AIG 2013 Annual Report Download - page 236

Note 12. Liability for Unpaid Claims and Claims Adjustment Expense, and Future Policy Benefits for
Life and Accident and Health Insurance Contracts, and Policyholder Contract Deposits
• Liability for unpaid claims and claims adjustment expense
• Future policy benefits
• Policyholder contract deposits
• Interest credited to policyholder account balances
Note 14. Debt
• Long-term debt
Note 15. Contingencies, Commitments and Guarantees
• Legal contingencies
Note 17. Noncontrolling Interests
Note 18. Earnings Per Share
Note 23. Income Taxes
Premiums for short-duration contracts are recorded as written on the inception date of the policy. Premiums are
earned primarily on a pro rata basis over the term of the related coverage. Sales of extended services contracts are
reflected as premiums written and earned on a pro rata basis over the term of the related coverage. The reserve for
unearned premiums includes the portion of premiums written relating to the unexpired terms of coverage.
Reinsurance premiums under a reinsurance contract are typically earned over the same period as the underlying
policies, or risks, covered by the contracts. As a result, the earnings pattern of a reinsurance contract may extend up
to 24 months, reflecting the inception dates of the underlying policies throughout the year.
Reinsurance premiums ceded are recognized as a reduction in revenues over the period the reinsurance coverage is
provided in proportion to the risks to which the premiums relate.
Premiums for long duration insurance products and life contingent annuities are recognized as revenues when due.
Estimates for premiums due but not yet collected are accrued.
Policy fees represent fees recognized from universal life and investment-type products consisting of policy charges
for the cost of insurance, policy administration charges, surrender charges and amortization of unearned revenue
reserves.
Aircraft leasing revenue from flight equipment under operating leases is recognized over the life of the leases as
rental payments become receivable under the provisions of the leases or, in the case of leases with varying
payments, under the straight-line method over the noncancelable term of the leases. In certain cases, leases provide
for additional payments contingent on usage. In those cases, rental revenue is recognized at the time such usage
occurs, net of estimated future contractual aircraft maintenance reimbursements. Gains on sales of flight equipment
are recognized when flight equipment is sold and the risk of ownership of the equipment is passed to the new owner.
Other income includes unrealized gains and losses on derivatives, including unrealized market valuation gains and
losses associated with the Global Capital Markets (GCM) super senior credit default swap (CDS) portfolio, advisory
fee income from AIG Life and Retirement’s broker dealer business, income from the Direct Investment book (DIB), as
well as legal settlements of $1.2 billion and $200 million from legacy crisis and other matters in 2013 and 2012,
respectively.
Other income from our Other Operations category consists of the following:
• Change in fair value relating to financial assets and liabilities for which the fair value option has been elected.
• Interest income and related expenses, including amortization of premiums and accretion of discounts on bonds
with changes in the timing and the amount of expected principal and interest cash flows reflected in the yield, as
applicable.
• Dividend income from common and preferred stock and distributions from other investments.
• Changes in the fair value of other securities sold but not yet purchased, futures, hybrid financial instruments,
securities purchased under agreements to resell, and securities sold under agreements to repurchase.
Other significant accounting policies
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AIG 2013 Form 10-K218
ITEM 8 / NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
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