AIG 2009 Annual Report Download - page 283

American International Group, Inc., and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The following table presents the effect of AIG’s derivative instruments in fair value hedging relationships on the
Consolidated Statement of Income (Loss):
Year Ended December 31,
(in millions) 2009
Interest rate contracts(a)(b)(c):
Gain (Loss) Recognized in Earnings on Derivative $ (240)
Gain (Loss) Recognized in Earnings on Hedged Item 343
Gain (Loss) Recognized in Earnings for Ineffective Portion and Amount Excluded from Effectiveness Testing 87
(a) Gains and losses recognized in earnings on derivatives and hedged items are recorded in Interest expense. Gains and losses recognized in earnings on
derivatives for the ineffective portion and amounts excluded from effectiveness testing are recorded in Net realized capital losses and Other income,
respectively.
(b) Includes $95 million for 2009 related to the ineffective portion and $(8) million for 2009 for amounts excluded from effectiveness testing.
(c) During 2008, AIG recognized a loss related to the ineffective portion of these hedges of $61 million, and a gain of $17 million related to amount
excluded from effectiveness testing.
The following table presents the effect of AIG’s derivative instruments in cash flow hedging relationships on the
Consolidated Statement of Income (Loss):
Year Ended December 31,
(in millions) 2009
Interest rate contracts(a)(b):
Gain (Loss) Recognized in OCI on Derivatives and Hedge Items $ 91
Gain (Loss) Reclassified from Accumulated OCI into Earnings(c) (4)
Gain (Loss) Recognized in Earnings on Derivatives for Ineffective Portion 5
(a) Gains and losses reclassified from Accumulated other comprehensive loss are recorded in Other income. Gains or losses recognized in earnings on
derivatives for the ineffective portion are recorded in Net realized capital losses.
(b) During 2008, AIG recognized a loss related to the ineffective portion these hedges of $13 million. In addition, all components of the derivative’s gains
and losses were included in the assessment of hedge effectiveness.
(c) The effective portion of the change in fair value of a derivative qualifying as a cash flow hedge is recorded in Accumulated other comprehensive loss
until earnings are affected by the variability of cash flows in the hedged item. At December 31, 2009, $74 million of the deferred net loss in
Accumulated other comprehensive loss is expected to be recognized in earnings during the next 12 months.
Derivatives Not Designated as Hedging Instruments
The following table presents the effect of AIG’s derivative instruments not designated as hedging instruments on the
Consolidated Statement of Income (Loss):
Year Ended December 31, 2009 Gains (Losses)
(in millions) Recognized in Earnings(a)
Interest rate contracts(b) $ 907
Foreign exchange contracts (681)
Equity contracts (863)
Commodity contracts (703)
Credit contracts 2,093
Other contracts 1,727
Total $ 2,480
(a) Represents gains of $1.3 billion for 2009 recorded in Net realized capital gains, and gains of $1.2 billion for 2009, recorded in Other income.
(b) Includes cross currency swaps.
275 AIG 2009 Form 10-K