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ITEM 8 / NOTE 6. FAIR VALUE MEASUREMENTS.....................................................................................................................................................................................Fair ..............................................................................................................................................................................................Value Information about Financial Instruments Not Measured at Fair ValueInformation regarding the estimation of fair value for financial instruments not carried at fair value (excludinginsurance contracts and lease contracts) is discussed below:• Mortgage and other loans receivable: Fair values of loans on real estate and other loans receivable wereestimated for disclosure purposes using discounted cash flow calculations based upon discount rates that webelieve market participants would use in determining the price that they would pay for such assets. For certainloans, our current incremental lending rates for similar types of loans is used as the discount rate, as webelieve that this rate approximates the rates that market participants would use. The fair values of policy loansare generally estimated based on unpaid principal amount as of each reporting date or, in some cases, basedon the present value of the loans using a discounted cash flow model. No consideration is given to credit riskas policy loans are effectively collateralized by the cash surrender value of the policies.• Other Invested Assets: The majority of Other invested assets that are not measured at fair value representinvestments in life settlement contracts. The fair value of life settlement contracts included in Other investedassets is determined on a discounted cash flow basis, incorporating current life expectancy assumptions.• Cash and short-term investments: The carrying values of these assets approximate fair values because ofthe relatively short period of time between origination and expected realization, and their limited exposure tocredit risk.• Policyholder contract deposits associated with investment-type contracts: Fair values for policyholdercontract deposits associated with investment-type contracts not accounted for at fair value were estimatedusing discounted cash flow calculations based upon interest rates currently being offered for similar contractswith maturities consistent with those remaining for the contracts being valued. Where no similar contracts arebeing offered, the discount rate is the appropriate tenor swap rate (if available) or current risk-free interest rateconsistent with the currency in which the cash flows are denominated.• Long-term debt: Fair values of these obligations were determined by reference to quoted market prices,where available and appropriate, or discounted cash flow calculations based upon our current marketobservableimplicit-credit-spread rates for similar types of borrowings with maturities consistent with thoseremaining for the debt being valued.The following table presents the carrying value and estimated fair value of our financial instruments notmeasured at fair value and indicates the level of the estimated fair value measurement based on theobservability of the inputs used:Estimated Fair ValueCarrying(in millions) Level 1 Level 2 Level 3 Total ValueDecember 31, 2012Assets:Mortgage and other loans receivableOther invested assetsShort-term investmentsCashLiabilities:Policyholder contract deposits associated withinvestment-type contractsOther liabilitiesLong-term debt *$ –––1,151December 31, 2011Assets:Mortgage and other loans receivable $ 20,494 $ 19,382Other invested assets 3,390 4,701Short-term investments 16,657 16,659Cash 1,474 1,474Liabilities:Policyholder contract deposits associated withinvestment-type contracts 122,125 106,950Other liabilities 896 896Long-term debt 61,295 64,487* Excludes Long-term debt of ILFC reclassed to Liabilities held for sale on the Consolidated Balance Sheet.$ 823 $ 19,396 $ 20,219 $ 19,348237 3,521 3,758 4,93220,752 – 20,752 20,752– – 1,151 1,151245 123,860 124,105 105,9792,205 818 3,023 3,02443,966 1,925 45,891 40,445..................................................................................................................................................................................................................................AIG 2012 Form 10-K 251–––
ITEM 8 / NOTE 7. INVESTMENTS.....................................................................................................................................................................................7. INVESTMENTS..............................................................................................................................................................................................Fixed Maturity and Equity Securities..............................................................................................................................................................................................Bonds held to maturity are carried at amortized cost when we have the ability and positive intent to hold thesesecurities until maturity. When we do not have the ability or positive intent to hold bonds until maturity, thesesecurities are classified as available for sale or as trading and are carried at fair value. None of our fixed maturitysecurities met the criteria for held to maturity classification at December 31, 2012 or 2011.Fixed maturity and equity securities classified as available for sale or as trading are carried at fair value. Unrealizedgains and losses from available for sale investments in fixed maturity and equity securities are reported as aseparate component of Accumulated other comprehensive income (loss), net of deferred acquisition costs anddeferred income taxes, in Total AIG shareholders’ equity. Realized and unrealized gains and losses from fixedmaturity and equity securities classified as trading are reflected in Net investment income (for insurance subsidiaries)or Other income (for DIB). Investments in fixed maturity and equity securities are recorded on a trade-date basis.Premiums and discounts arising from the purchase of bonds classified as available for sale are treated as yieldadjustments over their estimated holding periods, until maturity, or call date, if applicable. For investments in certainRMBS, CMBS and CDO/ABS, (collectively, structured securities), recognized yields are updated based on currentinformation regarding the timing and amount of expected undiscounted future cash flows. For high credit qualitystructured securities, effective yields are recalculated based on actual payments received and updated prepaymentexpectations, and the amortized cost is adjusted to the amount that would have existed had the new effective yieldbeen applied since acquisition with a corresponding charge or credit to net investment income. For structuredsecurities that are not high credit quality, effective yields are recalculated and adjusted prospectively based onchanges in expected undiscounted future cash flows. For purchased credit impaired (PCI) securities, at acquisition,the difference between the undiscounted expected future cash flows and the recorded investment in the securitiesrepresents the initial accretable yield, which is to be accreted into net investment income over the securities’remaining lives on a level-yield basis. Subsequently, effective yields recognized on PCI securities are recalculatedand adjusted prospectively to reflect changes in the contractual benchmark interest rates on variable rate securitiesand any significant increases in undiscounted expected future cash flows arising due to reasons other than interestrate changes.Trading securities include the investment portfolio of the DIB. Trading securities for the DIB are held to meetshort-term investment objectives and to economically hedge other securities...................................................................................................................................................................................................................................252 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 7 / LIQUIDITY AND CAPITAL RESO
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ITEM 7 / INVESTMENTS...............
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ITEM 7 / ENTERPRISE RISK MANAGEMENT
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ITEM 7 / CRITICAL ACCOUNTING ESTIMA
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ITEM 7 / GLOSSARY..................
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ITEM 7 / GLOSSARY..................
Page 217 and 218: ITEM 7A / QUANTITATIVE AND QUALITAT
Page 219 and 220: ITEM 8 / INDEX TO FINANCIAL STATEME
Page 221 and 222: AMERICAN INTERNATIONAL GROUP, INC.C
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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 20. STATUTORY FINANCI
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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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