives
Summary Statistics “Super Senior” Credit Derivatives* March 31, 2008 European Multi-Sector CDOs Residential Corporate – Corporate – Mortgage – Transaction Type`` Regulatory Arbitrage Regulatory Transactions Transactions Total Multi- Capital Motivated Motivated Total Capital w/Mixed Collateral w/No S
Slide 9: Credit Underwriting – Regulatory Capital Corporate Transactions
Credit Underwriting – Regulatory Capital Corporate Transactions Every Transaction Passes Through the Same Process of Careful Selection and Due Diligence • For each regulatory capital-motivated transaction, we review the originating bank’s underwriting standards, including for example: – The bank’s i
Slide 10: Credit Underwriting – European Residential Mortgage Transactions
Credit Underwriting – Regulatory Capital European Residential Mortgage Transactions Thorough Review of Underwriting, Processes and Performance • Understanding of the bank’s lending philosophy and the extent (if any) to which it has changed in recent times. • Underwriting standards and credit approva
Slide 11: Credit Underwriting – Arbitrage Motivated Corporate Transactions
Credit Underwriting – Arbitrage Motivated Corporate Transactions Every Transaction Passes Through the Same Process of Careful Selection and Due Diligence • Similar to the Regulatory Capital transactions, an internal AIGFP rating is assigned to each name in the portfolio (which in all cases is equal
Slide 12: Past Performance - Corporate Loans and European Residential Mortgages
Past Performance - Corporate Loans and European Residential Mortgages Extremely Low Loss Rates in Reference Pools with Attachment Points Always Significantly Higher • The losses realized to date in the underlying reference pools have been very small relative to our attachment points. This is a refle
Slide 13: Typical Tranche Structure of a Multi-Sector CDO
Typical Tranche Structure of a Multi-Sector CDO AAA Including “Super Senior” Layer AAA AAAAA Underlying AAAAA portfolio “Super AAA Senior” A AA AAA typically Risk Layer A AA comprises AA BBB A AA 125-200 - BBB A obligations AIGFP Net BBB A A from various Notional BBB sectors. BBB Exposure Those BBB
Slide 14: Credit Underwriting – Multi-Sector CDO Transactions
Credit Underwriting – Multi-Sector CDO Transactions Selective Review of Manager, Collateral and Proposed Structure (1 of 2) • Review and analysis of the CDO Manager (on all transactions), including: – Review of personnel and their experience and suitability for managing the assets and the structure
Slide 15: Credit Underwriting – Multi-Sector CDO Transactions
Credit Underwriting – Multi-Sector CDO Transactions Selective Review of Manager, Collateral and Proposed Structure (2 of 2) • Analysis of the key transaction terms, including: – The term of any proposed re-investment period – Management trading discretions, if any – Portfolio quality triggers in pla
Slide 16: Multi-Sector CDOs: What Differentiated our Transactions?
Multi-Sector CDOs What Differentiated our Transactions? Careful Portfolio Selection Combined with High Attachment Points • Adherence to conservative underwriting approach. • Remote attachment points, mostly with significant AAA-rated tranches below our position. • Calculated attachment points are on
Slide 17: Capital Markets Outline
Capital Markets Outline • Business Rationale, Portfolio Composition & Underwriting Standards • Fundamental Risk Assessment & Stress Testing • Accounting, Valuation Fundamentals & Economic Capital • Conclusions 17
Slide 18: Fundamental Risk Assessment: AIGFP Credit Review Process
Fundamental Risk Assessment: AIGFP Credit Review Process • AIGFP’s highly experienced credit team as part of its role conducts continual surveillance around the “Super Senior” portfolio. • Each quarter AIGFP re-runs its stress models against the entire “Super Senior” portfolio to account for updated
Slide 19: Fundamental Risk Assessment: AIG ERM
Fundamental Risk Assessment AIG ERM • Every quarter AIG Enterprise Risk Management (ERM) reviews AIGFP’s “Super Senior” credit derivative exposures. • The review considers delinquency, defaults and realized loss trends for each transaction relative to updated subordination levels. The assessment inc
Slide 20: Rating Agency Actions
Rating Agency Actions • At March 31, 2008 all three major rating agencies continued to rate 82% of AIGFP’s $60.6 billion “Super Senior” credit derivative multi-sector CDO portfolio with subprime RMBS collateral at AAA levels. This is despite a significant number of CDO downgrades during 2007 and the
Slide 21: AIG Stress Testing – Static Stress
AIG Stress Testing – Static Stress Illustration of Potential Realizable Credit Impairment Losses (Pre-Tax) on AIGFP’s “Super Senior" Credit Derivative Portfolio on Multi-Sector CDOs Description of AIG Static Stress Scenario* Value of Pre Tax Loss Estimates Collateral Securities Static Stress Scenari
Slide 22: Market Valuation vs. Static Stress Testing at Transaction Level
Market Valuation vs. Static Stress Testing Illustrations at Transaction Level Slides 23 to 25 show loss comparisons at the transaction level: In All Cases In Most Cases Market valuations indicate losses that exceed Market valuations indicate losses, while Static Static Stress Scenario realizable cre
Slide 23: Multi-Sector CDO Portfolio Transactions (1 of 3)
Multi-Sector CDO Portfolio Transactions (1 of 3) 3.0 $ Billions AIGFP Net Notional Exposure Transaction by Transaction Subordination Layer Illustration Static Stress Scenario Realizable Credit Impairment Gross Notional Loss Unrealized Market Valuation Loss 2.0 1.0 0.0 1 2 3 4 5 6 7 8 9 10 11 12 13 1
Slide 24: Multi-Sector CDO Portfolio Transactions (2 of 3)
Multi-Sector CDO Portfolio Transactions (2 of 3) 3.0 $ Billions AIGFP Net Notional Exposure Subordination Layer Transaction by Transaction Illustration Static Stress Scenario Realizable Credit Impairment Gross Notional Loss Unrealized Market Valuation Loss 2.0 1.0 0.0 40 41 42 43 44 45 46 47 48 49 5
Slide 25: Multi-Sector CDO Portfolio Transactions (3 of 3)
Multi-Sector CDO Portfolio Transactions (3 of 3) 5.0 AIGFP Net Not ional Exposure Transact ion by Transact ion Subordinat ion Layer Illust rat ion St at ic St ress Scenario Realizable Credit Impairment Gross Not ional Loss 4.0 Unrealized M arket Valuat ion Loss 3.0 2.0 1.0 0.0 77 78 79 80 81 82 83 8
