TROUBLED ASSET 

RELIEF PROGRAM 

Government’s 

Exposure to AIG 

Lessens as Equity 

Investments Are Sold 

Report to Congressional Committees

May 2012 

GAO-12-574 

United States Government Accountability Office

GAO 
 United States Government Accountability Office 

Highlights of GAO-12-574, a report to 

congressional committees 

May 2012 

TROUBLED ASSET RELIEF PROGRAM

Government’s Exposure to AIG Lessens as Equity 

Investments Are Sold 

Why GAO Did This Study 

Assistance provided by Treasury under 

the Troubled Asset Relief Program 

(TARP) and by the Federal Reserve to 

AIG represented one of the federal 

government’s largest investments in a 

private-sector institution. AIG is a 

holding company that, through its 

subsidiaries, engages in a broad range 

of insurance and insurance-related 

activities in the United States and 

abroad. 

As part of GAO’s statutory oversight of 

TARP, this report updates a set of 

indicators GAO last reported in July 

2011. Specifically, GAO discusses 

(1) the status of the government’s 

exposure to AIG and (2) trends in the 

financial condition of AIG and its 

insurance companies. To update the 

indicators, GAO primarily used 

available public filings as of December 

31, 2011, and other publicly available 

information as of March 31, 2012; 

reviewed rating agencies’ reports; and 

identified critical activities and 

discussed them with relevant agency 

officials. 

Treasury, the Federal Reserve, and 

AIG provided technical comments that 

GAO incorporated, as appropriate. 

What GAO Found 

Since GAO’s last report in July 2011, more of the assistance provided by the 

Department of the Treasury (Treasury) and the Board of Governors of the 

Federal Reserve System (Federal Reserve) to benefit American International 

Group, Inc. (AIG) has been repaid. As of March 22, 2012, the remaining 

assistance to AIG was $46.3 billion, including unpaid dividends and accrued 

interest. This amount includes Treasury’s $35.9 billion investment in AIG 

common stock and a balance of $8.3 billion owed by Maiden Lane III to the 

Federal Reserve Bank of New York (FRBNY). This remaining assistance was 

down from $92.5 billion in March 2011 and $154.7 billion in December 2010. 

Several indicators show that as of March 2012, the government’s remaining 

outstanding assistance to AIG has continued to be reduced, mostly because of 

repayments on the FRBNY loan to Maiden Lane II; repayment of AIA Aurora, 

LLC, a special purpose vehicle; and sales of Treasury’s common stock in AIG. 

The government’s outstanding assistance to AIG is largely composed of 

Treasury’s common stock in AIG. Treasury’s sales of AIG stock in May 2011 and 

March 2012 have yielded total proceeds of $11.8 billion and reduced Treasury’s 

ownership to 70 percent of the company. Based on the $30.83 closing share 

price of AIG common stock on March 30, 2012, Treasury could recoup the total 

value of assistance extended to AIG and take in an additional $2.7 billion 

including dividends. The remaining assistance through Maiden Lane III will likely 

be repaid in full and net additional returns to the government. When all the 

assistance is considered, the amount the federal government ultimately takes in 

could exceed the total support extended to AIG by more than $15.1 billion. This 

analysis is primarily based on repayments and recoveries and market valuation 

of AIG’s stock and does not include estimates of subsidy costs associated with 

the assistance. The actual repayment of the remaining assistance continues to 

depend on AIG’s long-term health, the timing of Treasury’s sale and the share 

price of AIG stock, among other things. As Treasury arranges to sell its stock in 

AIG to exit the company, several indicators suggest that the most likely buyers 

will be institutions, many of whom already have considerable holdings in other 

insurance companies. 

Several indicators show that in 2011, AIG had positive net income and its 

insurance operations were stable and profitable. AIG had a net income for 2011 

of $18.5 billion, primarily attributable to an income tax benefit and divested 

businesses. AIG’s operating cash flows declined in 2011, which was mostly due 

to cash payments covering several years of accrued interest and fees on the 

FRBNY revolving credit facility and reduction in cash flows from the absence of a 

full year of operating cash flows of foreign life subsidiaries that were sold during 

the year. Also, payments on catastrophic loss claims and asbestos liabilities 

reduced operating cash flows. The indicator on AIG’s quarterly insurance 

operating performance shows that AIG was profitable in most quarters and that 

investment income contributed considerably to that profitability, including several 

quarters when insurance underwriting by itself was not profitable. The 

sustainability of any positive trends in AIG’s operations will depend on how well it 

manages its business in the current economic environment. GAO will continue to 

monitor these issues. 

View GAO-12-574. For more information, 

contact Lawrance L. Evans at (202) 512-4802 

or evansl@gao.gov.
Page i GAO-12-574 TARP: AIG Equity Investments 

Letter 1 

Background 5

Federal Government’s Exposure to AIG Continued to Decline in 

2011; Further Reductions Depend on Future Market Conditions 14

AIG’s Financial Condition and Insurance Operations Have 

Remained Stable Since July 2011 42

Agency Comments 54

Appendix I Maiden Lane II Asset Auctions 58 

Appendix II Overview of Definitions of Credit Ratings and AIG’s Credit Ratings 60 

Appendix III GAO Contact and Staff Acknowledgments 64

Appendix IV Glossary of Terms 65

Tables 

Table 1: Outstanding Government Efforts to Assist AIG and the 

Government’s Remaining Exposure, as of March 22, 2012 12

Table 2: Composition and Repayment Progress of Federal 

Assistance to AIG, as of March 22, 2012 18

Table 3: Percentage Distribution of the Assets in the Maiden Lane II 

Portfolio, December 31, 2008, through December 31, 2011 25

Table 4: Percentage Distribution of the Assets in the Maiden Lane 

III Portfolio, December 31, 2008, through December 31, 

2011 28

Table 5: Dates and Values of Maiden Lane II Asset Auctions, April 

6, 2011, through February 28, 2012 58

Table 6: Summary of Rating Agencies’ Ratings 60

Table 7: AIG’s Key Credit Ratings, March 31, 2009, through 

December 31, 2011 62

Contents 
Page ii GAO-12-574 TARP: AIG Equity Investments 

Figures 

Figure 1: Changes in Composition and Level of Federal Assistance 

through March 22, 2012 16

Figure 2: Repayment Progress of Federal Assistance to AIG, as of 

March 22, 2012 20

Figure 3: Amounts Owed and Portfolio Value of Maiden Lane II, 

December 24, 2008, through March 22, 2012 23

Figure 4: Portfolio Composition for Maiden Lane II, December 31, 

2008, through December 31, 2011 24

Figure 5: Amounts Owed and Portfolio Value of Maiden Lane III, 

December 24, 2008, through March 22, 2012 26

Figure 6: Portfolio Composition for Maiden Lane III, December 31, 

2008, through December 31, 2011 27

Figure 7: Distribution of the Shares of AIG Common Stock 

Outstanding, the Market Value of Treasury’s Share of AIG 

Common Stock, and the Percentage of the Stock Held by 

Treasury, September 2010 to March 2012 32

Figure 8: Market Value of AIG Common Stock at Various Average 

Share Prices 34

Figure 9: Month-End Closing Share Prices of AIG Common Stock 

Compared to the S&P 500 Index and Breakeven Share 

Price for Treasury’s Remaining 1,248 Million Shares, 

September 2008 through March 2012 35

Figure 10: Number of Trading Days and Months It Would Take to 

Sell 1,248 Million Shares of AIG Common Stock Using 

Average Daily Trading Volume Over Rolling 12 Month 

Period from the Fourth Quarter of 2008 Through February 

29, 2012 37

Figure 11: Market Values of Institutional and Other Holdings of 

Common Stock in AIG and Nine Other Insurers Based on 

Share Prices on March 5, 2012 39

Figure 12: Approximate Number and Aggregate Market Values of 

Insurance Holdings for 1,979 Institutions, from Data 

Obtained in Late April and Early May 2011 41

Figure 13: Net Cash Flows and Changes in Cash from Operating, 

Investing, and Financing Activities, from First Quarter 

2007 through Fourth Quarter 2011 45

Figure 14: AIG CDS Premiums on AIG, January 2007 through March 

2012 47 
Page iii GAO-12-574 TARP: AIG Equity Investments 

Figure 15: Quarterly Statutory Underwriting Ratios of AIG (Chartis 

Domestic and Foreign Property/Casualty Insurance 

Companies) Compared to Averages for 15 Peers and AIG’s 

Property/Casualty Investment Income and Net Income as 

Percentages of Premiums Earned, First Quarter 2007 

through Fourth Quarter of 2011 52

Abbreviations 

AIA AIA Group Limited 

AIG American International Group, Inc. 

AIGFP AIG Financial Products Corp. 

ALICO American Life Insurance Company 

CDO collateralized debt obligation 

CDS credit default swap 

DPW direct premiums written 

EESA Emergency Economic Stabilization Act of 2008 

Federal Reserve Board of Governors of the Federal Reserve System 

FRBNY Federal Reserve Bank of New York 

RMBS residential mortgage-backed security 

S&P Standard & Poor’s 

SBF securities borrowing facility 

SEC Securities and Exchange Commission 

SIGTARP Special Inspector General for TARP 

SPV special purpose vehicle 

TARP Troubled Asset Relief Program 

Treasury Department of the Treasury 

This is a work of the U.S. government and is not subject to copyright protection in the 

United States. The published product may be reproduced and distributed in its entirety 

without further permission from GAO. However, because this work may contain 

copyrighted images or other material, permission from the copyright holder may be 

necessary if you wish to reproduce this material separately. 
Page 1 GAO-12-574 TARP: AIG Equity Investments 

United States Government Accountability Office

Washington, DC 20548 

May 7, 2012 

Congressional Committees 

Assistance provided to American International Group, Inc., (AIG) has 

represented one of the federal government’s largest investments in a 

private-sector institution. AIG is a holding company that through its 

subsidiaries engages in a broad range of insurance and insurance-related 

activities in the United States and abroad, including property/casualty 

insurance, life insurance and retirement services, mortgage guaranty, 

aircraft leasing, financial services, and asset management. Its potential 

demise in 2008 threatened to further disrupt the already troubled financial 

markets. To minimize the likelihood of such a scenario, the Board of 

Governors of the Federal Reserve System (Federal Reserve) and, 

subsequently, the Department of the Treasury (Treasury) deemed AIG to 

be systemically significant, opening the door for these entities to provide 

extraordinary assistance to AIG. The Federal Reserve, through its 

emergency powers under section 13(3) of the Federal Reserve Act, and 

Treasury, through the Emergency Economic Stabilization Act of 2008 

(EESA), which authorized the Troubled Asset Relief Program (TARP), 

collaborated to make available more than $180 billion for the benefit of 

AIG.1

 This assistance has been used to strengthen AIG’s financial 

condition and avert the company’s failure and, in turn, further disruption of 

the financial markets. Since January 2011, when AIG, the Federal 

Reserve, and Treasury took steps to recapitalize AIG, the company has 

continued repayment of its federal assistance. The extent to which 

Treasury will further recoup its investment will continue to depend on the 

long-term health of AIG and a number of other factors. Under our 

statutorily mandated responsibilities for providing timely oversight of 

 

1

EESA, Pub. L. No. 110-343, 122 Stat. 3765 (2008), codified at 12 U.S.C. §§ 5201 et seq. 

EESA originally authorized Treasury to purchase or guarantee up to $700 billion in 

troubled assets. The Helping Families Save Their Homes Act of 2009, Pub. L. No. 111-22, 

Div. A, 123 Stat. 1632 (2009), amended EESA to reduce the maximum allowable amount 

of outstanding troubled assets under the act by almost $1.3 billion, from $700 billion to 

$698.741 billion. While the Secretary of the Treasury extended the authority provided 

under EESA through October 3, 2010, the Dodd-Frank Wall Street Reform and Consumer 

Protection Act, Pub. L. No. 111-203, 124 Stat. 1376 (2010), enacted on July 21, 2010, (1) 

reduced Treasury’s authority to purchase or insure troubled assets to $475 billion and (2) 

prohibited Treasury from using its authority under EESA to incur any additional obligations 

for a program or initiative unless the program or initiative already had begun before June 

25, 2010. 

 
 

Page 2 GAO-12-574 TARP: AIG Equity Investments 

TARP, we are continuing to report on the federal government’s 

assistance to AIG.2

To help Congress monitor the condition of AIG and the government’s 

ability to recoup its assistance to AIG, we have developed indicators to 

monitor the status of the government’s exposure to AIG and trends in 

AIG’s financial condition. Because government assistance to AIG is a 

coordinated approach, in addition to providing timely reporting of 

Treasury’s assistance to AIG, we are also monitoring the efforts of the 

Federal Reserve.3

 In September 2009 we issued a report on the financial 

condition and the status of government’s exposure to AIG in which we 

first reported on these indicators. Since then, we have continued to 

monitor the financial risk posed by AIG, its financial condition, and the 

status of its repayment efforts.4

 This report provides an update on the AIG 

indicators primarily based on AIG’s latest available public filings as of 

 

2

We must report at least every 60 days on findings resulting from oversight of TARP’s 

performance in meeting the purposes of EESA, the financial condition and internal 

controls of TARP, the characteristics of both asset purchases and the disposition of assets 

acquired, TARP’s efficiency in using the funds appropriated for the program’s operation, 

TARP’s compliance with applicable laws and regulations, and other matters. 12 U.S.C. § 

5226(a). 

3

Our ability to review the Federal Reserve’s assistance was clarified by the Helping 

Families Save Their Homes Act of 2009, enacted on May 20, 2009, which provided us 

authority to audit Federal Reserve actions taken under section 13(3) of the Federal 

Reserve Act “with respect to a single and specific partnership or corporation.” Among 

other things, this amendment provides us with authority to audit Federal Reserve actions 

taken for three entities also assisted under TARP—Citigroup, Inc.; AIG; and the Bank of 

America Corporation. It also gives us the authority to access information from entities 

participating in TARP programs, such as AIG, for purposes of reviewing the performance 

of TARP. Section 1109 of the Dodd-Frank Wall Street Reform and Consumer Protection 

Act provided us authority to review various aspects of Federal Reserve facilities initiated in 

response to the financial crisis. 

4

See GAO, Troubled Asset Relief Program: The Government’s Exposure to AIG Following 

the Company’s Recapitalization, GAO-11-716 (Washington, D.C.: July 18, 2011); 

Troubled Asset Relief Program: Third Quarter 2010 Update of Government Assistance 

Provided to AIG and Description of Recent Execution of Recapitalization Plan, GAO-11-46

(Washington, D.C.: Jan. 20, 2011); and Troubled Asset Relief Program: Status of 

Government Assistance to AIG, GAO-09-975 (Washington, D.C.: Sept. 21, 2009). For our 

previous testimony on the assistance provided to AIG, see Troubled Asset Relief 

Program: Update of Government Assistance Provided to AIG, GAO-10-475 (Washington, 

D.C.: Apr. 27, 2010), and Federal Financial Assistance: Preliminary Observations on 

Assistance Provided to AIG, GAO-09-490T (Washington, D.C.: Mar. 18, 2009). For our 

review of the assistance offered by the Federal Reserve to AIG, see Financial Crisis: 

Review of Federal Reserve Financial System Assistance American International Group, 

Inc., GAO-11-616 (Washington, D.C.: Sept. 30, 2011). 
 

Page 3 GAO-12-574 TARP: AIG Equity Investments 

December 31, 2011, and other more recent publicly available information 

where available. Specifically, the report discusses (1) the status of the 

government’s exposure to AIG and (2) trends in the financial condition of 

AIG and its insurance companies. 

To conduct this work, we updated previously published indicators that 

address several dimensions of AIG’s business. Data used to create the 

indicators were collected from several sources, but most were based on 

publicly available information, such as AIG’s 10K and 10Q filings with the 

Securities and Exchange Commission (SEC) and insurance regulatory 

filings with the respective states of domicile (copies of which were 

provided to the National Association of Insurance Commissioners). We 

analyzed AIG’s SEC filings and supplements for those filings through the 

fourth quarter of 2011. We analyzed data from Thomson Reuters 

Datastream, SNL Financial, and Yahoo Finance.com. We obtained the 

ratings data of AIG from credit rating agencies. We also analyzed data 

from recent issues of the Federal Reserve weekly statistical releases 

H.4.1 and Treasury 105(a) and transaction reports. 

To monitor the status of the government’s exposure to AIG, we updated 

some indicators, excluded others, and developed several new ones. We 

updated and revised our indicators of the composition of the 

government’s assistance to AIG to more broadly include all of the Federal 

Reserve Bank of New York (FRBNY) and Treasury assistance that has 

been provided to AIG since 2008. We did not include our indicator that 

focused on the composition and level of the government’s direct 

assistance to AIG before and upon announcement and execution of the 

recapitalization agreement because another new indicator provides a 

longer historical perspective on the level and composition of all 

government assistance to, and on behalf of, AIG. In addition, we have 

added several new indicators to track the status of the government’s 

exposure to AIG because, with the Treasury exchanging most of its 

preferred equity for common equity in January 2011 as part of AIG’s 

recapitalization, our main focus is on the government’s prospects for full 

recovery of the assistance provided and the progress and timing of that 

recovery thus far. The new indicators show (1) the progress in recovering 

the federal assistance through March 22, 2012, highlighting the amount of 

assistance drawn and recovered, the remaining assistance yet to be 

recovered, and the value of assets to be monetized to recover the 

remaining assistance; (2) the composition of the Maiden Lane II [this 

special purpose vehicle (SPV) has been fully liquidated] and Maiden Lane 

III portfolios; (3) the percentage distribution of the assets in those 

portfolios; (4) the distribution of the shares of AIG common stock 
 

Page 4 GAO-12-574 TARP: AIG Equity Investments 

outstanding that illustrates the government’s level of ownership and 

equity exposure to AIG; and (5) one estimate of how long it might take 

Treasury to sell its common stock in AIG on the open market to help 

illustrate why we find that it would be more likely and practical for 

Treasury to sell its AIG stock to institutions. 

To assess AIG’s financial condition, we updated indicators of AIG’s cash 

flows and its credit default swap (CDS) premiums and key credit ratings. 

To assess the financial condition of AIG’s insurance companies, we 

compared the underwriting ratios for AIG with those of several of its 

peers. We have excluded the indicator on AIG’s shareholders’ equity that 

in 2008 was at risk of full depletion by massive losses if not for 

government assistance because AIG no longer faces such depletion risk 

and also is not at risk of such depletion while in the process of repaying 

the assistance provided. For example, AIG will not be required to buy 

back its common shares from Treasury to repay the assistance that was 

converted to common equity. Such a requirement would reduce AIG’s 

equity. Instead, Treasury may recover much of that assistance by selling 

those shares to the public.5

 We excluded the indicator that tracks 

quarterly life insurance contract deposits and withdrawals because of 

dispositions that considerably reduced the size of this segment and 

because of the relative stability of the remaining businesses since 2009. 

