AIG 2010 Annual Report Download - page 158

American International Group, Inc., and Subsidiaries
An aging of the pre-tax unrealized losses of fixed maturity and equity securities, distributed as a percentage of
cost relative to unrealized loss (the extent by which the fair value is less than amortized cost or cost), including
the number of respective items was as follows:
At December 31, 2010 Less than or equal Greater than 20% Greater than 50%
to 20% of Cost
(b)
to 50% of Cost
(b)
of Cost
(b)
Total
Aging
(a)
Unrealized Unrealized Unrealized Unrealized
(dollars in millions) Cost
(c)
Loss Items
(e)
Cost
(c)
Loss Items
(e)
Cost
(c)
Loss Items
(e)
Cost
(c)
Loss
(d)
Items
(e)
Investment grade bonds
0-6 months $ 35,727 $ 934 3,246 $ 31 $ 11 9 $ 145 $ 73 8 $ 35,903 $ 1,018 3,263
7-12 months 928 54 143 17 4 3 3 - 61 948 58 207
> 12 months 12,563 880 1,349 3,246 953 413 569 364 99 16,378 2,197 1,861
Total $ 49,218 $ 1,868 4,738 $ 3,294 $ 968 425 $ 717 $ 437 168 $ 53,229 $ 3,273 5,331
Below investment grade
bonds
0-6 months $ 1,160 $ 47 257 $ 3 $ 1 8 $ 1 $ - 35 $ 1,164 $ 48 300
7-12 months 102 7 29 67 21 11 4 2 38 173 30 78
> 12 months 4,257 391 445 2,556 815 266 858 527 175 7,671 1,733 886
Total $ 5,519 $ 445 731 $ 2,626 $ 837 285 $ 863 $ 529 248 $ 9,008 $ 1,811 1,264
Total bonds
0-6 months $ 36,887 $ 981 3,503 $ 34 $ 12 17 $ 146 $ 73 43 $ 37,067 $ 1,066 3,563
7-12 months 1,030 61 172 84 25 14 7 2 99 1,121 88 285
> 12 months 16,820 1,271 1,794 5,802 1,768 679 1,427 891 274 24,049 3,930 2,747
Total
(e)
$ 54,737 $ 2,313 5,469 $ 5,920 $ 1,805 710 $ 1,580 $ 966 416 $ 62,237 $ 5,084 6,595
Equity securities
0-6 months $ 601 $ 31 105 $ 65 $ 17 16 $ - $ - - $ 666 $ 48 121
7-12 months 32 5 89 10 2 24 - - - 42 7 113
> 12 months - - - - - - - - - - - -
Total $ 633 $ 36 194 $ 75 $ 19 40 $ - $ - - $ 708 $ 55 234
(a) Represents the number of consecutive months that fair value has been less than cost by any amount.
(b) Represents the percentage by which fair value is less than cost at December 31, 2010.
(c) For bonds, represents amortized cost.
(d) The effect on Net income of unrealized losses after taxes will be mitigated upon realization because certain realized losses will be charged to participating
policyholder accounts, or realization will result in current decreases in the amortization of certain DAC.
(e) Item count is by CUSIP by subsidiary.
For 2010, net unrealized gains related to fixed maturity and equity securities increased by $9.1 billion primarily
resulting from the narrowing of credit spreads.
As of December 31, 2010, the majority of AIG’s fixed maturity investments in an unrealized loss position of
more than 50 percent for more than 12 months, consisted of the unrealized loss of $891 million related to CMBS
and RMBS securities originally rated investment grade that are floating rate or that have low fixed coupons
relative to current market yields. A total of 99 securities with an amortized cost of $569 million and a net
unrealized loss of $364 million are still investment grade. As part of its credit evaluation procedures applied to
these and other securities, AIG considers the nature of both the specific securities and the market conditions for
those securities. For most security types supported by real estate-related assets, current market yields continue to
be higher than the yields were at the respective issuance dates of the securities. This is largely due to investors
demanding additional yield premium for securities whose performance is closely linked to the commercial and
residential real estate sectors. In addition, for floating rate securities, persistent low LIBOR levels continue to
make these securities less attractive.
AIG believes that the lack of demand for commercial and residential real estate collateral-based securities, low
contractual coupons and interest rate spreads, and the deterioration in the level of collateral support due to real
estate market conditions are the primary reasons for these securities trading at significant price discounts. Based
142 AIG 2010 Form 10-K