AIG 2008 Annual Report Download - page 167

Investments in RMBS, CMBS, CDOs and ABS
The amortized cost, gross unrealized gains (losses) and fair value of AIG’s investments in RMBS, CMBS,
CDOs and ABS were as follows:
Amortized
Cost
Gross
Unrealized
Gains
Gross
Unrealized
Losses
Fair
Value
Amortized
Cost
Gross
Unrealized
Gains
Gross
Unrealized
Losses
Fair
Value
2008 2007
At December 31,
(In millions)
Bonds — available for sale:
AIG, excluding AIGFP:
RMBS ................. $32,092 $ 645 $(2,985) $29,752 $ 89,851 $ 433 $(5,504) $ 84,780
CMBS ................. 14,205 126 (3,105) 11,226 23,918 237 (1,156) 22,999
CDO/ABS . ............. 6,741 233 (843) 6,131 10,844 196 (593) 10,447
Subtotal, excluding
AIGFP.................. 53,038 1,004 (6,933) 47,109 124,613 866 (7,253) 118,226
AIGFP* ................. 217 —— 217 16,369 355 (450) 16,274
Total . .................. $53,255 $1,004 $(6,933) $47,326 $140,982 $1,221 $(7,703) $134,500
*The December 31, 2007 amounts represent total AIGFP investments in mortgage-backed, asset-backed and
collateralized securities for which AIGFP has elected the fair value option effective January 1, 2008. At
December 31, 2008, the fair value of these securities was $12.4 billion. The December 31, 2008 amounts
represent securities for which AIGFP has not elected the fair value option.
Investments in RMBS
The amortized cost, gross unrealized gains (losses) and estimated fair value of AIG’s investments in
RMBS securities, other than those of AIGFP, were as follows:
Amortized
Cost
Gross
Unrealized
Gains
Gross
Unrealized
Losses
Fair
Value
Percent
of Total
Amortized
Cost
Gross
Unrealized
Gains
Gross
Unrealized
Losses
Fair
Value
Percent
of Total
2008 2007
At December 31,
(In millions)
RMBS:
U.S. agencies . . . ........ $12,793 $537 $ (22) $13,308 45% $14,575 $320 $ (70) $14,825 17%
Prime non-agency(a) ....... 12,744 41 (1,984) 10,801 36 21,552 72 (550) 21,074 25
Alt-A ................ 4,927 25 (743) 4,209 14 25,349 17 (1,620) 23,746 28
Other housing-related(b) ..... 410 23 (54) 379 1 4,301 2 (357) 3,946 5
Subprime . . ............ 1,218 19 (182) 1,055 4 24,074 22 (2,907) 21,189 25
Total . ................. $32,092 $645 $(2,985) $29,752 100% $89,851 $433 $(5,504) $84,780 100%
(a) Includes foreign and jumbo RMBS-related securities.
(b) Primarily wrapped second-lien.
AIG’s operations, other than AIGFP, held investments in RMBS with an estimated fair value of $29.8 billion at
December 31, 2008, or approximately 5 percent of AIG’s total invested assets. On December 12, 2008, RMBS with
an estimated fair value of $20.8 billion were sold to ML II in connection with AIG’s termination of the
U.S. securities lending program. In addition, AIG’s insurance operations held investments with a fair value
totaling $6.1 billion in CDOs/ABS, of which $14 million included some level of subprime exposure. AIG’s RMBS
investments are predominantly in highly-rated tranches that contain substantial protection features through
collateral subordination. At December 31, 2008, approximately 82 percent of these investments were rated
AAA, and approximately 9 percent were rated AA by one or more of the principal rating agencies. AIG’s
investments rated BBB or below totaled $1.8 billion, or less than 0.28 percent of AIG’s total invested assets at
December 31, 2008. As of February 19, 2009, $5.3 billion of AIG’s RMBS portfolio had been downgraded as a
result of rating agency actions since January 1, 2007, and $130 million of such investments had been upgraded. Of
AIG 2008 Form 10-K 161
American International Group, Inc., and Subsidiaries