Slide 26: Current Market Implied Probabilities of Default
Current Market Implied Probabilities of Default for AIGFP’s “Super Senior” Credit Derivative Portfolio on Multi-Sector CDOs Implied Probabilities of Default of Gross Exposures Over Lifetime of Portfolio* 70% 60% 50% Market Implied Probabilities of Default Reflect: 40% 30% 62% • Basic Credit Risk Fun
Slide 27: AIG Stress Testing – Roll Rate Stress
AIG Stress Testing – Roll Rate Stress Illustration of Potential Realizable Credit Impairment Losses (Pre-Tax) on AIGFP’s “Super Senior" Credit Derivative Portfolio on Multi-Sector CDOs Description of AIG Roll Rate Stress Analysis Value of Pre Tax Loss Estimates* $ BN • Coverage: Roll Rate Stress Sce
Slide 28: Stress Testing – Roll Rate Stress Scenario
Stress Testing – Roll Rate Stress Scenario AIGFP’s “Super Senior" Credit Derivative Portfolio on Multi-Sector CDOs Overview of Methodology Non- Performing Coverage1 Performing Mortgages Mortgages Collateral Pools Included in Roll Rate Stress Scenario Analysis Subprime Loss Loss & Alt-A Default Loss
Slide 29: AIG Stress Testing – Static vs. Roll Rate Stress
AIG Stress Testing – Static vs. Roll Rate Stress Illustration of Potential Realizable Credit Impairment Losses (Pre-Tax) on AIGFP’s “Super Senior" Credit Derivative Portfolio on Multi-Sector CDOs Comparison of AIG Stress Tests Value of Pre Tax Loss Estimates* • Enhanced AIG stress testing provides a
Slide 30: Other Market Participants' Estimates
Other Market Participants’ Estimates Potential Losses on AIGFP’s “Super Senior" Credit Derivative Portfolio on Multi-Sector CDOs • Due to the dislocation in the market for CDO collateral, AIG does not use the market values of the underlying CDO collateral in estimating its potential realizable credi
Slide 31: Conclusions From Fundamental Risk Assessment & Stress Testing
Conclusions From Fundamental Risk Assessment & Stress Testing • All three major rating agencies continued to rate 82% of AIGFP’s $60.6 billion “Super Senior” credit derivative multi-sector CDO portfolio with subprime RMBS collateral at AAA levels as of March 31, 2008 (69% as of April 30, 2008). This
Slide 32: Capital Markets Outline
Capital Markets Outline • Business Rationale, Portfolio Composition & Underwriting Standards • Fundamental Risk Assessment & Stress Testing • Accounting, Valuation Fundamentals & Economic Capital • Conclusions 32
Slide 33: Accounting for Super Senior Credit Derivative Swaps
Accounting for “Super Senior” Credit Derivative Swaps • AIGFP accounts for its “Super Senior” Credit Derivative portfolio in accordance with FAS 133 and FAS 157: – At inception the credit derivative is recorded at its transaction price as that is the best indicator of fair value. – Subsequent change
Slide 34: AIGFP Super Senior Credit Derivative Swaps Portfolio
AIGFP “Super Senior” Credit Derivative Swaps Portfolio Total Notional Amounts and Cumulative MTM Loss Cumulative MTM Loss Cumulative MTM Loss Notional Amount Through Through Type March 31, 2008 December 31, 2007 March 31, 2008 ($ Billions) ($ Billions) ($ Billions) Corporate Arbitrage1 $ 57.1 $0.2 $
Slide 35: Evolution of Valuation Methodologies for Corporate Arbitrage Transactions
Evolution of AIGFP’s Valuation Methodologies for “Super Senior” Corporate Arbitrage Transactions • At September 30, 2007 AIGFP employed the Binomial Expansion Technique (BET) model to value this portfolio, resulting in no noticeable change in fair value. • At December 31, 2007, AIGFP valued its Corp
Slide 36: Regulatory Capital Super Senior Transactions Valuation
Regulatory Capital (Corporate - Regulatory & European Residential Mortgage) “Super Senior” Transactions Valuation • Transactions entered into are of a highly customized, non-market standard nature, to facilitate regulatory capital relief, rather than for credit risk transfer. • Transactions are expe
Slide 37: Evolution of Valuation Methodologies for Multi-Sector CDOs
Evolution of AIGFP’s Valuation Methodologies / Inputs for “Super Senior” Credit Derivatives Written on Multi-Sector CDOs November 30, 2007 November 30, 2007 December 31, 2007 & Date September 30, 2007 October 31, 2007 (Method A) (Method B) March 31, 2008 Methodology • Modified BET • Modified BET • M
Slide 38: Process Followed for March 31, 2008 GAAP Valuation
Process Followed for March 31, 2008 GAAP Valuation of “Super Senior” CDS Written on CDOs Acquisition & Modeled Review of Third Overlay of Benchmarking Key Inputs “Super Party Prices of “Super Senior” to Independent to Modified Senior” Collateral Tranche Price Sources BET Model Market Securities Quot
Slide 39: Super Senior Multi-Sector CDO Valuation Model
“Super Senior” Multi-Sector CDO Valuation Model • The BET methodology was originally developed by Moody’s for rating portfolio credit products. • We modified it to imply default probabilities from market prices for the underlying securities, not from rating agency assumptions. • The model replaces a
Slide 40: Super Senior Multi-Sector CDO Valuation Model
“Super Senior” Multi-Sector CDO Valuation Model Model parameters are derived from independent market sources. • Third party prices for the underlying securities that comprise the collateral of each CDO are obtained from CDO managers. • AIGFP was able to obtain prices for at least 70% of unique colla
Slide 41: Similarities Between Excess Casualty Insurance & Super Senior Portfolio
Similarities Between Excess Casualty Insurance & AIGFP’s “Super Senior” Credit Derivative Portfolio on Multi-Sector CDOs “Super Senior” Credit Derivative Excess Casualty Insurance Portfolio on Multi-Sector CDO • AIG acts as principal • AIG acts as principal • AIG retains underwriting control • AIG r
Slide 42: Valuation Principles Applied By AIG
Valuation Principles Applied By AIG “Market Consistent “Fair Value” Value” under AIG’s Under U.S. GAAP Economic Capital Model (ECM) • “The price that would be received to sell an asset • For assets and tradeable / hedgeable liabilities, or paid to transfer a liability in an orderly represents the ma
Slide 43: Fair Value vs. Market Consistent Value for Non-Tradeable Liabilities