Instead, our cash flow indicator tracks AIG overall cash flows that include 

the cash flow impact of this segment. We excluded the indicator on 

quarterly premiums written because AIG’s business volume has remained 

fairly stable in 2010 and 2011. We also no longer update or include 

indicators that monitor AIG’s progress in unwinding AIG Financial 

Products Corp. (AIGFP) because, as we discuss later, the company has 

reported that AIGFP’s derivatives portfolio was largely wound-down as of 

the second quarter of 2011. 

The data used to construct the indicators in this report came largely from 

AIG’s public filings, Treasury, and the Federal Reserve. We have 

reviewed these data and found them to be sufficiently reliable for our 

purposes. We also used data from SNL Financial, Thomson Reuters, and 

Yahoo.com. We have relied on SNL Financial and Thomson Reuters data 

 

5

On March 13, 2012, Treasury sold 206,896,552 shares of its AIG stock at $29 per share. 

As part of this sale, AIG purchased 103,448,276 of those shares for $3 billion. This 

transaction is expected to reduce total AIG shareholders’ equity by approximately $3 

billion. 
 

Page 5 GAO-12-574 TARP: AIG Equity Investments 

for past reports, and we determined that these data were sufficiently 

reliable for the purpose of presenting and analyzing trends in financial 

markets. Our reports also have relied on data from Yahoo.com, and in our 

review of these data we found them to be reliable for our purposes. We 

also reported data from four rating agencies. Although we have reported 

on actions needed to improve the oversight of rating agencies, we used 

these data because the ratings are used by AIG, Treasury, and market 

participants. We also relied on AIG’s financial data, which we found 

reliable for our purposes. 

We conducted this performance audit from February 2012 to May 2012 in 

accordance with generally accepted government auditing standards. 

Those standards require that we plan and perform the audit to obtain 

sufficient, appropriate evidence to provide a reasonable basis for our 

findings and conclusions based on our audit objectives. We believe that 

the evidence obtained provides a reasonable basis for our findings and 

conclusions based on our audit objectives. 

AIG is an international insurance organization serving customers in more 

than 130 countries. As of December 31, 2011, AIG had assets of $555.8 

billion and revenues of $64.2 billion for the preceding year. AIG 

companies serve commercial, institutional, and individual customers 

through worldwide property/casualty networks. In addition, AIG 

companies provide life insurance and retirement services in the United 

States. 

AIG provides insurance and retirement services through several 

companies. More than 90 percent of the company’s revenues in 2011 

came through Chartis and SunAmerica Financial Group. Chartis offers 

property/casualty insurance and other products and services both in the 

United States and around the world commercially and to individual 

consumers, while SunAmerica Financial Group offers life insurance and 

retirement services. In 2011, AIG also generated 7 percent of its 

revenues in aircraft leasing operations. The remaining revenues were 

generated by its other businesses, which included among others, the 

remaining derivatives portfolio of AIGFP. According to AIG’s 10K for 

2011, the active wind-down of the AIGFP derivatives portfolio was 

completed by the end of the second quarter of 2011, and the remaining 

AIGFP derivatives portfolio consists predominantly of transactions AIG 

believes are of low complexity and low risk and support AIG’s risk 

Background 

AIG Operations 
 

Page 6 GAO-12-574 TARP: AIG Equity Investments 

management objectives or are not economically appropriate to unwind 

based on a cost-versus-benefit analysis. 

Federal, state, and international authorities regulate AIG and its 

subsidiaries. Until March 2010, the Office of Thrift Supervision was the 

consolidated supervisor of AIG, which was a thrift holding company by 

virtue of its ownership of the AIG Federal Savings Bank.6

 AIG has 

recently stated that it believes the company will be subject to additional 

regulation because of reforms contained in the Dodd-Frank Wall Street 

Reform and Consumer Protection Act to the extent that the statute and 

the regulations under it will affect the financial services they provide 

customers. AIG’s domestic, life, and property/casualty insurance 

companies are regulated by the state insurance regulators in states in 

which these companies are domiciled.7

 These state agencies regulate the 

financial solvency and market conduct of these companies, and they have 

the authority to approve or disapprove certain transactions between an 

insurance company and its parent or its parent’s subsidiaries. These 

agencies also coordinate the monitoring of companies’ insurance lines 

among multiple state insurance regulators. Finally, AIG’s general 

insurance business and life insurance business that are conducted in 

foreign countries are regulated by the supervisors in those jurisdictions to 

varying degrees. 

In addition, Treasury’s purchase, management, and sale of assets under 

TARP, including those associated with AIG, are subject to oversight by 

the Special Inspector General for TARP (SIGTARP). As part of its 

quarterly reports to Congress, SIGTARP has provided information on 

federal assistance and the restructuring of the federal assistance 

 

6

In 1999, AIG became a savings and loan holding company when the Office of Thrift 

Supervision granted AIG approval to organize AIG Federal Savings Bank. Until March 

2010, AIG was subject to Office of Thrift Supervision regulation, examination, supervision, 

and reporting requirements. As the consolidated supervisor, the Office of Thrift 

Supervision was charged with identifying systemic issues or weaknesses and ensuring 

compliance with regulations that govern permissible activities and transactions. For more 

information on the role of consolidated supervisors, see GAO, Financial Market 

Regulation: Agencies Engaged in Consolidated Supervision Can Strengthen Performance 

Measurement and Collaboration, GAO-07-154 (Washington, D.C.: Mar. 15, 2007). As we 

reported in GAO-11-716 in July 2011, AIG reported that it has been in discussions with the 

Autorité de Contrôle Prudentiel and the UK Financial Services Authority regarding the 

possibility of proposing another of AIG’s existing regulators as its equivalent supervisor. 

7

The primary state insurance regulators include New York, Pennsylvania, and Texas. 
 

Page 7 GAO-12-574 TARP: AIG Equity Investments 

provided to AIG, as well as information on the unwinding of AIGFP and 

the sale of certain AIG assets.8

 SIGTARP’s reporting on AIG’s activities 

also has included reports that focused on federal oversight of AIG 

compensation and efforts to limit AIG’s payments to its counterparties.9

The Congressional Oversight Panel, which helped provide oversight of 

TARP, also issued several reports that reviewed the government’s 

actions precipitating its assistance to AIG and executive compensation 

and identified several of its concerns with the rescue of AIG.10

In September 2008, the Federal Reserve, FRBNY, and Treasury 

determined through analysis of information provided by AIG and 

insurance regulators, as well as publicly available information, that market 

events at the time could have caused AIG to fail, which would have 

threatened the stability of financial markets.11 Consequently, the Federal 

Reserve and Treasury took steps to help ensure that AIG obtained 

sufficient funds to continue to meet its obligations and could complete an 

orderly sale of its operating assets and close its investment positions in its 

 

8

SIGTARP, Quarterly Report to Congress (Washington, D.C.: Jan. 26, 2012); Quarterly 

Report to Congress (Washington, D.C.: Jan. 26, 2011); Quarterly Report to Congress 

(Washington, D.C.: Oct. 26, 2010); Quarterly Report to Congress (Washington, D.C.: July 

21, 2010); Quarterly Report to Congress (Washington, D.C.: Apr. 20, 2010); Quarterly 

Report to Congress (Washington, D.C.: Jan. 30, 2010); Quarterly Report to Congress 

(Washington, D.C.: Oct. 21, 2009); Quarterly Report to Congress (Washington, D.C.: July 

21, 2009); Quarterly Report to Congress (Apr. 21, 2009); and Initial Report to the 

Congress (Washington, D.C.: Feb. 6, 2009). 

9

SIGTARP, Extent of Federal Agencies’ Oversight of AIG Compensation Varied, and 

Important Challenges Remain (Washington, D.C.: Oct. 14, 2009), and Factors Affecting 

Efforts to Limit Payments to AIG Counterparties (Washington, D.C.: Nov. 17, 2009). 

10Congressional Oversight Panel, June Oversight Report: The AIG Rescue, Its Impact on 

Markets, and the Government’s Exit Strategy (Washington, D.C: June 10, 2010); February 

Oversight Report: Executive Compensation Restrictions in the Troubled Asset Relief 

Program (Washington, D.C.: Feb. 10, 2011); and March Oversight Report: The Final 

Report of the Congressional Oversight Panel (Washington, D.C.: Mar. 16, 2011). Pursuant 

to EESA’s requirements, the Congressional Oversight Panel terminated on April 3, 2011. 

11In our March 2009 testimony on CDS, we noted that no single definition for systemic risk 

exists. Traditionally, systemic risk was viewed as the risk that the failure of one large 

institution would cause other institutions to fail. This micro-level definition is one way to 

think about systemic risk. Recent events have illustrated a more macro-level definition: the 

risk that an event could broadly affect the financial system rather than just one or a few 

institutions. See GAO, Systemic Risk: Regulatory Oversight and Recent Initiatives to 

Address Risk Posed by Credit Default Swaps, GAO-09-397T (Washington, D.C.: Mar. 5, 

2009). 

Federal Reserve and 

Treasury Provided 

Assistance to AIG 
 

Page 8 GAO-12-574 TARP: AIG Equity Investments 

securities lending program and AIGFP. The federal government first 

provided assistance to AIG in September 2008 and subsequently 

modified and amended that assistance. 

From July through early September 2008, AIG faced increasing liquidity 

pressure following a downgrade in its credit ratings in May 2008 due in 

part to residential mortgage-backed securities (RMBS) assets purchased 

with the cash collateral for the company’s securities lending, which 

declined in value and became less liquid. In addition, the values of the 

collateralized debt obligations (CDO) against which AIGFP had written 

CDS protection declined in value, triggering collateral calls.12 AIG 

attempted to raise additional capital in the private market in September 

2008 but was unsuccessful. On September 15, 2008, the rating agencies 

downgraded AIG’s debt rating, which further increased financial 

pressures on the company. Also around this time, the insurance 

regulators decided they would no longer allow AIG’s insurance 

subsidiaries to lend funds to the parent company under an AIG revolving 

credit facility, and they demanded that any outstanding loans be repaid 

and the facility be terminated. 

Federal Reserve’s assistance to AIG. In September 2008, prior to 

TARP, AIG received government assistance in the form of a loan from 

FRBNY. In exchange, AIG provided shares of preferred stock to the AIG 

Credit Facility Trust created by FRBNY. This trust received 100,000 

shares of Series C preferred stock, and Treasury received a 79.8 percent 

voting interest in AIG in exchange for FRBNY providing AIG a revolving 

loan.13 On October 6, 2008, the Federal Reserve authorized the creation 

of the AIG securities borrowing facility (SBF) to provide up to $37.8 billion 

of direct funding support to a securities lending program operated by 

certain AIG domestic insurance companies. From October 8, 2008, 

through December 11, 2008, FRBNY provided cash loans to certain AIG 

domestic life insurance companies, collateralized by investment-grade 

debt obligations. AIG’s borrowing under the AIG SBF peaked at $20.6 

billion before the AIG SBF was fully repaid in connection with the creation 

 

12CDOs are structured securities issued in tranches and backed by a pool of bonds, loans, 

or other assets. 

13These preferred shares were later converted to common stock and transferred to 

Treasury. 

AIG’s Financial Problems 

Mounted Rapidly in 2008 

Concerns about an AIG Failure 

Led the Federal Reserve and 

Treasury to Assist AIG and 

Subsequently Restructure That 

Assistance 
 

Page 9 GAO-12-574 TARP: AIG Equity Investments 

of Maiden Lane II LLC in December 2008.14 To provide further relief, in 

late 2008, FRBNY created two SPVs—Maiden Lane II LLC and Maiden 

Lane III LLC—to purchase some of AIG’s more troubled assets. 

 Maiden Lane II replaced the AIG SBF and was created to serve as a 

longer-term solution to AIG’s security lending program liquidity 

problems by purchasing RMBS assets from AIG’s U.S. securities 

lending portfolio, which were the source of significant demands on 

AIG’s working capital. The Federal Reserve authorized FRBNY to 

lend up to $22.5 billion to Maiden Lane II, and in December 2008 

FRBNY loaned the SPV $19.5 billion to fund its portion of the 

purchase price.15 The facility purchased $39.3 billion in face value of 

the RMBS directly from AIG domestic life insurance companies. 

 Maiden Lane III was created to purchase multisector CDOs on which 

AIGFP had written CDS contracts.16 In connection with the purchase 

of the CDOs, AIG’s CDS counterparties agreed to terminate the CDS 

contracts.17 The Federal Reserve authorized FRBNY to lend up to $30 

billion to Maiden Lane III, and in November and December 2008 

FRBNY loaned the SPV $24.3 billion.18

In March 2009, the government restructured its assistance to AIG, which 

included reducing the debt AIG owed on the revolving credit facility by 

$25 billion. In exchange, FRBNY received preferred equity interests 

totaling $25 billion in two SPVs created by AIG to hold the outstanding 

common stock of two life insurance company subsidiaries—American Life 

 

14The interest rate on AIG SBF loans was 100 basis points plus the average overnight 

repurchase agreement rate offered by dealers for the relevant collateral type. 

15AIG also acquired a subordinated $1 billion interest in the facility to absorb the first $1 

billion of any losses. 

16A multisector CDO is a CDO backed by a combination of corporate bonds, loans, assetbacked securities, or mortgage-backed securities. 

17AIGFP sold CDS on multisector CDOs. As a result, to unwind these contracts, Maiden 

Lane III was created to purchase the CDOs from AIG’s CDS counterparties. In exchange 

for purchasing the underlying assets, the counterparties agreed to terminate the CDS 

contracts, thereby eliminating the need for AIG to post additional collateral as the value of 

the CDOs fell. 

18AIG also paid $5 billion for an equity interest in Maiden Lane III and agreed to absorb 

the first $5 billion of any losses. 
 

Page 10 GAO-12-574 TARP: AIG Equity Investments 

Insurance Company (ALICO) and AIA Group Limited (AIA). FRBNY’s 

preferred interests were an undisclosed percentage of the fair market 

value of ALICO and AIA as determined by FRBNY. 

Treasury’s assistance to AIG. In addition to the FRBNY support, 

Treasury started providing TARP assistance to AIG in November 2008 by 

purchasing preferred shares (these were later converted to common 

stock). Using TARP funds, Treasury purchased $40 billion of Series D 

cumulative preferred stock, which was exchanged in April 2009 for $41.6 

billion of Series E noncumulative preferred stock.19 The difference of $1.6 

billion was in accumulated but unpaid dividends on the Series D stock.20

That same month, also using TARP funds, to strengthen AIG’s capital 

levels and further reduce AIG’s leverage, Treasury provided a $29.835 

billion equity capital facility to AIG, whereby AIG issued to Treasury 

300,000 shares of Series F fixed-rate noncumulative perpetual preferred 

stock and a warrant to purchase up to 3,000 shares of AIG common 

stock. As AIG drew on the facility, the aggregate liquidation preference of 

the Series F stock increased. 

In January 2011, AIG, FRBNY, Treasury, the AIG Credit Facility Trust, 

AIA Aurora LLC (AIA special purpose vehicle—SPV), and ALICO 

Holdings LLC (ALICO SPV) implemented a plan to recapitalize AIG and 

restructure the government’s assistance in a manner intended to facilitate 

the eventual sale of the government’s AIG stock. First, using loans to AIG 

from the AIA and ALICO SPVs, AIG repaid FRBNY in cash all the 

amounts owed under the FRBNY revolving credit facility and FRBNY 

terminated the credit facility. Second, Treasury, AIG, and the AIG Credit 

Facility Trust took steps to exchange the various preferred interests in 

AIG for common stock. 

 

19Cumulative preferred stock is a form of capital stock in which holders of preferred stock 

receive dividends before holders of common stock, and dividends that have been omitted 

in the past must be paid to preferred shareholders before common shareholders can 

receive dividends. 

20Because the Series E preferred stock more closely resembled common stock, principally 

because its dividends were noncumulative, rating agencies viewed the stock more 

positively when rating AIG’s financial condition. 

The January 2011 

Recapitalization of AIG 

Changed the Composition 

of Federal Assistance 
 

Page 11 GAO-12-574 TARP: AIG Equity Investments 

 The trust exchanged its shares of AIG’s Series C preferred stock for 

about 562.9 million shares of AIG common stock and subsequently 

transferred these shares to Treasury. 

 Treasury exchanged its shares of AIG’s Series E preferred stock for 

about 924.5 million shares of AIG common stock and its shares of 

AIG’s Series F preferred stock for (1) preferred interests in the AIA 

and ALICO SPVs, (2) 20,000 shares of the Series G preferred stock, 

and (3) about 167.6 million shares of AIG common stock. AIG and 

Treasury amended and restated the Series F securities purchase 

agreement to provide for AIG to issue 20,000 shares of Series G 

preferred stock to Treasury.21 AIG drew down the remaining available 

funds on the equity facility and used that amount to repurchase all of 

FRBNY’s preferred interests in the AIA and ALICO SPVs. AIG then 

issued shares of common stock and transferred the shares and the 

repurchased preferred interests to Treasury in payment of the 

liquidation preference of the Series F preferred stock. 

In addition, AIG issued to holders of AIG common stock, by means of a 

dividend, 10-year warrants to purchase up to 75 million shares of AIG 

common stock at an exercise price of $45 per share.22 The AIG Credit 

Facility Trust, Treasury, and FRBNY did not receive any of these 

warrants. According to Treasury officials, the warrants were issued to 

address the AIG board of directors’ desire to compensate existing 

shareholders for the dilutive effect of the recapitalization plan. Also, AIG 

used proceeds from the sale of ALICO and the initial public offering of AIA 

to reduce Treasury’s preferred interests (aggregate liquidation 

preference) in the ALICO and AIA SPVs to approximately $20.3 billion. 

 

21AIG drew down approximately $20.3 billion remaining under Treasury’s equity capital 

facility tied to the Series F preferred stock. According to Treasury, $40 billion of Series E 

preferred stock was exchanged for AIG common stock, $20.3 billion of Series F preferred 

stock was exchanged for SPV preferred stock, $7.5 billion of Series F preferred stock was 

exchanged for AIG common stock, and $2 billion of Series F preferred stock was 

exchanged for Series G preferred stock. AIG designated the $2 billion in Series G 

preferred stock to be available after the closing for general corporate purposes under the 

Series G preferred stock. AIG’s right to draw on the Series G preferred stock was made 

subject to terms and conditions substantially similar to those in the agreement. On May 

27, 2011, the available amount of the Series G preferred stock was reduced to $0 as a 

result of AIG’s primary offering of its common stock and the Series G preferred stock was 

cancelled. 

22Exercise price is the price at which the option holder may buy or sell the underlying 

asset. 
 

