AIG 2011 Annual Report Download - page 287

American International Group, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The following table presents the gross realized gains and gross realized losses from sales or redemptions of AIG’s
available for sale securities:
Years Ended December 31,
2011 2010 2009
Gross Gross Gross Gross Gross Gross
Realized Realized Realized Realized Realized Realized
(in millions) Gains Losses Gains Losses Gains Losses
Fixed maturities $ 2,042 $ 129 $ 2,138 $ 292 $ 1,497 $ 648
Equity securities 199 35 811 86 516 213
Total $ 2,241 $ 164 $ 2,949 $ 378 $ 2,013 $ 861
For the year ended December 31, 2011, 2010 and 2009 the aggregate fair value of available for sale securities
sold was $44.0 billion, $56.0 billion and $33.7 billion, respectively.
Evaluating Investments for Other-Than-Temporary Impairments
On April 1, 2009, AIG adopted prospectively an accounting standard addressing the evaluation of fixed maturity
securities for other-than-temporary impairments. These requirements have significantly altered AIG’s policies and
procedures for determining impairment charges recognized through earnings. The new standard requires a
company to recognize the credit component (a credit impairment) of an other-than-temporary impairment of a
fixed maturity security in earnings and the non-credit component in Accumulated other comprehensive income
(loss) when the company does not intend to sell the security or it is more likely than not that the company will
not be required to sell the security prior to recovery. The standard also changes the threshold for determining
when an other-than-temporary impairment has occurred on a fixed maturity security with respect to intent and
ability to hold the security until recovery and requires additional disclosures. A credit impairment, which is
recognized in earnings when it occurs, is the difference between the amortized cost of the fixed maturity security
and the estimated present value of cash flows expected to be collected (recovery value), as determined by
management. The difference between fair value and amortized cost that is not related to a credit impairment is
recognized as a separate component of Accumulated other comprehensive income (loss). AIG refers to both credit
impairments and impairments recognized as a result of intent to sell as ‘‘impairment charges.’’ The impairment
model for equity securities was not affected by the standard.
Impairment Policy – Effective April 1, 2009 and Thereafter
Fixed Maturity Securities
If AIG intends to sell a fixed maturity security or it is more likely than not that AIG will be required to sell a
fixed maturity security before recovery of its amortized cost basis and the fair value of the security is below
amortized cost, an other-than-temporary impairment has occurred and the amortized cost is written down to
current fair value, with a corresponding charge to earnings.
For all other fixed maturity securities for which a credit impairment has occurred, the amortized cost is written
down to the estimated recovery value with a corresponding charge to earnings. Changes in fair value compared to
recovery value, if any, is charged to unrealized appreciation (depreciation) of fixed maturity investments on which
other-than-temporary credit impairments were taken (a component of Accumulated other comprehensive income
(loss)).
When assessing AIG’s intent to sell a fixed maturity security, or whether it is more likely than not that AIG will
be required to sell a fixed maturity security before recovery of its amortized cost basis, management evaluates
relevant facts and circumstances including, but not limited to, decisions to reposition AIG’s investment portfolio,
sales of securities to meet cash flow needs and sales of securities to take advantage of favorable pricing.
AIG 2011 Form 10-K 273