Illustration of Key Differences Between Fair Value & Market Consistent Value for Non-Tradeable Liabilities Example: Valuation of Non-Tradeable Liability Consequent to Liability Market Crisis (e.g. Post KRW in P&C Insurance) -ILLUSTRATION - • Most significant difference is in risk margin component •
Slide 44: Market Consistent Value of Super Senior Portfolio for Economic Capital Model
Determination of Market Consistent Value of AIGFP’s “Super Senior” Credit Derivative Portfolio on Multi-Sector CDOs for AIG’s Economic Capital Model March 31, 2008 Conservative Estimate of Market Consistent Value AIG’s conservative estimate of Market Loss Under AIG’s Economic Capital Model (ECM) Con
Slide 45: Adjustments to Determine Available Economic Capital
Adjustments Made to Cumulative Unrealized GAAP Market Valuation Loss to Determine Available Economic Capital Under AIG’s ECM Market Consistent Value Adjustment to Determine Available Economic Capital (March 31, 2008) • With effect from the December 31, 2007, full $BN valuation update of economic cap
Slide 46: Discussion Outline
Discussion Outline • Business Rationale, Portfolio Composition & Underwriting Standards • Fundamental Risk Assessment & Stress Testing • Accounting, Valuation Fundamentals & Economic Capital • Conclusions 46
Slide 47: Remediation of the Valuation Material Weakness
Remediation of the Valuation Material Weakness in Respect of AIGFP’s “Super Senior” Credit Derivative Portfolio on Multi-Sector CDOs • As identified in AIG’s 2007 Form 10K, the material weakness essentially comprised three component issues: – Staff resources – Processes and controls to evaluate thir
Slide 48: Conclusions
Conclusions • AIGFP “Super Senior” credit derivative business was underwritten to an AIGFP super senior standard which projects zero losses at inception. • There has been deterioration in the credit quality and the market’s assessment of expected losses in the underlying collateral securities and AI
Slide 49: AIG Insurance Investment Portfolios
AIG Insurance Investment Portfolios 49
Slide 50: AIG Insurance Investment Portfolios
AIG Insurance Investment Portfolios • The investment portfolios of AIG’s insurance companies are managed by AIG Investments (AIGI)* on their behalf. • These portfolios are managed on a spread investment or Asset-Liability Management model, not as a transactional business. As a result, we do not: – “
Slide 51: Worldwide Insurance and Asset Management Bond Portfolios
AIG Insurance Investment Portfolios Worldwide Insurance and Asset Management Bond Portfolios • AIGI’s bond portfolios* had a fair value of $481.8 billion at March 31, 2008. • The securities are highly rated (approximately 96% are investment grade). • The bond portfolios are also well-diversified geo
Slide 52: Domestic Bonds by Category
AIG Insurance Investment Portfolios Domestic Bonds by Category March 31, 2008 $270.2 Billion RMBS 25% CMBS 4% Credit 43% Municipal 24% U.S. Government 1% CDO Debt Other ABS 1% 2% 52
Slide 53: Accounting and Valuation
AIG Insurance Investment Portfolios Accounting and Valuation • AIGI accounts for its RMBS, CMBS and CDOs in accordance with FAS 115, FSP FAS 115-1, FAS 91 and EITF 99-20. – These securities are predominantly classified as available for sale securities under FAS 115. – Changes in fair value are repor
Slide 54: Other Than Temporary Impairments (OTTI)
AIG Insurance Investment Portfolios Other Than Temporary Impairments (OTTI) • AIG’s senior management evaluates its investments for impairment such that a security is considered a candidate for other-than-temporary impairment if it meets any of the following criteria: – Trading at a significant (25
Slide 55: Consolidated Summary of Gains & Losses
AIG Insurance Investment Portfolios Consolidated Summary of Gains & Losses Financial Effect of Market Disruption Realized and Unrealized Gains / Losses (Pre-tax) Amount Attributable to Total AIG* ($ Millions) – For the quarter ended March 31, 2008 RMBS Portfolio Net realized capital gains (losses) (
Slide 56: RMBS Portfolios
AIG Insurance Investment Portfolios RMBS Portfolios 56
Slide 57: RMBS Overview
AIG Insurance Investment Portfolios RMBS Overview • Holdings of global residential mortgage Amortized Cost Fair Value market products total approximately $82.3 RMBS Type ($ Billions) % ($ Billions) % billion at March 31, 2008, or about 9.7% of Agency Pass-Through and AIG’s total invested assets. CMO
Slide 58: RMBS Portfolio
AIG Insurance Investment Portfolios RMBS Portfolio March 31, 2008 Amortized Cost RATING ($ Millions) BB & HOLDINGS AGENCY* AAA AA A BBB below TOTAL AGENCY $14,541 $ - $ - $ - $ - $ - $14,541 PRIME JUMBO - 12,471 1,724 423 199 7 14,824 ALT-A - 22,378 921 261 61 80 23,701 SUBPRIME - 18,900 1,655 460 1
Slide 59: Total RMBS - $82.3 Billion
AIG Insurance Investment Portfolios Total RMBS - $82.3 Billion March 31, 2008 Payment Waterfall RMBS RMBS (principal + interest) (Collateralpool (Collateral poolofof residential mortgages) residential mortgages) Priority First AAA & Agency AAAtranche tranche AAA $74.3 Billion (90.3%) AA AAtranche tr
Slide 60: Total RMBS Exposure by Vintage
AIG Insurance Investment Portfolios Total RMBS Exposure by Vintage - $82.3 Billion March 31, 2008 30.0 AIGI focuses almost exclusively 25.0 on AAA and AA rated investments with relatively short tenors 20.0 $ Billions Weighted average expected 15.0 life (WAL) is 5.6 years 10.0 5.0 0.0 Pre 2003 2003 2
Slide 61: Subprime RMBS
AIG Insurance Investment Portfolios Subprime RMBS • 95% of AIGI’s exposure to the poor performing 2006/2007 2006 Vintage Credit Enhancement for AIGI* vintages is rated AAA or AA. Original Current Credit Credit • Lifetime loss estimates for 2006/2007 vintage subprime Rating Enhancement Enhancement se
Slide 62: Subprime RMBS - $21.6 Billion
AIG Insurance Investment Portfolios Subprime RMBS - $21.6 Billion March 31, 2008 Payment Waterfall RMBS RMBS (principal + interest) (Collateralpool (Collateral poolofof residential mortgages) residential mortgages) Priority First AAA AAAtranche AAA tranche $18.9 Billion (87.5%) AA AAtranche tranche
Slide 63: Subprime RMBS Exposure by Vintage
AIG Insurance Investment Portfolios Subprime RMBS Exposure by Vintage - $21.6 Billion March 31, 2008 12.0 AIGI focuses almost exclusively 10.0 on AAA and AA rated investments with relatively short tenors 8.0 $ Billions WAL is 4.2 years 6.0 4.0 2.0 0.0 Pre 2003 2003 2004 2005 2006 2007 AAA 0.1 0.4 0.