Page 12 GAO-12-574 TARP: AIG Equity Investments 

At the closing of the recapitalization, Treasury held approximately 1.655 

billion shares of AIG common stock (at then-current stock prices, these 

shares were valued at about $49.148 billion), representing approximately 

92 percent of the outstanding AIG common stock, and owned about $20.3 

billion in preferred interests in AIA and ALICO SPVs. These investments 

gave Treasury an increased total exposure to AIG of over $69 billion. 

As shown in table 1, as of March 22, 2012, approximately 1 year following 

AIG’s 2011 recapitalization, Federal Reserve’s and Treasury’s exposure 

to AIG, excluding unpaid dividends and accrued interest, was $44 billion. 

Since AIG’s recapitalization, most of the government’s exposure has 

been in the form of Treasury’s ownership of AIG common stock. 

Table 1: Outstanding Government Efforts to Assist AIG and the Government’s Remaining Exposure, as of March 22, 2012 

Dollars in millions 

Description of the federal assistance 

Outstanding 

balance 

Sources to repay the 

government 

Federal Reserve 

FRBNY created an SPV—Maiden Lane II—to provide AIG liquidity by 

purchasing RMBS from AIG life insurance companies. FRBNY 

provided a loan to Maiden Lane II for the purchases. FRBNY also 

terminated its securities lending program with AIG, which had 

provided additional liquidity associated with AIG’s securities lending 

program when it created Maiden Lane II. 

$0a Proceeds from asset sales, asset 

maturities, and interest were used 

to repay the FRBNY loan. 

FRBNY created an SPV called Maiden Lane III to provide AIG 

liquidity by purchasing CDOs from AIGFP’s counterparties in 

connection with the termination of CDS. FRBNY again provided a 

loan to the SPV to fund the purchases along with funds paid to the 

counterparties by AIG. 

8,271a Proceeds from asset sales, asset 

maturities, and interest will be used 

to repay the FRBNY loan. 

Treasury 

The remaining preferred interests in the AIA SPV had an aggregate 

liquidation preference of approximately $16.9 billion following a 

partial repayment on January 14, 2011. From February through 

March 22, 2012, AIG used proceeds from various sales to fully repay 

the preferred interest on the AIA SPV, and certain participating 

returns attributable to the preferred interests. 

0b Proceeds from asset sales used to 

pay down the preferred interests. 

Treasury received 1.655 billion shares of AIG common stock 

(approximately 92 percent of the company). On May 24, 2011, 

Treasury sold 200 million of these shares and on March 13, 2012, 

sold 206.9 million shares. These sales reduced Treasury’s shares to 

1,248.1 million shares (approximately 70 percent of the company).c

35,743c

 Treasury’s goal is to sell the shares 

over time to recoup taxpayers’ 

funds. 

Total outstanding assistance, excluding unpaid dividends and 

accrued interest 

$44,014 

Sources: GAO analysis of AIG SEC filings, and Federal Reserve and Treasury data. 
 

Page 13 GAO-12-574 TARP: AIG Equity Investments 

a

Government debt shown is the remaining principal owed for the Maiden Lane III facility as of March 

22, 2012, and reflects principal only and does not include accrued interest of $718 million for the 

Maiden Lane III loan. On January 19, 2012, FRBNY announced that it sold Maiden Lane II assets 

with a current face value of $7.014 billion through a competitive process to Credit Suisse Securities 

(USA) LLC, and on February 8, 2012, it announced that it sold Maiden Lane II assets with a current 

face value of $6.2 billion through a competitive process to Goldman Sachs & Co. In March 2012, 

FRBNY sold the remaining securities in the Maiden Lane II portfolio and used proceeds to fully pay 

the remaining debt and accrued interest. 

b

On August 18, 2011, AIG reduced the remaining liquidation preference of preferred interests that 

Treasury holds in the AIA SPV to approximately $9.3 billion by applying the proceeds of $2.15 billion 

from the sale of Nan Shan Life Insurance Company, Ltd., its Taiwan-based life insurance company, to 

Ruen Chen Investment Holding Co., Ltd., for $2.16 billion in cash. Additional payments through 

November 1, 2011, further reduced the remaining liquidation preference in AIA SPV to approximately 

$9 billion. On March 22, 2012, Treasury announced that AIG fully repaid Treasury for its remaining 

preferred interest in the AIA SPV. 

c

Treasury’s cost basis in 1.655 billion AIG common shares of $47.543 billion comprises liquidation 

preferences of $40 billion for Series E preferred shares, plus $7.543 billion for Series F preferred 

shares. In addition, unpaid dividends and fees of $1.605 billion are to be repaid as part of the 

liquidation preference. On May 24, 2011, Treasury sold 200 million shares of its common stock in 

AIG, reducing its holdings from approximately 1.655 billion shares to 1.455 billion shares, and AIG 

sold 100 million newly issued shares of common stock, increasing the total number of outstanding 

common shares to approximately 1.9 billion. These transactions reduced Treasury’s equity interest in 

AIG to approximately 77 percent. Treasury’s overall cost basis in its remaining shares was $41.799 

billion that was derived from its cost basis per share of $28.7269. Treasury’s overall cost basis per 

share is the combined cost basis of AIG common shares within TARP ($43.53) and AIG common 

shares outside of TARP. Treasury received the common shares outside of TARP from a trust created 

by FRBNY for the benefit of the Treasury. The trust exchanged its AIG Series C preferred shares, for 

AIG common shares. The May 2011 sale included about 132 million AIG common shares within 

TARP on which Treasury had a realized loss and about 68 million AIG common shares, with no cost 

basis outside of TARP, on which Treasury had a realized gain. Overall, Treasury had a realized gain 

as the 200 million shares were sold at a higher price ($29 per share) than Treasury’s overall cost 

basis. On March 13, 2012, Treasury sold 206,896,552 shares of AIG common stock at $29 per share, 

for total proceeds of $6 billion. This sale, plus Treasury’s sale in May 2011, yielded total proceeds of 

$11.8 billion, including $7.79 billion from sales of AIG common stock within TARP. Remaining 

outstanding assistance to Treasury of $35.743 billion was computed by subtracting from $47.543 

billion (Treasury’s cost basis in 1.655 billion shares) proceeds totaling $11.8 billion from Treasury’s 

sales of AIG stock in May 2011 and March 2012. The information does not reflect returns from the 

sale, announced by FRBNY on April 26, 2012, of some of the Maiden Lane III holdings through a 

competitive bid process to a consortium of financial institutions. 
 

Page 14 GAO-12-574 TARP: AIG Equity Investments 

As of March 22, 2012, the date Treasury announced that AIG had fully 

repaid Treasury for its remaining preferred interest in the AIA SPV, the 

government’s exposure to AIG had decreased to approximately $44 

billion.23 We reported in July 2011 that this exposure had increased from 

$120.7 billion in September 2009 to $129.1 billion in December 2009 and 

then decreased to $86.1 billion as of March 31, 2011.24 The reduction 

was due to several factors, including AIG’s full repayment of the debt 

related to Maiden Lane II and the liquidation preference in the AIA SPV, 

as well as Treasury selling almost 407 million shares of the 1.655 billion 

shares AIG common stock it received in exchange for preferred shares in 

AIG as part of AIG’s January 2011 recapitalization. We have developed 

three new indicators that show the composition and level of all 

government assistance to AIG at points in time, including the portfolio of 

assistance and AIG’s repayment of that assistance as of March 22, 2012. 

Since AIG no longer has outstanding debt directly owed to the 

government and the government is focusing on recouping its common 

equity investments in AIG by selling its AIG stock and its remaining debt 

in Maiden Lane III by selling its investment portfolio, we have added new 

indicators to track these investments in greater detail. One of these new 

indicators tracks the level of Treasury’s ownership of AIG stock.25

Three new indicators track the changing composition and level of 

government assistance to AIG and where that assistance stood as of 

March 22, 2012. The first indicator shows the assistance available to AIG 

and the levels of assistance actually used since FRBNY provided its initial 

assistance to AIG in October 2008. Its purpose is to show the progress 

 

23In table 1 we reported outstanding assistance to be $44 billion, which includes $35.7 

billion in outstanding AIG common stock owned by Treasury—the portion of the original 

cost of the shares to be repaid. By contrast, figure 1 reports the remaining federal 

assistance to be $44.2 billion, which includes Treasury’s $35.9 billion cost of its AIG 

common stock. This cost is the product of 1,248,141,210 shares multiplied by the original 

breakeven price of $28.7269 on all 1.655 billion shares AIG received as part of the 

recapitalization in January 2011 plus unpaid dividends. 

24We reported the amounts for 2009 and 2010 in GAO-11-46, GAO-10-475, and 

GAO-09-975 . 

25This new indicator replaces a prior indicator of the composition of the government’s 

direct assistance to AIG before and upon announcement and execution of the 

recapitalization agreement because other new indicators allow us to focus more directly 

on the government’s exposure to AIG through its remaining debt and equity investments. 

Federal Government’s 

Exposure to AIG 

Continued to Decline 

in 2011; Further 

Reductions Depend 

on Future Market 

Conditions 

The Government Has 

Recouped Some of Its 

Assistance to AIG 
 

Page 15 GAO-12-574 TARP: AIG Equity Investments 

AIG has made in repaying its assistance and changes in composition and 

level of that assistance. 

This indicator (see fig. 1) covers both the debt and equity assistance from 

both FRBNY and Treasury. It shows that the maximum federal assistance 

available to AIG grew from $122.8 billion as of October 29, 2008, to 

$172.4 billion as of December 31, 2009.26 Over the same period, the 

government’s exposure fluctuated between 68 percent and 81 percent of 

this cap. The assistance included (1) FRBNY’s loans through the 

revolving credit and secured borrowing facilities (the latter facility was 

opened for 2 months in 2008); (2) loans to Maiden Lanes II and III; (3) 

FRBNY’s receipt of preferred interests in two AIG SPVs, namely AIA 

Aurora LLC and ALICO Holdings LLC; and (4) Treasury’s purchase of 

AIG’s Series D/E preferred stock and Series F preferred stock. By 

December 31, 2010, the assistance available to AIG had been reduced to 

$154.7 billion, primarily because of repayments from the Maiden Lane 

facilities. The amount of assistance both available and provided to the 

company was reduced as part of the January 2011 recapitalization that 

resulted in the government owning 92 percent of AIG’s common stock. 

This ownership was reduced to approximately 77 percent in May 2011 

after Treasury sold 200 million shares of its common stock in AIG and 

reduced further to approximately 70 percent in March 2012 after Treasury 

sold 206,896,552 shares.27 As of March 22, 2012, outstanding 

government assistance was $44.2 billion, of which $35.9 billion or about 

81 percent was in the form of Treasury’s remaining holdings in AIG 

common stock and $8.3 billion was in remaining principal owed on 

Maiden III. 

 

26The peak amount of assistance available to AIG was $182.3 billion. 

27On May 24, 2011, AIG sold 100 million shares of common stock, which were issued on 

May 27, 2011, increasing the total number of common shares outstanding to 

approximately 1.9 billion. On May 24, 2011, Treasury sold 200 million shares of its 

common stock in AIG, reducing its holdings to approximately 1.5 billion shares, or 

approximately 77 percent of the equity interest in AIG as of May 27, 2011. On March 13, 

2012, AIG bought half of the approximately 207 million shares of AIG common stock that 

Treasury sold on that date, which reduced total outstanding AIG common shares to 

approximately 1.793 billion and Treasury’s holdings to approximately 1.248 billion shares 

and common equity ownership to approximately 70 percent. 
 

Page 16 GAO-12-574 TARP: AIG Equity Investments 

Figure 1: Changes in Composition and Level of Federal Assistance through 

March 22, 2012 

Note: Amounts shown do not include accrued interest and dividends. 

a

Remaining available authorized assistance for October 2008 and December 31, 2008, was 

comprised of undrawn amounts on FRBNY’s revolving credit facility, secured borrowing facility, and 

loans to Maiden Lanes II and III. For December 31, 2009, and December 31, 2010, this amount 

included undrawn amounts on Treasury’s Series F facility. 

b

Treasury’s cost of AIG Common Stock is the product of the remaining shares held by Treasury 

(1,655,037,962 shares on March 31, 2011; 1,455,037,962 shares on December 31, 2011; and 

1,248,141,410 shares on March 22, 2012) times Treasury’s original breakeven price of $28.7262 per 

share. Including unpaid dividends, the breakeven price would be $29.6967 per share. 

To complement the previous indicator, we developed two indicators that 

provide more detail on the composition of the federal assistance. The first 

one lists each of the FRBNY facilities established to assist AIG, 
 

Page 17 GAO-12-574 TARP: AIG Equity Investments 

Treasury’s preferred equity interests in AIG, and Treasury’s common 

stock in AIG, and the second shows the progress that AIG has made in 

repaying the federal assistance as of March 22, 2012. For each form of 

assistance the indicator provides (1) potential returns, (2) the total 

assistance drawn by or on behalf of AIG, (3) a summary of the debt that 

was restructured as preferred equity and the eventual exchange of the 

preferred equity for common equity, (4) accrued interest and dividend on 

all assistance provided, (5) the amount of the assistance that has been 

repaid and the amount that remains outstanding, and (6) the current value 

of the assets that are the sources to recoup or repay the remaining 

assistance. The purpose of the indicator is to summarize the activities of 

each form of assistance provided to or on behalf of AIG from the 

beginning in 2008 to the remaining assistance owed to the government as 

of March 22, 2012. 

As shown in table 2, the FRBNY revolving credit facility has been repaid, 

including interest and fees, and closed. AIG’s initial maximum authorized 

assistance (cap) under the facility was $85 billion. In November 2008, 

when Treasury repaid $40 billion of the assistance in exchange of Series 

D preferred shares, the facility’s cap was reduced by $25 billion, which 

was $15 billion less than the $40 billion repayment. This effectively 

provided AIG access to $15 billion of additional assistance, which allowed 

it the opportunity to draw up to $100 billion ($15 billion plus $85 billion) on 

the credit facility. AIG’s maximum draw on the facility reached $88.549 

billion (including accrued interest), which occurred on April 26, 2010. The 

indicator also shows that for Maiden Lane II and Maiden Lane III, 

respectively, total assistance was $19.494 billion and $24.339 billion. As 

of March 22, 2012, the FRBNY loan and accrued interest on the Maiden 

Lane II facility were fully repaid. The remaining $8.989 billion in 

assistance owed (which includes accrued interest) all pertains to Maiden 

Lane III and the current value of assets to be monetized to pay back that 

remaining assistance is $17.449 billion. It also shows that a portion of 

Treasury’s preferred equity interests (Series D/E and F) have been 

exchanged for AIG common stock. As of March 22, 2012, that assistance 

amounted to $37.3 billion (this includes $1.6 billion of dividends), which is 

to be repaid by the sale of AIG common stock, valued at $38.5 billion 

(1,248,141,410 shares of government-owned AIG stock at $30.83 a 

share, which was the closing price of AIG on March 30, 2012). Based on 

the composition of the remaining federal assistance to AIG, the 

repayment and recovery progress thus far on all assistance as of March 

22, 2012, and the March 30, 2012, value of the remaining shares of AIG 

stock held by Treasury, the government could receive total returns of 

approximately $15.1 billion in excess of the assistance provided, including 
 

Page 18 GAO-12-574 TARP: AIG Equity Investments 

Interest, dividends, and fees. This analysis does not include estimates of 

subsidy costs associated with the assistance. 

Table 2: Composition and Repayment Progress of Federal Assistance to AIG, as of March 22, 2012 

Dollars in millions 

Total

Revolving 

credit 

facility 

(RCF)a

Maiden 

Lanes II 

and IIIb Series 

D/E Series F 

AIA and 

ALICO 

SPVs AIG stock

Potential or realized return to the government 

in excess of assistance provided (interest, 

dividends, and fees plus net gain or loss) 

$15,138 $6,700 $4,261 $0 $0 $1,440 $2,737 

Total or maximum assistance drawn by or on 

behalf of AIG by facilityi $160,217 $88,549a $43,833c n/aa $27,835j

 n/aa n/a

Debt restructured as preferred equity 0 (65,000)a n/a $40,000a n/a $25,000a n/a

Preferred equity exchanged for common 

stock 

0 n/a n/a (40,000) (7,543) n/a $47,543

Interest, dividends, and fees on assistance 

provided 

11,126 6,700 1,381d n/a n/a 1,440 1,605

Total assistance repaid by or on behalf of AIG (125,006) (30,249) (36,225) 

n/a (20,292) (26,440) (11,800)e

Remaining assistance, including unpaid 

dividends and accrued interest, owed to the 

government 

46,337 0 8,989f 0 0 0 37,348

Current value of assets to be monetized or 

pledged as security for repaying remaining 

assistance 

55,929 n/a 17,449f n/a n/a n/a 38,480g

Estimated gain or (loss) to the 

government on assistance to AIG 

$4,012 n/a $2,880f, h $0 $0 n/a $1,132 

Potential or realized return to the government 

in excess of assistance provided 

 Interest, dividends, and fees 

 Estimated gain or (loss) to the 

government on assistance to AIG 

Totals—return to the government 

$11,126

4,012

$15,138

$6,700

n/a

$6,700

$1,381

2,880

$4,261

n/a

$0

$0

n/a 

$0 

$0 

$1,440

n/a

$1,440 

$1,605

1,132

$2,737 

Sources: GAO analysis of Treasury, Federal Reserve, and AIG data. 

Note: N/a means not applicable. 

a

AIG’s initial maximum authorized assistance (cap) under the RCF was $85 billion. In November 

2008, when Treasury repaid $40 billion of the assistance in exchange of Series D preferred shares, 

the RCF cap was reduced by $25 billion, which was $15 billion less than the $40 billion repayment. 

This effectively provided AIG access to $15 billion of additional assistance which allowed AIG the 

opportunity to draw up to $100 billion ($15 billion plus $85 billion) on the RCF. AIG’s maximum draw 

on the RCF reached $88.549 billion on April 26, 2010. On this date the $88.549 billion was comprised 

of $23.549 billion that AIG owed under the RCF, plus $40 billion of RCF borrowings previously repaid 

by Treasury in exchange for Series D preferred shares and $25 billion previously converted to 

preferred liquidation preferences in the AIA and ALICO SPVs. 
 

Page 19 GAO-12-574 TARP: AIG Equity Investments 

b

The values for the Maiden Lane facilities are as of March 22, 2012. For Maiden Lane II and Maiden 

Lane III, respectively, total assistance was $19.494 billion and $24.339 billion. As of March 22, 2012, 

the FRBNY loan and accrued interest on the Maiden Lane II facility were fully repaid. The remaining 

assistance owed all pertains to Maiden Lane III and consists of unpaid principal of $8.271 billion and 

unpaid interest of $718 million; current value of assets to be monetized to pay back remaining 

assistance was $17.449 billion. 

c

The Federal Reserve Board authorized the SBF that provided AIG access to $37.8 billion of direct 

funding support from October 8, 2008, through December 11, 2008, to a securities lending program 

operated by certain AIG domestic insurance companies. By providing overnight loans against 

investment grade debt obligations, the SBF was intended to reduce pressure on AIG’s subsidiaries to 

meet demands for returning cash collateral by liquidating the portfolio of RMBS in strained markets. 

