AIG 2011 Annual Report Download - page 275

American International Group, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2011 December 31, 2010
Fair Value Fair Value
Using Net Unfunded Using Net Unfunded
(in millions) Investment Category Includes Asset Value Commitments Asset Value Commitments
Hedge funds:
Event-driven Securities of companies undergoing
material structural changes, including
mergers, acquisitions and other
reorganizations 774 2 1,310 2
Long-short Securities that the manager believes are
undervalued, with corresponding short
positions to hedge market risk 927 - 1,038 -
Relative value Funds that seek to benefit from market
inefficiencies and value discrepancies
between related investments 52 - 230 -
Distressed Securities of companies that are already in
default, under bankruptcy protection or
troubled 272 10 369 20
Other Non-U.S. companies, futures and
commodities, macro and multi-strategy and
industry-focused strategies 748 - 708 -
Total hedge funds 2,773 12 3,655 22
Total $ 6,873 $ 1,193 $ 7,920*$ 1,496
* Includes investments of entities classified as held for sale of $415 million at December 31, 2010.
At December 31, 2011, private equity fund investments included above are not redeemable during the lives of
the funds and have expected remaining lives that extend in some cases more than 10 years. At that date,
32 percent of the total above had expected remaining lives of less than three years, 55 percent between three and
seven years and 13 percent between seven and 10 years. Expected lives are based upon legal maturity, which can
be extended at the fund manager’s discretion, typically in one-year increments.
At December 31, 2011, hedge fund investments included above are redeemable monthly (9 percent), quarterly
(53 percent), semi-annually (10 percent) and annually (28 percent), with redemption notices ranging from 1 day to
180 days. More than 79 percent require redemption notices of less than 90 days. Investments representing
approximately 47 percent of the value of the hedge fund investments cannot be redeemed, either in whole or in
part, because the investments include various restrictions. The majority of these restrictions were put in place prior
to 2009 and do not have stated end dates. The restrictions that have pre-defined end dates are generally expected
to be lifted by the end of 2012. The partial restrictions relate to certain hedge funds that hold at least one
investment that the fund manager deems to be illiquid. In order to treat investors fairly and to accommodate
subsequent subscription and redemption requests, the fund manager isolates these illiquid assets from the rest of
the fund until the assets become liquid.
AIG also measures the fair value of certain assets on a non-recurring basis, generally quarterly, annually or
when events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable.
These assets include cost and equity-method investments, life settlement contracts, flight equipment primarily
under operating leases, collateral securing foreclosed loans and real estate and other fixed assets, goodwill and
AIG 2011 Form 10-K 261
FAIR VALUE MEASUREMENTS ON A NON-RECURRING BASIS