AIG 2008 Annual Report Download - page 165

hedge, private equity and affordable housing funds. The MIP sold credit protection by issuing predominantly single-
name investment grade corporate credit default swaps with the intent to earn spread income on credit exposure in an
unfunded and leveraged form.
AIG Global Real Estate maintains a proprietary investment portfolio of direct real estate investments and
investments in real estate based joint ventures and partnerships. AIG Global Real Estate invests primarily in
strategic and opportunistic development projects domiciled in the U.S., Europe and Asia. AIG Investments holds
investments in various direct private equity and private equity funds that were originally acquired as warehouse
investments targeted for future managed investment products but which are now considered proprietary
investments.
Available for Sale and Held to Maturity Investments
The amortized cost or cost and fair value of AIG’s available for sale and held to maturity securities were
as follows:
Amortized
Cost or
Cost
Gross
Unrealized
Gains
Gross
Unrealized
Losses
Fair
Value
Amortized
Cost or
Cost
Gross
Unrealized
Gains
Gross
Unrealized
Losses
Fair
Value
December 31, 2008 December 31, 2007
(In millions)
Available for sale(a):
U.S. government and government
sponsored entities . . . . . . . . . $ 4,433 $ 331 $ (59) $ 4,705 $ 7,956 $ 333 $ (37) $ 8,252
Obligations of states,
municipalities and political
subdivisions . . . . . . . . . . . . . 62,718 1,150 (2,611) 61,257 46,087 927 (160) 46,854
Non-U.S. governments . . . . . . . 62,176 6,560 (1,199) 67,537 67,023 3,920 (743) 70,200
Corporate debt . . . . . . . . . . . . . 194,481 4,661 (13,523)(b) 185,619 239,822 6,215 (4,518) 241,519
Mortgage-backed, asset-backed
and collateralized . . . . . . . . . 53,255 1,004 (6,933) 47,326 140,982 1,221 (7,703) 134,500
Total bonds. . . . . . . . . . . . . . . . . $377,063 $13,706 $(24,325) $366,444 $501,870 $12,616 $(13,161) $501,325
Equity securities . . . . . . . . . . . . . 8,381 1,146 (719) 8,808 15,188 5,547 (463) 20,272
Total . . . . . . . . . . . . . . . . . . . . . $385,444 $14,852 $(25,044) $375,252 $517,058 $18,163 $(13,624) $521,597
Held to maturity(c):........... $—$—$—$—$ 21,581 $ 609 $ (33) $ 22,157
(a) At December 31, 2007, included AIGFP available for sale securities with a fair value of $39.3 billion, for
which AIGFP elected the fair value option effective January 1, 2008, consisting primarily of corporate debt,
mortgage-backed, asset-backed and CDO securities. At December 31, 2008, the fair value of these securities
was $26.1 billion. At December 31, 2008 and December 31, 2007, fixed maturities held by AIG that were below
investment grade or not rated totaled $19.4 billion and $27.0 billion, respectively. During the third quarter of
2008, AIG changed its intent to hold until maturity certain tax-exempt municipal securities held by its
insurance subsidiaries. As a result, all securities previously classified as held to maturity are now classified in
the available for sale category. See Note 1 to the Consolidated Financial Statements for additional infor-
mation. Fixed maturity securities reported on the balance sheet include $442 million of short-term investments
included in Securities lending invested collateral.
(b) Financial institutions represent approximately 57 percent of the total gross unrealized losses at December 31,
2008.
(c) Represents obligations of states, municipalities and political subdivisions. In 2008, AIG changed its intent to
hold such securities to maturity.
At December 31, 2008, approximately 54 percent of the fixed maturity securities were in domestic entities.
Approximately 28 percent of such domestic securities were rated AAA by one or more of the principal rating
agencies. Approximately eight percent were below investment grade or not rated. AIG’s investment decision
process relies primarily on internally generated fundamental analysis and internal risk ratings. Third-party rating
AIG 2008 Form 10-K 159
American International Group, Inc., and Subsidiaries