The interest rate on the SBF was 100 basis points—a common measure used in quoting yield on 

bills, notes, and bonds and represents 1/100 of a percent of yield—plus the average overnight 

repurchase agreement rate offered by dealers for the relevant collateral type. AIG’s borrowing under 

the SBF peaked at $20.6 billion before it was fully repaid in connection with the creation of Maiden 

Lane II LLC. This $20.6 billion is included in the $43.833 of total borrowings on the Maiden Lane 

facilities. 

d

Interest income on loans totaling $1.381 billion consisted of accrued and paid interest of $80 million 

on the secured borrowing facility before it was closed into Maiden Lane II, $583 million paid on 

Maiden Lane II, and accrued and unpaid interest of $718 million on Maiden Lane III. 

e

On March 13, 2012, Treasury sold 206,896,552 shares of AIG common stock at $29 per share, for 

total proceeds of $6 billion. This sale plus Treasury’s sale in May 2011 yielded total proceeds of $11.8 

billion, including $7.79 billion from sales of AIG common stock within TARP. 

f

For Maiden Lane III, because the assets to be monetized have a greater fair value than the 

remaining assistance owed, the government is expected to be fully repaid. The information on Maiden 

Lane III does not reflect returns from the sale, announced by FRBNY on April 26, 2012, of some of 

the Maiden Lane III holdings through a competitive bid process to a consortium of financial 

institutions. 

g

This is the market value of 1,248,141,410 shares of government-owned AIG stock at $30.83 a share, 

which was the closing price of AIG on March 30, 2012. 

h

Total gain consisted of a $2.220 billion gain plus accrued interest of $580 million to FRBNY on the 

full repayment of the Maiden II loan and AIG’s payment to FRBNY of $80 million for accrued interest 

on the secured borrowing facility. 

i

Each facility’s maximum assistance drawn, when added together totaled $160.217. This amount is 

greater than the maximum assistance outstanding at any one time because the maximum amounts 

drawn occurred at different times for each facility. Specifically, on Dec 24, 2008, when the maximum 

amount drawn on the Maiden Lane facilities reached $43.833 billion, $80.018 billion was drawn on 

the RCF and Series F was not yet created; thus total outstanding assistance at that time was 

$123.851 billion. Around April 26, 2010, when the maximum amount drawn on the RCF reached 

$88.549 billion, only $7.543 was drawn on the Series F facility and $31.339 billion was owed on the 

Maiden Lane facilities, for total outstanding assistance of $127.431 billion. In January 2011, when the 

maximum amount drawn on the Series F facility reached $27.865 billion, the remaining balance still 

owed on the RCF was fully repaid and part of the $25 billion of preferred equity in AIA and ALICO 

was repaid as part of the recapitalization, while $26.303 billion was owed on the Maiden Lane 

facilities for total outstanding assistance of under $80 billion. 

j

As part of AIG restructuring that closed on January 14, 2011, $2 billion of authorized assistance 

under the Series F preferred shares was used to provide authorized assistance under Series G 

preferred shares. No amounts were ever drawn on the Series G facility and the authorized amount 

was reduced to zero when AIG issued common stock on May 27, 2011. 

Figure 2 shows the progress that has been made in repaying the federal 

assistance to AIG as of March 22, 2012. As of that date, $125 billion had 

been repaid by or on behalf of AIG and the government had $46.337 

billion in remaining assistance outstanding, including $11.1 billion in 

accrued interest and fees and unpaid dividends. The remaining 
 

Page 20 GAO-12-574 TARP: AIG Equity Investments 

assistance outstanding comprised $37.3 billion in AIG stock valued at 

$38.5 billion as of March 30, 2012, and $9 billion in debt and accrued 

interest owed to FRBNY by Maiden Lane III that is secured by assets 

valued at $17.4 billion as of March 22, 2012. 

Figure 2: Repayment Progress of Federal Assistance to AIG, as of March 22, 2012 

We also are monitoring the status of the government’s indirect assistance 

to AIG through the Maiden Lane II and Maiden Lane III facilities. As 

discussed earlier, FRBNY provided loans to the facilities, giving Maiden 

Lane II capital to purchase RMBS from AIG’s domestic life insurance 

companies and Maiden Lane III capital to purchase multisector CDOs 

from AIGFP’s CDS counterparties. By monitoring the principal and 

Maiden Lane II Has Repaid 

FRBNY and Maiden Lane 

III’s Assets Have Been 

Reduced Significantly 
 

Page 21 GAO-12-574 TARP: AIG Equity Investments 

interest owed on these facilities, we can track FRBNY’s historical and 

ongoing exposure related to financial assistance it provided to AIG. The 

Maiden Lane II and Maiden Lane III portfolios were funded primarily by 

loans from FRBNY, which are not debt on AIG’s books. At the time of 

implementation, the Federal Reserve had said that it planned to keep the 

Maiden Lane assets until they matured or increased in value to maximize 

the amount of money recovered through their sale but that it had the 

authority to change its portfolio strategy at any time. The loans and 

related expenses were to be repaid from cash generated by investment 

yields, maturing assets, and sales of assets in the facilities. Such cash 

was to be used to pay, in this order: operating expenses of the LLC, 

principal due to FRBNY, interest due to FRBNY, principal due to AIG, and 

interest due to AIG. Any remaining funds were to be shared between 

FRBNY and AIG, according to specific percentages for each LLC. In 

addition to the FRBNY investments in the facilities, AIG invested $1 billion 

in Maiden Lane II and $5 billion in Maiden Lane III. As of March 7, 2012, 

FRBNY had been fully repaid by Maiden Lane II, but the assistance to 

AIG through Maiden Lane III was not fully repaid. This assistance is the 

only debt owed to the government that relates to AIG and as of March 22, 

2012, the principal and interest owed by Maiden Lane III had been 

reduced to $9 billion from $11.5 billion in July 2011. 

Maiden Lane II has fully repaid FRBNY. As shown in figure 3, the 

portfolio value of Maiden Lane II, which was as high as $20 billion in 

December 2008, was reduced to $9.3 billion by the end of 2011. This 

occurred primarily because of cash flows from the facility’s assets and in 

2011 nearly $10 billion (face value) in assets were sold through auctions 

(see app. I). As of March 7, 2012, the facility had fully repaid the FRBNY 

loan, and as of March 21, 2012, the deferred payment or interest payable 

to subsidiaries of AIG had been reduced to zero and the SPV had net 

portfolio holdings of only $19 million. 

To repay FRBNY, as we discussed in our July 2011 report, in early April 

2011, FRBNY began offering securities in the Maiden Lane II RMBS 

portfolio for sale to a group of dealers on more or less a weekly basis 

through early June 2011, a strategy that it hoped would avoid market 
 

Page 22 GAO-12-574 TARP: AIG Equity Investments 

disruption.28 FRBNY’s investment manager, BlackRock Solutions, 

disposed of the Maiden Lane II securities through a competitive sales 

process. To maximize returns to the public, FRBNY did not stipulate a 

time frame for disposing of these assets. Through June 9, 2011, Maiden 

Lane II held several auctions and sold nearly $10 billion from its portfolio. 

As of March 7, 2012, the facility had fully repaid FRBNY the outstanding 

principal and interest. 

 

28See GAO-11-716. Following an offer by AIG to repurchase the assets it had sold to 

Maiden Lane II, FRBNY announced on March 30, 2011, that it had declined AIG’s offer. 

FRBNY and the Federal Reserve said this was done to serve the public interest of 

maximizing returns from any sale and promoting financial stability. In light of improved 

conditions in the RMBS market and a high level of interest, FRBNY stated that it would 

begin more extensive asset sales through a competitive sales process. 
 

Page 23 GAO-12-574 TARP: AIG Equity Investments 

Figure 3: Amounts Owed and Portfolio Value of Maiden Lane II, December 24, 2008, through March 22, 2012 

Note: When Maiden Lane II was established in 2008, the par value of total securities purchased was 

$39.3 billion. Since January 2010, FRBNY has published the current principal balance for each 

security held by Maiden Lane II as of the end of the quarter. 

As shown in the previous indicator, the outstanding loan balance was 

being reduced while value of the assets in the Maiden Lane II portfolio 

sometimes increased but mostly decreased by smaller amounts than the 

reductions in the outstanding loan balances; two new indicators show 

these assets in more detail.29 The first indicator (fig. 4) is intended to 

show which categories of assets dominate the portfolio and which ones 

remain as the portfolio unwinds. The second indicator (table 3) shows the 

percentage distribution of the assets in the portfolio by category. Figure 4 

and table 3 show that through December 2011, most of RMBS assets in 

the portfolio were subprime, followed by Alt-A adjustable-rate mortgages 

 

29This is the most recent publicly available information as of April 1, 2012. 
 

Page 24 GAO-12-574 TARP: AIG Equity Investments 

(ARM), “other”, and option ARM. Figure 4 also shows that the portfolio 

experienced little change until the first auction of Maiden Lane II assets in 

April 2011 and then stabilized by June 9, 2011, the date of the last Spring 

asset auctions. 

Figure 4: Portfolio Composition for Maiden Lane II, December 31, 2008, through December 31, 2011 

Note: In early April 2011, FRBNY began offering segments of the Maiden Lane II RMBS portfolio for 

sale to a group of dealers on a more or less weekly basis through early June 2011, a strategy that it 

hoped would avoid market disruption. Through June 9, 2011, Maiden Lane II held several auctions 

and sold nearly $10 billion from its portfolio. In addition, on January 19, 2012, FRBNY announced that 

it had sold assets with a current face value of $7 billion through a competitive process to Credit 

Suisse Securities (USA) LLC and on February 8, 2012, it announced that it sold assets with a current 

face value of $6.2 billion through a competitive process to Goldman Sachs & Co. More recently, on 

February 28, 2012, FRBNY announced the sale of the remaining securities in the Maiden Lane II 

portfolio, and as of March 7, 2012, the facility had repaid FRBNY the outstanding principal and 

interest. 
 

Page 25 GAO-12-574 TARP: AIG Equity Investments 

Table 3 shows that the Maiden Lane II asset auctions generally resulted 

in transactions that minimally changed the distribution of the assets in the 

portfolio.30

Table 3: Percentage Distribution of the Assets in the Maiden Lane II Portfolio, December 31, 2008, through December 31, 2011 

Securities 

sector 12/31/08 3/31/09 6/31/09 09/30/09 12/31/09 3/31/10 6/30/10 9/30/10 12/31/10 3/31/11 6/30/11 9/30/11 12/31/11

Subprime 57.3% 59.5% 55.6% 55.1% 54.8% 55.0% 54.6% 54.8% 55.6% 54.4% 59.8% 59.6% 59.2%

Alt-A ARM 27.7 26.9 29.7 30.8 31.3 30.9 30.8 30.5 29.4 29.1 23.5 23.7 23.9

Option 

ARM 

– – 5.6 5.9 6.1 6.5 6.8 6.8 6.8 7.5 6.0 6.0 5.9

Other 15.0 13.6 9.1 8.2 7.9 7.7 7.9 7.9 8.2 8.9 10.6 10.7 11.0

Source: GAO analysis of Federal Reserve data. 

Note: Cash and cash equivalents are not included. 

A second major round of auctions of Maiden Lane assets began in 

January 2012 and continued through late February 2012. According to 

FRBNY’s February 28, 2012, announcement of its most recent and final 

securities sale from Maiden Lane II, all of the SPV’s securities have been 

sold and the result is full repayment of the $19.5 billion FRBNY loan, plus 

$580 million in accrued interest on the loan and a net gain of 

approximately $2.8 billion. While the Maiden Lane II portfolio was still 

active, FRBNY officials noted Maiden Lane II’s assets were high-quality 

bonds and thus they had expected to receive timely payments of interest 

and principal on most bonds in the portfolio regardless of the holding 

period. The assets continued to generate payments of interest and 

returns of principal at maturity while the portfolio was active. 

Maiden Lane III continues to unwind. As shown in figure 5, the portfolio 

value of Maiden Lane III dropped from $28.2 billion in December 2008 to 

$22.7 billion 1 year later and rose slightly to $24.2 billion by June 29, 

2011. From June through October 2011 the portfolio’s value began to fall 

again but has remained fairly stable since then at just under $18 billion. 

During this period, principal and interest owed to FRBNY continued to be 

reduced from $24.4 billion in December 2008 to $9 billion (which included 

accrued interest of $718 million) as of March 22, 2012. Also, as of 

December 30, 2009, the excess in value of the remaining portfolio over 

 

30This is the most recent publicly available information as of April 1, 2012. 
 

Page 26 GAO-12-574 TARP: AIG Equity Investments 

the remaining FRBNY debt was about $4.2 billion and as of March 22, 

2012, it had increased to about $8.4 billion. Overall, $16.1 billion of the 

principal on the FRBNY loan had been repaid as of March 22, 2012. 

Figure 5: Amounts Owed and Portfolio Value of Maiden Lane III, December 24, 2008, through March 22, 2012 

Note: When Maiden Lane III was established in 2008, the par value of total securities purchased was 

$62.1 billion. Since January 2010, FRBNY has published the current principal balance for each 

security held by Maiden Lane III as of the end of the quarter. The information does not reflect returns 

from the sale, announced by FRBNY on April 26, 2012, of some of the Maiden Lane III holdings 

through a competitive bid process to a consortium of financial institutions. 

As shown previously in figure 5 and as was the case for Maiden Lane II, 

the outstanding loan balance continued to be reduced while the value of 

the assets in the Maiden Lane III portfolio increased in some periods, but 

in some periods decreased, usually by a smaller amount than the 

reductions in the outstanding loan balances. We have developed two new 

indicators that show these assets in more detail. The first indicator (fig. 6) 

shows the extent to which certain assets make up the investment portfolio 

(to show which assets dominate the portfolio and which ones remain as 

the portfolio unwinds) and the second indicator (table 4) shows the 
 

Page 27 GAO-12-574 TARP: AIG Equity Investments 

percentage distribution of the assets in the portfolio. Figure 6 shows that 

through December 2011, most of the assets in the portfolio were highgrade ABS and commercial real estate CDOs.31

Figure 6: Portfolio Composition for Maiden Lane III, December 31, 2008, through December 31, 2011 

Table 4 shows that over the life of the facility, most of the assets have 

been high grade ABS CDOs followed by commercial real estate CDOs, 

while there have been relatively few RMBS, commercial mortgagebacked securities (CMBS), and other assets.32

 

31This is the most recent publicly available information as of April 1, 2012. 

32This is the most recent publicly available information as of April 1, 2012. 
 

Page 28 GAO-12-574 TARP: AIG Equity Investments 

Table 4: Percentage Distribution of the Assets in the Maiden Lane III Portfolio, December 31, 2008, through December 31, 

2011 

Securities 

sector 12/31/08 3/31/09 6/31/09 09/30/09 12/31/09 3/31/10 6/30/10 9/30/10 12/31/10 3/31/11 6/30/11 9/30/11 12/31/11

High grade 

ABS CDO 

70.4% 70.8% 69.7% 69.8% 68.9% 66.2% 66.4% 65.9% 65.2% 64.5% 63.8% 64.6% 63.4%

Commercial 

real estate 

CDO 

18.0 19.6 20.1 20.0 21.0 23.7 23.9 24.0 25.0 25.9 26.3 25.8 27.0

Mezzanine 

ABS CDO 

11.6 9.6 9.1 9.2 8.9 9.0 8.6 8.9 8.5 8.3 8.4 8.1 8.2

RMBS, 

CMBS, and 

other 

0.0 0.0 1.1 1.1 1.1 1.1 1.1 1.2 1.3 1.3 1.5 1.5 1.5

Source: GAO analysis of Federal Reserve data. 

Note: Cash and cash equivalents are not included. 

FRBNY officials expect to continue receiving timely payments of interest 

and principal on most bonds in the portfolio regardless of the holding 

period. In their view, the risk is that these payments could cease before 

the underlying portfolio has substantially matured or defaults could occur 

prior to the full repayment of outstanding principal.33 The assets in the 

portfolio have continued to generate payments of interest and returns of 

principal at maturity. 

Maiden Lane III’s assets have continued to amortize and the long-term 

plan is for this SPV to sell the portfolio’s assets to repay the debt. Federal 

Reserve officials said that they regularly evaluate opportunities to sell 

assets—while still meeting their objective of maximizing long-term cash 

flows—and have been able to sell a handful of assets across this 

 

33Federal Reserve officials added that BlackRock Solutions, its investment manager for 

Maiden Lane III, currently produces moderate and extreme stress case scenarios to 

evaluate the potential risk to their outstanding loans if either significant downside shock 

were to occur. As of March 23, 2012, they said that BlackRock Solutions projected full 

repayment of interest and principal on the FRBNY loans to Maiden Lane III under the 

moderate and extreme stress scenarios. In early April 2012, the FRBNY changed the 

investment objective for Maiden Lane III, which now allows BlackRock Solutions to 

explore the sale of assets. There is no fixed timeframe for the sales; at each stage, the 

Federal Reserve will sell an asset only if the best available bid represents good value for 

the public, while taking appropriate care to avoid market disruption. On April 18, 2012, 

FRBNY announced that it has initiated a competitive bid process for the MAX CDO 

holdings in the Maiden Lane III portfolio. 
 

Page 29 GAO-12-574 TARP: AIG Equity Investments 

portfolio. Their decision to sell an asset depends on an asset’s discounted 

expected future cash flows and weighing those cash flows across 

scenarios by how likely they are to occur. Federal Reserve officials said 

that there has been no change in the approach to the disposition of 

Maiden Lane III assets. 

