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ITEM 8 / NOTE 7. INVESTMENTS.....................................................................................................................................................................................value based on market-observable interest rates. All other repurchase agreements are recorded at their contractedrepurchase amounts plus accrued interest.Under the secured financing transactions described above, securities available for sale with a fair value of $8.2 billionand $2.3 billion at December 31, 2012 and December 31, 2011, respectively, and trading securities with a fair valueof $3.0 billion and $2.8 billion at December 31, 2012 and December 31, 2011, respectively, were pledged tocounterparties.Prior to January 1, 2012, in the case of repurchase agreements where we did not obtain collateral sufficient to fundsubstantially all of the cost of purchasing identical replacement securities during the term of the contract (generallyless than 90 percent of the security value), we accounted for the transaction as a sale of the security and reportedthe obligation to repurchase the security as a derivative contract. The fair value of securities transferred underrepurchase agreements accounted for as sales was $2.1 billion at December 31, 2011. Effective January 1, 2012,the level of collateral received by the transferor in a repurchase agreement or similar arrangement is no longerrelevant in determining whether the transaction should be accounted for as a sale. There were no repurchaseagreements accounted for as sales as of December 31, 2012.We also enter into agreements in which securities are purchased by us under agreements to resell (reverserepurchase agreements), which are accounted for as secured financing transactions and reported as short-terminvestments or other assets, depending on their terms. These agreements are recorded at their contracted resaleamounts plus accrued interest, other than those that are accounted for at fair value. Such agreements entered intoby the DIB are carried at fair value based on market observable interest rates. In all reverse repurchase transactions,we take possession of or obtain a security interest in the related securities, and we have the right to sell or repledgethis collateral received. The fair value of securities collateral pledged to us was $11.0 billion and $6.8 billion atDecember 31, 2012 and December 31, 2011, respectively, of which $33 million and $122 million was repledged byus.Insurance – Statutory and Other Deposits..............................................................................................................................................................................................Total carrying values of cash and securities deposited by our insurance subsidiaries under requirements of regulatoryauthorities or other insurance-related arrangements, including certain annuity-related obligations and certainreinsurance agreements, were $8.9 billion and $9.8 billion at December 31, 2012 and 2011, respectively.Other Pledges..............................................................................................................................................................................................Certain of our subsidiaries are members of Federal Home Loan Banks (FHLBs) and such membership requires themembers to own stock in these FHLBs. These subsidiaries owned an aggregate of $84 million and $77 million ofstock in FHLBs at December 31, 2012 and December 31, 2011, respectively. To the extent an AIG subsidiaryborrows from the FHLB, its ownership interest in the stock of FHLBs will be pledged to the FHLB. In addition, oursubsidiaries have pledged securities available for sale with a fair value of $341 million at December 31, 2012,associated with advances from the FHLBs.Certain GIAs have provisions that require collateral to be posted or payments to be made by us upon a downgradeof our long-term debt ratings. The actual amount of collateral required to be posted to the counterparties in the eventof such downgrades, and the aggregate amount of payments that we could be required to make, depend on marketconditions, the fair value of outstanding affected transactions and other factors prevailing at and after the time of thedowngrade. The fair value of securities pledged as collateral with respect to these obligations approximated$4.4 billion and $5.1 billion at December 31, 2012 and December 31, 2011, respectively. This collateral primarilyconsists of securities of the U.S. government and government sponsored entities and generally cannot be repledgedor resold by the counterparties...................................................................................................................................................................................................................................264 AIG 2012 Form 10-K