AIG 2011 Annual Report Download - page 179

The following table presents AIG’s aggregate credit exposures to non-financial institutions in the United Kingdom
and Europe:
December 31, 2011 Fixed Maturity(a)(b)
(in millions) Secured Senior Total Derivatives Other(c) Total
Euro-zone countries:
Germany $ 16 $ 2,566 $ 2,582 $ 62 $ 1,167 $ 3,811
France 34 2,528 2,562 979 3,250 6,791
Netherlands 190 1,417 1,607 - 780 2,387
Spain 11 1,188 1,199 10 1,050 2,259
Italy 108 1,036 1,144 39 559 1,742
Ireland - 718 718 - 74 792
Belgium 2 590 592 - 193 785
Luxembourg 5 312 317 - 348 665
Other Euro-zone 18 290 308 - 469 777
Total Euro-zone $ 384 $ 10,645 $ 11,029 $ 1,090 $ 7,890 $ 20,009
Remainder of Europe:
United Kingdom 267 6,398 6,665 529 6,428 13,622
Switzerland 16 1,581 1,597 10 292 1,899
Jersey 8 298 306 - 13 319
Other remainder of Europe 135 434 569 - 584 1,153
Total remainder of Europe $ 426 $ 8,711 $ 9,137 $ 539 $ 7,317 $ 16,993
Total $ 810 $ 19,356 $ 20,166 $ 1,629 $ 15,207 $ 37,002
(a) Fixed maturity securities primarily includes available-for-sale securities, with $211 million in trading securities.
(b) United Kingdom/European exposure also consists of $345 million of subordinated debt, primarily in the United Kingdom and Switzerland; bank
loans of $95 million; and preferred equity securities of $91 million.
(c) Other primarily consists of insurance related products, including captive fronting programs ($8.1 billion), trade credit insurance ($3.8 billion)
and surety insurance ($2.3 billion).
Approximately 87 percent of fixed maturity securities in the United Kingdom and European non-financial
institutions were considered investment grade based on AIG’s internal ratings. Among non-financial institution
corporate exposures to Euro-zone countries, France represented the largest single country, amounting to
$6.8 billion of the $20 billion total, of which $2.6 billion were fixed maturity securities. Approximately two-thirds
of these French exposures were to issuers in the oil and gas, rail, utilities and telecommunications industries.
Euro-zone periphery non-financial institution corporate exposures ($5 billion) are heavily weighted towards large
multinational corporate or issuers in relatively stable industries, such as regulated utilities (26 percent),
telecommunications (18 percent) and oil & gas (7 percent).
AIG also had United Kingdom and European structured product exposures (largely residential mortgage-
backed, commercial mortgage-backed and asset-backed securities) totaling $8.6 billion at December 31, 2011.
United Kingdom structured products accounted for $4.2 billion or 48 percent of these exposures, while the
Netherlands and Germany comprised 23 percent and 7 percent, respectively. Structured product exposures to the
European peripheral countries accounted for 2 percent of the total. Approximately 90 percent of the United
Kingdom and European structured products exposures were rated A or better at December 31, 2011. See Critical
Accounting Estimates — Fair Value Measurements of Certain Financial Assets and Liabilities — Level 3 Assets
and Liabilities — Regulatory Capital Portfolio for a discussion of European related regulatory capital transactions.
In addition, AIG had commercial real estate-related net equity investments in Europe totaling $647 million and
related unfunded commitments of $165 million. Moreover, ILFC’s fleet includes aircraft on operating leases to
U.K. and European airlines with a net book value of approximately $13.5 billion, of which approximately
$3.1 billion or 23 percent are aircraft on lease to carriers based in the five Euro-zone periphery countries.
AIG actively monitors its European credit exposures, especially those exposures to issuers in the European
periphery, and uses various stress assumptions to identify issuers and securities warranting review by senior
management and to determine whether mitigating actions should be taken. Mitigating actions in these areas to date
have largely included non-renewal of maturing exposures and sales and tender of securities. To date, credit default
protection has not been actively used. The financial condition of issuers is periodically evaluated, and internal risk
ratings are adjusted as circumstances warrant. The result of these continuing reviews has led AIG to believe that its
combined credit risk exposures to sovereign governments, financial institutions and non-financial corporations in the
Euro-zone are manageable risks given the type and size of exposure and the credit quality and size of the issuers.
AIG 2011 Form 10-K 165