As stated earlier, the government restructured its assistance to AIG in 

March 2009. As part of that restructuring, FRBNY reduced the debt AIG 

owed on the revolving credit facility by $25 billion and in exchange, 

FRBNY received $25 billion of preferred equity interests in two SPVs 

created by AIG to hold the outstanding common stock of two life 

insurance company subsidiaries, ALICO and AIA. FRBNY’s preferred 

interests were an undisclosed percentage of the fair market value of 

ALICO and AIA as determined by FRBNY. In November 2010, the 

company announced that it had sold ALICO to MetLife for approximately 

$16.2 billion (including approximately $7.2 billion in cash and the 

remainder in MetLife securities), and in October 2010 it announced that it 

had raised more than $20.5 billion in gross proceeds in the initial public 

offering of two-thirds of the shares of AIA. By January 14, 2011, the date 

of AIG’s recapitalization, the aggregate liquidation preference of the AIA 

and ALICO SPVs had grown to approximately $26.4 billion. Following the 

sale of ALICO on January 14, a partial repayment by AIG reduced the 

aggregate liquidation preference of the remaining preferred interests to 

approximately $20.3 billion. These FRBNY preferred interests were 

purchased by AIG and transferred to Treasury (Treasury refers to these 

transferred amounts as “AIA preferred units” and “ALICO junior preferred 

units”).34

Treasury received several repayments from AIG on its AIA and ALICO 

SPV investments in 2011 and 2012 that resulted in AIG fully repaying 

Treasury’s remaining capitalization investment in both SPVs. In February 

2011, AIG used $2.2 billion of proceeds from the sale of two life insurance 

companies to reduce the ALICO and AIA liquidation preferences, and on 

March 8, 2011, AIG used $6.9 billion from the sale of MetLife equity 

securities to repay Treasury’s remaining $1.4 billion of preferred interests 

in the ALICO SPV and reduce by $5.5 billion Treasury’s remaining 

 

34Treasury exchanged its shares of AIG’s Series F preferred stock for the preferred 

interests in the AIA and ALICO SPVs, along with 20,000 shares of the Series G preferred 

stock and about 167.6 million shares of AIG common stock. 

All Assistance Associated 

with the ALICO and AIA 

SPVs Has Been Repaid 
 

Page 30 GAO-12-574 TARP: AIG Equity Investments 

preferred interests in the AIA SPV. Treasury received five additional 

payments throughout 2011 totaling $3.3 billion, and by November 2011, 

the remaining preferred interest on the AIA SPV had been reduced to $9 

billion. Most recently, on March 22, 2012, Treasury announced that AIG 

had fully repaid Treasury for its remaining preferred interest in the AIA 

SPV.35

The amount of the $37.348 billion (which includes unpaid dividends) in 

remaining equity assistance to AIG that Treasury will recoup depends on 

the prices at which it sells its remaining 1.248 billion shares.36 As a 

shareholder, selling AIG stock with the goal of maximizing taxpayers’ 

returns is a reasonable goal for Treasury. However, we have previously 

reported that as a government agency providing temporary emergency 

assistance, Treasury also is balancing this goal with exiting its assistance 

as soon as is practicable. Treasury has retained Greenhill & Co., LLC to 

advise it on selling and disposing of its AIG common shares. One way to 

measure potential return to the taxpayer is to track the performance of the 

company’s stock price. 

We have developed a new indicator that tracks total shares of AIG’s 

common stock outstanding, including shares of that stock held by 

Treasury. The purpose of this indicator is to track the changing proportion 

of Treasury’s remaining AIG common stock and the value of that stock as 

Treasury sells its remaining shares of AIG’s stock to reduce its exposure 

to AIG. 

Figure 7 shows that in December 2010, about 1 month before AIG’s 

recapitalization, there were about 147.1 million shares of AIG common 

stock outstanding, most of which were held by Treasury. With the January 

2011 recapitalization and the government exchanging its preferred shares 

for common shares, the number of AIG common shares outstanding was 

 

35According to Treasury’s announcement, Treasury had expected AIG to repay the 

remaining principal plus accrued interest and the AIA SPV with sales of ordinary shares in 

AIA and Maiden Lane II proceeds by mid-March 2012 and the release of escrowed 

proceeds from AIG’s sale of ALICO to MetLife in two tranches, one by November 2012 

and the remainder in May 2013. 

36Treasury’s cost basis in AIG common shares of $49.148 billion comprises liquidation 

preferences of $40 billion for Series E preferred shares, $7.543 billion for Series F 

preferred shares, and unpaid dividend and fees of $1.605 billion. 

Treasury Would Have to 

Sell Its AIG Common 

Stock for at Least an 

Average Share Price of 

$29.70 to Fully Recover Its 

Assistance, Including Cash 

and Unpaid Dividends 
 

Page 31 GAO-12-574 TARP: AIG Equity Investments 

increased to 1.796 billion, with the government holding 1.655 billion, or 

about 92 percent, of the shares. Since the recapitalization, the 

government has reduced its shares and AIG has issued more stock. As 

we discussed in our July 2011 report, on May 24, 2011, a 300 million 

share offering to the public was priced, consisting of 200 million 

secondary shares from Treasury and 100 million primary shares from 

AIG. The transaction (all 300 million shares) closed on May 27, 2011, 

reducing Treasury’s holdings to approximately 1.5 billion shares. On May 

27, 2011, AIG issued and sold 100 million shares of common stock, 

increasing the total number of outstanding common shares to 

approximately 1.9 billion. As a result, Treasury held approximately 77 

percent equity interest in AIG. As of December 30, 2011, the market 

value of Treasury’s remaining shares in AIG was about $33.8 billion. 

Treasury’s equity interest in AIG was reduced further to approximately 70 

percent in March 2012 after Treasury sold approximately 207 million 

shares, half of which were purchased by AIG. When Treasury will sell its 

remaining AIG shares will depend on how future market conditions enable 

Treasury to meet its dual goals of maximizing taxpayer returns and exiting 

its exposure to AIG as soon as is practical. 
 

Page 32 GAO-12-574 TARP: AIG Equity Investments 

Figure 7: Distribution of the Shares of AIG Common Stock Outstanding, the Market 

Value of Treasury’s Share of AIG Common Stock, and the Percentage of the Stock 

Held by Treasury, September 2010 to March 2012 

Note: Total outstanding shares as of March 22, 2012, are reduced by 103,448,276 from the amount 

shown as of December 31, 2011, to reflect Treasury-owned shares that AIG bought on March 13, 

2012. 

The following indicator shows the market value of AIG’s stock at various 

share prices and the profits or losses that Treasury would realize if it were 

to sell all of its stock at those share prices. A related indicator also 

compares month-end share prices of AIG common stock with Standard 

and Poor’s (S&P) 500 index since the federal government began 

providing assistance to AIG in 2008. Treasury’s cost basis of $49.148 

billion for those shares was established as part of AIG’s recapitalization 

plan, which was announced on September 30, 2010, and executed on 

January 14, 2011, when Treasury received 1.655 billion shares of AIG 

common stock to be the repayment source for the $49.148 billion. This 

cost basis comprises $47.543 billion of liquidation preferences in Series E 

and Series F preferred shares plus $1.605 billion of unpaid dividends and 

fees. Treasury said that its primary goal is to recoup taxpayers’ actual 

cash outlays. As such, using the cash in/cash out approach, Treasury 

included only the cost of the liquidation preferences in the Series E and 
 

Page 33 GAO-12-574 TARP: AIG Equity Investments 

Series F preferred shares—$47.543 billion—to calculate a breakeven 

share price to be $28.73. Under a different approach that captures the 

entire amount owed—$49.148 billion—the breakeven share price would 

include the $1.605 billion of unpaid dividends and fees and thus would 

increase to approximately $29.70. This amount represents the minimum 

average price at which Treasury would need to sell all of its shares to fully 

recover the $49.148 billion owed by AIG. 

As shown in figure 8, the amount of the $49.148 billion Treasury will 

recover depends on the average price at which it sells its 1.655 billion 

shares of AIG common stock (the size of Treasury’s holdings following 

AIG’s recapitalization). The figure shows several share prices, some 

higher and some lower than the breakeven share price, to indicate how 

much of the full amount of assistance Treasury would recover at each 

price. For example, at an average price of $40 a share Treasury would 

recover an additional $17.1 billion, while at an average price of $25 a 

share Treasury would recover $7.8 billion less than the amount of 

assistance. 
 

Page 34 GAO-12-574 TARP: AIG Equity Investments 

Figure 8: Market Value of AIG Common Stock at Various Average Share Prices 

Note: Treasury’s cost per share of $29.6967 comprises $40 billion plus $7.543 billion on Series E and 

F preferred shares, respectively, plus $1.605 billion of unpaid dividends and fees on Series D 

preferred shares. 

From January 2011, when AIG was recapitalized, the daily closing share 

price of AIG stock trended downward but remained above our $29.70 

breakeven price until May 24, 2011, when it closed at $29.46 (see fig. 9). 

More specifically, the price trended down from $45.25 per share on 

January 14, 2011, to $28.28 per share on May 25, 2011—its lowest price 

since early March 2010. This 37.5 percent downtrend reduced the value 

of Treasury-owned shares by $28.1 billion. In contrast, the S&P 500 index 

increased over this same period. The AIG share price reached a low of 

just over $20 per share in November 2011. Since then, however, the price 

has risen to $30.83 per share as of March 30, 2012, which is above 
 

Page 35 GAO-12-574 TARP: AIG Equity Investments 

Treasury’s $28.73 breakeven price excluding the unpaid dividend and the 

$29.70 breakeven price including the unpaid dividend. The current 

upward trend in the price of AIG common stock suggests that conditions 

for Treasury to sell its AIG shares have improved since November 2011. 

Responding to these conditions, as previously stated, in early March 2012 

Treasury sold 207 million shares of its AIG common stock for $6 billion. 

Figure 9: Month-End Closing Share Prices of AIG Common Stock Compared to the S&P 500 Index and Breakeven Share Price 

for Treasury’s Remaining 1,248 Million Shares, September 2008 through March 2012 

Notes: AIG’s share price was retroactively adjusted prior to July 2009 for the 1 for 20 reverse stock 

split that took effect on July 1, 2009. In January 2011, AIG issued 10-year warrants to AIG common 

shareholders as a 16.331455 percent dividend, as part of the Recapitalization Plan. None of the 

warrants were issued to Treasury or FRBNY. The warrants, which expire January 19, 2021, allow AIG 

shareholders of record on January 13, 2011, to purchase up to 74,997,778 shares of AIG Common 

Stock at an exercise price of $45 per share. AIG share prices prior to January 2011 (back to July 

2009) are actual closing prices and not adjusted for this dividend. 

To better understand the options available to Treasury for selling its 

remaining AIG common stock, we have developed a set of indicators that 

examine the prospects of selling the stock on the open market versus 

selling it to institutional buyers. The first indicator shows how long it would 

take Treasury to sell its remaining shares of AIG common stock in the 

Treasury Might Seek Large 

Institutional Buyers for Its 

AIG Stock 
 

Page 36 GAO-12-574 TARP: AIG Equity Investments 

open market if it decided to pursue this approach. Following sales of 200 

million shares in May 2011 and approximately 207 million shares in 

March 2012, Treasury’s ownership of AIG common stock stood at 1.248 

billion shares, or 70 percent, of AIG’s common stock. These shares are to 

be sold to recoup the remaining $37.348 billion (including unpaid 

dividends) in equity assistance to AIG. The government’s full recovery of 

this portion of assistance to AIG is tied to Treasury’s prospects for selling 

AIG stock. Those prospects depend on the share price discussed earlier, 

investor interest, and the period over which Treasury sells its stock. 

Treasury officials told us that they will consider offers by institutions, 

sovereign funds, retail investors, and others. This indicator provides the 

number of trading days in a month and the number of months it would 

take to sell Treasury’s remaining 1.248 billion shares of AIG common 

stock, based on average daily trading volumes over rolling 12 month 

periods. This metric is intended to provide perspective on the challenges 

Treasury would likely face if it intended to sell its remaining 1.248 billion 

shares in the open market. 

Figure 10 shows that based on AIG common stock’s average daily trading 

volume of 8.1 million shares over the 12 month period from March 1, 

2011, to February 29, 2012, Treasury’s remaining 1.248 billion AIG 

shares represent about 155 trading days (there are approximately 252 

trading days in a year) or 7.4 months of average daily trading volume in 

AIG common stock as of February 29, 2012.37 Over this 12 month period, 

about 8.1 million shares were traded daily, on average, which was about 

1 million shares higher than the 7.1 million share average daily trading 

volume for the rolling 12 month period that ended March 31, 2011. The 

figure shows that if average 12 month trading volumes were to increase 

to levels that occurred in late 2009 and most of 2010, the remaining 

common shares would represent as little as 3 months of daily trading 

volume. 

 

37We are using the most recent full month prior to the March 22, 2012, cut-off that we 

have been using for several of our other indicators. 
 

Page 37 GAO-12-574 TARP: AIG Equity Investments 

Figure 10: Number of Trading Days and Months It Would Take to Sell 1,248 Million Shares of AIG Common Stock Using 

Average Daily Trading Volume Over Rolling 12 Month Period from the Fourth Quarter of 2008 Through February 29, 2012 

Note: Calculations did not factor the potential for trading volume to increase with the increasing public 

float as shares held by Treasury are sold. 

These measures of trading volume in days suggests how long it might 

take Treasury to sell its remaining AIG stock if it attempted to become a 

daily active seller in the open market. However, for the open market to 

accommodate such active selling by Treasury, at levels that match 

existing average trading volume without considerable downward pressure 

on AIG’s stock price, existing and new buyers would have to collectively 

double the current daily buying volume. Whether such increased buying 

of AIG stock would enter the market to accommodate such selling by 

Treasury is unknown. Our analysis suggests that it would not be feasible 

to expect Treasury to be able to sell its remaining 1.248 billion shares of 

AIG stock in an orderly manner in the open market, which supports the 

agency’s stated strategy of selling its stock in large blocks to institutional 

investors.38 This strategy of selling to institutional investors also may help 

 

38Institutional investors include mutual funds, pension funds, trust funds, foundations, 

endowments, investment banks, and other nonindividual organization investors that hold 

large volumes of securities and qualify for fewer investor protection regulations because 

they are assumed to be knowledgeable investors. 
 

Page 38 GAO-12-574 TARP: AIG Equity Investments 

Treasury balance its competing goals of maximizing returns as a 

shareholder and exiting the investment as government agency as soon as 

practical. 

The next two indicators help illustrate the prospects for institutional 

ownership of AIG. One indicator compares the market capitalization of 

AIG with that of nine other large insurance companies and compares the 

amount of stock the federal government holds in AIG to the amount of 

stock institutional investors hold in the nine other large insurance 

companies. Institutional ownership in the nine other large insurance 

companies could indicate potential institutional interest in AIG. While this 

indicator is helpful in demonstrating that AIG eventually could have 

majority institutional ownership like other large insurance companies, it 

does not capture the full potential for institutional interest in AIG because 

it is limited to institutional holdings in nine insurance companies. A 

second indicator more broadly portrays the institutional ownership of 

insurance companies. 

Figure 11 shows that institutional investors collectively have majority 

common stock ownership of each of the nine large insurance companies. 

This finding is consistent with comments by Treasury officials that 

insurance companies tend to be largely held by institutional investors, 

which suggests that Treasury may look to institutional investors to 

purchase most of its AIG stock. The data, obtained for March 5, 2012, 

show that institutional investors own on average 82.6 percent of the 

companies. The ownership ranges from a low of 64 percent for Prudential 

Financial to a high of 99 percent for CNA. The market value of 

institutional holdings ranged from $7.7 billion (of CNA) to $30.2 billion (of 

MetLife). Thus institutional holdings in each of the nine insurers are 

smaller than Treasury’s holdings in AIG of $44.2 billion. If institutions 

were to purchase the remaining AIG shares held by Treasury in 

proportion to their 82.6 percent average ownership in the nine companies, 

the amount would be $36.5 billion (which is 82.6 percent of $44.2 billion). 

This amount would be considerably larger than institutional ownership in 

each of the other nine institutions and raises questions about whether 

institutions collectively might desire or have the capacity to acquire $36.5 

billion of AIG stock. 
 

Page 39 GAO-12-574 TARP: AIG Equity Investments 

Figure 11: Market Values of Institutional and Other Holdings of Common Stock in 

AIG and Nine Other Insurers Based on Share Prices on March 5, 2012 

Notes: We identified, but did not include in our analysis for this figure, 25 other insurers, each with a 

market capitalization larger than $8 billion as of March 8, 2011. The combined market capitalization of 

the 25 insurers was $866 billion. CNA is 89.99 percent owned by Loews Corp. 

Institutions with the largest insurance holdings may consider adding AIG 

stock to their existing insurance holdings, and such institutions may have 

the greatest capacity to buy Treasury’s AIG stock. To analyze whether 

institutions collectively might have the capacity to acquire most of 

Treasury’s AIG stock, we developed an indicator on the aggregate 

insurance holdings of 1,979 institutions as of March 2012. This indicator 

is broader than that shown in figure 11 because it identifies and quantifies 

all insurance holdings of the 1,979 institutions. The premise behind the 

indicator is that institutions that have existing insurance holdings also 

might consider acquiring stock in AIG. The indicator provides the 

aggregate insurance holdings of the institutions that invest in AIG and 

nine other large insurers. As such, it may be useful for determining 

whether these institutions could have the capacity to purchase Treasury’s 

AIG stock. The indicator is not intended as a device for speculating about 
 

Page 40 GAO-12-574 TARP: AIG Equity Investments 

whether the institutions should or will purchase AIG stock. Also, it is not 

known whether other institutions with considerable insurance holdings 

might exist that, if added to our analysis, would make total institutional 

insurance holdings considerably larger than aggregate amounts shown in 

the indicator. 

Figure 12 shows that 1,979 institutions with existing insurance holdings 

may have the resources to consider buying Treasury’s remaining stock in 

AIG. The figure shows that, using data from late April and early May 

2011, the 1,979 institutions have an average of 14.2 percent of their 

holdings in insurance companies. Of these institutions, 1,392 each had 

insurance holdings of less than $100 million (totaling $26.5 billion), and 

587 each had insurance holdings of more than $100 million. Among these 

institutions, as the size of an institution’s insurance holdings increases, 

the percent of their holdings in insurance companies decreases. For 

example, investors with less than $100 million invested in insurance 

companies have 88 percent of their aggregate investments in these 

companies, but the largest two groups of investors—those with between 

$4 billion and $5 billion and those with more than $5 billion invested in 

insurance companies—have 13.1 percent and 6.3 percent, respectively, 

of their aggregate investments in insurance companies. Consequently, 

larger institutional investors might have a greater capacity to invest in 

Treasury’s AIG stock. If the 19 institutions with the largest insurance 

portfolios increased their insurance holdings to the 14.2 percent 

aggregate average of these holdings for all 1,979 institutions, their 

insurance investments would increase by $300 billion, considerably larger 

than the $47.5 billion of AIG stock Treasury received as part of AIG’s 

recapitalization. For these 19 institutions a percentage point increase in 

their insurance holdings would amount to $38 billion, as these institutions 

have combined total portfolio holdings of $3.8 trillion ($239.5 billion 

divided by 6.3 percent). Thus, $47.5 billion of AIG stock would raise their 

insurance holdings from 6.3 percent to 7.6 percent. This suggests that 

should they choose to do so, these institutions, as a group, have the 

capacity to purchase $47.5 billion of AIG stock without concentrating their 

holdings in insurance or considerably changing the distribution of their 

holdings by industry. 
 

