Bring on tomorrow - AIG.com

ITEM 7 / ENTERPRISE RISK MANAGEMENT.....................................................................................................................................................................................The following table presents our aggregate United Kingdom and European credit exposures (excluding ILFC)by product type:December 31, 2012Fixed Cash and Insurance December 31,Maturity Short-Term Credit Reinsurance 2011(in millions) Securities (a) Investments (b) Exposures (c) Recoverables Other (d) Total TotalEuro-Zone countries:France $ 4,834 $ 422 $ 3,349 $ 590 $ 1,338 $ 10,533 $ 8,612Germany 4,655 633 1,976 1,755 229 9,24814,696Netherlands 5,817 56 1,745 619 96 8,3338,650Spain 1,872 135 2,041 18 1 4,0674,909Italy 1,616 2 1,151 59 20 2,8482,816Belgium 796 1 369 4 4 1,1741,062Ireland 784 61 172 – 1 1,0181,644Luxembourg 307 3 356 1 – 667613Austria 316 7 197 2 1 523557Finland 313 13 104 2 – 432378Other Euro-Zone 140 10 151 1 3 305253Total Euro-Zone $ 21,450 $ 1,343 $ 11,611 $ 3,051 $ 1,693 $ 39,148 $ 44,190Remainder of EuropeUnited Kingdom $ 15,600 $ 1,822 $ 8,814 $ 2,189 $ 1,947 $ 30,372 $ 29,052Switzerland 3,011 448 1,060 2,767 4 7,2907,670Sweden 1,550 1,804 286 3 – 3,6435,584Other remainder of Europe 3,228 613 1,310 90 371 5,6125,492Total remainder of Europe $ 23,389 $ 4,687 $ 11,470 $ 5,049 $ 2,322 $ 46,917 $ 47,798Total $ 44,839 $ 6,030 $ 23,081 $ 8,100 $ 4,015 $ 86,065 $ 91,988(a) Fixed maturity securities primarily includes available-for-sale and trading securities reported at fair value of $41.4 billion ($41.4 billion amortizedcost), and $3.4 billion ($3.4 billion amortized cost), respectively.(b) Cash and short-term investments include bank deposit placements ($3.8 billion), collateral posted to counterparties against structured products($1.9 billion), securities purchased under agreements to resell ($187 million), and operating accounts ($115 million).(c) Insurance Credit Exposures primarily consist of captive fronting management programs ($10.7 billion), trade credit insurance ($6.2 billion), andsurety bonds ($2.1 billion) and commercial letters of credit supporting insurance credit exposures ($794 million).(d) Other primarily consists of derivative transactions reported at fair value.At December 31, 2012, approximately 86 percent of fixed maturity securities in the United Kingdom and Europeanexposures were considered investment grade based on our internal ratings. European financial institution fixedmaturity securities exposure was $10.2 billion, of which $1.1 billion were covered bonds (debt securities secured by apool of financial assets sufficient to cover any bondholder claims and that have full recourse to the issuing bank).$4.4 billion of fixed maturity securities were issued by banks domiciled in the Euro-Zone countries. Our subordinateddebt holdings and Tier 1 and preference share securities in these banks totaled $901 million and $312 million,respectively, at December 31, 2012. These exposures were predominantly to the largest banks in those countries.Other Credit Concentrations..............................................................................................................................................................................................We have a risk concentration in the U.S. municipal sector, primarily through the investment portfolios of ourinsurance companies. A majority of these securities were held in available-for-sale portfolios of our domestic propertyand casualty insurance companies. See Investments – Available for Sale Investments herein for further details. Wehad $464 million of additional exposure to the municipal sector outside of our insurance company portfolios atDecember 31, 2012, compared to $892 million at December 31, 2011. These exposures consisted of derivatives andtrading securities (at fair value), and exposure related to other insurance and financial services operations.We have a risk concentration in the residential mortgage sector in the form of non-agency RMBS, CDO of RMBS aswell as our mortgage guaranty insurance business. See Investments – Available for Sale Investments herein forfurther details on RMBS and CDO investments. The net risk-in-force for UGC was $33.6 billion at December 31,2012, of which exposure in the United States was $30.4 billion...................................................................................................................................................................................................................................AIG 2012 Form 10-K 161