AIG 2012 Annual Report Download - page 281

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value based on market-observable interest rates. All other repurchase agreements are recorded at their contracted
repurchase amounts plus accrued interest.
Under the secured financing transactions described above, securities available for sale with a fair value of $8.2 billion
and $2.3 billion at December 31, 2012 and December 31, 2011, respectively, and trading securities with a fair value
of $3.0 billion and $2.8 billion at December 31, 2012 and December 31, 2011, respectively, were pledged to
counterparties.
Prior to January 1, 2012, in the case of repurchase agreements where we did not obtain collateral sufficient to fund
substantially all of the cost of purchasing identical replacement securities during the term of the contract (generally
less than 90 percent of the security value), we accounted for the transaction as a sale of the security and reported
the obligation to repurchase the security as a derivative contract. The fair value of securities transferred under
repurchase agreements accounted for as sales was $2.1 billion at December 31, 2011. Effective January 1, 2012,
the level of collateral received by the transferor in a repurchase agreement or similar arrangement is no longer
relevant in determining whether the transaction should be accounted for as a sale. There were no repurchase
agreements accounted for as sales as of December 31, 2012.
We also enter into agreements in which securities are purchased by us under agreements to resell (reverse
repurchase agreements), which are accounted for as secured financing transactions and reported as short-term
investments or other assets, depending on their terms. These agreements are recorded at their contracted resale
amounts plus accrued interest, other than those that are accounted for at fair value. Such agreements entered into
by the DIB are carried at fair value based on market observable interest rates. In all reverse repurchase transactions,
we take possession of or obtain a security interest in the related securities, and we have the right to sell or repledge
this collateral received. The fair value of securities collateral pledged to us was $11.0 billion and $6.8 billion at
December 31, 2012 and December 31, 2011, respectively, of which $33 million and $122 million was repledged by
us.
Insurance – Statutory and Other Deposits
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Total carrying values of cash and securities deposited by our insurance subsidiaries under requirements of regulatory
authorities or other insurance-related arrangements, including certain annuity-related obligations and certain
reinsurance agreements, were $8.9 billion and $9.8 billion at December 31, 2012 and 2011, respectively.
Other Pledges
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Certain of our subsidiaries are members of Federal Home Loan Banks (FHLBs) and such membership requires the
members to own stock in these FHLBs. These subsidiaries owned an aggregate of $84 million and $77 million of
stock in FHLBs at December 31, 2012 and December 31, 2011, respectively. To the extent an AIG subsidiary
borrows from the FHLB, its ownership interest in the stock of FHLBs will be pledged to the FHLB. In addition, our
subsidiaries have pledged securities available for sale with a fair value of $341 million at December 31, 2012,
associated with advances from the FHLBs.
Certain GIAs have provisions that require collateral to be posted or payments to be made by us upon a downgrade
of our long-term debt ratings. The actual amount of collateral required to be posted to the counterparties in the event
of such downgrades, and the aggregate amount of payments that we could be required to make, depend on market
conditions, the fair value of outstanding affected transactions and other factors prevailing at and after the time of the
downgrade. The fair value of securities pledged as collateral with respect to these obligations approximated
$4.4 billion and $5.1 billion at December 31, 2012 and December 31, 2011, respectively. This collateral primarily
consists of securities of the U.S. government and government sponsored entities and generally cannot be repledged
or resold by the counterparties.
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AIG 2012 Form 10-K264
ITEM 8 / NOTE 7. INVESTMENTS