AIG 2013 Annual Report Download - page 238

If the qualitative test is not performed or if the test indicates a potential impairment is present, we estimate the fair
value of each reporting unit and compare the estimated fair value with the carrying amount of the reporting unit,
including allocated goodwill. The estimate of a reporting unit’s fair value involves management judgment and is
based on one or a combination of approaches including discounted expected future cash flows, market-based
earnings multiples of the unit’s peer companies, external appraisals or, in the case of reporting units being
considered for sale, third-party indications of fair value, if available. We consider one or more of these estimates
when determining the fair value of a reporting unit to be used in the impairment test.
If the estimated fair value of a reporting unit exceeds its carrying value, goodwill is not impaired. If the carrying value
of a reporting unit exceeds its estimated fair value, goodwill associated with that reporting unit potentially is impaired.
The amount of impairment, if any, is measured as the excess of the carrying value of the goodwill over the implied
fair value of the goodwill. The implied fair value of the goodwill is measured as the excess of the fair value of the
reporting unit over the amounts that would be assigned to the reporting unit’s assets and liabilities in a hypothetical
business combination. An impairment charge is recognized in earnings to the extent of the excess. AIG Property
Casualty manages its assets on an aggregate basis and does not allocate its assets, other than goodwill, between its
operating segments. Therefore, the carrying value of the reporting units was determined by allocating the carrying
value of AIG Property Casualty to those units based on an internal capital allocation model.
At December 31, 2013, we performed our annual goodwill impairment test. Based on the results of the goodwill
impairment test, we concluded that the remaining goodwill was not impaired.
The following table presents the changes in goodwill by reportable segment:
Balance at December 31, 2011:
Goodwill – gross $ 2,546 $ 2,304 $ 4,850
Accumulated impairments (1,196) (2,281) (3,477)
Net goodwill 1,350 23 1,373
Increase (decrease) due to:
Acquisition 119 – 119
Goodwill impairments – (23) (23)
Balance at December 31, 2012:
Goodwill – gross $ 2,665 $ 2,281 $ 4,946
Accumulated impairments (1,196) (2,281) (3,477)
Net goodwill $ 1,469 $ – $ 1,469
Increase (decrease) due to:
Other 6–6
Balance at December 31, 2013:
Goodwill – gross
Accumulated impairments
Net goodwill
Separate accounts represent funds for which investment income and investment gains and losses accrue directly to
the policyholders who bear the investment risk. Each account has specific investment objectives and the assets are
carried at fair value. The assets of each account are legally segregated and are not subject to claims that arise from
any of our other businesses. The liabilities for these accounts are equal to the account assets. For a more detailed
discussion of separate accounts, see Note 13 herein.
Other policyholder funds are reported at cost and include any policyholder funds on deposit that encompass
premium deposits and similar items, including liabilities for dividends arising out of participating business, reserves for
experience-rated group products and unearned revenue reserves (URR). URR consist of front end loads on interest-
sensitive contracts, representing those policy loads that are non-level and typically higher in initial policy years than
in later policy years. URR for interest-sensitive life insurance policies are generally deferred and amortized, with
interest, in relation to the incidence of estimated gross profits (EGPs) for investment-oriented products to be realized
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AIG 2013 Form 10-K220
ITEM 8 / NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
AIG Property
(in millions) Casualty Other Total
$ 2,671 $ 2,281 $ 4,952
(1,196) (2,281) (3,477)
$ 1,475 $ – $ 1,475
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