AIG 2011 Annual Report Download - page 278

American International Group, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The following table presents the gains or losses recorded related to the eligible instruments for which AIG elected
the fair value option:
Gain (Loss)
Years Ended December 31,
(in millions) 2011 2010 2009
Assets:
Mortgage and other loans receivable $11$ 53 $ (6)
Bonds and equity securities 1,273 2,060 2,513
Trading – ML II interest 42 513 (25)
Trading – ML III interest (646) 1,792 419
Securities purchased under agreements to resell 34 1(8)
Retained interest in AIA 1,289 (638) -
Short-term investments and other invested assets and Other assets 1(40) (32)
Liabilities:
Policyholder contract deposits -(320) (1,121)
Securities sold under agreements to repurchase (62) 14 (73)
Securities and spot commodities sold but not yet purchased (4) (21) (148)
Other long-term debt(a) (966) (1,595) 2,482
Other liabilities (1) (1) (173)
Total gain(b) $ 971 $ 1,818 $ 3,828
(a) Includes GIAs, notes, bonds, loans and mortgages payable.
(b) Excludes discontinued operations. For instruments required to be carried at fair value, AIG recognized gains of $1.3 billion, $4.9 billion and
$3.8 billion for the years ended December 31, 2011, 2010 and 2009, respectively, that were primarily due to changes in the fair value of
derivatives, trading securities and certain other invested assets for which the fair value option was not elected.
Interest income and expense and dividend income on assets and liabilities elected under the fair value option
are recognized and classified in the Consolidated Statement of Operations depending on the nature of the
instrument and related market conventions. For Direct Investment book-related activity, interest, dividend income
and interest expense are included in Other income. Otherwise, interest and dividend income are included in Net
investment income in the Consolidated Statement of Operations. Gains and losses on AIG’s Maiden Lane
Interests are recorded in Net investment income. See Note 2(a) herein for additional information about AIG’s
policies for recognition, measurement, and disclosure of interest and dividend income and interest expense.
During 2011, 2010 and 2009, AIG recognized gains of $420 million and losses of $779 million and $86 million,
respectively, attributable to the observable effect of changes in credit spreads on AIG’s own liabilities for which
the fair value option was elected. AIG calculates the effect of these credit spread changes using discounted cash
flow techniques that incorporate current market interest rates, AIG’s observable credit spreads on these liabilities
and other factors that mitigate the risk of nonperformance such as cash collateral posted.
The following table presents the difference between fair values and the aggregate contractual principal amounts
of mortgage and other loans receivable and long-term borrowings for which the fair value option was elected:
December 31, 2011 December 31, 2010
Outstanding Outstanding
(in millions) Fair Value Principal Amount Difference Fair Value Principal Amount Difference
Assets:
Mortgage and other loans
receivable $ 107 $ 150 $ (43) $ 143 $ 203 $ (60)
Liabilities:
Other long-term debt*$ 10,766 $ 8,624 $ 2,142 $ 12,143 $ 10,508 $ 1,635
* Includes GIAs, notes, bonds, loans and mortgages payable.
264 AIG 2011 Form 10-K