Slide 64: Alt-A RMBS
AIG Insurance Investment Portfolios Alt-A RMBS • Most of AIGI’s Alt-A exposure is at the AAA 2006 Vintage Credit Enhancement for AIGI*** super senior* level, especially in the Original Credit Current Credit underperforming 2006/2007 vintages. Rating Enhancement Enhancement • Over 98% of our Alt-A ex
Slide 65: Alt-A RMBS - $23.7 Billion
AIG Insurance Investment Portfolios ALT-A RMBS - $23.7 Billion March 31, 2008 Payment Waterfall RMBS RMBS (principal + interest) (Collateralpool (Collateral poolof of residentialmortgages) residential mortgages) Priority First AAA AAAtranche AAA tranche $22.4 Billion (94.5%) AA AAtranche tranche AA
Slide 66: Alt-A RMBS Exposure by Vintage
AIG Insurance Investment Portfolios ALT-A RMBS Exposure by Vintage - $23.7 Billion March 31, 2008 12.0 AIGI focuses almost exclusively 10.0 on AAA and AA rated investments 8.0 with relatively short tenors $ Billions 6.0 WAL is 4.0 years 4.0 2.0 0.0 Pre 2003 2003 2004 2005 2006 2007 AAA 0.2 0.6 1.0 4
Slide 67: Prime Jumbo RMBS
AIG Insurance Investment Portfolios Prime Jumbo RMBS • The domestic prime jumbo RMBS portfolio 2006 Vintage Credit Enhancement for AIGI* totaled $14.8 billion at March 31, 2008. Original Credit Current Credit Rating Enhancement Enhancement • Approximately 96% of AIGI’s exposure to these securities i
Slide 68: RMBS Rating Agency Actions
AIG Insurance Investment Portfolios RMBS Rating Agency Actions* First Time Rating Action Cumulative Rating Actions January 1, 2008 – March 31, 2008 January 1, 2007 – April 30, 2008 Number of Amortized Cost Number of Amortized Cost % of Non-Agency Securities ($ Million) Securities ($ Million) RMBS Po
Slide 69: CMBS Portfolios
AIG Insurance Investment Portfolios CMBS Portfolios 69
Slide 70: CMBS Portfolios - Overview
AIG Insurance Investment Portfolios CMBS Portfolios - Overview • AIGI’s CMBS portfolio demonstrated strong credit performance in the first quarter of 2008: – The upgrade / downgrade ratio is better than the U.S. CMBS universe – Delinquencies in underlying collateral are low and better than the gener
Slide 71: CMBS Portfolios
AIG Insurance Investment Portfolios CMBS Portfolios March 31, 2008 • AIGI’s CMBS portfolio is predominantly comprised of traditional commercial mortgage backed securities. • Approximately 91% of the CMBS portfolio is rated AAA / AA and over 99% is investment grade. AAA 78.0% Amortized Cost Descripti
Slide 72: CMBS Portfolios
AIG Insurance Investment Portfolios CMBS Portfolios March 31, 2008 • AIGI’s CMBS portfolio is well-diversified geographically and by property type. Vintage % – The top ten states represent 65% of total exposure 2007 23.1% – No single property type represents more than 34% 2006 13.8% • The majority o
Slide 73: CMBS Portfolios – ReREMIC/CRE CDO Holdings
AIG Insurance Investment Portfolios CMBS Portfolios – ReREMIC/ CRE CDO Holdings March 31, 2008 Top 10 States % CA 14.7% • Only 8.4% of the total CMBS portfolio is represented by ReREMIC/ CRE CDO securities. NY 10.1% TX 7.1% – Close to 54% of these securities is ReREMIC and the other 46% is CRE CDOs
Slide 74: CMBS Portfolios
AIG Insurance Investment Portfolios CMBS Portfolios March 31, 2008 • Delinquencies in the U.S. CMBS sector are near historic lows and have remained below 1% since 2005. • AIGI’s CMBS portfolio continues to outperform the U.S. Conduit CMBS universe. Current Delinquencies (%) 0.6% 0.5% 0.5% 0.4% 0.3%
Slide 75: CMBS Rating Actions Through March 31, 2008
AIG Insurance Investment Portfolios CMBS Portfolios Rating Actions Through March 31, 2008 • AIGI’s CMBS portfolio did not experience any downgrades in the first quarter and thus the portfolio’s rating actions compare favorably to those on the U.S. CMBS universe. Upgrade / Downgrade Ratio All CMBS Tr
Slide 76: CMBS Rating Actions Through April 29, 2008
AIG Insurance Investment Portfolios CMBS Portfolios Rating Actions Through April 29, 2008 • Fitch downgraded 156 ReREMIC/ CRE CDO bonds in April 2008 due to changed correlation and concentration assumptions. Neither S&P nor Moody’s has announced similar assumption changes. • AIG owns 27 of these dow
Slide 77: CDO Portfolios
AIG Insurance Investment Portfolios CDO Portfolios 77
Slide 78: CDO Portfolio Overview
AIG Insurance Investment Portfolios CDO Portfolio Overview March 31, 2008 • CDO investments total $4.2 billion and represent less than 1% of the total insurance investment portfolios. • More than 81% of the holdings are transactions with underlying collateral consisting of primarily investment grade
Slide 79: CDO Portfolio Overview
AIG Insurance Investment Portfolios CDO Portfolio Overview • As of March 31, 2008 the composition of the $4.2 billion CDO portfolio is as follows: Ratings Amortized Collateral Type Amortized ($ in Billions) Cost % ($ in Billions) Cost % Bank Loans (CLO) $2.08 49.4% AAA $0.76 18.0% AA 0.90 21.4% Synt
Slide 80: Bank Loan CLOs
AIG Insurance Investment Portfolios Bank Loan CLOs March 31, 2008 • The composition of the $2.1 billion of Collateralized Loan Obligation (CLO) holdings (49% of the total CDO portfolio) by rating is as follows: Amortized ($ in Billions) Costs % Ratings Amortized AAA ($ in Billions) $0.02 Cost1% % AA
Slide 81: Synthetic Investment Grade Rated Corporate CDOs
AIG Insurance Investment Portfolios Synthetic Investment Grade (IG) Rated Corporate CDOs March 31, 2008 • The $1.3 billion in IG Corporate Synthetic holdings (32% of the total CDO portfolio) is highly rated as shown below: Ratings Amortized ($ in Billions) Cost % AAA $0.37 27.6% AA 0.66 49.3% A 0.30
Slide 82: Other CDOs
AIG Insurance Investment Portfolios Other CDOs March 31, 2008 • 90% of the remaining CDO holdings, which primarily include market value and older vintage CDOs, is rated A or better. • These holdings total $744 million and have a fair market value of $682 million. • These CDO positions are experienci
Slide 83: Monoline Exposure
AIG Insurance Investment Portfolios Monoline Exposure 83
Slide 84: Monoline Exposure
AIG Insurance Investment Portfolios Monoline Exposure March 31, 2008 • AIGI’s monoline exposure totals $41.5 billion, 99% of which is financial guarantees. – 76% of the total exposure relates to municipal bonds, which are highly rated, even without the financial guarantees. • Fundamental credit anal