Page 41 GAO-12-574 TARP: AIG Equity Investments 

Figure 12: Approximate Number and Aggregate Market Values of Insurance 

Holdings for 1,979 Institutions, from Data Obtained in Late April and Early May 2011 

Notes: The 1,979 institutions were identified as shareholders in the nine large insurers analyzed in 

figure 12. The nine insurers are ACE, Allstate, Chubb, CNA, Hartford Financial Services, MetLife, 

Progressive, Prudential Financial, and Travelers. Data on total insurance holdings of the 1,979 

institutions were collected in late April and early May 2011. SNL Financial data on institutional stock 

holdings are from each institution’s latest available quarterly Form 13F filing with SEC. The latest 

available quarterly Form 13F filings differed among the 1,979 institutions at the time of our analysis. 

SNL Financial daily updates the market values of these holdings using daily stock prices. Because of 

the volume of data used in this analysis, we could not obtain market values of holdings for all 1,979 

institutions as of a single day. Rather, we used data over several days from late April to early May 

2011. Thus, the aggregates for institutional holdings reflect quarterly 13F filings and market value 

dates that differ among the 1,979 institutions. 
 

Page 42 GAO-12-574 TARP: AIG Equity Investments 

With the government still holding the majority of AIG’s common stock, a 

critical question is whether AIG’s financial condition and operating 

performance and external perceptions about its financial condition and 

operating performance can remain strong enough for the government to 

recoup its investment. In 2011, two-thirds of the company’s revenues 

were from its Chartis property/casualty and general insurance business 

and a quarter were from their Sun Financial life insurance and retirement 

services businesses. In 2011 the company also reported net income of 

$18.5 billion, which was up $8.5 billion from 2010 and continued the 

reversal of losses reported in 2009 and 2008. The $8.5 billion increase in 

net income was primarily attributable to the favorable effect of an income 

tax benefit in 2011 versus tax expense in 2010 partially offset by the 

absence in 2011 of gains recognized in 2010 on sales of properties and 

divested businesses. When gains and losses from sales of properties and 

divested business are excluded AIG showed a loss from continuing 

operations before taxes of $1.139 billion in 2011 versus a profit of $169 

million in 2010. This reduction occurred because reduced operating 

expenses were not fully offset by reduced revenues from the absence of 

the full contribution of discontinued businesses. The indicators in this 

section show that AIG’s financial condition and operating results have 

remained relatively stable. To track AIG’s financial condition, we have 

indicators of AIG’s cash flows, CDS premiums on AIG, and AIG’s credit 

ratings.39 The company maintained stable net cash flows from operating, 

investing, and financing activities throughout 2010 and 2011 while federal 

assistance was reduced including as part of AIG’s recapitalization. The 

prices offered for CDS on AIG decreased and stabilized starting May 

2009 and have remained fairly stable through March 2012. AIG’s credit 

ratings also have remained stable since the first quarter of 2011. To 

assess the financial condition of AIG’s insurance companies, we reviewed 

 

39Since our previous update in July 2011, we have stopped tracking some indicators that 

we used to track AIG’s financial condition. As noted previously, we no longer include the 

indicator on AIG’s shareholders’ equity which, in 2008, would have been fully depleted by 

massive losses, if not for government assistance. We no longer include it because AIG 

has maintained positive equity since the government assistance 2008 and no longer 

appears to face risk of depletion from losses. Also, AIG will not be required to repay 

assistance by buying back all AIG common shares now held by Treasury. Such a 

transaction could considerably reduce AIG’s equity. 

AIG’s Financial 

Condition and 

Insurance Operations 

Have Remained 

Stable Since July 2011 
 

Page 43 GAO-12-574 TARP: AIG Equity Investments 

the underwriting profitability of these companies as a group.40 We found 

that since the first quarter of 2010, the underwriting costs relative to 

premium revenues of AIG’s property/casualty companies have been 

higher than peers on average, but that AIG’s companies’ net income was 

positive because of investment income. 

AIG maintained stable cash flows throughout 2011 at levels much 

improved over 2008, although divestures of certain AIG businesses since 

2007 have made AIG a smaller organization. During the first three 

quarters of 2007, AIG generated cash from its operating activities which 

indicated that it was profitable. It also generated cash through its 

financing activities, which indicated that it had access to the capital 

markets and used cash in its investing activities which indicated that it 

was growing its income-producing assets. The indicator of cash flows and 

net changes in cash tracks cash flows from operating, financing and 

investing activities and the combined net changes in cash from these 

activities. It uses data from AIG’s quarterly and annual Consolidated 

Statements of Cash Flows. 

 Operating activity cash flows indicate whether the company’s core 

businesses are profitable. 

 Financing activity cash flows indicate the extent to which a company 

uses the capital markets for equity and debt financing such as issuing 

its stock, bonds, and commercial paper to investors and obtaining 

bank loans and other forms of bank credit. 

 Investing activity cash flows indicate the extent to which a company 

invests in its production capacity and efficiency (capital expenditures), 

acquires and divests businesses, and has financial investments such 

as stocks and bonds. 

 

40We also have no longer include indicators that track the financial performance and 

condition of AIG’s insurance companies. We no longer include the indicator on quarterly 

life insurance contract deposits and withdrawals because divestitures have considerably 

reduced the size of this segment and its impact on AIG overall and also because our cash 

flow indicator on AIG’s overall operating, financing and investing cash flow captures the 

cash flow impact of insurance contract deposits. Also we excluded the indicator on 

quarterly dollar volume of insurance premiums written because AIG’s premium volume 

over the past several quarters has remained fairly stable. 

AIG Maintained Stable Net 

Cash Flows While 

Reducing Federal 

Assistance to a 

Considerable Degree 
 

Page 44 GAO-12-574 TARP: AIG Equity Investments 

Generally, a healthy and growing company can generate cash internally 

from operations, generate cash externally from financing activities, and 

use this cash for growth in its operations or investments in incomeyielding financial assets. 

As shown in figure 13, AIG began to stabilize its cash flows in 2009 and 

maintained stable cash flows throughout 2010 and 2011. However, the 

composition of its cash flows in 2011 changed from that of 2009 and 

2010. After reporting operating cash flows of $16.9 billion and $18.6 

billion in 2010 and 2009, respectively, the company reported operating 

cash flows of $35 million in 2011, which was the lowest since the $755 

million reported for 2008, as originally reported (this was restated as 

negative $122 million in its 2010 10K). The decline in operating cash 

flows in 2011 was mostly due to $6.4 billion of cash payments covering 

several years of accrued interest and fees on the FRBNY credit facility 

and a $10.4 billion reduction in cash flows from the absence of a full year 

of operating cash flows of foreign life subsidiaries (AIA, ALICO, AIG Star, 

AIG Edison, and Nan Shan) that were sold during the year. Payments on 

catastrophic loss claims and asbestos liabilities also reduced operating 

cash flows. Without these payments and reductions, operating cash flows 

in 2011 could have been at least $16.8 billion. However, AIG’s net 

change in cash from all cash flow activities combined in 2011 did not 

change considerably from that reported in 2010 and 2009 as net cash 

used in financing activities was largely offset by net cash generated from 

investing activities. Net cash used in financing activities was higher in 

2011 primarily due to full repayment of the FRBNY credit facility and 

partial repayment of the SPV preferred interests in connection with the 

recapitalization in January 2011. Net cash generated from investing 

activities resulted primarily from the utilization of restricted cash 

generated from the AIA initial public offering and ALICO sale and the 

monetization of MetLife securities received in 2010 when ALICO was 

sold. 
 

Page 45 GAO-12-574 TARP: AIG Equity Investments 

Figure 13: Net Cash Flows and Changes in Cash from Operating, Investing, and Financing Activities, from First Quarter 2007 

through Fourth Quarter 2011 

Note: Operating cash flows of $755 million for 2008 as originally reported (restated as negative $122 

million in AIG’s 2010 10K) and $35.171 billion for 2007 include both continuing and discontinued 

operations as of year-end 2010. Operating cash flows from continuing operations was net cash used 

of $122 million for 2008 and net cash provided of $32.792 billion for 2007. 

AIG’s cash flows began to stabilize in 2009 and 2010. Since the third 

quarter of 2008, quarterly financing cash flows have been negative except 

for two quarters, reflecting the company’s still limited access to the private 

capital markets. The negative amounts increased over the first three 

quarters of 2010, but they were much smaller than the negative amounts 

recorded in the first three quarters of 2009 and decreased significantly in 

the fourth quarter of 2010. 

Throughout 2009 and 2010, AIG had net cash inflows from operating 

activities and had returned to a precrisis condition of net cash outflows 

from investing activities—the latter indicating that the company is once 

again purchasing or expanding its base of income-producing assets 

rather than selling them to raise cash. AIG reported in its second quarter 

2010 10Q filing with SEC that it primarily used its cash flows to meet its 
 

Page 46 GAO-12-574 TARP: AIG Equity Investments 

debt obligations and the liquidity needs of its subsidiaries. In the first 

quarter of 2011, AIG’s net cash flows diminished primarily due to 

payments the company made to FRBNY. The company’s net cash flows 

decreased to $5.3 billion for its operating activities, mostly because of a 

$6.4 billion payment to the FRBNY revolving credit facility and $2 billion in 

unrealized losses on earnings. However, the company’s operating 

activities benefited from $1.2 billion in net cash flows provided by 

discontinued operations. AIG’s net cash flows also decreased for its 

financing activities, by nearly $34.5 billion, largely because of $26.4 billion 

in repayment of the FRBNY SPV preferred interests, $14.6 billion in 

FRBNY credit facility payments, and $9.1 billion in repayment of Treasury 

SPV preferred interests, offset in part by $20.3 billion in proceeds drawn 

on a Treasury’s Series F equity facility. In addition, instead of investing in 

operations or acquiring businesses, the company had $39.6 billion in 

positive net cash flows from investment activities largely due to $30.5 

billion that included activities related to AIG’s recapitalization and $4.2 

billion from sales of short-term investments. 

Dropping from their peak in May 2009, AIG CDS premiums have 

decreased and appear to be trending down generally toward precrisis 

levels. CDS premiums are the price insured parties pay to purchase CDS 

protection against AIG defaulting on senior unsecured debt, they are 

another indicator of AIG’s financial strength. This indicator measures what 

the market believes to be AIG’s probability of default by tracking 

premiums (expressed in basis points) paid by an insured party against a 

possible default on a senior unsecured bond and the spreads between 

the 3-year and 5-year premiums.41 This measure pertains to CDS prices 

on AIG and not AIGFP’s CDS inventory that the company is winding 

down; it is a composite of what dealers would charge customers for CDS 

on AIG. Higher basis point levels indicate a higher premium for a CDS 

contract. The higher the CDS premiums, the greater the market’s 

perception of credit risk associated with AIG. Conversely, the lower the 

CDS premiums, the greater its confidence in AIG’s financial strength (the 

lower the market’s expectation that AIG will default). 

 

41A basis point is a common measure used in quoting yield on bills, notes, and bonds and 

represents 1/100 of a percent of yield. 

AIG CDS Premiums 

Continue to Trend 

Downward Toward 

Precrisis Levels 
 

Page 47 GAO-12-574 TARP: AIG Equity Investments 

AIG’s CDS premiums generally continued to decrease since May 2009, 

and as of March 8, 2012, were similar to their March 2008 level for the 3-

year and 5-year CDS premiums (see fig. 14). From May 2009 through 

March 2010, the CDS index for the insurance sector declined, but not as 

much as the CDS premiums for AIG. From March 2010 through May 

2011, AIG’s CDS premiums declined slightly. The premiums rose 

somewhat during the latter part of 2011 but receded again in the first 3 

months of 2012. While the overall trend is positive, meaning declining 

premiums, the extent to which this decline in the cost to protect against 

an AIG default reflects confidence in the stand-alone creditworthiness of 

AIG or relative to the extent to which the decline is due to the ongoing 

federal assistance to AIG is unclear. As the Federal Reserve has noted, 

the premium on AIG’s CDS is based both on the market’s assessment of 

the government’s level of commitment to assist AIG and AIG’s financial 

strength. 

Figure 14: AIG CDS Premiums on AIG, January 2007 through March 2012 

Note: CDS provide protection to the buyer of the CDS contract if the assets covered by the contract 

go into default. 
 

Page 48 GAO-12-574 TARP: AIG Equity Investments 

Ratings of AIG’s debt and financial strength by various credit rating 

agencies showed mixed trends in the first quarter of 2011, but since then 

they have remained stable. Credit ratings measure a company’s ability to 

repay its obligations and directly affect that company’s cost of and ability 

to access unsecured financing. If a company’s ratings are downgraded, 

its borrowing costs can increase, capital can be more difficult to raise, 

business partners may terminate contracts or transactions, counterparties 

can demand additional collateral, and operations can become more 

constrained generally. Rating agencies can downgrade a company’s key 

credit ratings if they believe it is unable to meet its obligations. In AIG’s 

case, downgrades could affect its ability to raise funds and could increase 

the cost of financing its major insurance operations. Downgrades in AIG’s 

credit ratings also could result in downgrades on insurer financial strength 

ratings for the AIG life and property/casualty companies, further declines 

in credit limits, and counterparties demanding that AIG post additional 

collateral. Collectively, these effects could impede AIG’s restructuring 

efforts and hamper any plans to access traditional sources of private 

capital to replace the public investments. Conversely, an upgrade in AIG’s 

credit ratings would indicate an improvement in its condition and possibly 

lead to lower borrowing costs and facilitate corporate restructuring. 

Several of AIG’s key credit ratings remained fairly stable during the last 

three quarters of 2010, became mixed in the first quarter of 2011, and 

have since stabilized and remained stable through the end of 2011.42

Since our last report on AIG insurance sector ratings, S&P, Moody’s and 

Fitch Ratings have not reported any changes to their ratings of AIG’s 

long-term or short-term debt, nor have these agencies or AM Best 

changed their ratings of AIG’s property/casualty financial strength ratings. 

However, on January 27, 2012, AM Best revised their ratings outlook for 

AIG’s life insurer and property/casualty lines from “negative” to “stable.” 

According to the rating agency, the revised outlook for AIG’s life lines 

reflects improved surrender rates, strong positive cash flows, and the 

progress made to restore its leading market positions.43 The stable 

outlook reflects Chartis’s U.S. market position; its ability to lead 

underwrite, attract, and retain clients by leveraging its significant global 

 

42See appendix II for a detailed listing of AIG’s historical and current credit ratings and an 

explanation of the meaning of the various credit ratings. 

43“Surrender rates” refer to the extent that customers are ‘cashing-in’ the value of their 

policy, which results in a cash outflow for the life insurance company. 

AIG’s Credit Ratings Have 

Remained Stable since the 

First Quarter of 2011 
 

Page 49 GAO-12-574 TARP: AIG Equity Investments 

capacity, extensive product offerings, and innovation; and greater 

emphasis on pricing premiums to match the chance that clients will make 

an insurance claim and using data-based models to determine insurance 

premiums. It also suggests that estimates of their claim obligations 

compares to earlier projections will be acceptable, and Chartis will 

continue to maintain a supportive level of risk-adjusted capitalization 

through favorable net earnings while providing shareholder dividends to 

its parent in accordance with historical norms. The stable outlook also 

reflects continued improvements at AIG including the January 2011 

implementation of the company’s recapitalization plan, AIG’s recent 

issuance of debt and equity in the public capital markets, enhanced 

holding company liquidity and the orderly wind down of AIGFP. Only Fitch 

Ratings has reported any rating change for AIG’s life insurer financial 

strength rating, and this change was a rating upgrade, from A-/stable to 

A/stable on April 25, 2011. 

To track the performance of AIG’s insurance companies, we use an 

indicator of AIG’s underwriting ratios. In nearly every quarter since the 

first quarter of 2008, underwriting in AIG’s property/casualty companies 

has not been profitable, but net income generally has been positive 

because investment income more than offset underwriting losses. For 

property/casualty insurers, underwriting profitability can be measured 

using the combined ratio, which is the sum of the loss and the expense 

ratios. The loss ratio measures claims costs plus claims adjustment 

expenses relative to net earned premiums. For example, a loss ratio of 

77.3 percent indicates that 77.3 cents of every dollar in premiums earned 

are used for claims and claims-related costs. A rising loss ratio indicates 

rising claims costs relative to the premiums earned, which may be due to 

increased claims losses, decreased premiums earned, or a combination 

of the two. The expense ratio measures the level of underwriting 

administrative expenses relative to net premiums earned and is a 

measure of underwriting efficiency. For example, an expense ratio of 22.4 

percent indicates that 22.4 cents of every dollar in premiums earned are 

used for underwriting expenses. The combined ratio (combining the loss 

ratio and the expense ratio) is an overall measure of a property/casualty 

insurer’s underwriting profitability. Thus, a combined ratio of less than 100 

percent would indicate that an insurer’s underwriting is profitable and a 

ratio of more than 100 percent would indicate an underwriting loss. 

Our indicator tracks AIG’s underwriting ratios quarterly compared with the 

average underwriting ratios of its 15 property/casualty insurance peers or 

competitors and AIG’s investment income and net income as percentages 

AIG’s Property/Casualty 

Companies Were 

Profitable throughout 2010 

and 2011 Because 

Investment Income More 

than Offset Underwriting 

Losses 
 

Page 50 GAO-12-574 TARP: AIG Equity Investments 

of premiums earned. To identify the 15 property/casualty insurance peers 

of AIG, we analyzed the distributions of 2009 direct premiums written 

(DPW) by lines of business of 30 property/casualty companies that each 

had more than $1 billion in DPW for 2009.44 From these companies, we 

defined a “peer” of AIG as a company that generated more than 90 

percent of its DPW in lines that accounted for more than 60 percent of 

AIG’s DPW. We defined a nonpeer of AIG as a company that generated 

more than 80 percent of its DPW in lines that accounted for less than 40 

percent of AIG’s DPW or more than 50 percent of its DPW in a single line 

that was less than 20 percent of AIG’s DPW. 

The top panel of figure 15 compares AIG’s ratios to those of its peers. 

