AIG 2013 Annual Report Download - page 265

During 2013, 2012 and 2011, we recognized losses of $54 million, losses of $641 million and gains of $420 million,
respectively, attributable to the observable effect of changes in credit spreads on our own liabilities for which the fair
value option was elected. We calculate the effect of these credit spread changes using discounted cash flow
techniques that incorporate current market interest rates, our observable credit spreads on these liabilities and other
factors that mitigate the risk of nonperformance such as cash collateral posted.
The following table presents the difference between fair values and the aggregate contractual principal
amounts of mortgage and other loans receivable and long-term borrowings for which the fair value option
was elected:
Assets:
Mortgage and other loans receivable $ 134 $ 141 $ (7)
Liabilities:
Long-term debt*$ 8,055 $ 5,705 $ 2,350
* Includes GIAs, notes, bonds, loans and mortgages payable.
There were no mortgage or other loans receivable for which the fair value option was elected that were 90 days or
more past due or in non-accrual status at December 31, 2013 and 2012.
We measure the fair value of certain assets on a non-recurring basis, generally quarterly, annually or when events or
changes in circumstances indicate that the carrying amount of the assets may not be recoverable. These assets
include cost and equity-method investments, investments in life settlements, collateral securing foreclosed loans and
real estate and other fixed assets, goodwill and other intangible assets. See Note 6 herein for additional information
about how we test various asset classes for impairment.
The following table presents assets measured at fair value on a non-recurring basis at the time of
impairment and the related impairment charges recorded during the periods presented:
December 31, 2013
Investment real estate $–$18
Other investments 151 327
Investments in life settlements 309 312
Other assets 11 3
Total $ 471 $ 660
December 31, 2012
Other investments $ – $ – $ 1,930 $ 1,930
Investments in life settlements – – 120 120
Other assets – 3 18 21
Total $ – $ 3 $ 2,068 $ 2,071
Information regarding the estimation of fair value for financial instruments not carried at fair value (excluding
insurance contracts and lease contracts) is discussed below:
•Mortgage and other loans receivable: Fair values of loans on real estate and other loans receivable were
estimated for disclosure purposes using discounted cash flow calculations based on discount rates that we believe
market participants would use in determining the price that they would pay for such assets. For certain loans, our
current incremental lending rates for similar types of loans are used as the discount rates, because we believe this
FAIR VALUE MEASUREMENTS ON A NON-RECURRING BASIS
FAIR VALUE INFORMATION ABOUT FINANCIAL INSTRUMENTS NOT MEASURED AT FAIR VALUE
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AIG 2013 Form 10-K 247
ITEM 8 / NOTE 5. FAIR VALUE MEASUREMENTS
December 31, 2013 December 31, 2012
Outstanding Outstanding
(in millions) Fair Value Principal Amount Difference Fair Value Principal Amount Difference
$– $–$–
$ 6,747 $ 5,231 $ 1,516
Assets at Fair Value Impairment Charges
Non-Recurring Basis December 31,
(in millions) Level 1 Level 2 Level 3 Total 2013 2012 2011
$–$–$–$– $–
– – 1,615 1,615 112
– – 896 896 971
–114859 31
$ – $ 11 $ 2,559 $ 2,570 $ 1,114
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