AIG 2010 Annual Report Download - page 157

American International Group, Inc., and Subsidiaries
With the adoption of the new other-than-temporary impairments accounting standard on April 1, 2009, severity
loss charges subsequent to that date exclusively related to equity securities and other invested assets. In all prior
periods, these charges primarily related to mortgage-backed, asset-backed and collateralized securities, corporate
debt securities of financial institutions and other equity securities. Notwithstanding AIG’s intent and ability to hold
such securities until they had recovered their cost or amortized cost basis, and despite structures that indicated, at
the time, that a substantial amount of the securities should have continued to perform in accordance with original
terms, AIG concluded, at the time, that it could not reasonably assert that the impairment would be temporary.
Determinations of other-than-temporary impairments are based on fundamental credit analyses of individual
securities without regard to rating agency ratings. Based on this analysis, AIG expects to receive cash flows
sufficient to cover the amortized cost of all below investment grade securities for which credit losses were not
recognized.
In addition to the severity losses, AIG recorded other-than-temporary impairment charges in 2010, 2009 and
2008 related to:
• securities for which AIG has changed its intent from hold to sell;
• declines due to foreign exchange rates;
• issuer-specific credit events;
• certain structured securities; and
• other impairments, including equity securities, partnership investments and private equity investments.
AIG recognized $441 million, $958 million and $10.8 billion in other-than-temporary impairment charges in
2010, 2009, and 2008, respectively, due to changes in intent. The other-than-temporary impairment charges in 2010
related to changes in intent resulting from the repositioning of certain investments, primarily within the Chartis
portfolios.
With respect to the issuer-specific credit events shown above, no other-than-temporary impairment charge with
respect to any one single credit was significant to AIG’s consolidated financial condition or results of operations,
and no individual other-than-temporary impairment charge exceeded 0.2 percent, 0.1 percent and 1.0 percent of
total equity in 2010, 2009 and 2008, respectively.
In periods subsequent to the recognition of an other-than-temporary impairment charge for available for sale
fixed maturity securities that is not foreign exchange related, AIG generally prospectively accretes into earnings
the difference between the new amortized cost and the expected undiscounted recovery value over the remaining
expected holding period of the security. The amounts of accretion recognized in earnings for 2010, 2009 and 2008
were $401 million, $735 million and $634 million, respectively. For a discussion of recent accounting standards
affecting fair values and other-than-temporary impairments, see Notes 2 and 7 to the Consolidated Financial
Statements.
AIG 2010 Form 10-K 141