Since 2007, which was just prior to the onset of federal assistance to AIG, 

AIG’s combined ratios usually have been higher than the average of its 

peers. Nevertheless, since the first quarter of 2010—with the exception of 

the third quarter of 2010 when the combined ratios of AIG’s peers 

averaged 99.7 (a ratio of less than 100 indicates that the underwriting 

was profitable)—the combined ratios for AIG and its peers have 

exceeded 100, indicating that their underwriting usually has not been 

profitable. By comparison, in 2007 the underwriting of both AIG and its 

peers were profitable. From 2008 through 2009 underwriting remained 

profitable for AIG peers but became unprofitable for AIG. The top panel of 

the figure also shows that while AIG’s expense ratios have been lower 

than the average of its peers in every quarter, its loss ratios have been 

 

44We reviewed 30 property/casualty companies and identified 15 as AIG’s 

property/casualty insurance peers based on the similarities in the distributions of their 

premiums written in 2009 by lines of business. As did AIG, these companies wrote 

premiums in several property/casualty lines of insurance. The companies are ACE, 

Allegheny, Allianz SE, American Financial, Arch Capital, Argo Group, Chubb, CNA, 

Fairfax Financial, Hartford Financial Services, Liberty Mutual, Markel, Old Republic, 

Travelers, and WR Berkley. Other property/casualty insurers not identified as peers were 

mostly companies concentrated in private auto insurance or home/farm owners insurance 

and other lines of insurance that were not major lines for AIG. These companies are 

Allstate; Assurant, Inc.; Bank of America; Berkshire Hathaway (GEICO); Erie Insurance 

Group; FM Global; Nationwide Mutual; Progressive; QBE Insurance Group; State Farm 

Fire and Casualty; State Farm Mutual Auto Insurance; Tokio Marine; United Services 

Automobile Association; White Mountains; and Zurich Financial Services. 
 

Page 51 GAO-12-574 TARP: AIG Equity Investments 

higher than the average of its peers in every quarter.45 The lower panels 

of the figure show that despite a combined ratio usually over 100, AIG’s 

property/casualty companies had positive net income in 16 of the 20 

quarters because investment income, which increased every quarter in 

2011, more than offset the underwriting losses.46

 

45Historical operating ratios for commercial insurance have been revised to include Private 

Client Group and exclude HSB Group, Inc. The loss ratio for the fourth quarter of 2009 

includes a $2.3 billion increase in the reserve for prior years’ adverse loss development. 

The underwriting expense for the fourth quarter of 2008 includes a $1.2 billion charge for 

impairment to goodwill, increasing the expense ratio by 22.5 points. Claims related to 

major catastrophes were $1.4 billion in 2008, including hurricane claims of $1.1 billion in 

the third quarter of 2008. Conversely, claims related to major catastrophes were $100 

million in 2007. 

46Investment returns are not considered part of underwriting and thus are not included in 

the ratios. 
 

Page 52 GAO-12-574 TARP: AIG Equity Investments 

Figure 15: Quarterly Statutory Underwriting Ratios of AIG (Chartis Domestic and Foreign Property/Casualty Insurance 

Companies) Compared to Averages for 15 Peers and AIG’s Property/Casualty Investment Income and Net Income as 

Percentages of Premiums Earned, First Quarter 2007 through Fourth Quarter of 2011 
 

Page 53 GAO-12-574 TARP: AIG Equity Investments 

Note: The ratios are originally reported, nonrestated figures. We did not include restated figures 

because they revise the prior periods to reflect the effect of discontinued operations, acquisitions, or 

other changes to conform to the current period. We determined AIG’s property/casualty peers for our 

analysis by comparing various property/casualty companies’ distribution of premiums written in 2009 

by their lines of business. Similar to AIG, its peers have several lines of business. The 15 peers are 

ACE, Alleghany, Allianz SE, American Financial, Arch Capital, Argo Group, Chubb, CNA, Fairfax 

Financial, Hartford, Liberty Mutual, Markel, Old Republic, Travelers, and WR Berkley. Other 

property/casualty companies were not included in the peer group for this analysis. Most of these 

companies were concentrated either in the private auto insurance business or home/farm owners 

insurance, neither of which is among AIG’s largest lines of business. These companies are Allstate; 

Assurant, Inc.; Bank of America; Berkshire Hathaway (GEICO); Erie Insurance Group; FM Global; 

Nationwide Mutual; Progressive; QBE Insurance Group; State Farm Fire and Casualty; State Farm 

Mutual Auto Insurance; Tokio Marine; United Services Automobile Association; White Mountains; and 

Zurich Financial Services. 

While our data cover only 5 full calendar years, they suggest a pattern of 

loss ratios increasing overall and being volatile at times and expense 

ratios that have remained fairly stable. Investment returns were high 

enough for AIG to be profitable in 8 of the 12 quarters from 2007 through 

2009, and 6 of the 8 quarters through the end of 2011. The capital losses 

in the fourth quarter of 2010 (68.4 percent) largely reflect a $3.7 billion 

fourth quarter loss in AIG’s property/casualty net income. Moreover, in the 

fourth quarter of 2010, AIG’s combined ratio increased sharply to 191.1, 

while the average ratio of its peers rose modestly to 103.9. The sharp 

increase for AIG resulted primarily from domestic property/casualty 

insurance in which claims and claims adjustment expenses rose 105 

percent and underwriting expenses rose 31 percent, while premiums 

earned declined 4 percent. Second, the 4 percent rise in premiums 

earned by foreign property/casualty insurance was more than offset by 

increases of 30 percent in claims and claims adjustment expenses and 19 

percent in underwriting expenses. Claims and claims adjustment 

expenses increased mostly from actual losses exceeding estimated 

losses (adverse loss development) that was recognized and recorded in 

2010 for asbestos and excess casualty and workers’ compensation 

coverage in years prior to 2010. Increased underwriting expenses reflect 

increased costs in areas such as brokers’ commissions, employee 

incentive programs, marketing, financial systems, impairments of 

intangible assets, divestitures, and workforce reductions.47 However, in 

the first quarter of 2011, the loss ratio and combined ratio declined 

considerably from the fourth quarter of 2010 due to declines in claims and 

claims-adjustment expenses and remained lower throughout 2011, with 

no adverse loss development reported in the fourth quarter of 2011. 

 

47An impairment to an intangible asset is a decline in its fair value or expected future cash 

flows that is recognized by reducing the asset’s value that is carried on the books. 
 

Page 54 GAO-12-574 TARP: AIG Equity Investments 

Since our last report in July 2011, much of the federal assistance to 

benefit AIG has been repaid by or on behalf of AIG. Debt assistance 

through Maiden Lane II has been repaid, as has equity assistance 

through the AIA SPV. The remaining federal assistance to AIG consists of 

remaining assets and accrued interest in Maiden Lane III and remaining 

Treasury-owned common shares in AIG to be sold. With sales of AIG 

common stock thus far, Treasury has reduced its equity interest in AIG 

from 77 percent to 70 percent. However, monitoring the markets to 

identify divestment strategies that will strike the right balance between 

Treasury’s competing goals of maximizing taxpayers’ returns and exiting 

its investments as soon as practicable will remain important for Treasury. 

Consequently, the government’s, and thus the taxpayers’, exposure to 

AIG will be tied to the success and ongoing performance of AIG. The 

sustainability of any positive trends in AIG’s operations will depend on 

how well it manages its business in the current economic environment. 

Similarly, the government’s ability to fully recoup its assistance will be 

determined by the long-term health of AIG as well as other market factors 

that are beyond the control of AIG or the government such as the 

performance of the insurance sectors, the credit derivatives markets, and 

investors’ interest in the company—including large institutional investors. 

We will continue to monitor these issues in our future work. 

We provided a draft of this report to Treasury for review and comment. 

Treasury did not provide overall written comments. We also shared a 

draft of this report with the Federal Reserve and AIG. We received written 

technical comments from Treasury, the Federal Reserve, and AIG, which 

we have incorporated in the report as appropriate. 

We are sending copies of this report to appropriate congressional 

committees, the Financial Stability Oversight Board, the Special Inspector 

General for TARP, the Department of the Treasury, the federal banking 

regulators, and other interested parties. In addition, the report also is 

available at no charge on the GAO website at http://www.gao.gov. 

Agency Comments 
 

Page 55 GAO-12-574 TARP: AIG Equity Investments 

If you or your staffs have any questions concerning this report please 

contact Lawrance L. Evans, Jr. at (202) 512-4802 or evansl@gao.gov. 

Contact points for our Offices of Congressional Relations and Public 

Affairs may be found on the last page of this report. GAO staff who made 

major contributions to this report are listed in appendix III. 

Lawrance L. Evans, Jr. 

Acting Director 

Financial Markets and 

 Community Investment 
 

Page 56 GAO-12-574 TARP: AIG Equity Investments 

List of Congressional Committees 

The Honorable Daniel K. Inouye 

Chairman 

The Honorable Thad Cochran 

Vice Chairman 

Committee on Appropriations 

United States Senate 

The Honorable Tim Johnson 

Chairman 

The Honorable Richard C. Shelby 

Ranking Member 

Committee on Banking, Housing, 

And Urban Affairs 

United States Senate 

The Honorable Kent Conrad 

Chairman 

The Honorable Jeff Sessions 

Ranking Member 

Committee on the Budget 

United States Senate 

The Honorable Max Baucus 

Chairman 

The Honorable Orrin G. Hatch 

Ranking Member 

Committee on Finance 

United States Senate 

The Honorable Hal Rogers 

Chairman 

The Honorable Norm Dicks 

Ranking Member 

Committee on Appropriations 

House of Representatives 
 

Page 57 GAO-12-574 TARP: AIG Equity Investments 

The Honorable Paul Ryan 

Chairman 

The Honorable Chris Van Hollen 

Ranking Member 

Committee on the Budget 

House of Representatives 

The Honorable Spencer Bachus 

Chairman 

The Honorable Barney Frank 

Ranking Member 

Committee on Financial Services 

House of Representatives 

The Honorable Dave Camp 

Chairman 

The Honorable Sander Levin 

Ranking Member 

Committee on Ways and Means 

House of Representative 
Appendix I: Maiden Lane II Asset Auctions 

Page 58 GAO-12-574 TARP: AIG Equity Investments 

To repay the Federal Reserve Bank of New York (FRBNY), in early April 

2011, FRBNY began offering segments of the Maiden Lane II residential 

mortgage-backed securities (RMBS) portfolio for sale to a group of 

dealers on a more or less weekly basis through early June 2011, a 

strategy that it hoped would avoid market disruption. Following an offer by 

American International Group, Inc. (AIG) to repurchase the assets it had 

sold to Maiden Lane II, FRBNY announced on March 30, 2011, that it had 

declined AIG’s offer. FRBNY and the Board of Governors of the Federal 

Reserve System said this was done to serve the public interest of 

maximizing returns from any sale and promoting financial stability. In light 

of improved conditions in the RMBS market and a high level of interest, 

FRBNY stated that it would begin more extensive asset sales through a 

competitive sales process. FRBNY’s investment manager, BlackRock 

Solutions, disposed of the Maiden Lane II securities through a competitive 

sales process. To maximize returns to the public, FRBNY did not stipulate 

a time frame for disposing of these assets. Through June 9, 2011, Maiden 

Lane II held several auctions and sold nearly $10 billion from its portfolio 

(see table 5). In addition, on January 19, 2012, FRBNY announced that it 

had sold assets with a current face value of $7 billion through a 

competitive process to Credit Suisse Securities (USA) LLC and on 

February 8, 2012, it announced that it sold assets with a current face 

value of $6.2 billion through a competitive process to Goldman Sachs & 

Co. According to FRBNY, the proceeds from both sales would enable the 

repayment of the entire remaining outstanding balance of the FRBNY 

loan to the Maiden Lane II in early March 2012. More recently, on 

February 28, 2012, FRBNY announced the sale of the remaining 

securities in the Maiden Lane II portfolio, and as of March 7, 2012, the 

facility had repaid FRBNY the outstanding principal and interest. 

Table 5: Dates and Values of Maiden Lane II Asset Auctions, April 6, 2011, through 

February 28, 2012 

Date of auction 

Face value of 

assets solda Cumulative assets 

sold (face value)

April 6, 2011 $1,326,856,873 $1,326,856,873 

April 13, 2011 626,080,072 1,952,936,945 

April 14, 2011 534,127,946 2,487,064,891 

April 28, 2011 1,122,794,209 3,609,859,100

May 4, 2011 1,773,371,055 5,383,230,155

May 10, 2011 427,486,898 5,810,717,053

May 12, 2011 1,373,506,029 7,184,223,082

May 19, 2011 878,641,682 8,062,864,764

Appendix I: Maiden Lane II Asset Auctions 
Appendix I: Maiden Lane II Asset Auctions 

Page 59 GAO-12-574 TARP: AIG Equity Investments 

Date of auction 

Face value of 

assets solda Cumulative assets 

sold (face value)

June 9, 2011 1,898,594,878 9,961,459,642

January 19, 2012b 7,014,000,000 16,975,459,642

February 8, 2012b 6,200,000,000 23,175,459,642

February 28, 2012 6,000,000,000 29,175,459,642

Total $29,175,459,642

Source: GAO analysis of FRBNY data. 

Note: There were no asset auctions for Maiden Lane II from mid-June 2011 through mid-January 

2012. 

a

Value is the face amount of the most recent balance of principal outstanding. 

b

On January 19, 2012, FRBNY announced that it sold assets with a current face value of $7.014 

billion through a competitive process to Credit Suisse Securities (USA) LLC and on February 8, 2012, 

it announced that it sold assets with a current face value of $6.2 billion through a competitive process 

to Goldman Sachs & Co. On February 28, 2012, FRBNY announced the sale of the remaining 

securities in the Maiden Lane II portfolio with the sale of assets with a current face amount of $6 

billion through a competitive process to Credit Suisse Securities (USA) LLC, As of March 21, 2012, in 

addition to the facility having repaid FRBNY the outstanding principal and interest, had no deferred 

payment and interest payable to subsidiaries of AIG had been reduced to zero and the SPV had net 

portfolio holdings of only $19 million. The management of the portfolio generated a net gain for the 

benefit of the public of approximately $2.8 billion, including $580 million in accrued interest on the 

FRBNY loan. 
Appendix II: Overview of Definitions of Credit 

Ratings and AIG’s Credit Ratings 

Page 60 GAO-12-574 TARP: AIG Equity Investments 

Credit ratings measure a company’s ability to repay its obligations and 

directly affect that company’s cost of and ability to access unsecured 

financing. If a company’s ratings are downgraded, its borrowing costs can 

increase, capital can be more difficult to raise, business partners may 

terminate contracts or transactions, counterparties can demand additional 

collateral, and operations can become more constrained generally. Rating 

agencies can downgrade the company’s key credit ratings if they believe 

the company is unable to meet its obligations. In American International 

Group, Inc.’s (AIG) case, this could affect its ability to raise funds and 

increase the cost of financing its major insurance operations, and, in turn, 

impede AIG’s restructuring efforts. Conversely, an upgrade in AIG’s credit 

ratings would indicate an improvement in its condition and possibly lead 

to lower borrowing costs and facilitate corporate restructuring. 

Moody’s Investors Service (Moody’s), Standard and Poor’s (S&P), and 

Fitch Ratings (Fitch) are three of the credit rating agencies that assess 

the creditworthiness of AIG. Each of the rating agencies uses a unique 

rating to denote the grade and quality of the bonds being rated. Table 6 

provides an overview of the ratings for Moody’s, S&P, and Fitch. 

Table 6: Summary of Rating Agencies’ Ratings 

Grade and quality Definitions Moody’sa S&Pb Fitchb

Highest grade and quality There is an extremely strong capacity to meet financial 

commitments on the obligation and bonds have little 

investment risk. 

Aaa AAA AAA 

High grade and quality There is a very strong capacity to meet financial 

commitment on the obligation and bonds have very little 

investment risk, but margins of protection may be lower 

than with the highest grade bonds. 

Aa AA AA 

Upper-medium grade and 

quality 

There is a strong capacity to meet financial commitment 

on the obligation and the principal and interest are 

adequately secured, but the bonds are more vulnerable to 

a changing economy. 

A A A 

Medium and lower-medium 

grade 

There are adequate protections for these obligations, but 

the bonds have investment and speculative 

characteristics. This group comprises the lowest level of 

investment grade bonds. 

Baa BBB BBB 

Noninvestment and 

speculative grades 

There is little protection on these obligations and the 

interest and principal may be in danger, in cases in which 

default may be likely. 

Ba1 and below BB+ and 

below 

BB+ and 

below 

Sources: GAO descriptions of information from Moody’s, S&P, and Fitch. 

a

Moody’s has numerical modifiers of 1, 2, and 3 in each rating classification from Aa to B: “1” 

indicates that the issue ranks in the higher end of the category, “2” indicates a midrange ranking, and 

“3” indicates that the issue ranks in the lower end of the category. 

Appendix II: Overview of Definitions of 

Credit Ratings and AIG’s Credit Ratings 
Appendix II: Overview of Definitions of Credit 

Ratings and AIG’s Credit Ratings 

Page 61 GAO-12-574 TARP: AIG Equity Investments 

b

S&P and Fitch: Ratings from ‘AA’ to ‘CCC’ may be modified by the addition of a plus (+) or minus (-) 

sign to show relative standing within the major rating categories. 

As shown in table 7, AIG’s key credit ratings remained largely unchanged 

from May 2009 through December 2011, primarily because federal 

assistance provided AIG with needed liquidity. From March 31, 2009, to 

December 15, 2009, AM Best, Moody’s, and S&P maintained the same 

credit ratings for AIG’s long-term debt and the financial strength of its 

property/casualty and life insurance companies due in large part to 

support that the Federal Reserve and Treasury provided.1

 Since we last 

reported on the insurance ratings, S&P, Moody’s, and Fitch have not 

reported any changes to their ratings of AIG’s long-term or short-term 

debt. Nor have these agencies or AM Best changed their ratings of AIG’s 

property/casualty financial strength ratings. However, on January 27, 

2012, AM Best revised their ratings outlook for AIG’s life insurer and 

property/casualty lines from “negative” to “stable.” According to the rating 

agency, the revised outlook for AIG’s life lines reflects improved surrender 

rates, strong positive cash flows, and the progress made to restore its 

leading market positions. This stable outlook also reflects Chartis’s U.S. 

market position; its ability to lead, attract and retain clients by leveraging 

its significant global capacity, extensive product offerings and innovation; 

and greater emphasis on technical pricing and predictive modeling. It 

further suggests that any future reserve development will be acceptable, 

that Chartis will continue to maintain a supportive level of risk-adjusted 

capitalization through favorable net earnings while providing shareholder 

dividends to its parent in accordance with historical norms. This stable 

outlook also reflects continued improvements at AIG including the 

January 2011 implementation of the company’s recapitalization plan, 

AIG’s recent issuance of debt and equity in the public capital markets, 

enhanced holding company liquidity and the orderly wind down of AIGFP. 

Only Fitch has reported any rating change for AIG’s life insurer financial 

strength rating, and this change was a rating upgrade, from A-/stable to 

A/stable on April 25, 2011. 

