AIG 2012 Annual Report Download - page 177

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Aggregate credit exposure to European governments totaled $6.0 billion at December 31, 2012, compared to
$7.6 billion at December 31, 2011. Many of the European governments’ ratings have been downgraded by one or
more of the major rating agencies, occurring mostly in countries in the Euro-Zone periphery (Spain, Italy and
Portugal) where our government credit exposures totaled $245 million at December 31, 2012. The downgrades
primarily reflect large government budget deficits, rising government debt-to-GDP ratios and large financing
requirements of these countries, which have led to difficult financing conditions. These credit exposures primarily
included available-for-sale and trading securities (at fair value) issued by these governments. At December 31, 2012,
we had no direct or guaranteed credit exposure to the governments of Greece or Ireland.
Our exposure to European financial institutions at December 31, 2012 included $20.2 billion of credit exposures to
European banks, of which $18.7 billion were considered investment grade based on our internal ratings. Aggregate
below investment grade rated credit exposures to European banks were $1.4 billion. Our credit exposures to banks
domiciled in the Euro-Zone countries totaled $8.0 billion at December 31, 2012, of which $4.4 billion were fixed
maturity securities. Credit exposures to banks based in the five countries of the Euro-Zone periphery (Spain, Italy,
Ireland, Greece, and Portugal) totaled $993 million, of which $707 million were fixed maturity securities. These credit
exposures were primarily to the largest banks in Spain and Italy. Credit exposures to banks based in France totaled
$1.5 billion at December 31, 2012, of which $833 million were fixed maturity securities. Our credit exposures were
predominantly to the largest banks in these countries.
In addition, our exposure at December 31, 2012 to European financial institutions included $10.5 billion of aggregate
credit exposure to non-bank institutions, mostly insurers and reinsurers, with $7.6 billion, or 73 percent, of credit
exposure representing reinsurance recoverable balances. Reinsurance recoverables were primarily to highly rated
reinsurers based in Switzerland, the United Kingdom and Germany. $1.3 billion of the aggregate credit exposure at
December 31, 2012 to non-banks was fixed maturity securities, of which 94 percent were considered investment
grade based on our internal ratings.
Of the $19.3 billion of non-financial institution corporate exposure to Euro-Zone countries at December 31, 2012,
93 percent was to fixed maturity securities ($11.0 billion) and insurance-related products ($7.0 billion), with the
majority of the insurance exposures being captive fronting programs ($3.0 billion), trade credit insurance ($1.9 billion),
and surety bonds ($1.5 billion). France’s exposure of $6.6 billion at December 31, 2012 represented the largest
single non-financial corporate country exposure within the Euro-Zone, of which $2.6 billion were fixed maturity
securities. Approximately two-thirds of the French exposures were to issuers in the utilities, oil and gas, and
telecommunications industries. Euro-Zone periphery non-financial institution corporate exposures ($5.0 billion) at
December 31, 2012 were heavily weighted towards large multinational corporations or issuers in relatively stable
industries, such as regulated utilities (25 percent), telecommunications (17 percent), and oil and gas (13 percent).
Of the $6.1 billion at December 31, 2012 of United Kingdom and European structured product exposures (largely
consisting of residential mortgage-backed, commercial mortgage-backed and other asset-backed securities), United
Kingdom structured products accounted for 69 percent, while the Netherlands and Germany comprised 23 percent
and 2 percent, respectively. Structured product exposures to the Euro-Zone periphery accounted for 4 percent of the
total. Approximately 89 percent of the United Kingdom and European structured products exposures were rated A or
better at December 31, 2012 based on external rating agency ratings.
In addition, we had commercial real estate-related net equity investments in Europe totaling $497 million at
December 31, 2012 and related unfunded commitments of $105 million.
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AIG 2012 Form 10-K160
ITEM 7 / ENTERPRISE RISK MANAGEMENT