AIG 2010 Annual Report Download - page 274

American International Group, Inc., and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(c) Approximately 5 percent and 6 percent of the fair value of the total assets recorded as Level 3 relates to various private equity, real estate, hedge
fund and fund-of-funds investments that are consolidated by AIG at both December 31, 2010 and 2009, respectively. AIG’s ownership in these
funds represented 68.6 percent, or $1.3 billion, of Level 3 assets at December 31, 2010 and 71.1 percent, or $1.6 billion, of Level 3 assets at
December 31, 2009. For December 31, 2010, includes AIG’s remaining 33 percent interest in AIA classified as Level 1.
(d) Included in Level 3 is the fair value derivative liability of $3.7 billion and $4.8 billion at December 31, 2010 and 2009, respectively, on the
Capital Markets’ super senior credit default swap portfolio.
Transfers of Level 1 and Level 2 Assets and Liabilities
AIG’s policy is to record transfers of assets and liabilities between Level 1 and Level 2 at their fair values as of
the end of each reporting period, consistent with the date of the determination of fair value. Assets are
transferred out of Level 1 when they are no longer transacted with sufficient frequency and volume in an active
market. During the year ended December 31, 2010, AIG transferred certain assets from Level 1 to Level 2,
including approximately $477 million of investments in U.S. government and government sponsored entities.
Conversely, assets are transferred from Level 2 to Level 1 when transaction volume and frequency are indicative
of an active market. AIG had no significant transfers from Level 2 to Level 1 during the twelve months ended
December 31, 2010.
Changes in Level 3 recurring fair value measurements
The following tables present changes during 2010 and 2009 in Level 3 assets and liabilities measured at fair value
on a recurring basis, and the realized and unrealized gains (losses) recorded in the Consolidated Statement of
258 AIG 2010 Form 10-K