AIG 2012 Annual Report Download - page 265

.....................................................................................................................................................................................
upon age groups and duration. In general, increases in volatility and utilization rates will increase the fair value, while
increases in lapse rates and mortality rates will decrease the fair value of the liability associated with the GMWB.
Derivative liabilities – credit contracts
..............................................................................................................................................................................................
The significant unobservable inputs used for Derivatives liabilities – credit contracts are recovery rates, diversity
scores, and the weighted average life of the portfolio. AIG non-performance risk is also considered in the
measurement of the liability.
An increase in recovery rates and diversity score will decrease the fair value of the liability. An increase in the
weighted average life will have a directionally similar corresponding effect on the fair value measurement of the
liability.
Investments in Certain Entities Carried at Fair Value Using Net Asset Value per Share
..............................................................................................................................................................................................
The following table includes information related to our investments in certain other invested assets,
including private equity funds, hedge funds and other alternative investments that calculate net asset value
per share (or its equivalent). For these investments, which are measured at fair value on a recurring basis,
we use the net asset value per share as a practical expedient to measure fair value.
Investment Category
Private equity funds:
Leveraged buyout Debt and/or equity investments made as part of a
transaction in which assets of mature companies
are acquired from the current shareholders,
typically with the use of financial leverage $ 3,185 $ 945
Non-U.S. Investments that focus primarily on Asian and
European based buyouts, expansion capital,
special situations, turnarounds, venture capital,
mezzanine and distressed opportunities strategies 165 57
Venture capital Early-stage, high-potential, growth companies
expected to generate a return through an eventual
realization event, such as an initial public offering
or sale of the company 316 39
Distressed Securities of companies that are already in
default, under bankruptcy protection, or troubled 182 42
Other Real estate, energy, multi-strategy, mezzanine,
and industry-focused strategies 252 98
Total private equity
funds 4,100 1,181
Hedge funds:
Event-driven Securities of companies undergoing material
structural changes, including mergers, acquisitions
and other reorganizations 774 2
Long-short Securities that the manager believes are
undervalued, with corresponding short positions to
hedge market risk 927 –
Macro Investments that take long and short positions in
financial instruments based on a top-down view of
certain economic and capital market conditions 173 –
Distressed Securities of companies that are already in
default, under bankruptcy protection or troubled 272 10
Other Non-U.S. companies, futures and commodities,
relative value, and multi-strategy and industry-
focused strategies 627 –
Total hedge funds 2,773 12
Total $ 6,873 $ 1,193
..................................................................................................................................................................................................................................
AIG 2012 Form 10-K248
December 31, 2012 December 31, 2011
Fair Value Using Fair Value Using
Net Asset Value Net Asset Value
Per Share Unfunded Per Share Unfunded
(in millions) Investment Category Includes (or its equivalent) Commitments (or its equivalent) Commitments
$ 2,549 $ 659
179 25
163 16
87 21
255 152
3,233 873
747 2
1,091 –
238 –
316 –
416 –
2,808 2
$ 6,041 $ 875
ITEM 8 / NOTE 6. FAIR VALUE MEASUREMENTS