AIG 2013 Annual Report Download - page 247

The following table presents the components of income from discontinued operations:
Revenues:
Premiums $ – $ 5,012
Net investment income – 1,632
Net realized capital gains – 844
Other income –5
Total revenues – 7,493
Benefits, claims and expenses – 6,324
Interest expense allocation –2
Income from discontinued operations – 1,167
Gain on sale 1 2,338
Income from discontinued operations, before income tax expense 1 3,505
Income tax expense – 1,038
Income from discontinued operations, net of income tax expense $ 1 $ 2,467
We carry certain of our financial instruments at fair value. We define the fair value of a financial instrument as the
amount that would be received from the sale of an asset or paid to transfer a liability in an orderly transaction
between market participants at the measurement date. We are responsible for the determination of the value of the
investments carried at fair value and the supporting methodologies and assumptions.
The degree of judgment used in measuring the fair value of financial instruments generally inversely correlates with
the level of observable valuation inputs. We maximize the use of observable inputs and minimize the use of
unobservable inputs when measuring fair value. Financial instruments with quoted prices in active markets generally
have more pricing observability and less judgment is used in measuring fair value. Conversely, financial instruments
for which no quoted prices are available have less observability and are measured at fair value using valuation
models or other pricing techniques that require more judgment. Pricing observability is affected by a number of
factors, including the type of financial instrument, whether the financial instrument is new to the market and not yet
established, the characteristics specific to the transaction, liquidity and general market conditions.
Assets and liabilities recorded at fair value in the Consolidated Balance Sheets are measured and classified in
accordance with a fair value hierarchy consisting of three ‘‘levels’’ based on the observability of inputs available in
the marketplace used to measure the fair values as discussed below:
•Level 1: Fair value measurements that are based on quoted prices (unadjusted) in active markets that we have
the ability to access for identical assets or liabilities. Market price data generally is obtained from exchange or
dealer markets. We do not adjust the quoted price for such instruments.
•Level 2: Fair value measurements based on inputs other than quoted prices included in Level 1 that are
observable for the asset or liability, either directly or indirectly. Level 2 inputs include quoted prices for similar
assets and liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are
not active, and inputs other than quoted prices that are observable for the asset or liability, such as interest rates
and yield curves that are observable at commonly quoted intervals.
5. FAIR VALUE MEASUREMENTS
Fair Value Measurements on a Recurring Basis
Fair Value Hierarchy
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AIG 2013 Form 10-K 229
ITEM 8 / NOTE 4. HELD-FOR-SALE CLASSIFICATION, DIVESTED BUSINESSES AND DISCONTINUED
OPERATIONS
Years Ended December 31,
(in millions) 2013 2012 2011
$–
–
–
–
–
–
–
–
150
150
66
$84
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