AIG 2013 Annual Report Download - page 277

In periods subsequent to the recognition of an other-than-temporary impairment charge for available for sale fixed
maturity securities that is not foreign exchange related, we prospectively accrete into earnings the difference between
the new amortized cost and the expected undiscounted recovery value over the remaining expected holding period of
the security.
The following table presents a rollforward of the cumulative credit losses in other-than-temporary
impairments recognized in earnings for available for sale fixed maturity securities:
Balance, beginning of year $ 6,504 $ 6,786
Increases due to:
Credit impairments on new securities subject to impairment losses 194 235
Additional credit impairments on previously impaired securities 483 735
Reductions due to:
Credit impaired securities fully disposed for which there was no prior intent or
requirement to sell (1,105) (529)
Credit impaired securities for which there is a current intent or anticipated
requirement to sell (5) –
Accretion on securities previously impaired due to credit*(915) (544)
Hybrid securities with embedded credit derivatives reclassified to other bond
securities – (179)
Other 8–
Balance, end of year $ 5,164 $ 6,504
* Represents both accretion recognized due to changes in cash flows expected to be collected over the remaining expected term of the credit
impaired securities and the accretion due to the passage of time.
We evaluate our available for sale equity securities, equity method and cost method investments for impairment by
considering such securities as candidates for other-than-temporary impairment if they meet any of the following
criteria:
• The security has traded at a significant (25 percent or more) discount to cost for an extended period of time (nine
consecutive months or longer);
• A discrete credit event has occurred resulting in (i) the issuer defaulting on a material outstanding obligation;
(ii) the issuer seeking protection from creditors under the bankruptcy laws or any similar laws intended for court-
supervised reorganization of insolvent enterprises; or (iii) the issuer proposing a voluntary reorganization pursuant
to which creditors are asked to exchange their claims for cash or securities having a fair value substantially lower
than the par value of their claims; or
• We have concluded that we may not realize a full recovery on our investment, regardless of the occurrence of one
of the foregoing events.
The determination that an equity security is other-than-temporarily impaired requires the judgment of management
and consideration of the fundamental condition of the issuer, its near-term prospects and all the relevant facts and
circumstances. In addition to the above criteria, all equity securities that have been in a continuous decline in value
below cost over twelve months are impaired. We also consider circumstances of a rapid and severe market valuation
decline (50 percent or more) discount to cost, in which we could not reasonably assert that the impairment period
would be temporary (severity losses).
Our investments in private equity funds and hedge funds are evaluated for impairment similar to the evaluation of
equity securities for impairments as discussed above. Such evaluation considers market conditions, events and
Credit Impairments
Equity Securities
Other Invested Assets
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AIG 2013 Form 10-K 259
ITEM 8 / NOTE 6. INVESTMENTS
Years Ended December 31,
(in millions) 2013 2012 2011
$ 5,164
47
78
(643)
–
(774)
–
–
$ 3,872
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