AIG 2011 Annual Report Download - page 133

The following table presents credit valuation adjustment gains (losses) for the Direct Investment book (excluding
intercompany transactions):
Counterparty Credit AIG’s Own Credit
Valuation Adjustment Valuation Adjustment
(in millions) on Assets on Liabilities
Year Ended December 31, 2011
Bond trading securities $ (71) Notes and bonds payable $ 141
Loans and other assets 31 Hybrid financial instrument liabilities 147
Guaranteed Investment Agreements
(GIAs) 112
Other liabilities 20
Decrease in assets $ (40) Decrease in liabilities $ 420
Net pre-tax increase to Other income $ 380
Year Ended December 31, 2010
Bond trading securities $ 1,678 Notes and bonds payable $ (251)
Loans and other assets 40 Hybrid financial instrument liabilities (311)
GIAs (173)
Other liabilities (44)
Increase in assets $ 1,718 Increase in liabilities $ (779)
Net pre-tax increase to Other income $ 939
Year Ended December 31, 2009
Bond trading securities 2,095 Notes and bonds payable (163)
Loans and other assets (48) Hybrid financial instrument liabilities (83)
GIAs 172
Other liabilities (12)
Increase in assets $ 2,047 Increase in liabilities $ (86)
Net pre-tax increase to Other income $ 1,961
Change in Fair Value of the MetLife Securities Prior to Sale
AIG recognized a loss in 2011, representing the decline in the securities’ value, due to market conditions, from
December 31, 2010 through the date of their sale in the first quarter of 2011.
Change in Fair Value of AIA Securities
AIG recognized a $1.3 billion gain in 2011, a 12 percent increase in the value of AIG’s 33 percent interest in
AIA, which is recorded in Other invested assets and accounted for under the fair value method. In 2010, AIG
recognized a $638 million loss on its interest in AIA during the approximate two month holding period following
the initial public offering in late October 2010.
Change in Fair Value of ML III
The loss attributable to AIG’s interest in ML III for 2011 was due to significant spread widening and reduced
interest rates.
The gain of $1.8 billion on ML III for 2010 was attributable to the shortening of weighted average life by
1.34 years. Additionally, fair value for 2010 was positively affected by a decrease in projected credit losses in the
underlying collateral securities. During 2010, credit spreads tightened by 287 basis points.
AIG 2011 Form 10-K 119