2007 Annual Report - AIG.com

American International Group, Inc. and Subsidiaries
The fair value of AIG’s RMBS investments, other than those of AIGFP, at December 31, 2007 by year of vintage and
credit rating were as follows:
Year of Vintage
(in millions) Prior 2003 2004 2005 2006 2007 Total
Rating:
AAA $4,053 $6,202 $7,070 $16,011 $25,392 $18,937 $77,665
AA 63 785 555 1,092 2,117 512 5,124
A 46 242 345 480 248 138 1,499
BBB and below — 53 74 214 114 37 492
Total $4,162 $7,282 $8,044 $17,797 $27,871 $19,624 $84,780
The fair value of AIG’s Alt-A investments included in the RMBS investments above, other than those of AIGFP, at
December 31, 2007 by year of vintage and credit rating were as follows:
Year of Vintage
(in millions) Prior 2003 2004 2005 2006 2007 Total
Rating:
AAA $208 $623 $ 960 $4,899 $9,301 $6,512 $22,503
AA 23 199 150 391 117 11 891
A 1 37 51 137 48 6 280
BBB and below — 11 19 36 6 — 72
Total $232 $870 $1,180 $5,463 $9,472 $6,529 $23,746
The fair value of AIG’s subprime RMBS investments, other than those of AIGFP, at December 31, 2007 by year of
vintage and credit rating were as follows:
Year of Vintage
(in millions) Prior 2003 2004 2005 2006 2007 Total
Rating:
AAA $127 $362 $557 $5,403 $7,926 $4,081 $18,456
AA 6 35 116 277 1,562 357 2,353
A 10 82 100 120 34 26 372
BBB and below — — — 8 — — 8
Total $143 $479 $773 $5,808 $9,522 $4,464 $21,189
AIG’s underwriting practices for investing in RMBS, other assetbacked
securities and CDOs take into consideration the quality of
the originator, the manager, the servicer, security credit ratings,
underlying characteristics of the mortgages, borrower characteristics,
and the level of credit enhancement in the transaction. AIG’s
strategy is typically to invest in securities rated AA or better and
create diversification across multiple underlying asset classes.
General Insurance Invested Assets
In AIG’s General Insurance business, the duration of liabilities for
long-tail casualty lines is greater than other lines. As differentiated
from the Life Insurance & Retirement Services companies, the
focus is not on asset-liability matching, but on preservation of
capital and growth of surplus.
Fixed income holdings of the Domestic General Insurance
companies are comprised primarily of tax-exempt securities, which
provide attractive risk-adjusted after-tax returns. These high quality
municipal investments have an average rating of AA.
Fixed income assets held in Foreign General Insurance are of
high quality and short to intermediate duration, averaging
3.6 years compared to 7.0 years for those in Domestic General
Insurance.
While invested assets backing reserves are invested in
conventional fixed income securities in Domestic General Insurance,
a modest portion of surplus is allocated to large capitalization,
high-dividend, public equity strategies and to alternative
investments, including private equity and hedge funds. These
investments have provided a combination of added diversification
and attractive long-term returns.
General Insurance invested assets grew by $13.7 billion, or 12
percent, during 2007 as bond holdings grew by $6 billion. Listed
equity holdings grew by $1.3 billion.
AIG 2007 Form 10-K 105