AIG 2014 Annual Report Download - page 193

ITEM 7 / ENTERPRISE RISK MANAGEMENT
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The following table presents the fair value of GCM’s derivatives portfolios by internal counterparty credit rating:
At December 31,
(in millions) 2014 2013
Rating:
AAA $ 56 $ 129
AA 130 156
A 215 291
BBB 962 687
Below investment grade 68 114
Tota l $ 1,431 $ 1,377
See Note 11 to the Consolidated Financial Statements for additional discussion related to derivative transactions.
AIG Parent and Other
The major risk for investments in life settlements is longevity risk, which represents the risk of a change in the carrying value of
the contracts arising from actual mortality rates being lower than the expected mortality rates. This risk could arise from longer
term societal health changes as well as other factors.
Critical Accounting Estimates
The preparation of financial statements in accordance with U.S. GAAP requires the application of accounting policies that often
involve a significant degree of judgment.
The accounting policies that we believe are most dependent on the application of estimates and
assumptions, which are critical accounting estimates, are related to the determination of:
• classification of ILFC as held for sale and related fair value measurement;
• income tax assets and liabilities, including recoverability of our net deferred tax asset and the predictability of future tax
operating profitability of the character necessary to realize the net deferred tax asset;
• liability for unpaid losses and loss adjustment expenses;
• reinsurance assets;
• valuation of future policy benefit liabilities and timing and extent of loss recognition;
• valuation of liabilities for guaranteed benefit features of variable annuity products;
• estimated gross profits to value deferred acquisition costs for investment-oriented products;
• impairment charges, including other-than-temporary impairments on available for sale securities, impairments on
investments in life settlements and goodwill impairment;
• liability for legal contingencies; and
• fair value measurements of certain financial assets and liabilities.
These accounting estimates require the use of assumptions about matters, some of which are highly uncertain at the time of
estimation. To the extent actual experience differs from the assumptions used, our consolidated financial condition, results of
operations and cash flows could be materially affected.