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ITEM 7 / ENTERPRISE RISK MANAGEMENT.....................................................................................................................................................................................At December 31, 2012:• $80.6 billion, or 94 percent, of these global financial institution credit exposures were considered investment gradebased on our internal ratings.• $4.9 billion, or 6 percent, were considered non-investment grade. Most of the non-investment grade exposure wasto financial institutions in countries that we believe are not of investment grade quality. Aggregate credit exposureto the ten largest below investment grade-rated financial institutions was $2.1 billion.• Our aggregate credit exposure to fixed maturity securities of the financial institution sector amounted to$34.4 billion.• Short-term bank deposit placements, reverse repurchase agreements, repurchase agreements and commercialpaper issued by financial institutions (primarily commercial banks), operating account balances with banks andbank-issued commercial letters of credit supporting insurance credit exposures were $20.4 billion, or 24 percent ofthe total global financial institution credit exposure.• The remaining credit exposures to this sector were primarily related to reinsurance recoverables, collateralextended to counterparties mostly pursuant to derivative transactions, derivatives, and captive fronting riskmanagement programs for these financial institutions.European ..............................................................................................................................................................................................ConcentrationsWe actively monitor our European credit exposures, especially those exposures to issuers in the Euro-Zoneperiphery. We use various stress assumptions to identify issuers and securities warranting review by seniormanagement and to determine the need for mitigating actions. As a mitigating action, we typically decide not torenew maturing exposures or, when the opportunity presents itself, to sell or to tender securities. To date, we havenot actively used credit default protection. We periodically evaluate the financial condition of issuers and adjustinternal risk ratings as warranted.The result of these continuing reviews has led us to believe that our combined credit risk exposures to sovereigngovernments, financial institutions and non-financial corporations in the Euro-Zone are manageable risks given thetype and size of exposure and the credit quality and size of the issuers.The following table presents our aggregate United Kingdom and European credit exposures (excluding ILFC)by major sector:December 31, 2012Structured December 31,Financial Non-Financial Products/ 2011(in millions) Sovereign Institution Corporates Other (a) Total TotalEuro-Zone countries:France $ 1,207 $ 2,535 $ 6,728 $ 63 $ 10,533 $ 8,612Germany 1,446 3,675 3,879 248 9,24814,696Netherlands 442 4,205 2,295 1,391 8,3338,650Spain 146 682 2,197 1,042 4,0674,909Italy 96 348 2,168 236 2,8482,816Belgium 132 209 833 – 1,1741,062Ireland – 98 858 62 1,0181,644Luxembourg – 24 607 35 666613Austria 157 168 198 – 523557Finland 138 32 262 – 432378Other Euro-Zone 26 22 245 13 306253Total Euro-Zone $ 3,790 $ 11,998 $ 20,270 $ 3,090 $ 39,148 $ 44,190Remainder of EuropeUnited Kingdom $ 816 $ 9,557 $ 15,802 $ 4,197 $ 30,372 $ 29,052Switzerland 67 4,521 2,702 – 7,2907,670Sweden 195 2,934 514 – 3,6435,584Other remainder of Europe 1,098 1,659 1,715 1,140 5,6125,492Total remainder of Europe $ 2,176 $ 18,671 $ 20,733 $ 5,337 $ 46,917 $ 47,798Total $ 5,966 $ 30,669 $ 41,003 $ 8,427 $ 86,065 $ 91,988(a)Other represents mortgage guaranty insurance ($1.3 billion), primarily in Spain ($941 million) and Italy ($188 million)...................................................................................................................................................................................................................................AIG 2012 Form 10-K 159
ITEM 7 / ENTERPRISE RISK MANAGEMENT.....................................................................................................................................................................................Aggregate credit exposure to European governments totaled $6.0 billion at December 31, 2012, compared to$7.6 billion at December 31, 2011. Many of the European governments’ ratings have been downgraded by one ormore of the major rating agencies, occurring mostly in countries in the Euro-Zone periphery (Spain, Italy andPortugal) where our government credit exposures totaled $245 million at December 31, 2012. The downgradesprimarily reflect large government budget deficits, rising government debt-to-GDP ratios and large financingrequirements of these countries, which have