Slide 85: Monoline Exposure by Entity
AIG Insurance Investment Portfolios Monoline Exposure by Entity March 31, 2008 • Exposure by monoline entity and by type of exposure is as follows: Financial Guarantees Other (2) ($ in Billions) (1) Amortized Amortized Monoline Entity Cost Cost MBIA $12.96 $0.16 FSA 10.42 0.12 AMBAC 9.06 0.14 FGIC 7
Slide 86: Monoline Exposure by Underlying Ratings
AIG Insurance Investment Portfolios Monoline Exposure by Underlying Ratings March 31, 2008 • 85% of the portfolio has underlying ratings of A or above, partly reflecting the large percentage of municipal bonds. ($ in Billions) Amortized Underlying Ratings (1) Cost (2) % AAA $2.73 6.7% AA 22.00 53.6%
Slide 87: Monoline Exposure - Municipal Bonds by Underlying Ratings
AIG Insurance Investment Portfolios Monoline Exposure - Municipal Bonds by Underlying Ratings • As of March 31, 2008 AIGI’s municipal bond portfolio totaled $62.0 billion. • More than 99% of the total municipal bond portfolio is rated A or better, even without the financial guarantees. • More than 9
Slide 88: Monoline Exposure - RMBS/CMBS
AIG Insurance Investment Portfolios Monoline Exposure - RMBS/CMBS March 31, 2008 • AIGI’s $6.6 billion insured RMBS/CMBS portfolio is diversified across product types. • 51% of the underlying RMBS/CMBS portfolio is internally rated investment grade, 37% of which is AAA. • The below investment grade
Slide 89: Monoline Exposure – ABS
AIG Insurance Investment Portfolios Monoline Exposure – ABS March 31, 2008 • AIGI’s $2.1 billion insured non-RMBS/CMBS ABS portfolio is diversified across product types. • 98% of the underlying ABS portfolio is internally rated investment grade. • We do not rely on monoline support as the primary so
Slide 90: Monoline Exposure Summary
AIG Insurance Investment Portfolios Monoline Exposure Summary March 31, 2008 • Fundamental credit underwriting is the foundation for all of AIGI’s investment decisions. • Financial guarantees are viewed as a secondary form of payment for all wrapped investments. – 85% of AIGI’s $41 billion insured p
Slide 91: AIG Insurance Investment Portfolios: Conclusion
AIG Insurance Investment Portfolios: Conclusion 91
Slide 92: In Conclusion
AIG Insurance Investment Portfolios In Conclusion • The global financial markets remain under considerable stress with reduced financing opportunities for residential mortgage borrowers. • Market expectations for losses in the 2006/2007 U.S. subprime, Alt-A and prime vintages have increased substant
Slide 93: United Guaranty – Mortgage Insurance
United Guaranty – Mortgage Insurance 93
Slide 94: United Guaranty (UGC) Executive Statement
United Guaranty (UGC) Executive Statement • UGC, as a broad market participant, operates in an inherently cyclical business that is highly correlated to the fortunes of the housing market. • Although the loss ratio for the past twelve months was 204%, UGC prices its products for long-term profitabil
Slide 95: Mortgage Guaranty Product Characteristics
United Guaranty Mortgage Guaranty Product Characteristics • Mortgage guaranty insurance is a multi-year contract with monthly premiums and automatic renewals (15-30 year mortgage term). UGC can generally only cancel the policy for non-payment of premium or other policy exclusions. • Mortgage guarant
Slide 96: Real Estate Portfolio
United Guaranty Real Estate Portfolio Total Portfolio FICO (≥ 660) FICO (620- 659) FICO (<620) (as of March 31, 2008) Domestic Mortgage Net $31.5 Billion $22.5 Billion $6.5 Billion $2.5 Billion Risk-in-Force 60+ Day Delinquency 4.0% 2.5% 6.9% 15.4% 2008 Vintage $2.1 Billion $1.8 Billion $261 Million
Slide 97: Loss Emergence
United Guaranty Loss Emergence • The deterioration of the U.S. housing market has United Guaranty Domestic Mortgage Net Risk-In-Force affected all segments of the mortgage business, March 31, 2008 but the high LTV second-lien mortgages are Domestic Second particularly sensitive to declining home val
Slide 98: Analysis of Loss Reserve – Domestic Mortgage Product
United Guaranty Analysis of Loss Reserve – Domestic Mortgage Product • UGC’s Corporate Actuarial Department employs rigorous analyses of the loss reserve adequacy of its businesses on a quarterly basis. - The total loss reserve equals the sum of the case reserves and incurred but not reported (IBNR)
Slide 99: First-Lien Portfolio In-Force Summary
United Guaranty First-Lien Portfolio In-Force Summary March 31, 2008 • $27.7 billion net risk-in-force • 903,956 policies in force • Average FICO score of 697 • 52,439 delinquent loans • 5.8% delinquency ratio* *Comprised of primary and pool insurance. 99
Slide 100: Delinquency Rates – UGC vs. Industry
United Guaranty % Delinquency Rates – UGC vs. Industry (First-Lien Primary) 7.00 6.81 6.94 6.92 6.50 Industry* 6.33 6.08 6.09 5.93 6.00 5.65 5.69 6.00 5.50 5.28 5.30 5.01 5.06 4.94 4.92 4.89 4.89 5.00 4.69 4.68 4.73 4.68 4.59 4.62 4.65 4.49 4.51 4.52 4.52 4.41 4.39 4.44 4.39 4.50 4.26 4.29 4.29 4.23
Slide 101: First-Lien Portfolio by Product
United Guaranty First-Lien Portfolio by Product Portfolio Net RIF by Product as of March 31, 2008 Fixed Rate Loans Positively Amortizing ARM’s $1.9BN Potential Neg-Am ARM’s $1.1BN 7% Interest Only Loans 4% $2.8BN 10% $21.9BN 79% 79% of the first-lien portfolio is in fixed rate loans. 101
Slide 102: First-Lien Portfolio by Flow / Bulk Channel
United Guaranty First-Lien Portfolio by Flow / Bulk Channel Portfolio Net RIF by Channel as of March 31, 2008 Flow Channel $1.2BN 4% Bulk Channel $26.5BN 96% UGC chose to be a minor participant in the higher risk bulk channel (subprime, Alt-A). 102
Slide 103: First-Lien Key Risk Initiatives
United Guaranty First-Lien Key Risk Initiatives • Tightened underwriting standards and eligibility guidelines. • Implementing expanded “declining markets” policy restricting LTV to 90% in over 50% of the total Core Based Statistical Areas (CBSA) in the country. • Increased rates in appropriate busin
Slide 104: Second-Lien Portfolio In-Force Summary
