AIG 2009 Annual Report Download - page 74

American International Group, Inc., and Subsidiaries
• losses related to AIG’s economic interest in ML II and investment in ML III of approximately $1.1 billion in
2008; and
• the effect of increased levels of short-term investments, for liquidity purposes.
Net Realized Capital Gains (Losses)
Years Ended December 31,
(in millions) 2009 2008 2007
Sales of fixed maturity securities $ 956 $ (5,159) $ (429)
Sales of equity securities 390 104 917
Sales of real estate and loans (10) 238 172
Other-than-temporary impairments:
Severity (1,892) (27,798) (1,517)
Change in intent (1,036) (11,518) (993)
Foreign currency declines (517) (1,903) (500)
Issuer-specific credit events (4,185) (5,785) (497)
Adverse projected cash flows on structured securities (149) (1,645) (446)
Provision for loan losses (708) --
Foreign exchange transactions (1,256) 3,166 (672)
Derivative instruments 1,749 (3,420) 16
Other (196) 1,015 448
Total $(6,854) $(52,705) $(3,501)
2009 and 2008 Comparison
Net realized capital losses decreased in 2009 compared to 2008 primarily due to the following:
• the 2008 period included non-credit impairments (i.e. severity losses) throughout the year that are no longer
required for fixed maturity securities due to the adoption of the new other-than-temporary impairments
accounting standard commencing in the second quarter of 2009. Additionally, other-than-temporary
impairments declined from the 2008 period due to improved market conditions. See Note 6 to the Consolidated
Financial Statements; and Investments — Other-Than-Temporary Impairments.
• gains on sales of fixed maturity securities in 2009 compared to losses in 2008 reflecting improvement in the
credit markets.
• gains on derivative instruments not qualifying for hedge accounting treatment in 2009 compared to losses in
2008 resulting from weakening of the U.S. dollar.
Partially offsetting the above items were losses on sales of real estate and other assets in 2009. Additionally, Net
realized capital losses includes foreign exchange translation losses in 2009 compared to gains in 2008 primarily
resulting from the weakening of the U.S. dollar.
2008 and 2007 Comparison
Net realized capital losses increased in 2008 compared to 2007 primarily due to an increase in other-than-temporary
impairment charges. The increase in other-than-temporary impairment charges included the following significant
items:
• an increase in severity losses primarily related to certain RMBS, other structured securities and securities of
financial institutions due to rapid and severe market valuation declines where the impairment period was not
deemed temporary;
AIG 2009 Form 10-K 66