AIG 2015 Annual Report Download - page 116

ITEM 7 / INVESTMENTS
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116
NAIC Designations of Fixed Maturity Securities
The Securities Valuation Office (SVO) of the National Association of Insurance Companies (NAIC) evaluates the investments
of U.S. insurers for statutory reporting purposes and assigns fixed maturity securities to one of six categories called ‘NAIC
Designations.’ In general, NAIC Designations of ‘1’ highest quality, or ‘2’ high quality, include fixed maturity securities
considered investment grade, while NAIC Designations of ‘3’ through ‘6’ generally include fixed maturity securities referred to
as below investment grade. The NAIC has adopted revised rating methodologies for certain structured securities, including
non-agency RMBS and CMBS, which are intended to enable a more precise assessment of the value of such structured
securities and increase the accuracy in assessing expected losses to better determine the appropriate capital requirement for
such structured securities. These methodologies result in an improved NAIC Designation for such securities compared to the
rating typically assigned by the three major rating agencies. The following tables summarize the ratings distribution of Life
Insurance Companies fixed maturity security portfolio by NAIC Designation, and the distribution by composite AIG credit rating,
which is generally based on ratings of the three major rating agencies. See Investments – Credit Ratings herein for a full
description of the composite AIG credit ratings.
The following table presents the fixed maturity security portfolio of Life Insurance Companies categorized by NAIC
Designation, at fair value:
December 31, 2015
(in millions)
Total
Total Below
Investment Investment
NAIC Designation 1 2 Grade 3 4 5 6Grade Total
Other fixed maturity securities $ 44,714 $58,029 $102,743 $4,801 $2,739 $ 413 $ 133 $8,086 $110,829
Mortgage-backed, asset-backed and collateralized 42,411 2,091 44,502 239 181 29 471 920 45,422
Tot a l * $ 87,125 $60,120 $147,245 $5,040 $2,920 $ 442 $ 604 $9,006 $156,251
* Excludes $4.5 billion of fixed maturity securities for which no NAIC Designation is available because they are not held in legal entities within Life Insurance
Companies that require a statutory filing.
The following table presents the fixed maturity security portfolio of Life Insurance Companies categorized by
composite AIG credit rating, at fair value:
December 31, 2015
(in millions)
Total
Total Below
Investment CCC and Investment
Composite AIG Credit Rating AAA/AA/A BBB Grade BB B Lower Grade Total
Other fixed maturity securities $ 44,758 $ 58,156 $ 102,914 $ 4,692 $ 2,808 $ 415 $ 7,915 $ 110,829
Mortgage-backed, asset-backed and collateralized 26,312 3,352 29,664 1,266 1,033 13,459 15,758 45,422
Tot a l * $ 71,070 $ 61,508 $ 132,578 $ 5,958 $ 3,841 $ 13,874 $ 23,673 $ 156,251
* Excludes $4.5 billion of fixed maturity securities for which no NAIC Designation is available because they are not held in legal entities within Life Insurance
Companies that require a statutory filing.
Credit Ratings
At December 31, 2015, approximately 90 percent of our fixed maturity securities were held by our domestic entities.
Approximately 16 percent of such securities were rated AAA by one or more of the principal rating agencies, and
approximately 17 percent were rated below investment grade or not rated. Our investment decision process relies primarily on
internally generated fundamental analysis and internal risk ratings. Third-party rating services’ ratings and opinions provide
one source of independent perspective for consideration in the internal analysis.