United Guaranty Second-Lien Portfolio In-Force Summary March 31, 2008 • $3.8 billion net risk-in-force • 616,381 policies in force • Average FICO score of 718 • 8,315 delinquent loans • 1.35% delinquency ratio 104
Slide 105: Second-Lien Key Risk Initiatives
United Guaranty Second-Lien Key Risk Initiatives • Significant changes in eligibility New Insurance Written guidelines and pricing have $ Billions had a major effect on the 20.0 $19.0 quality and volume of new business written. 15.0 – Eliminated alternative risk product 10.0 $9.0 – Eliminating all p
Slide 106: Risk Mitigating Factors
United Guaranty Risk Mitigating Factors • UGC uses several mitigants to reduce the volatility of losses transferred from lenders, which are reflected in the net risk-in-force figures: - Risk sharing: funded arrangements through captive reinsurance with most major lenders, in which the lenders share
Slide 107: Summary
United Guaranty Summary • UGC is engaged in a highly cyclical business, with high returns in 8 out of 10 years and underwriting losses in 2 out of 10 years on average. The downturns in the housing industry negatively affect short-term profitability, as pricing is actuarially derived for long-term pe
Slide 108: American General Finance
American General Finance 108
Slide 109: American General Finance (AGF)
American General Finance (AGF) • Since 1920, AIG’s domestic consumer finance business has provided mortgage and consumer loans through a network of branch offices, which currently consists of 1,600 locations throughout most of the U.S. • In addition, AGF originates and acquires mortgage loans throug
Slide 110: Portfolio Mix
American General Finance Portfolio Mix Total Net Receivables Before Allowance 1Q08 76% 16% 8% $26.7 YE07 76% 15% 9% $25.5 YE06 78% 14% 8% $24.3 YE05 80% 14% 6% $23.8 YE04 78% 15% 7% $20.2 $0 $5 $10 $15 $20 $25 $30 Billions Real Estate Non-Real Estate Retail Sales Finance 110
Slide 111: Real Estate Portfolio
American General Finance Real Estate Portfolio Total Portfolio FICO (≥ 660) FICO (620 – 659) FICO (< 620) (as of March 31, 2008) Outstandings $20.3 Billion $9.6 Billion $3.5 Billion $6.7 Billion LTV 80% 84% 80% 75% 60+ Day Delinquency 2.99% 1.69% 3.71% 4.50% 2007 Vintage $4.4 Billion $1.3 Billion $9
Slide 112: Loan-To-Value at Origination
American General Finance Loan-To-Value at Origination Total Portfolio 90 Loan-To-Value (%) 85 80 75 70 1Q07 2Q07 3Q07 4Q07 1Q08 Disciplined underwriting maintained and improved already low LTVs. 112
Slide 113: Net Real Estate Loan Growth
American General Finance Net Real Estate Loan Growth As the real estate market continued to soften, AGF maintained its underwriting discipline despite Billions experiencing lower volume and growth. $1.8 $1.4 $1.2 $1.2 $0.6 $0.4 $0.3 $0.3 $0.2 $0.1 $0.1 $0.0 $0.0 $0.0 -$0.1 -$0.2 * -$0.3 -$0.6 1Q 2Q
Slide 114: AGF vs. Subprime ABS Market
American General Finance AGF vs. “Subprime ABS Market” 60+ Day Delinquency* 30% As of February, 2008 25% Subprime ABS Real Estate Market 20% 15% 10% 5% AGF Total Real Estate 0% 2004 2005 2006 1Q07 2Q07 3Q07 4Q07 1Q08 * Source: First American CoreLogic, LoanPerformance 114
Slide 115: Real Estate Credit Quality
American General Finance Real Estate Credit Quality With continued weakness in mortgage markets, AGF’s delinquency and losses continued to rise from recent all-time lows. However, they remain below AGF’s target ranges as well as industry levels. 5% 60+ Day Delinquency 4% Target range 3.0% - 4.0% 3%
Slide 116: Risk Mitigating Practices – Real Estate Portfolio
American General Finance Risk Mitigating Practices – Real Estate Portfolio • 97% of mortgages are underwritten with full income verification. • 89% are fixed-rate mortgages; only about 7% of the total mortgage portfolio re-sets interest rates by the end of 2008; another 1% by the end of 2009. • Adju
Slide 117: Summary
American General Finance Summary • At the end of the first quarter, AGF’s real estate loan portfolio grew to $20.3 billion due in large part to the Equity One, Inc., portfolio acquisition. – Equity One, Inc.’s branch-offered products are similar to those of AGF (1st & 2nd Fixed Rate Mortgages, Consu
Slide 118: Capital Markets – Data Appendices
Capital Markets – Data Appendices 118
Slide 119: Summary Statistics Super Senior Credit Derivatives
Summary Statistics “Super Senior” Credit Derivatives* March 31, 2008 European Multi-Sector CDOs Residential Corporate – Corporate – Mortgage – Transaction Type`` Regulatory Arbitrage Regulatory Transactions Transactions Total Multi- Capital Motivated Motivated Total Capital w/Mixed Collateral w/No S
Slide 120: Key Statistics for Multi Sector CDOs with Mixed Collateral, Including Subprime
Summary of Key Statistics for Multi Sector CDOs with Mixed Collateral, Including Subprime Billion US$ High Grade Collateral Mezzanine Collateral (predominantly AA Rated) (predominantly BBB Rated) • Total Gross Transaction Notional: 53.0 • Total Gross Transaction Notional: 29.5 • AIGFP Total Net* Not
Slide 121: Super Senior Exposure Corporate Loans
“Super Senior” Exposure Corporate Loans A-4
Slide 122: Regulatory Capital - Corporate by Primary Jurisdiction
Regulatory Capital - Corporate by Primary Jurisdiction Net Percentage Current Realized Pool Weighted Average Maturity Number Notional of Total Average Losses to Date (years) of Deals (Bn) Subordination % Primarily Single To To Country Exposure First Call * Maturity Portfolio Germany 14.4 7.5 23.3 0.
Slide 123: Arbitrage Motivated - Corporate by Primary Jurisdiction
Arbitrage Motivated - Corporate by Primary Jurisdiction Net Percentage Current Realized Pool Weighted Average Maturity Number Notional of Total Average Losses to Date (years) of Deals (Bn) Subordination % Primarily Single To To Country Exposure First Call Maturity Portfolio USA 41.5 72.6 18.0 0.12 5
Slide 124: Arbitrage Motivated - Corporate by Rating
Arbitrage Motivated - Corporate by Rating Arbitrage Book Including CLOs by Rating % of Total Aaa 1.4% Aa1 0.2% Aa2 1.4% Arbitrage Book Including CLOs by Rating Aa3 2.5% BB 10.13% B 11.63% A1 3.9% CCC 0.37% A2 7.1% AAA 1.36% A3 10.6% AA 4.06% Baa1 11.0% Baa2 30.1% Baa3 9.7% Ba1 4.1% BBB 50.83% Ba2 5.
