AIG 2011 Annual Report Download - page 268

American International Group, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2010 Counterparty Cash
(in millions) Level 1 Level 2 Level 3 Netting(a) Collateral(b) Total
Liabilities:
Policyholder contract deposits $ - $ - $ 445 $ - $ - $ 445
Derivative liabilities:
Interest rate contracts - 9,387 325 - - 9,712
Foreign exchange contracts 14 324 - - - 338
Equity contracts - 286 43 - - 329
Commodity contracts - 68 - - - 68
Credit contracts(e) - 5 4,175 - - 4,180
Other contracts - 52 256 - - 308
Counterparty netting and cash collateral - - - (6,298) (2,902) (9,200)
Total derivative liabilities 14 10,122 4,799 (6,298) (2,902) 5,735
Other long-term debt(f) - 11,161 982 - - 12,143
Other liabilities(g) 391 2,228 - - - 2,619
Total $ 405 $ 23,511 $ 6,226 $ (6,298) $ (2,902) $ 20,942
(a) Represents netting of derivative exposures covered by a qualifying master netting agreement.
(b) Represents cash collateral posted and received. Securities collateral posted for derivative transactions that is reflected in Fixed maturity securities
in the Consolidated Balance Sheet, and collateral received, not reflected in the Consolidated Balance Sheet, were $1.8 billion and $100 million,
respectively, at December 31, 2011 and $1.4 billion and $109 million, respectively, at December 31, 2010.
(c) Included in Level 1 are $12.4 billion and $11.1 billion at December 31, 2011 and December 31, 2010, respectively, of AIA shares publicly
traded on the Hong Kong Stock Exchange. Approximately 3 percent and 5 percent of the fair value of the assets recorded as Level 3 relates to
various private equity, real estate, hedge fund and fund-of-funds investments that are consolidated by AIG at December 31, 2011 and
December 31, 2010, respectively. AIG’s ownership in these funds represented 57.3 percent, or $0.7 billion, of Level 3 assets at December 31,
2011 and 68.6 percent, or $1.3 billion, of Level 3 assets at December 31, 2010.
(d) Included in Level 2 is the fair value of $0.1 billion and $1.6 billion at December 31, 2011 and December 31, 2010, respectively, of securities
purchased under agreements to resell.
(e) Included in Level 3 is the fair value derivative liability of $3.2 billion and $3.7 billion at December 31, 2011 and December 31, 2010,
respectively, on the AIGFP super senior credit default swap portfolio.
(f) Includes GIAs, notes, bonds, loans and mortgages payable.
(g) Included in Level 2 is the fair value of $0.6 billion, $144 million and $6 million at December 31, 2011 of securities sold under agreements to
repurchase, securities and spot commodities sold but not yet purchased and trust deposits and deposits due to banks and other depositors,
respectively. Included in Level 2 is the fair value of $2.1 billion, $94 million and $15 million at December 31, 2010 of securities sold under
agreements to repurchase, securities and spot commodities sold but not yet purchased and trust deposits and deposits due to banks and other
depositors, respectively.
AIG’s policy is to record transfers of assets and liabilities between Level 1 and Level 2 at their fair values as of
the end of each reporting period, consistent with the date of the determination of fair value. Assets are
transferred out of Level 1 when they are no longer transacted with sufficient frequency and volume in an active
market. During the year ended December 31, 2011, AIG transferred certain assets from Level 1 to Level 2,
including approximately $1.2 billion of investments in securities issued by the U.S. government that are no longer
actively traded and approximately $1.2 billion of investments in securities issued by Non-U.S. governments.
Conversely, assets are transferred from Level 2 to Level 1 when transaction volume and frequency are indicative
of an active market. AIG had no significant transfers from Level 2 to Level 1 during the twelve months ended
December 31, 2011.
254 AIG 2011 Form 10-K
TRANSFERS OF LEVEL 1 AND LEVEL 2 ASSETS AND LIABILITIES