AIG 2012 Annual Report Download - page 171

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$542 million in 2011, and $401 million in 2010. For a discussion of AIG’s other-than-temporary impairment
accounting policy, see Note 7 to the Consolidated Financial Statements.
The following table shows the aging of the pre-tax unrealized losses of fixed maturity and equity securities,
the extent to which the fair value is less than amortized cost or cost, and the number of respective items in
each category:
Investment grade bonds
0 - 6 months $ 10,865 $ 157 1,637 $ – $ – – $ – $ – – $ 10,865 $ 157 1,637
7 - 11 months 465 10 112 – – – – – – 465 10 112
12 months or more 4,830 277 631 481 129 47 12 10 2 5,323 416 680
Total $ 16,160 $ 444 2,380 $ 481 $ 129 47 $ 12 $ 10 2 $ 16,653 $ 583 2,429
Below investment grade
bonds
0 - 6 months $ 904 $ 56 354 $ 122 $ 34 17 $ – $ – – $ 1,026 $ 90 371
7 - 11 months 175 9 108 14 4 10 4 2 14 193 15 132
12 months or more 2,987 227 508 1,164 353 135 201 128 62 4,352 708 705
Total $ 4,066 $ 292 970 $ 1,300 $ 391 162 $ 205 $ 130 76 $ 5,571 $ 813 1,208
Total bonds
0 - 6 months $ 11,769 $ 213 1,991 $ 122 $ 34 17 $ – $ – – $ 11,891 $ 247 2,008
7 - 11 months 640 19 220 14 4 10 4 2 14 658 25 244
12 months or more 7,817 504 1,139 1,645 482 182 213 138 64 9,675 1,124 1,385
Total(e) $ 20,226 $ 736 3,350 $ 1,781 $ 520 209 $ 217 $ 140 78 $ 22,224 $ 1,396 3,637
Equity securities
0 - 11 months $ 225 $ 18 151 $ 61 $ 18 43 $ – $ – – $ 286 $ 36 194
12 months or more 17 – 2 2 1 2 – – – 19 1 4
Total $ 242 $ 18 153 $ 63 $ 19 45 $ – $ – – $ 305 $ 37 198
(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, 2012.
(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 result in current
decreases in the amortization of certain DAC.
(e) Item count is by CUSIP by subsidiary.
For 2012, net unrealized gains related to fixed maturity and equity securities increased by $10.4 billion primarily due
to the decline in interest rates and narrowing of credit spreads.
As of December 31, 2012, the majority of our fixed maturity investments in an unrealized loss position of more than
50 percent for 12 months or more consisted of the unrealized loss of $138 million primarily 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 2 securities with an amortized cost of $12 million and a net unrealized loss of
$10 million are still investment grade. As part of our credit evaluation procedures we consider 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 at the time those securities were issued. In
addition, for floating rate securities, persistently low LIBOR levels continue to make these securities less attractive to
secondary purchasers of these assets.
We believe that these securities are trading at significant price discounts primarily due to 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. Based on our analysis,
and taking into account the level of subordination below these securities, we continue to believe that the expected
cash flows from these securities will be sufficient to recover the amortized cost of our investment. We continue to
monitor these positions for potential credit impairments that could result from further deterioration in commercial and
residential real estate fundamentals.
See also Note 7 to the Consolidated Financial Statements for further discussion of our investment portfolio.
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AIG 2012 Form 10-K154
December 31, 2012 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)
ITEM 7 / INVESTMENTS