Slide 125: Super Senior Exposure European Residential Mortgages
“Super Senior” Exposure European Residential Mortgages A-7
Slide 126: European Residential Mortgages Summary by Geography
European Residential Mortgages Summary by Geography AIGFP Net % of Total Current Average Realized Weighted Average Number of Notional Exposure Subordination Losses to Maturity Transactions Exposure % Date (years) (Bn) % of Pool To First Call* To Maturity Denmark 41.5 29.0 9.3 0.0 1.2 31.5 3 France 4
Slide 127: Multi Sector CDO Exposure: Mezzanine Collateral Underlying Summary
“Super Senior” Multi Sector CDO Exposure Consisting of Mixed Collateral, Including Subprime: Mezzanine Collateral Underlying Summary A-9
Slide 128: Summary of Transaction Current Status
Data as of Feb 29 “Super Senior” Multi Sector CDO Exposure - Mezzanine Collateral Underlying Summary Summary of Transaction Current Status Gross Notional 29.5bn AIG Notional Exposure 17.5bn Max: Min: Avg: (net of transaction subordination) 886 mm 25 mm 301 mm Number of Transactions 58 Managed Transa
Slide 129: Summary of Reference Obligations in our Transactions
“Super Senior” Multi Sector CDO Exposure - Mezzanine Collateral Underlying Summary Summary of Reference Obligations in our Transactions Subprime RMBS Alt A Other CDO CMBS Other Non Total RMBS ABS ABS Classifications 63.2% 10.2% 7.00% 6.6% 7.9% 3.9% 1.2% 100.0% AAA AA A BBB BB <BB NR Rating 2.7% 5.0%
Slide 130: Recent Rating Performance
“Super Senior” Multi Sector CDO Exposure - Mezzanine Collateral Underlying Summary Recent Rating Performance Underlying Reference Obligations in our Transactions Moody’s S&P % of Subprime Upgraded 0.6% 0.3% Since Deal Inception % of Subprime Downgraded 12.6% 19.7% Since Deal Inception Overall Transa
Slide 131: Underlying Subprime Reference Obligations
“Super Senior” Multi Sector CDO Exposure - Mezzanine Collateral Underlying Summary Underlying Subprime Reference Obligations AAA AA A BBB BB <BB Total Rating 0.6% 1.6% 4.6% 32.7% 8.6% 15. 1% 63.2% Pre 2005 2006 2007 Total 2005 Vintage 20.3% 34.6% 4.5% 3.8% 63.2% Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 T
Slide 132: Additional Subprime Breakdown
“Super Senior” Multi Sector CDO Exposure - Mezzanine Collateral Underlying Summary Additional Subprime Breakdown Avg. % of Subprime 3.5% Collateral that is 2nd Lien Average LTV at Inception 80.5 Current Average 12 mos CPR 32.8% Rate Average FICO Score 630 Floating Fixed Average Loan Type 61.3% 38.7%
Slide 133: Underlying CDO Reference Obligations Breakdown
“Super Senior” Multi Sector CDO Exposure - Mezzanine Collateral Underlying Summary Underlying CDO Reference Obligations Breakdown High Mezz Other CMBS Other Total Grade ABS Classifications 0.8% 3.5% 0.1% 0.8% 1.5% 6.6% AAA AA A BBB BB <BB NR Total Rating 0.1% 0.5% 1.1% 2.5% 0.5% 1.9% 0.0% 6.6% Pre 2
Slide 134: CDO Exposure to Non Subprime RMBS Collateral
“Super Senior” Multi Sector CDO Exposure - Mezzanine Collateral Underlying Summary CDO Exposure to Non Subprime RMBS Collateral Prime RMBS by Pre 2005 2006 2007 Total Vintage 2005 3.9% 2.6% 0.4% 0.2% 7.0% RMBS Alt A by Pre 2005 2006 2007 Total Vintage 2005 4.5% 4.5% 1.0% 0.3% 10.2% Percentages shown
Slide 135: Multi Sector CDO Exposure: High Grade Collateral Underlying Summary
“Super Senior” Multi Sector CDO Exposure Consisting of Mixed Collateral, Including Subprime: High Grade Collateral Underlying Summary A-16
Slide 136: Summary of Transaction Current Status
Data as of Feb 29 “Super Senior” Multi Sector CDO Exposure – High Grade Collateral Underlying Summary Summary of Transaction Current Status Gross Notional 53.0bn AIG Notional Exposure 43.1bn Max: Min: Avg: (net of transaction subordination) 2.2 bn 46.4 mm 958 mm Number of Transactions 45 Managed Tra
Slide 137: Summary of Underlying Reference Obligations in Our Transactions
“Super Senior” Multi Sector CDO Exposure – High Grade Collateral Underlying Summary Summary of Underlying Reference Obligations in Our Transactions Subprime RMBS Alt A Other CDO CMBS Other Non Total RMBS ABS ABS Classifications 47.3% 16.1% 11.9% 15.3% 6.9% 2.2% 0.3% 100.0% AAA AA A BBB BB <BB NR Rat
Slide 138: Recent Rating Performance
“Super Senior” Multi Sector CDO Exposure – High Grade Collateral Underlying Summary Recent Rating Performance Underlying Reference Obligations in our Transactions Moody’s S&P % of Subprime Upgraded 0.6% 0.5% Since Deal Inception % of Subprime Downgraded 1.4% 2.2% Since Deal Inception Overall Transac
Slide 139: Underlying Subprime Reference Obligations
“Super Senior” Multi Sector CDO Exposure – High Grade Collateral Underlying Summary Underlying Subprime Reference Obligations AAA AA A BBB BB <BB Total Rating 4.5% 20.7% 17.1% 2.5% 0.9% 1.6% 47.3% Pre 2005 2005 2006 2007 Total Vintage 16.4% 25.4% 2.7% 2.8% 47.3% Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 T
Slide 140: Additional Subprime Breakdown
“Super Senior” Multi Sector CDO Exposure – High Grade Collateral Underlying Summary Additional Subprime Breakdown Avg. % of Subprime Collateral 3.1% that is 2nd Lien Average LTV at Inception 80.5 Current Average 12 month 33.1% CPR Rate Average FICO Score 630 Floating Fixed Average Loan Type 60.2% 39
Slide 141: Underlying CDO Reference Obligations Breakdown
“Super Senior” Multi Sector CDO Exposure – High Grade Collateral Underlying Summary Underlying CDO Reference Obligations Breakdown High Mezzanine Other CMBS Other Total Grade ABS Classifications 3.0% 8.3% 0.2% 1.1% 2.7% 15.3% AAA AA A BBB BB <BB NR Total Rating 3.9% 4.7% 2.2% 1.3% 1.7% 1.2% 0.3% 15.
