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VARIABLE INTEREST ENTITIES
9 Months Ended
Sep. 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.

 

Balance Sheet Classification and Exposure to Loss

 

The following table presents the total assets and total liabilities associated with our variable interests in consolidated VIEs, as classified in the Condensed Consolidated Balance Sheets:

 

   
(in millions)
  Real estate
and
investment
funds(c)

  Securitization
vehicles

  Structured
investment
vehicles

  Affordable
housing
partnerships

  Other
  Total
 
   

September 30, 2013

                                     

Assets:

                                     

Available for sale securities

  $   $ 11,111   $   $   $   $ 11,111  

Trading securities

            745         117     862  

Mortgage and other loans receivable

                    301     301  

Other invested assets

    924             2,068     862     3,854  

Other assets

    65         646     36     707     1,454
   

Total assets(a)(b)

  $ 989   $ 11,111   $ 1,391   $ 2,104   $ 1,987   $ 17,582
   

Liabilities:

                                     

Long-term debt                         

  $ 74   $ 151   $ 87   $ 194   $ 198   $ 704  

Other liabilities                         

    47         61     79     257     444
   

Total liabilities

  $ 121   $ 151   $ 148   $ 273   $ 455   $ 1,148
   

December 31, 2012

                                     

Assets:

                                     

Available for sale securities

  $ 198   $ 2,422   $   $   $ 324   $ 2,944  

Trading securities

    15         792         204     1,011  

Mortgage and other loans receivable

                    398     398  

Other invested assets

    1,122             2,230     1,023     4,375  

Other assets

    59         902     33     2,013     3,007
   

Total assets(a)(b)

  $ 1,394   $ 2,422   $ 1,694   $ 2,263   $ 3,962   $ 11,735
   

Liabilities:

                                     

Long-term debt

  $ 157   $ 25   $ 9   $ 133   $ 424   $ 748  

Other liabilities

    20         43     68     1,044     1,175
   

Total liabilities

  $ 177   $ 25   $ 52   $ 201   $ 1,468   $ 1,923
   

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

(b)  At September 30, 2013 and December 31, 2012 includes approximately $12.2 billion and $3.6 billion, respectively, of primarily investment-grade debt securities held by certain securitization vehicles that issued beneficial interests in these investments. The majority of the beneficial interests issued are held by AIG.

(c)  At September 30, 2013 and December 31, 2012, off-balance sheet exposure, primarily consisting of commitments to real estate and investment funds, was $50.8 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 millions)
  Total VIE
Assets

  On-Balance
Sheet*

  Off-Balance
Sheet

  Total
 
   

September 30, 2013

                         

Real estate and investment funds

  $ 20,087   $ 2,203   $ 193   $ 2,396  

Affordable housing partnerships

    474     473         473  

Other

    1,181     166     87     253
   

Total

  $ 21,742   $ 2,842   $ 280   $ 3,122
   

December 31, 2012

                         

Real estate and investment funds

  $ 16,662   $ 1,881   $ 169   $ 2,050  

Affordable housing partnerships

    498     498         498  

Other

    1,018     79         79
   

Total

  $ 18,178   $ 2,458   $ 169   $ 2,627
   

*     At September 30, 2013 and December 31, 2012, $2.8 billion and $2.5 billion, respectively, of our total unconsolidated VIE assets were recorded as Other invested assets.

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