led to difficult financing conditions. These credit exposures primarilyincluded available-for-sale and trading securities (at fair value) issued by these governments. At December 31, 2012,we had no direct or guaranteed credit exposure to the governments of Greece or Ireland.Our exposure to European financial institutions at December 31, 2012 included $20.2 billion of credit exposures toEuropean banks, of which $18.7 billion were considered investment grade based on our internal ratings. Aggregatebelow investment grade rated credit exposures to European banks were $1.4 billion. Our credit exposures to banksdomiciled in the Euro-Zone countries totaled $8.0 billion at December 31, 2012, of which $4.4 billion were fixedmaturity securities. Credit exposures to banks based in the five countries of the Euro-Zone periphery (Spain, Italy,Ireland, Greece, and Portugal) totaled $993 million, of which $707 million were fixed maturity securities. These creditexposures were primarily to the largest banks in Spain and Italy. Credit exposures to banks based in France totaled$1.5 billion at December 31, 2012, of which $833 million were fixed maturity securities. Our credit exposures werepredominantly to the largest banks in these countries.In addition, our exposure at December 31, 2012 to European financial institutions included $10.5 billion of aggregatecredit exposure to non-bank institutions, mostly insurers and reinsurers, with $7.6 billion, or 73 percent, of creditexposure representing reinsurance recoverable balances. Reinsurance recoverables were primarily to highly ratedreinsurers based in Switzerland, the United Kingdom and Germany. $1.3 billion of the aggregate credit exposure atDecember 31, 2012 to non-banks was fixed maturity securities, of which 94 percent were considered investmentgrade based on our internal ratings.Of the $19.3 billion of non-financial institution corporate exposure to Euro-Zone countries at December 31, 2012,93 percent was to fixed maturity securities ($11.0 billion) and insurance-related products ($7.0 billion), with themajority of the insurance exposures being captive fronting programs ($3.0 billion), trade credit insurance ($1.9 billion),and surety bonds ($1.5 billion). France’s exposure of $6.6 billion at December 31, 2012 represented the largestsingle non-financial corporate country exposure within the Euro-Zone, of which $2.6 billion were fixed maturitysecurities. Approximately two-thirds of the French exposures were to issuers in the utilities, oil and gas, andtelecommunications industries. Euro-Zone periphery non-financial institution corporate exposures ($5.0 billion) atDecember 31, 2012 were heavily weighted towards large multinational corporations or issuers in relatively stableindustries, such as regulated utilities (25 percent), telecommunications (17 percent), and oil and gas (13 percent).Of the $6.1 billion at December 31, 2012 of United Kingdom and European structured product exposures (largelyconsisting of residential mortgage-backed, commercial mortgage-backed and other asset-backed securities), UnitedKingdom structured products accounted for 69 percent, while the Netherlands and Germany comprised 23 percentand 2 percent, respectively. Structured product exposures to the Euro-Zone periphery accounted for 4 percent of thetotal. Approximately 89 percent of the United Kingdom and European structured products exposures were rated A orbetter at December 31, 2012 based on external rating agency ratings.In addition, we had commercial real estate-related net equity investments in Europe totaling $497 million atDecember 31, 2012 and related unfunded commitments of $105 million...................................................................................................................................................................................................................................160 AIG 2012 Form 10-K
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American International Group, Inc.2
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KEY FACTS & FIGURES52,000+ $65.7 bi
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■We said we would return to profi
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Financial HighlightsYears Ended Dec
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~63,000AIG EMPLOYEES AROUND THE WOR
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$115.1 millionAVERAGE CLAIMS PAID E
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$10,000MAXIMUM DONATION MADE BY AIG
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American International Group, Inc.F
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AMERICAN INTERNATIONAL GROUP, INC.A
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ITEM 1 / BUSINESS / AIG............
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ITEM 1 / BUSINESS / AIG............
