AIG 2012 Annual Report Download - page 277

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Net Realized Capital Gains and Losses
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Net realized capital gains and losses are determined by specific identification. The net realized capital gains and
losses are generated primarily from the following sources:
• Sales of fixed maturity securities and equity securities (except trading securities accounted for at fair value and
investments for which the fair value option has been elected), real estate, investments in private equity funds and
hedge funds and other types of investments.
• Reductions to the cost basis of fixed maturity securities and equity securities (except trading securities accounted
for at fair value and investments for which the fair value option has been elected) and other invested assets for
other-than-temporary impairments.
• Changes in fair value of derivatives except for (1) those instruments at AIGFP that are not intermediated on behalf
of other AIG subsidiaries and (2) those instruments that are designated as hedging instruments when the change
in the fair value of the hedged item is not reported in Net realized capital gains (losses Exchange gains and losses
resulting from foreign currency transactions.
The following table presents the components of Net realized capital gains (losses) and the increase
(decrease) in unrealized appreciation of our available for sale securities:
Sales of fixed maturity securities $ 1,913 $ 1,846
Sales of equity securities 164 725
Other-than-temporary impairments:
Severity (51) (73)
Change in intent (12) (441)
Foreign currency declines (32) (63)
Issuer-specific credit events (1,165) (2,457)
Adverse projected cash flows (20) (5)
Provision for loan losses 48 (304)
Change in the fair value of MetLife securities prior to their sale (191) 315
Foreign exchange transactions (93) 191
Derivative instruments 448 (416)
Other (308) (34)
Net realized capital gains (losses) $ 701 $ (716)
Increase in unrealized appreciation of investments:
Fixed maturities $ 5,578 $ 8,677
Equity securities (206) 473
Other investments 146 156
Increase in unrealized appreciation*$ 5,518 $ 9,306
* Excludes net unrealized gains attributable to businesses held for sale.
Evaluating Investments for Other-Than-Temporary Impairments
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Fixed Maturity Securities
If we intend to sell a fixed maturity security or it is more likely than not that we will be required to sell a fixed maturity
security before recovery of its amortized cost basis and the fair value of the security is below amortized cost, an
other-than-temporary impairment has occurred and the amortized cost is written down to current fair value, with a
corresponding charge to earnings. When assessing our intent to sell a fixed maturity security, or whether it is more
likely than not that we will be required to sell a fixed maturity security before recovery of its amortized cost basis,
management evaluates relevant facts and circumstances including, but not limited to, decisions to reposition our
investment portfolio, sales of securities to meet cash flow needs and sales of securities to take advantage of
favorable pricing.
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AIG 2012 Form 10-K260
$ 2,607
484
(44)
(62)
(8)
(1,048)
(5)
104
–
(234)
(684)
(181)
$ 929
$ 10,599
(232)
343
$ 10,710
Years Ended December 31,
(in millions) 2012 2011 2010
ITEM 8 / NOTE 7. INVESTMENTS