AIG 2006 Annual Report Download - page 198

American International Group, Inc. and Subsidiaries
Notes to Consolidated Financial Statements Continued
13. Fair Value of Financial Instruments
Continued
The carrying values and fair values of AIG’s financial instruments at December 31, 2006 and 2005 were as follows:
2006 2005
Carr ying Fair Carrying Fair
(in millions) Value(a) Value Value(a) Value
Assets:
Fixed maturities $417,865 $418,582 $385,680 $386,199
Equity securities 30,222 30,222 23,588 23,588
Mortgage loans on real estate, policy and collateral loans 28,418 28,655 24,909 26,352
Securities available for sale 47,205 47,205 37,511 37,511
Trading securities 5,031 5,031 6,499 6,499
Spot commodities 220 220 92 96
Unrealized gain on swaps, options and forward transactions 19,252 19,252 18,695 18,695
Trading assets 2,468 2,468 1,204 1,204
Securities purchased under agreements to resell 33,702 33,702 14,547 14,547
Finance receivables, net of allowance 29,573 26,712 27,995 27,528
Securities lending collateral 69,306 69,306 59,471 59,471
Other invested assets(b) 40,330 40,637 29,186 29,408
Short-term investments 25,249 25,249 15,342 15,342
Cash 1,590 1,590 1,897 1,897
Liabilities:
Policyholders’ contract deposits 244,658 239,964 227,027 223,244
Borrowings under obligations of guaranteed investment agreements 20,664 20,684 20,811 22,373
Securities sold under agreements to repurchase 22,710 22,710 11,047 11,047
Trading liabilities 3,141 3,141 2,546 2,546
Hybrid financial instrument liabilities 8,856 8,856 ——
Securities and spot commodities sold but not yet purchased 4,076 4,076 5,975 5,975
Unrealized loss on swaps, options and forward transactions 11,401 11,401 12,740 12,740
Trust deposits and deposits due to banks and other depositors 5,249 5,261 4,877 5,032
Commercial paper 13,029 13,029 9,208 9,208
Notes, bonds, loans and mortgages payable 104,690 106,494 78,439 79,518
Securities lending payable 70,198 70,198 60,409 60,409
(a) The carrying value of all other financial instruments approximates fair value.
(b) Excludes aircraft asset investments held by non-Financial Services subsidiaries.
At December 31, 2006, AIG’s non-employee directors received
14. Stock Compensation Plans
stock-based compensation in two forms, options granted pursuant
At December 31, 2006, AIG employees could be awarded to the 1999 Plan and grants of AIG common stock with deliver y
compensation pursuant to six different stock-based compensation deferred until retirement from the Board, pursuant to the AIG
plan arrangements: (i) AIG 1999 Stock Option Plan, as amended Director Stock Plan, which was approved by the shareholders at
(1999 Plan); (ii) AIG 1996 Employee Stock Purchase Plan, as the 2004 Annual Meeting of Shareholders.
amended (1996 Plan); (iii) AIG 2002 Stock Incentive Plan, as From January 1, 2003 through December 31, 2005, AIG
amended (2002 Plan) under which AIG has issued time-vested accounted for share-based payment transactions with employees
restricted stock units (RSUs) and performance restricted stock under FAS No. 123, ‘‘Accounting for Stock-Based Compensation.’’
units (performance RSUs); (iv) SICO’s Deferred Compensation Share-based employee compensation expense from option awards
Profit Participation Plans (SICO Plans); (v) AIG’s 2005-2006 was not recognized in the statement of income in prior periods.
Deferred Compensation Profit Participation Plan (AIG DCPPP) and Effective January 1, 2006, AIG adopted the fair value recognition
(vi) the AIG Partners Plan. The AIG DCPPP was adopted as a provisions of FAS 123R. FAS 123R requires that companies use a
replacement for the SICO Plans for the 2005-2006 period, and fair value method to value share-based payments and recognize
the AIG Partners Plan replaces the AIG DCPPP. Stock-based the related compensation expense in net earnings. AIG adopted
compensation earned under the AIG DCPPP and the AIG Partners FAS 123R using the modified prospective application method, and
Plan is issued as awards under the 2002 Plan. AIG currently accordingly, financial statement amounts for the prior periods
settles share option exercises and other share awards to presented have not been restated to reflect the fair value method
participants through the issuance of shares it has previously of expensing share-based compensation under FAS 123R. The
acquired and holds in its treasury account, except for share modified prospective application method provides for the recogni-
awards made by SICO, which are settled by SICO. tion of the fair value with respect to share-based compensation
148 AIG 2006 Form 10-K