 

1

AIG’s long-term debt was rated at A-/Negative (S&P) and A3/Negative (Moody’s), and its 

short-term debt was rated at A-1 (S&P) and P-1 (Moody’s). While these ratings are 

described using slightly different terminology, they tend to show relative consistency in the 

strength of AIG’s debt. 
Appendix II: Overview of Definitions of Credit 

Ratings and AIG’s Credit Ratings 

Page 62 GAO-12-574 TARP: AIG Equity Investments 

Table 7: AIG’s Key Credit Ratings, March 31, 2009, through December 31, 2011 

Rating agency 

Mar. 31, 

2009 

May 15, 

2009 

Dec. 15, 

2009 

Mar. 31, 

2010 

July 31, 

2010 

Sep. 30, 

2010 

Dec. 31, 

2010 

Mar. 31, 

2011 

July 31, 

2011 

Dec. 31, 

2011 

Debt 

Long-term 

Potential 

consequences of 

a future 

downgrade 

AIGFP would have to post collateral and termination payments. The total obligations depend on the market and 

other factors at the time of the downgrade. For example: 

At December 31, 2011, a one-notch downgrade from S&P would have resulted in negligible additional collateral 

postings and termination payments, while a one-notch downgrade from Moody’s and a two-notch from S&P would 

increase that cost to $264 million. Another notch downgrade would have increased that cost to $531 million. By 

comparison, at June 30, 2010, a one-notch, two-notch, or three-notch downgrade from S&P and Moody’s would 

have cost AIG negligibly and up to $298 million, and $650 million, respectively, in cumulative additional collateral 

postings and termination payments. 

S&P A-/na n/c n/c n/c n/c n/c n/c A-/s n/c n/c 

Moody’s A3/na n/c n/c n/c n/c n/c n/c Baa1/s n/c n/c 

Fitch A BBB/e n/c n/c BBB/s n/c n/c n/c n/c n/c 

Short-term 

Potential 

consequences of 

a future 

downgrade 

According to AIG, currently the company does not issue commercial paper or other short term debt instruments. 

Therefore, there would be no immediate financial impact if there was a downgrade of its short term ratings. Current 

credit facility pricing is tied to the long-term ratings. 

S&P A-1 for AIG 

Funding, 

Curzon, and 

Nightingalea

 

n/c n/c n/c n/c n/c n/c A-2 n/c n/c 

Moody’s P-1 for AIG 

Fundinga

 

n/c n/c n/c n/c on review 

for 

possible 

downgrade

n/c P-2/s n/c n/c 

Fitch F1 n/c n/c n/c n/c n/c affirmed 

and 

withdrawn 

Nov. 19, 

2010 

not 

rated 

n/c n/c 

Financial 

strength 

 

Life insurer 
Appendix II: Overview of Definitions of Credit 

Ratings and AIG’s Credit Ratings 

Page 63 GAO-12-574 TARP: AIG Equity Investments 

Rating agency 

Mar. 31, 

2009 

May 15, 

2009 

Dec. 15, 

2009 

Mar. 31, 

2010 

July 31, 

2010 

Sep. 30, 

2010 

Dec. 31, 

2010 

Mar. 31, 

2011 

July 31, 

2011 

Dec. 31, 

2011 

Potential 

consequences of 

a future 

downgrade 

According to AIG, a ratings downgrade of SAFG Retirement Services Inc., would have a significant negative 

impact. AIG’s domestic life insurance new business would be severely impacted, in several instances forcing the 

company to exit businesses that serve either the high-net-worth marketplace or businesses that are governed by 

trust contracts including universal life, structured settlements, pensions and private placements. The company 

would need to continue to dedicate key resources to retention and management of existing producer and client 

relationships. Additional retention strategies would need to be implemented. 

AIG’s retirement services businesses would also be highly impacted since the companies distribute through rating 

sensitive distribution channels. There is a minimum rating that many banks or groups cannot go below and a 

further downgrade would certainly result in the companies falling below that minimum. With respect to variable 

annuities, a further ratings downgrade could cause a significant number of major firms to resuspend sales or to 

initiate permanent suspension, which would increase surrender rates and, potentially foster partial withdrawals that 

lock-in adverse death benefit exposures, and result in a significant loss of wholesalers. 

AM Best A/na n/c n/c n/c n/c n/c n/c n/c n/c n/c 

S&P A+/n n/c n/c n/c n/c n/c n/c A+/s n/c n/c 

Moody’s A1/developing n/c n/c A1/n n/c n/c n/c A2/s n/c n/c 

Fitch AA- A-/e n/c n/c A-/s n/c n/c n/c A/s n/c 

Property/casualty 

insurer 

 n/c n/c 

Potential 

consequences of 

a future 

downgrade 

According to AIG, a further downgrade of Chartis’s financial strength rating from a leading rating agency could, in 

the extreme, irreparably harm Chartis’s worldwide businesses, potentially putting Chartis into “run-off”, meaning 

that it could only service business left with the company as it could not effectively write profitable, new business. In 

the U.S., AM Best is the key rating agency for Chartis’s U.S. businesses, while Standard & Poor’s ratings have 

greater impact on a global scale. A further degradation of either of these ratings could effectively put Chartis at a 

severe competitive disadvantage. 

Prior to September 2008, AIG’s credit ratings and financial position were advantageous for its property casualty 

companies and provided an uplift in the insurance operations ratings. Since 2008, AIG’s financial challenges have 

put downward pressure on Chartis’s financial strength ratings to the point that financial strength is no longer a key 

competitive advantage for Chartis as most of its key competitors have stronger ratings. 

AM Best A/na n/c n/c n/c n/c n/c n/c n/c n/c n/c 

S&P A+/n n/c n/c n/c n/c n/c n/c A/s n/c n/c 

Moody’s Aa3/n n/c n/c n/c n/c n/c n/c A1/s n/c n/c 

Fitch AA- A+/e n/c placed 

rating 

on 

rating 

watch -

negative

A+/s n/c n/c A/s n/c n/c 

Sources: GAO description of information from AIG Securities and Exchange Commission filings; S&P, Fitch, Moody’s, and AM Best; 

and AIG. 

Note: N/c means no change, n means negative, e means evolving, and s means stable. 

a

These are key ratings. 
Appendix III: GAO Contact and Staff 

Acknowledgments 

Page 64 GAO-12-574 TARP: AIG Equity Investments 

Lawrance L. Evans, Jr., (202) 512-4802 or evansl@gao.gov

In addition to the contact named above, Karen Tremba (Assistant 

Director), Rachel DeMarcus, John Forrester, Marc Molino, Patricia Moye, 

Jennifer Schwartz, and Melvin Thomas made important contributions to 

this report. 

Appendix III: GAO Contact and Staff 

Acknowledgments 

GAO Contact 

Staff 

Acknowledgments 
Appendix IV: Glossary of Terms 

Page 65 GAO-12-574 TARP: AIG Equity Investments 

The net cost of an asset or security that is used to compute the gains or 

losses on that asset or security. It is calculated by starting with the 

original cost of an asset or security, then adding the value of any 

improvements, legal fees, and assessments and subtracting the value of 

any accumulated depreciation, amortization, and other losses. 

An item owned by an individual, corporation, or government that provides 

a benefit, has economic value, and could be converted into cash. For 

businesses, an asset generates cash flow and may include, for example, 

accounts receivable and inventory. Assets are listed on a company’s 

balance sheet. 

A trader’s record or inventory of long (buy) and short (sell) positions on 

securities it holds and orders placed. A book may hold few or several 

positions and a trader may have several books, which are variously 

organized, such as by types of product or risk. 

The value of cash, goods, and other financial resources a business uses 

to generate income or make an investment. Companies can raise capital 

from investors by selling stocks and bonds. Capital is often used to 

measure the financial strength of a company. 

The market for long-term funds in which securities such as common 

stock, preferred stock, and bonds are traded. Both the primary market for 

new issues and the secondary market for existing securities are part of 

the capital market. 

Costs of adjusting a claim that include attorneys’ fees and investigation 

expenses. 

Properties or other assets pledged by a borrower to secure credit from a 

lender. If the borrower does not pay back or defaults on the loan, the 

lender may seize the collateral. 

Appendix IV: Glossary of Terms 

Adjusted Basis 

Asset 

Book 

Capital 

Capital Market 

Claims (Adjustment) 

Expenses 

Collateral 
Appendix IV: Glossary of Terms 

Page 66 GAO-12-574 TARP: AIG Equity Investments 

Securities backed by a pool of bonds, loans, or other assets. In a basic 

collateralized debt obligation, a pool of bonds, loans, or other assets are 

pooled and securities then are issued in different tranches (see “tranche” 

and “mezzanine tranche”) that vary in risk and return. 

This ratio is a common measure of the performance of the daily 

operations of an insurance company. It is calculated by adding the 

amount of incurred losses and the amount of expenses incurred by the 

company and dividing that combined amount by the earned premium 

generated during the same period. The ratio describes the related cost of 

losses and expenses for every $100 of earned premiums. A ratio of less 

than 100 percent generally indicates that the company is making 

underwriting profit while a ratio of more than 100 percent generally means 

that it is paying out more money in claims that it is receiving from 

premiums. 

An unsecured obligation with maturities ranging from 2 to 270 days 

issued by banks, corporations, and other borrowers with high credit 

ratings to finance short-term credit needs, such as operating expenses 

and account receivables. Commercial paper is a low-cost alternative to 

bank loans. Issuing commercial paper allows a company to raise large 

amounts of funds quickly without the need to register with the Securities 

and Exchange Commission, either by selling them directly to an investor 

or to a dealer who then sells them to a large and varied pool of 

institutional buyers. 

Bilateral contracts that are sold over the counter and transfer credit risks 

from one party to another. In return for a periodic fee, the seller (who is 

offering credit protection) agrees to compensate the buyer (who is buying 

credit protection) if a specified credit event, such as default, occurs. 

A financial instrument, traded on- or off-exchange, the price of which 

directly depends on the value of one or more underlying commodities. 

Derivatives involve the trading of rights or obligations on the basis of the 

underlying product, but they do not directly transfer property. 

Collateralized Debt 

Obligation 

Combined Ratio 

Commercial Paper 

Credit Default Swap 

Derivative 
Appendix IV: Glossary of Terms 

Page 67 GAO-12-574 TARP: AIG Equity Investments 

Provides coverage when a director or officer of a company commits a 

negligent act or misleading statement that results in the company being 

sued. 

Ownership interest in a business in the form of common stock or 

preferred stock. 

Insurance protection to various professions for negligent acts or 

omissions resulting in bodily injury, property damage, or liability to a 

client. 

The ratio of underwriting expenses to net premiums earned. It is a 

measure of underwriting efficiency, in which an increase in the ratio 

represents increased expenses relative to premiums. The underwriting 

expenses include the amortization of deferred policy acquisition costs 

(commissions, taxes, licenses and fees, and other underwriting expenses 

amortized over the policy term), and insurance operating costs and 

expenses. For example, a 22.4 expense ratio indicates that 22.4 cents 

out of every dollar in premiums earned are used for underwriting 

expenses. 

An estimated value of an asset or liability that is reasonable to all willing 

parties involved in a transaction taking into account market conditions 

other than liquidation. For example, the fair value of derivative liability 

represents the fair market valuation of the liabilities in a portfolio of 

derivatives. In this example, the fair value provides an indicator of the 

dollar amount the market thinks the trader of the portfolio would need to 

pay to eliminate its liabilities. 

Goodwill occurs when a company buys another entity and pays more 

than the market value of all assets on the entity’s books. A company will 

pay more because of intangibles—such trademarks and copyrights—on 

the books at historical cost and other factors—such as human capital, 

brand name, and client base—that accounting conventions do not capture 

on the books. If the company later determines that the entity has lost 

value and recovery is not a realistic expectation it might decide to record 

the lost value as an impairment. 

Directors and Officer 

Liability Insurance 

Equity 

Errors and Omissions 

Liability Insurance (or 

Coverage) 

Expense Ratio 

Fair Value 

Goodwill (and Goodwill 

Impairment) 
Appendix IV: Glossary of Terms 

Page 68 GAO-12-574 TARP: AIG Equity Investments 

A business’s financial obligation that must be made to satisfy the 

contractual terms of such an obligation. Current liabilities, such as 

accounts payable or wages, are debts payable within 1 year, while longterm liabilities, such as leases and bond repayments, are payable over a 

longer period. 

Measure of the extent to which a business has cash to meet its 

immediate and short-term obligations. Liquidity also is measured in terms 

of a company’s ability to borrow money to meet short-term demands for 

funds. 

The ratio of claims and claims adjustment expenses incurred to net 

earned premiums. For example, a 77.3 loss ratio indicates that 77.3 cents 

out of every dollar in premiums earned are used to adjust and pay claims. 

A tranche is a piece or portion of a structured deal, or one of several 

related securities that are issued together but offer different risk-reward 

characteristics. The mezzanine tranche is subordinated to the senior 

tranche, but is senior to the equity tranche. The senior tranche is the 

least-risky tranche whereas the equity tranche is the first loss and riskiest 

tranche. 

Securities or debt obligations that represent claims to the cash flows from 

pools of mortgage loans, such as mortgages on residential property. 

These securities are issued by Ginnie Mae, Fannie Mae, and Freddie 

Mac, as well as private institutions, such as brokerage firms and banks. 

The amount upon which payments between parties to certain types of 

derivatives contracts are based. The gross notional amount is not 

exchanged between the parties, but instead represents the underlying 

quantity upon which payment obligations are computed. The net notional 

amount represents the maximum dollar level exposure for the portfolio. 

Funds provided by investors in exchange for common or preferred stock. 

Paid-in capital represents the funds raised by the business from equity, 

and not from ongoing operations. 

Liability 

Liquidity 

Loss Ratio 

Mezzanine Tranche 

Mortgage-Backed 

Securities 

Notional Amount (Gross 

and Net) 

Paid-in Capital 
Appendix IV: Glossary of Terms 

Page 69 GAO-12-574 TARP: AIG Equity Investments 

A class of ownership in a corporation or stock that has characteristics of 

both common stock and debt. Preferred shareholders receive their 

dividends before common stockholders, but they generally do not have 

the voting rights available to common stockholders. 

A calculation of the accumulated earnings of a corporation minus cash 

dividends since inception. 

A proportionate decrease in the number of shares held by stockholders 

that a company generally institutes to increase the market price per share 

of its stock. In a 1-for-10 stock split stockholders would own 1 share for 

every 10 shares that they owned before the reverse split. 

The amount of required capital that an insurance company must maintain 

based on the inherent risks in the insurer’s operations. Authorized control 

level risk-based capital is the level at which an insurance commissioner 

can first take control of an insurance company. 

Secured debt is backed or secured by a pledge of collateral. 

The process of pooling debt obligations and dividing that pool into 

portions (called tranches) that can be sold as securities in the secondary 

market—a market in which investors purchase securities or assets from 

other investors. Financial institutions use securitization to transfer the 

credit risk of the assets they originate from their balance sheets to those 

of the investors who purchased the securities. 

Total assets minus total liabilities of a company, as found on a company’s 

balance sheet. Shareholders’ equity is also known as owner’s equity, net 

worth, or book value. The two sources for shareholders’ equity are money 

that originally was invested in the company, along with additional 

investments made thereafter, and retained earnings. 

A market in which supply exceeds demand resulting in a lowering of 

prices in that market. Also refers to a buyer’s market, as buyers hold 

much of the power in negotiating prices. 

Preferred Stock 

(Cumulative, 

Noncumulative, etc.) 

Retained Earnings 

Reverse Stock Split 

Risk-Based Capital 

(Insurance) 

Secured 

Securitization 

Shareholders’ Equity 

Soft Market 
Appendix IV: Glossary of Terms 

Page 70 GAO-12-574 TARP: AIG Equity Investments 

Minimum standard of financial health for an insurance company, in which 

assets exceed liabilities. In general, a solvent company is able to pay its 

debt obligations as they come due. 

A legal entity, such as a limited partnership that a company creates to 

carry out some specific financial purpose or activity. Special purpose 

vehicles can be used for purposes such as securitizing loans to help 

spread the credit and interest rate risk of their portfolios over a number of 

investors. 

The amount of a security or commodity owned by an investor or a dealer. 

A tranche is a portion or class of a security. A security may have several 

tranches, each with different risks and rates of return, among other 

differences. 

Previously issued shares of a company that the company has 

repurchased from investors. 

A profit or loss on an investment that has not been sold. That is, an 

unrealized profit or loss occurs when the current price of a security that 

still is owned by the holder is higher or lower than the price the holder 

paid for it. 

Unsecured debt is not backed by any pledge of collateral. 

An options contract on an underlying asset that is in the form of a 

transferable security. A warrant gives the holder the right to purchase a 

specified amount of the issuer’s securities in the future at a specific price. 

Solvency 

Special Purpose Vehicle 

Trading Position 

Tranche 

Treasury Stock 

Unrealized Gains and 

Losses 

Unsecured Debt 

Warrant 

(250624)
The Government Accountability Office, the audit, evaluation, and 

investigative arm of Congress, exists to support Congress in meeting its 

constitutional responsibilities and to help improve the performance and 

accountability of the federal government for the American people. GAO 

examines the use of public funds; evaluates federal programs and 

policies; and provides analyses, recommendations, and other assistance 

to help Congress make informed oversight, policy, and funding decisions. 

GAO’s commitment to good government is reflected in its core values of 

accountability, integrity, and reliability. 

The fastest and easiest way to obtain copies of GAO documents at no 

cost is through GAO’s website (www.gao.gov). Each weekday afternoon, 

GAO posts on its website newly released reports, testimony, and 

correspondence. To have GAO e-mail you a list of newly posted products, 

go to www.gao.gov and select “E-mail Updates.” 

The price of each GAO publication reflects GAO’s actual cost of 

production and distribution and depends on the number of pages in the 

publication and whether the publication is printed in color or black and 

white. Pricing and ordering information is posted on GAO’s website, 

http://www.gao.gov/ordering.htm. 

Place orders by calling (202) 512-6000, toll free (866) 801-7077, or 

TDD (202) 512-2537. 

Orders may be paid for using American Express, Discover Card, 

MasterCard, Visa, check, or money order. Call for additional information. 

Connect with GAO on Facebook, Flickr, Twitter, and YouTube. 

Subscribe to our RSS Feeds or E-mail Updates. Listen to our Podcasts. 

Visit GAO on the web at www.gao.gov. 

Contact: 

Website: www.gao.gov/fraudnet/fraudnet.htm 

E-mail: fraudnet@gao.gov

Automated answering system: (800) 424-5454 or (202) 512-7470 

Katherine Siggerud, Managing Director, siggerudk@gao.gov, (202) 512-

4400, U.S. Government Accountability Office, 441 G Street NW, Room 

7125, Washington, DC 20548 

Chuck Young, Managing Director, youngc1@gao.gov, (202) 512-4800 

U.S. Government Accountability Office, 441 G Street NW, Room 7149 

Washington, DC 20548 

GAO’s Mission 

Obtaining Copies of 

GAO Reports and 

Testimony 

Order by Phone 

Connect with GAO 

To Report Fraud, 

Waste, and Abuse in 

Federal Programs 

Congressional 

Relations 

Public Affairs 

Please Print on Recycled Paper.