Slide 142: CDO Exposure to non Subprime RMBS Collateral
“Super Senior” Multi Sector CDO Exposure – High Grade Collateral Underlying Summary CDO Exposure to non Subprime RMBS Collateral Prime RMBS by Pre 2005 2005 2006 2007 Total Vintage 4.7% 5.7% 1.0% 0.5% 11.9% RMBS Alt A by Pre 2005 2005 2006 2007 Total Vintage 3.7% 10.4% 1.5% 0.5% 16.1% Percentages sh
Slide 143: Cash Multi Sector CDO Exposure: Mezzanine Collateral Underlying Summary
Cash Multi Sector CDO Exposure Consisting of Mixed Collateral, Including Subprime: Mezzanine Collateral Underlying Summary A-23
Slide 144: Summary of Transaction Current Status
Cash Multi Sector CDO Exposure - Mezzanine Collateral Underlying Summary Summary of Transaction Current Status AIG Notional Exposure 2.6bn Max: Min: Avg: (net of transaction subordination) 191 mm 4 mm 41 mm Number of Transactions 63 Managed Transactions 12 Static Transactions 51 Weighted Average Num
Slide 145: Summary of Reference Obligations in our Transactions
Cash Multi Sector CDO Exposure - Mezzanine Collateral Underlying Summary Summary of Reference Obligations in our Transactions Subprime RMBS Alt Other CDO CMBS Other Non Total A RMBS ABS ABS Classifications 64.6% 10.0% 6.7% 5.0% 8.1% 4.6% 1.0% 100.0% AAA AA A BBB BB <BB NR Total Rating 3.1% 6.0% 13.6
Slide 146: Recent Rating Performance
Cash Multi Sector CDO Exposure - Mezzanine Collateral Underlying Summary Recent Rating Performance Underlying Reference Obligations in Our Transactions Moody’s S&P % of Subprime Upgraded 0.7% 0.7% Since Deal Inception % of Subprime Downgraded 14.7% 22.6% Since Deal Inception Overall Transaction Deal
Slide 147: Underlying Subprime Reference Obligations
Cash Multi Sector CDO Exposure - Mezzanine Collateral Underlying Summary Underlying Subprime Reference Obligations AAA AA A BBB BB <BB Total Rating 0.5% 1.3% 6.4% 31.7% 10.0% 14.7% 64.6% Pre 2005 2006 2007 Total 2005 Vintage 24.6% 33.4% 3.5% 3.1% 64.6% Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Total 2005
Slide 148: Additional Subprime Breakdown
Cash Multi Sector CDO Exposure - Mezzanine Collateral Underlying Summary Additional Subprime Breakdown Avg. % of Subprime 3.7% Reference Collateral that is 2nd Lien Average LTV at Inception 80.4 Current Average 12 mos CPR 33.3% Rate Average FICO Score 631 Floating Fixed Average Loan Type 59.8% 40.2%
Slide 149: Underlying CDO Reference Obligations Breakdown
Cash Multi Sector CDO Exposure - Mezzanine Collateral Underlying Summary Underlying CDO Reference Obligations Breakdown High Mezz Other ABS CMBS Other Total Grade Classifications 0.6% 2.7% 0.1% 0.7% 0.9% 5.0% AAA AA A BBB BB <BB NR Total Rating 0.1% 0.4% 0.8% 1.9% 0.4% 1.4% 0.0% 5.0% Pre 2005 2005 2
Slide 150: CDO Exposure to Non Subprime RMBS Collateral
Cash Multi Sector CDO Exposure - Mezzanine Collateral Underlying Summary CDO Exposure to Non Subprime RMBS Collateral Prime RMBS by Pre 2005 2005 2006 2007 Total Vintage 4.2% 2.0% 0.4% 0.1% 6.7% RMBS Alt A by Pre 2005 2005 2006 2007 Total Vintage 5.6% 3.4% 0.9% 0.1% 10.0% Percentages shown are of Gr
Slide 151: Cash Multi Sector CDO Exposure: High Grade Collateral Underlying Summary
Cash Multi Sector CDO Exposure Consisting of Mixed Collateral, Including Subprime: High Grade Collateral Underlying Summary A-30
Slide 152: Summary of Transaction Current Status
Cash Multi Sector CDO Exposure – High Grade Collateral Underlying Summary Summary of Transaction Current Status AIG Notional Exposure 1.4bn Max: Min: Avg: (net of transaction subordination) 250 mm 14 mm 131 mm Number of Transactions 11 Managed Transactions 1 Static Transactions 10 Weighted Average N
Slide 153: Summary of Underlying Reference Obligations in Our Transactions
Cash Multi Sector CDO Exposure – High Grade Collateral Underlying Summary Summary of Underlying Reference Obligations in Our Transactions Subprime RMBS Alt A Other CDO CMBS Other Non Total RMBS ABS ABS Classifications 38.9% 11.2% 13.3% 12.6% 20.7% 2.0% 1.3% 100.0% AAA AA A BBB BB <BB NR Rating 44.0%
Slide 154: Recent Rating Performance
Cash Multi Sector CDO Exposure – High Grade Collateral Underlying Summary Recent Rating Performance Underlying Reference Obligations in Our Transactions Moody’s S&P % of Subprime Upgraded 0.7% 0.7% Since Deal Inception % of Subprime Downgraded 2.0% 4.7% Since Deal Inception Overall Transaction Deals
Slide 155: Underlying Subprime Reference Obligations
Cash Multi Sector CDO Exposure – High Grade Collateral Underlying Summary Underlying Subprime Reference Obligations AAA AA A BBB BB <BB Total Rating 5.2% 14.5% 14.0% 3.5% 1.0% 0.7% 38.9% Pre 2005 2006 2007 Total 2005 Vintage 13.2% 21.5% 2.8% 1.4% 38.9% Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Total 2005
Slide 156: Additional Subprime Breakdown
Cash Multi Sector CDO Exposure – High Grade Collateral Underlying Summary Additional Subprime Breakdown Avg. % of Reference Transaction 2.4% Collateral that is 2nd Lien Average LTV at Inception 80.1 Current Average 12 month 34.2% CPR Rate Average FICO Score 629 Floating Fixed Average Loan Type 62.4%
Slide 157: Underlying CDO Reference Obligations Breakdown
Cash Multi Sector CDO Exposure - Mezzanine Collateral Underlying Summary Underlying CDO Reference Obligations Breakdown High Mezz Other ABS CMBS Other Total Grade Classifications 0.6% 2.7% 0.1% 0.7% 0.9% 5.0% AAA AA A BBB BB <BB NR Total Rating 0.1% 0.4% 0.8% 1.9% 0.4% 1.3% 0.0% 4.9% Pre 2005 2005 2
Slide 158: CDO Exposure to non Subprime RMBS Collateral
Cash Multi Sector CDO Exposure - Mezzanine Collateral Underlying Summary CDO Exposure to non Subprime RMBS Collateral Prime RMBS by Pre 2005 2005 2006 2007 Total Vintage 4.2% 2.0% 0.4% 0.1% 6.7% RMBS Alt A by Pre 2005 2005 2006 2007 Total Vintage 5.6% 3.4% 0.9% 0.1% 10.0% Percentages shown are of Gr
Slide 159: Multi-Sector CDOs Transactions with No Subprime Exposure
Multi-Sector CDOs Transactions with No Subprime Exposure All are rated AAA except for one deal, which is split rated, Aaa/AA (Moodys/S&P) Net Exposure by Deal Type ($ Billions) Underlying Asset Composition Prime CMBS $3.9 RMBS $8.3 23% RMBS_ALT-A CDO 4.01% 15.40% 49% RMBS_SUBPRIM E 1.35% CMBS 43.73%
Slide 160: The Strength to Be There
THE STRENGTH TO BE THERE:
American International Group — Q1 2008 Earnings Presentation on 6ix