AIG 2013 Annual Report Download - page 218

product line. Changes in the equity markets and volatility primarily impact individual variable annuities in our
Retirement Income Solutions and Group Retirement product lines. The effect of changes in mortality
primarily impacts the universal life insurance business.
Assumptions:
Net Investment Spread
Effect of an increase by 10 basis points $ 139 $ (19) $ 8 $ 151
Effect of a decrease by 10 basis points (141) 19 (7) (153)
Equity Return(a)
Effect of an increase by 1% 60 (22) – 82
Effect of a decrease by 1% (57) 55 – (112)
Volatility(b)
Effect of an increase by 1% – 11 – (11)
Effect of a decrease by 1% – (11) – 11
Mortality
Effect of an increase by 1% (15) 21 (6) (30)
Effect of a decrease by 1% 9 (21) 4 26
(a) Represents the net impact of 1 percent increase or decrease in long-term equity returns for GMDB and GMIB reserves and negligible net impact
of 1 percent increase or decrease in the S&P 500 index for living benefit reserves.
(b) Represents the net impact of 1 percentage point increase or decrease in implied volatility.
The analysis of DAC, guaranteed benefits reserve and unearned revenue liability is a dynamic process that considers
all relevant factors and assumptions described above. We estimate each of the above factors individually, without the
effect of any correlation among the key assumptions. An assessment of sensitivity associated with changes in any
single assumption would not necessarily be an indicator of future results.
At each balance sheet date, we evaluate our available for sale securities holdings with unrealized losses.
See the discussion in Note 6 to the Consolidated Financial Statements for additional information on the methodology
and significant inputs, by security type, that we use to determine the amount of other-than-temporary impairment on
fixed maturity and equity securities.
For a discussion of impairments on investments in life settlements, see Investments in this MD&A and Note 6 to the
Consolidated Financial Statements.
For a discussion of goodwill impairment, see Note 2 to the Consolidated Financial Statements. In 2013 and 2012,
AIG elected to bypass the qualitative assessment and therefore, performed quantitative assessments that supported
a conclusion that the fair value of each of the two reporting units tested exceeded their book value. In determining
fair value, we primarily use a discounted expected future cash flow analysis based on AIG’s business projections that
inherently include judgments regarding business trends.
Impairment Charges
Other-Than-Temporary Impairments on Available For Sale Securities
Impairments on Investments in Life Settlements
Goodwill Impairment
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AIG 2013 Form 10-K200
ITEM 7 / CRITICAL ACCOUNTING ESTIMATES
Guaranteed Unearned Net
December 31, 2013 Benefits Revenue Pre-Tax
(in millions) DAC/SIA Reserve Liability Earnings
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