AIG 2011 Annual Report Download - page 307

American International Group, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The following table presents the net notional amount, fair value of derivative (asset) liability and unrealized
market valuation gain (loss) of the AIGFP super senior credit default swap portfolio, including credit default
swaps written on mezzanine tranches of certain regulatory capital relief transactions, by asset class:
Unrealized
Market
Fair Value of Valuation Gain
Derivative (Asset) (Loss)
Net Notional Amount Liability at Years Ended
December 31, December 31, December 31,
(in millions) 2011(a) 2010(a) 2011(b)(c) 2010(b)(c) 2011(c) 2010(c)
Regulatory Capital:
Corporate loans $ 1,830 $ 5,193 $-$-$-$-
Prime residential mortgages(d) 3,653 31,613 -(190) 653
Other 887 1,263 917 84
Total 6,370 38,069 9(173) 14 57
Arbitrage:
Multi-sector CDOs(e) 5,476 6,689 3,077 3,484 249 663
Corporate debt/CLOs(f) 11,784 12,269 127 171 44 (67)
Total 17,260 18,958 3,204 3,655 293 596
Mezzanine tranches(d)(g) 989 2,823 10 198 32 (55)
Total $ 24,619 $ 59,850 $ 3,223 $ 3,680 $ 339 $ 598
(a) Net notional amounts presented are net of all structural subordination below the covered tranches.
(b) Fair value amounts are shown before the effects of counterparty netting adjustments and offsetting cash collateral.
(c) Includes credit valuation adjustment gains (losses) of $26 million and ($133) million in the years ended December 31, 2011 and 2010,
respectively, representing the effect of changes in AIG’s credit spreads on the valuation of the derivatives liabilities.
(d) During 2011, AIGFP terminated two super senior prime residential mortgage transactions, with a combined net notional amount of
$24.1 billion, that had previously been the subject of a collateral dispute. In addition, AIGFP terminated all of the related mezzanine tranches
and hedge transactions related to those mezzanine tranches, with a combined net notional amount of $2.2 billion. The transactions were
terminated at values that approximated their collective fair values at the time of termination.
(e) During 2011, AIGFP liquidated one multi-sector super senior CDS transaction with a net notional amount of $188 million. The primary
underlying collateral components, which consisted of individual ABS CDS transactions, were sold in an auction to counterparties, including
AIGFP, at their approximate fair value at the time of the liquidation. AIGFP was the winning bidder on approximately $107 million of
individual ABS CDS transactions, which are reported in written single name credit default swaps as of December 31, 2011. During 2011,
AIGFP also paid $37 million to its counterparties with respect to multi-sector CDOs. Multi-sector CDOs also include $4.6 billion and
$5.5 billion in net notional amount of credit default swaps written with cash settlement provisions at December 31, 2011 and December 31,
2010, respectively.
(f) Corporate debt/CLOs include $1.2 billion and $1.3 billion in net notional amount of credit default swaps written on the super senior tranches
of CLOs at December 31, 2011 and December 31, 2010, respectively.
(g) Net of offsetting purchased CDS of $1.4 billion in net notional amount at December 31, 2010. There were no offsetting purchased CDSs at
December 31, 2011.
The expected weighted average maturity of AIGFP’s super senior credit derivative portfolios as of
December 31, 2011 was 0.72 years for the regulatory capital corporate loan portfolio, 0.41 years for the regulatory
capital prime residential mortgage portfolio, 3.78 years for the regulatory capital other portfolio, 6.42 years for the
multi-sector CDO arbitrage portfolio and 4.18 years for the corporate debt/CLO portfolio.
AIG 2011 Form 10-K 293