AIG 2013 Annual Report Download - page 293

The following table presents the fair values of derivative assets and liabilities in the Consolidated Balance
Sheets:
Global Capital Markets derivatives:
AIG Financial Products $ 59,854 $ 4,725 $ 66,717 $ 5,506
AIG Markets 14,028 1,308 18,774 1,818
Total Global Capital Markets derivatives 73,882 6,033 85,491 7,324
Non-Global Capital Markets derivatives(a) 24,040 1,014 32,139 2,436
Total derivatives, gross $ 97,922 7,047 $ 117,630 9,760
Counterparty netting(b) (2,467) (2,467)
Cash collateral(c) (909) (1,976)
Total derivatives, net 3,671 5,317
Less: Bifurcated embedded derivatives – 1,256
Total derivatives on consolidated balance sheet $ 3,671 $ 4,061
(a) Represents derivatives used to hedge the foreign currency and interest rate risk associated with insurance as well as embedded derivatives included in
insurance contracts. Assets and liabilities include bifurcated embedded derivatives, which are recorded in Policyholder contract deposits.
(b) Represents netting of derivative exposures covered by a qualifying master netting agreement.
(c) Represents cash collateral posted and received that is eligible for netting.
We engage in derivative transactions that are not subject to a clearing requirement directly with unaffiliated third
parties, in most cases, under International Swaps and Derivatives Association, Inc. (ISDA) agreements. Many of the
ISDA agreements also include Credit Support Annex (CSA) provisions, which generally provide for collateral postings
at various ratings and threshold levels. We attempt to reduce our risk with certain counterparties by entering into
agreements that enable collateral to be obtained from a counterparty on an upfront or contingent basis. We minimize
the risk that counterparties to transactions might be unable to fulfill their contractual obligations by monitoring
counterparty credit exposure and collateral value and generally requiring additional collateral to be posted upon the
occurrence of certain events or circumstances. In addition, certain derivative transactions have provisions that require
collateral to be posted upon a downgrade of our long-term debt ratings or give the counterparty the right to terminate
the transaction. In the case of some of the derivative transactions, upon a downgrade of our long-term debt ratings,
as an alternative to posting collateral and subject to certain conditions, we may assign the transaction to an obligor
with higher debt ratings or arrange for a substitute guarantee of our obligations by an obligor with higher debt ratings
or take other similar action. The actual amount of collateral required to be posted to counterparties in the event of
such downgrades, or the aggregate amount of payments that we could be required to make, depends on market
conditions, the fair value of outstanding affected transactions and other factors prevailing at and after the time of the
downgrade.
Collateral posted by us to third parties for derivative transactions was $3.2 billion and $4.5 billion at December 31,
2013 and December 31, 2012, respectively. In the case of collateral posted under derivative transactions that are not
subject to clearing, this collateral can generally be repledged or resold by the counterparties. Collateral provided to
us from third parties for derivative transactions was $1 billion and $1.4 billion at December 31, 2013 and
December 31, 2012, respectively. We generally can repledge or resell this collateral to the extent it is posted under
derivative transactions that are not subject to clearing.
We have elected to present all derivative receivables and derivative payables, and the related cash collateral
received and paid, on a net basis on our Condensed Consolidated Balance Sheets when a legally enforceable ISDA
Master Agreement exists between us and our derivative counterparty. An ISDA Master Agreement is an agreement
between two counterparties, which may have multiple derivative transactions with each other governed by such
agreement, and such ISDA Master Agreement generally provides for the net settlement of all or a specified group of
these derivative transactions, as well as cash collateral, through a single payment, in a single currency, in the event
Collateral
Offsetting
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AIG 2013 Form 10-K 275
ITEM 8 / NOTE 11. DERIVATIVES AND HEDGE ACCOUNTING
December 31, 2013 December 31, 2012
Derivative Assets Derivative Liabilities Derivative Assets Derivative Liabilities
Notional Fair Notional Fair Notional Fair Notional Fair
(in millions) Amount Value Amount Value Amount Value Amount Value
$ 41,942 $ 2,567 $ 52,679 $ 3,506
12,531 964 23,716 1,506
54,473 3,531 76,395 5,012
60,021 795 15,668 1,202
$ 114,494 4,326 $ 92,063 6,214
(1,734) (1,734)
(820) (1,484)
1,772 2,996
107 485
$ 1,665 $ 2,511
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