2007 Annual Report - AIG.com

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American International Group, Inc. and Subsidiaries Notes to Consolidated Financial Statements Continued 3. Investments Continued (c) Net Realized Gains and Losses: The Net realized capital gains (losses) and increase (decrease) in unrealized appreciation of AIG’s available for sale investments were as follows: (in millions) 2007 2006 2005 Net realized capital gains (losses): Sales of fixed maturities $ (468) $ (382) $ 372 Sales of equity securities 1,087 813 643 Sales of real estate and other assets 619 303 88 Other-than-temporary impairments (4,072) (944) (598) Foreign exchange transactions (643) (382) 701 Derivative instruments (115) 698 (865) Total $(3,592) $ 106 $ 341 Increase (decrease) in unrealized appreciation of investments: Fixed maturities $(5,504) $ (198) $(4,656) Equity securities 2,440 432 850 Other investments (3,842) 986 2,138 AIGFP investments (1,140) 1,354 (1,909) Increase (decrease) in unrealized appreciation $(8,046) $2,574 $(3,577) Net unrealized gains (losses) included in the consolidated statement of income from investment securities classified as trading securities in 2007, 2006 and 2005 were $1.1 billion, $938 million and $1.1 billion, respectively. The gross realized gains and gross realized losses from sales of AIG’s available for sale securities were as follows: 2007 2006 2005 Gross Gross Gross Gross Gross Gross Realized Realized Realized Realized Realized Realized (in millions) Gains Losses Gains Losses Gains Losses Fixed maturities $ 680 $ 1,148 $ 711 $1,093 $1,586 $1,214 Equity securities 1,368 291 1,111 320 930 354 Preferred stocks 10 — 22 — 101 34 Total $2,058 $ 1,439 $1,844 $1,413 $2,617 $1,602 (d) Fair Value of Investment Securities: The amortized cost or cost and estimated fair value of AIG’s available for sale and held to maturity securities at December 31, 2007 and 2006 were as follows: December 31, 2007* December 31, 2006 Amortized Gross Gross Amortized Gross Gross Cost or Unrealized Unrealized Fair Cost or Unrealized Unrealized Fair (in millions) Cost Gains Losses Value Cost Gains Losses Value Available for sale: * U.S. government and government sponsored entities $ 7,956 $ 333 $ 37 $ 8,252 $ 7,667 $ 221 $ 140 $ 7,748 Obligations of states, municipalities and political subdivisions 46,087 927 160 46,854 59,785 1,056 210 60,631 Non-U.S. governments 67,023 3,920 743 70,200 62,860 5,461 437 67,884 Corporate debt 239,822 6,216 4,518 241,520 257,383 7,443 2,536 262,290 Mortgage-backed, asset-backed and collateralized 140,982 1,221 7,703 134,500 104,687 502 362 104,827 Total bonds $501,870 $12,617 $13,161 $501,326 $492,382 $14,683 $3,685 $503,380 Equity securities 15,188 5,545 463 20,270 13,147 2,807 159 15,795 Total $517,058 $18,162 $13,624 $521,596 $505,529 $17,490 $3,844 $519,175 Held to maturity: * Bonds — Obligations of states, municipalities and political subdivisions $21,581 $609 $33 $22,157 $21,437 $731 $14 $22,154 * At December 31, 2007 and 2006, fixed maturities held by AIG that were below investment grade or not rated totaled $27.0 billion and $26.6 billion, respectively. 154 AIG 2007 Form 10-K
American International Group, Inc. and Subsidiaries 3. Investments Continued The following table presents the amortized cost and estimated fair values of AIG’s available for sale and held to maturity fixed maturity securities at December 31, 2007, by contractual maturity. Actual maturities may differ from contractual maturities because certain borrowers have the right to call or prepay certain obligations with or without call or prepayment penalties. Available for Sale Held to Maturity Amortized Amortized (in millions) Cost Fair Value Cost Fair Value Due in one year or less $ 25,844 $ 25,994 $ 72 $ 69 Due after one year through five years 95,494 97,466 284 277 Due after five years through ten years 121,961 123,196 1,511 1,547 Due after ten years 117,589 120,170 19,714 20,264 Mortgage-backed, asset-backed and collateralized 140,982 134,500 — — Total available for sale $501,870 $501,326 $21,581 $22,157 AIG’s available for sale securities are recorded on the consolidated balance sheet at December 31, 2007 and 2006 as follows: Fair Value (in millions) 2007 2006 Bonds available for sale $397,372 $386,869 Common stocks available for sale 17,900 13,256 Preferred stocks available for sale 2,370 2,539 Financial Services securities available for sale 40,305 47,205 Securities lending invested collateral 63,649 69,306 Total $521,596 $519,175 (e) Non-Income Producing Invested Assets: At December 31, 2007, non-income producing invested assets were insignificant. (f) Gross Unrealized Losses and Estimated Fair Values on Investments: The following table summarizes the cost basis and gross unrealized losses on AIG’s available for sale securities, aggregated by major investment category and length of time that individual securities have been in a continuous unrealized loss position, at December 31, 2007 and 2006: 12 Months or less More than 12 Months Total Unrealized Unrealized Unrealized (in millions) Cost (a) Losses Cost (a) Losses Cost (a) Losses 2007 Bonds (b) $190,809 $ 9,935 $65,137 $3,226 $255,946 $13,161 Equity securities 4,433 463 — — 4,433 463 Total $195,242 $10,398 $65,137 $3,226 $260,379 $13,624 2006 Bonds (b) $ 69,656 $ 1,257 $84,040 $2,428 $153,696 $ 3,685 Equity securities 2,734 159 — — 2,734 159 Total $ 72,390 $ 1,416 $84,040 $2,428 $156,430 $ 3,844 (a) For bonds, represents amortized cost. (b) Primarily relates to the corporate debt category. At December 31, 2007, AIG held 37,281 and 2,307 of AIG recorded other-than-temporary impairment charges of $4.7 individual bond and stock investments, respectively, that were in billion (including $643 million related to AIGFP recorded in Other an unrealized loss position, of which 9,930 individual investments income), $944 million and $598 million in 2007, 2006 and 2005, were in an unrealized loss position for a continuous 12 months or respectively. See Note 1(c) herein for AIG’s other-than-temporary longer. impairment accounting policy. AIG 2007 Form 10-K 155
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AMERICAN INTERNATIONAL GROUP, INC.
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FINANCIAL HIGHLIGHTS (in millions,
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overall financial condition, althou
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Group Executive Committee We are ad
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AIG’s life insurance network is t
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We have also begun to address the e
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WHAT WE SEE The ability to see and
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The Major Accounts Practice within
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Around the world, the middle class
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WE SEE GROWTH OPPORTUNITIES IN EMER
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To grow the strength of the AIG glo
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Since 2003, the AIG Disaster Relief
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RESPECT Respect encompasses how we
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Life Insurance & Retirement Service
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Domestic Brokerage Group— Gross P
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In the summer of 2007, widespread f
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in gross premiums written. It launc
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It grew new business premiums from
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emerging markets for its services,
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ILFC—Revenues by Region Total = $
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AIG Investments acquired a 94 perce
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and changing interest rates, as wel
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American International Group, Inc.
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UNITED STATES SECURITIES AND EXCHAN
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Page 157 and 158: American International Group, Inc.
Page 191 and 192: Index of Notes to Consolidated Fina
Page 207: American International Group, Inc.
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SHAREHOLDER INFORMATION Corporate H
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2007 Annual Report - AIG.com

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