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ITEM 7 / LIQUIDITY AND CAPITAL RESOURCES.....................................................................................................................................................................................Other Operations..............................................................................................................................................................................................Mortgage Guaranty..............................................................................................................................................................................................We currently expect that our Mortgage Guaranty subsidiaries will be able to continue to satisfy future liquidityrequirements and meet their obligations, including requirements arising out of reasonably foreseeable contingenciesor events, through cash from operations and, to the extent necessary, asset dispositions. Mortgage Guarantysubsidiaries maintain substantial liquidity in the form of cash and short-term investments, totaling $699 million as ofDecember 31, 2012. Mortgage Guaranty businesses also maintain significant levels of investment-grade fixedmaturity securities, which could be monetized in the event liquidity levels are insufficient to meet obligations. Thesesecurities included substantial holdings in municipal and corporate bonds totaling $3.5 billion at December 31, 2012.Global Capital Markets..............................................................................................................................................................................................GCM acts as the derivatives intermediary between AIG and its subsidiaries and third parties to provide hedgingservices. It executes its derivative trades under International Swaps and Derivatives Association, Inc. (ISDA)agreements. The agreements with third parties typically require collateral postings. Many of GCM’s transactions withAIG and its subsidiaries also include collateral posting requirements. However, generally, no collateral is called underthese contracts unless it is needed to satisfy posting requirements with third parties. Most of GCM’s CDS are subjectto collateral posting provisions. These provisions differ among counterparties and asset classes. The amount offuture collateral posting requirements is a function of our credit ratings, the rating of the reference obligations and themarket value of the relevant reference obligations, with the latter being the most significant factor. We estimate theamount of potential future collateral postings associated with the super senior CDS using various methodologies. Thecontingent liquidity requirements associated with such potential future collateral postings are incorporated into ourliquidity planning assumptions.As of December 31, 2012 and December 31, 2011, respectively, GCM had total assets of $8.0 billion and $9.6 billionand total liabilities of $4.9 billion and $5.8 billion. GCM’s assets consist primarily of cash, short-term investments,other receivables, net of allowance, and unrealized gains on swaps, options and forwards. GCM’s liabilities consistprimarily of trade payables and unrealized losses on swaps, options and forwards. Collateral posted included in GCMto third parties was $4.2 billion and $5.1 billion at December 31, 2012 and December 31, 2011, respectively.Collateral obtained included in GCM from third parties was $846 million and $1.2 billion at December 31, 2012 andDecember 31, 2011, respectively. The collateral amounts reflect counterparty netting adjustments available undermaster netting agreements and are inclusive of collateral that exceeded the fair value of derivatives as of thereporting date.Direct Investment Book..............................................................................................................................................................................................The DIB is managed so that it maintains the liquidity that we believe is necessary to meet all of the DIB liabilities asthey come due, even under stress scenarios, without having to liquidate DIB assets or rely on additional liquidity fromAIG Parent. If the DIB’s risk target is breached, we expect to take appropriate actions to increase the DIB’s liquiditysources or reduce liquidity requirements to maintain the risk target, although no assurance can be given that this canbe achieved under then-prevailing market conditions. Any additional liquidity shortfalls would need to be funded byAIG Parent.The DIB’s assets consist primarily of cash, short term investments, fixed maturity securities issued by U.S.government and government sponsored entities, mortgage and asset backed securities and, to a lesser extent, bankloans and mortgage loans. The DIB’s liabilities consist primarily of notes and other borrowings supported by assetsas well as other short-term financing obligations. As of December 31, 2012 and December 31, 2011, respectively, theDIB had total assets of $28.5 billion and $31.0 billion and total liabilities of $23.8 billion and $28.2 billion.The overall hedging activity for the assets and liabilities of the DIB is executed by GCM. The value of hedges relatedto the non-derivative assets and liabilities of AIGFP in the DIB is included within the assets and liabilities andoperating results of GCM and are not included within the DIB operating results, assets or liabilities...................................................................................................................................................................................................................................AIG 2012 Form 10-K 129