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ITEM 1 / BUSINESS / AIG PROPERTY CA
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ITEM 1 / BUSINESS / AIG PROPERTY CA
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ITEM 1 / BUSINESS / AIG LIFE AND RE
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ITEM 1 / BUSINESS / OTHER OPERATION
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ITEM 1 / BUSINESS / OTHER OPERATION
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ITEM 1 / BUSINESS..................
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ITEM 1 / BUSINESS..................
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ITEM 1 / BUSINESS..................
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ITEM 1 / BUSINESS..................
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ITEM 1 / BUSINESS..................
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ITEM 1A / RISK FACTORS.............
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ITEM 1B / UNRESOLVED STAFF COMMENTS
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ITEM 5 / MARKET FOR REGISTRANT’S
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ITEM 6 / SELECTED FINANCIAL DATA...
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ITEM 6 / SELECTED FINANCIAL DATA...
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ITEM 7 / MANAGEMENT’S DISCUSSION
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ITEM 7 / USE OF NON-GAAP MEASURES..
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ITEM 7 / EXECUTIVE SUMMARY.........
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ITEM 7 / RESULTS OF OPERATIONS.....
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ITEM 8 / NOTE 1. BASIS OF PRESENTAT
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ITEM 8 / NOTE 2. SUMMARY OF SIGNIFI
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ITEM 8 / NOTE 3. SEGMENT INFORMATIO
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ITEM 8 / NOTE 3. SEGMENT INFORMATIO
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ITEM 8 / NOTE 4. DIVESTED BUSINESSE
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ITEM 8 / NOTE 4. DIVESTED BUSINESSE
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ITEM 8 / NOTE 5. BUSINESS COMBINATI
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ITEM 8 / NOTE 6. FAIR VALUE MEASURE
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ITEM 8 / NOTE 7. INVESTMENTS.......
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ITEM 8 / NOTE 8. LENDING ACTIVITIES
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ITEM 8 / NOTE 9. REINSURANCE.......
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ITEM 8 / NOTE 10. DEFERRED POLICY A
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ITEM 8 / NOTE 10. DEFERRED POLICY A
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ITEM 8 / NOTE 11. VARIABLE INTEREST
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ITEM 8 / NOTE 11. VARIABLE INTEREST
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ITEM 8 / NOTE 12. DERIVATIVES AND H
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ITEM 8 / NOTE 13. LIABILITY FOR UNP
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ITEM 8 / NOTE 14. VARIABLE LIFE AND
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ITEM 8 / NOTE 15. DEBT OUTSTANDING.
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ITEM 8 / NOTE 15. DEBT OUTSTANDING.
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ITEM 8 / NOTE 16. CONTINGENCIES, CO
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ITEM 8 / NOTE 17. TOTAL EQUITY.....
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ITEM 8 / NOTE 18. NONCONTROLLING IN
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ITEM 8 / NOTE 19. EARNINGS (LOSS) P
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ITEM 8 / NOTE 21. SHARE-BASED COMPE
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ITEM 8 / NOTE 21. SHARE-BASED COMPE
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ITEM 8 / NOTE 22. EMPLOYEE BENEFITS
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ITEM 8 / NOTE 24. INCOME TAXES.....
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ITEM 8 / NOTE 26. QUARTERLY FINANCI
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ITEM 8 / NOTE 27. INFORMATION PROVI
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PART II............................
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PART IV............................
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SignatureTitle/s/ ARTHUR C. MARTINE
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ExhibitNumber Description Location(
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Condensed Financial Information of
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Condensed Financial Information of
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Notes to Condensed Financial Inform
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Supplementary Insurance Information
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Valuation and Qualifying AccountsFo
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Subsidiaries of RegistrantExhibit 2
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Percentageof VotingSecuritiesJurisd
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Percentageof VotingSecuritiesJurisd
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CONSENT OF INDEPENDENT REGISTERED P
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CERTIFICATIONSI, Robert H. Benmosch
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CERTIFICATIONExhibit 32In connectio
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SECURITIES REGISTERED PURSUANT TO S
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American International Group, Inc.1
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