AIG 2009 Annual Report Download - page 219

American International Group, Inc., and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Aircraft in the fleet are evaluated for impairment whenever events or changes in circumstances indicate the carrying
amount of an asset may not be recoverable. Recoverability of assets is measured by comparing the carrying amount of
an asset to future undiscounted net cash flows expected to be generated by the asset. These evaluations for
impairment are significantly affected by estimates of future net cash flows and other factors that involve uncertainty.
There are a number of factors and circumstances that can influence (and increase) the potential for recognizing an
impairment loss. A firm commitment to sell aircraft would result in aircraft being reclassified from held for use to held
for sale for financial reporting purposes and would require an impairment assessment based on the aircraft’s fair
value. An increase in the likelihood of a sale transaction being completed could result in a similar impairment
assessment if the probability of an aircraft sale becomes high enough to reduce the probability weighted expected
undiscounted future cash flows to be realized from the aircraft to an amount that is less than its carrying value.
When assets are retired or disposed of, the cost and associated accumulated depreciation are removed from the
related accounts and the difference, net of proceeds, is recorded as a gain or loss in Other income.
Accumulated depreciation on flight equipment was $13.9 billion and $12.3 billion at December 31, 2009 and 2008,
respectively.
Other invested assets: Other invested assets consist primarily of investments by AIG’s insurance operations in hedge
funds, private equity funds, other investment partnerships and direct private equity investments.
Hedge funds, private equity funds and other investment partnerships in which AIG’s insurance operations hold in
the aggregate less than a five percent interest are reported at fair value. The change in fair value is recognized as a
component of Accumulated other comprehensive income (loss). With respect to hedge funds, private equity funds and
other investment partnerships in which AIG holds in the aggregate a five percent or greater interest or less than a five
percent interest but in which AIG has more than a minor influence over the operations of the investee, AIG’s carrying
value is its share of the net asset value of the funds or the partnerships. The changes in such net asset values,
accounted for under the equity method, are recorded in Net investment income.
In applying the equity method of accounting, AIG consistently uses the most recently available financial
information provided by the general partner or manager of each of these investments, which is one to three months
prior to the end of AIG’s reporting period. The financial statements of these investees are generally audited on an
annual basis.
Other invested assets include direct private equity investments entered into for strategic purposes and not solely for
capital appreciation or for income generation. These investments are accounted for under the equity method. At
December 31, 2009, AIG’s significant direct private equity investments included its 26 percent interest in Tata AIG
Life Insurance Company, Ltd., its 26 percent interest in Tata AIG General Insurance Company, Ltd. and its
41.55 percent interest in The Fuji Fire and Marine Insurance Co., Ltd. Dividends received from unconsolidated
entities in which AIG’s ownership interest is less than 50 percent were $1 million, $20 million and $30 million for the
years ended December 31, 2009, 2008, and 2007, respectively. The undistributed earnings of unconsolidated entities in
which AIG’s ownership interest is less than 50 percent were $12 million, $227 million and $266 million at
December 31, 2009, 2008 and 2007, respectively.
Also included in Other invested assets are real estate held for investment, aircraft asset investments held by
non-Financial Services subsidiaries and investments in life settlement contracts. See Note 6(e) herein for further
information.
Securities purchased (sold) under agreements to resell (repurchase), at contract value: Securities purchased under
agreements to resell and Securities sold under agreements to repurchase are accounted for as collateralized borrowing
or lending transactions and are recorded at their contracted resale or repurchase amounts, plus accrued interest other
than those entered into by AIGFP. AIGFP carries such agreements at their current fair value based on market
observable interest rates and credit spreads. AIG’s policy is to take possession of or obtain a security interest in
securities purchased under agreements to resell.
211 AIG 2009 Form 10-K