AIG 2014 Annual Report Download - page 300

ITEM 8 / NOTE 14. VARIABLE LIFE AND ANNUITY CONTRACTS
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value of the contract only through a series of withdrawals that do not exceed a specific percentage per year of the guaranteed
amount. If, after the series of withdrawals, the account value is exhausted, the contract holder will receive a series of annuity
payments equal to the remaining guaranteed amount, and, for lifetime GMWB products, the annuity payments continue as
long as the covered person(s) is living. With a GMAV benefit, the contract holder can monetize the excess of the guaranteed
amount over the account value of the contract, provided the contract holder persists until the maturity date.
The liabilities for GMWB and GMAV, which are recorded in Policyholder contract deposits, are accounted for as embedded
derivatives measured at fair value, with changes in the fair value of the liabilities recorded in Other net realized capital gains
(losses). The fair value of these embedded derivatives was a net liability of $957 million at December 31, 2014 and a net asset
of $37 million at December 31, 2013. See Note 5 herein for discussion of the fair value measurement of guaranteed benefits
that are accounted for as embedded derivatives. We had account values subject to GMWB and GMAV that totaled $35 billion
and $28.6 billion at December 31, 2014 and 2013, respectively. The net amount at risk for GMWB represents the present value
of minimum guaranteed withdrawal payments, in accordance with contract terms, in excess of account value, assuming no
lapses. The net amount at risk for GMAV represents the present value of minimum guaranteed account value in excess of the
current account balance, assuming no lapses. The net amount at risk related to these guarantees was $414 million and $63
million at December 31, 2014 and 2013, respectively. The increase in 2014 was primarily due to a decrease in interest rates.
We use derivative instruments and other financial instruments to mitigate a portion of our exposure that arises from GMWB
and GMAV benefits.
See Note 1 for discussion of presentation changes for policy fees that are related primarily to GMWB embedded derivatives.
15. DEBT
Our long-term debt is denominated in various currencies, with both fixed and variable interest rates. Long-term debt is carried
at the principal amount borrowed, including unamortized discounts, hedge accounting valuation adjustments and fair value
adjustments, when applicable. The interest rates presented in the following table reflect the range of contractual rates in effect
at December 31, 2014, including fixed and variable rate issuances.
The following table lists our total debt outstanding at December 31, 2014 and 2013. The interest rates presented in the
following table are the range of contractual rates in effect at December 31, 2014, including fixed and variable-rates:
Balance at Balance at
At December 31, 2014 Range of Maturity December 31, December 31,
(in millions) Interest Rate(s) Date(s) 2014 2013
Debt issued or guaranteed by AIG:
AIG general borrowings:
Notes and bonds payable 2.30% - 8.13% 2015 - 2097 $ 15,570 $ 14,062
Subordinated debt 2.38% 2015 250 250
Junior subordinated debt 4.88% - 8.63% 2037 - 2047 2,466 5,533
Loans and mortgages payable 9.00% 2015 - 1
AIGLH notes and bonds payable 6.63% - 7.50% 2025 - 2029 284 299
AIGLH junior subordinated debt 7.57% - 8.50% 2030 - 2046 536 1,054
Total AIG general borrowings 19,106 21,199
AIG/DIB borrowings supported by assets:(a)
MIP notes payable 2.28% - 8.59% 2015 - 2018 2,870 7,963
Series AIGFP matched notes and bonds payable 0.10% - 0.24% 2017 - 2047 34 3,219
GIAs, at fair value 0.04% - 8.50% 2015 - 2047 4,648 5,530
Notes and bonds payable, at fair value 0.15% - 10.4% 2015 - 2049 818 1,217
Total AIG/DIB borrowings supported by assets 8,370 17,929
Total debt issued or guaranteed by AIG 27,476 39,128
Debt not guaranteed by AIG:
Other subsidiaries notes, bonds, loans and
mortgages payable 0.06% - 5.60% 2015 - 2047 58 656
Debt of consolidated investments(b) 0.03% - 9.06% 2015 - 2061 3,683 1,909
Total debt not guaranteed by AIG 3,741 2,565