AIG 2010 Annual Report Download - page 366

American International Group, Inc., and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Plan Assets
The investment strategy with respect to assets relating to AIG’s U.S. and non-U.S. pension plans is designed to
achieve investment returns that will (a) provide for the benefit obligations of the plans over the long term;
(b) limit the risk of short-term funding shortfalls; and (c) maintain liquidity sufficient to address cash needs.
Accordingly, the asset allocation strategy is designed to maximize the investment rate of return while managing
various risk factors, including but not limited to, volatility relative to the benefit obligations, diversification and
concentration, and the risk and rewards profile indigenous to each asset class.
There were no shares of AIG Common Stock included in the U.S. and non-U.S. pension plans assets at
December 31, 2010 or 2009.
U.S. pension plans
The long-term strategic asset allocation is reviewed and revised approximately every three years. The plans’
assets are monitored by the investment committee of AIG’s Retirement Board and the investment managers,
which can entail allocating the plans assets among approved asset classes within pre-approved ranges permitted by
the strategic allocation.
The following table presents the asset allocation percentage by major asset class for U.S. pension plans and the
target allocation:
At December 31, Target Actual Actual
2011 2010 2009
Asset class:
Equity securities 45% 60% 56%
Fixed maturity securities 30% 22% 25%
Other investments 25% 17% 16%
Cash and cash equivalents -% 1% 3%
Total 100% 100% 100%
The expected long-term rate of return for the plan was 7.75 percent for both 2010 and 2009. The expected rate
of return is an aggregation of expected returns within each asset class category. The expected asset return and any
contributions made by AIG together are expected to maintain the plans’ ability to meet all required benefit
obligations. The expected asset return with respect to each asset class was developed based on a building block
approach that considers historical returns, current market conditions, asset volatility and the expectations for
future market returns. While the assessment of the expected rate of return is long-term and thus not expected to
change annually, significant changes in investment strategy or economic conditions may warrant such a change.
Non-U.S. pension plans
The assets of the non-U.S. pension plans are held in various trusts in multiple countries and are invested primarily
in equities and fixed maturity securities to maximize the long-term return on assets for a given level of risk.
The following table presents the asset allocation percentage by major asset class for Non-U.S. pension plans and
the target allocation:
At December 31, Target Actual Actual
2011 2010 2009
Asset class:
Equity securities 42% 57% 46%
Fixed maturity securities 35% 28% 27%
Other investments 20% 10% 22%
Cash and cash equivalents 3% 5% 5%
Total 100% 100% 100%
350 AIG 2010 Form 10-K