AIG 2015 Annual Report Download - page 112

ITEM 7 / RESULTS OF OPERATIONS / CORPORATE AND OTHER

112
2014 used under Pennsylvania and Delaware prescribed or permitted practices, change in payout pattern assumptions,
including the effect of commutations and accelerated settlements for the certain Excess Workers’ Compensation reserves, as
well as accretion. See Insurance Reserves - Discounting of Reserves for additional information.
Investments
OVERVIEW
Our investment strategies are tailored to the specific business needs of each operating unit. The investment objectives are
driven by the respective business models for Non-Life Insurance Companies, Life Insurance Companies and AIG Parent. The
primary objectives are generation of investment income, preservation of capital, liquidity management and growth of surplus to
support the insurance products. The majority of assets backing our insurance liabilities consist of intermediate and long
duration fixed maturity securities.
Investments Highlights in 2015
• A rise in rates, widening of credit spreads and sales of equity securities resulted in a decrease in our net unrealized
gain position in our investment portfolio. Net unrealized gains in our available for sale portfolio decreased to
approximately $8.8 billion as of December 31, 2015 from approximately $19.0 billion as of December 31, 2014.
• We continued to make investments in structured securities and other fixed maturity securities and increased lending
activities in mortgage loans with favorable risk versus return characteristics to improve yields and increase net
investment income.
• Our alternative investments portfolio performance experienced a significant drop off in the second half of 2015 due to
increased volatility in equity markets, which affected the performance of our hedge fund portfolio.
• Blended investment yields on new investments were lower than blended rates on investments that were sold, matured
or called.
• Other-than-temporary impairments increased due to impairments within the energy and emerging markets sectors,
driven primarily by slowing growth in China and weakness in commodity markets.
• We experienced an increase in gains of sales of securities in 2015 versus 2014 due to a partial divestiture of our PICC
equity interests.
Investment Strategies
Investment strategies are based on considerations that include the local and general market conditions, liability duration and
cash flow characteristics, rating agency and regulatory capital considerations, legal investment limitations, tax optimization and
diversification.
Some of our key investment strategies are as follows:
• Fixed maturity securities held by the U.S. insurance companies included in Non-Life Insurance Companies consist of a mix
of instruments that meet our current risk-return, tax, liquidity, credit quality and diversification objectives.