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VARIABLE INTEREST ENTITIES
 6 Months Ended
Jun. 30, 2013
VARIABLE INTEREST ENTITIES  
VARIABLE INTEREST ENTITIES

8. VARIABLE INTEREST ENTITIES

 

We enter into various arrangements with variable interest entities (VIEs) in the normal course of business. Our involvement with VIEs is primarily through our insurance companies as a passive investor in debt securities (rated and unrated) and equity interests issued by VIEs. Our exposure is generally limited to those interests held.

For VIEs with attributes consistent with that of an investment company or a money market fund, the primary beneficiary is the party or group of related parties that absorbs a majority of the expected losses of the VIE, receives the majority of the expected residual returns of the VIE, or both.

For all other VIEs, the primary beneficiary is the entity that has both (1) the power to direct the activities of the VIE that most significantly affect the VIE's economic performance and (2) the obligation to absorb losses or the right to receive benefits that could be potentially significant to the VIE. While also considering these factors, the consolidation conclusion depends on the breadth of our decision-making ability and our ability to influence activities that significantly affect the economic performance of the VIE.

 

Exposure to Loss

 

AIG's total off-balance sheet exposure associated with VIEs, primarily consisting of commitments to real estate and investment funds, was $0.2 billion at both June 30, 2013 and December 31, 2012.

The following table presents the total assets and total liabilities associated with our variable interests in consolidated VIEs:

 

 
  


   
  


   
  
   
 
   VIE Assets(a)   VIE Liabilities  
(in billions)
  

June 30,
2013

   December 31,
2012
  

June 30,
2013

   December 31,
2012
  
   

ALICO SPV(b)

  
$
–
 
 $ 0.6  
$
0.1
 
 $ 0.1  

Real estate and investment funds(c)

  
 
1.0
 
   1.4  
 
0.1
 
   0.2  

Securitization vehicles

  
 
4.9
 
   2.4  
 
0.1
 
   –  

Structured investment vehicles

  
 
1.5
 
   1.7  
 
0.1
 
   0.1  

Affordable housing partnerships

  
 
2.2
 
   2.3  
 
0.3
 
   0.2  

Other

  
 
3.2
 
   3.3  
 
0.8
 
   1.3
   

Total

  
$
12.8
 
 $ 11.7  
$
1.5
 
 $ 1.9
   

(a)  The assets of each VIE can be used only to settle specific obligations of that VIE.

(b)  On May 1, 2013, escrowed funds totaling $547 million were released in accordance with the ALICO stock purchase agreement. See Note 10 for additional information.

(c)  At June 30, 2013 and December 31, 2012, off-balance sheet exposure with respect to real estate and investment funds was $50.9 million and $48.7 million, respectively.

We calculate our maximum exposure to loss to be (i) the amount invested in the debt or equity of the VIE, (ii) the notional amount of VIE assets or liabilities where we have also provided credit protection to the VIE with the VIE as the referenced obligation, and (iii) other commitments and guarantees to the VIE. Interest holders in VIEs sponsored by us generally have recourse only to the assets and cash flows of the VIEs and do not have recourse to us, except in limited circumstances when we have provided a guarantee to the VIE's interest holders.

The following table presents total assets of unconsolidated VIEs in which we hold a variable interest, as well as our maximum exposure to loss associated with these VIEs:

 

   
 
    
   Maximum Exposure to Loss  
(in billions)
   Total VIE
Assets
   On-Balance
Sheet
   Off-Balance
Sheet
   Total
  
   

June 30, 2013

                          

Real estate and investment funds

   $ 17.7   $ 2.2   $ 0.2   $ 2.4  

Affordable housing partnerships

     0.5     0.5     –     0.5  

Other

     1.1     0.1     –     0.1
   

Total

   $ 19.3   $ 2.8   $ 0.2   $ 3.0
   

December 31, 2012

                          

Real estate and investment funds

   $ 16.7   $ 1.8   $ 0.2   $ 2.0  

Affordable housing partnerships

     0.5     0.5     –     0.5  

Other

     1.0     0.1     –     0.1
   

Total

   $ 18.2   $ 2.4   $ 0.2   $ 2.6
   

 

Balance Sheet Classification

 

AIG's interests in the assets and liabilities of consolidated and unconsolidated VIEs were classified in the Condensed Consolidated Balance Sheets as follows:

 

 
  


   
  


   
  
   
 
   Consolidated VIEs   Unconsolidated VIEs  
(in billions)
  

June 30,
2013

   December 31,
2012
  

June 30,
2013

   December 31,
2012
  
   

Assets:

  
 
 
 
      
 
 
 
      

Available for sale securities

  
$
5.3
 
 $ 2.9  
$
–
 
 $ –  

Trading securities

  
 
0.9
 
   1.0  
 
0.1
 
   0.1  

Mortgage and other loans receivable

  
 
0.3
 
   0.4  
 
–
 
   –  

Other invested assets

  
 
4.0
 
   4.4  
 
2.7
 
   2.3  

Other assets

  
 
2.3
 
   3.0  
 
–
 
   –
   

Total assets

  
$
12.8
 
 $ 11.7  
$
2.8
 
 $ 2.4
   

Liabilities:

  
 
 
 
      
 
 
 
      

Long-term debt

  
$
0.7
 
 $ 0.7  
$
–
 
 $ –  

Other liabilities

  
 
0.8
 
   1.2  
 
–
 
   –
   

Total liabilities

  
$
1.5
 
 $ 1.9  
$
–
 
 $ –
   

See Note 11 to the Consolidated Financial Statements in the 2012 Annual Report for additional information on VIEs.