AIG 2014 Annual Report Download - page 258

ITEM 8 / NOTE 5. FAIR VALUE MEASUREMENTS

241
Corporate debt 487 (114) (549) (176)
RMBS 4,424 (266) (2,340) 1,818
CMBS 1,023 (188) (460) 375
CDO/ABS 2,662 (159) (557) 1,946
Total bonds available for sale 9,146 (865) (3,912) 4,369
Other bond securities:
Corporate debt - - - -
RMBS 350 (12) (130) 208
CMBS 24 (71) (153) (200)
CDO/ABS 353 (72) (2,325) (2,044)
Total other bond securities 727 (155) (2,608) (2,036)
Equity securities available for sale 58 (12) (115) (69)
Other invested assets 882 (9) (809) 64
Total assets $ 10,813 $ (1,041) $ (7,444) $ 2,328
Liabilities:
Policyholder contract deposits $ - $ (26) $ 228 $ 202
Derivative liabilities, net 10 (1) (738) (729)
Long-term debt(b) - - 38 38
Total liabilities $ 10 $ (27) $ (472) $ (489)
(a) There were no issuances during the years ended December 31, 2014 and 2013.
(b) Includes GIAs, notes, bonds, loans and mortgages payable.
Both observable and unobservable inputs may be used to determine the fair values of positions classified in Level 3 in the
tables above. As a result, the unrealized gains (losses) on instruments held at December 31, 2014 and 2013 may include
changes in fair value that were attributable to both observable (e.g., changes in market interest rates) and unobservable
(e.g., changes in unobservable long-dated volatilities) inputs.
Transfers of Level 3 Assets and Liabilities
We record transfers of assets and liabilities into or out of Level 3 at their fair values as of the end of each reporting period,
consistent with the date of the determination of fair value. As a result, the Net realized and unrealized gains (losses) included
in income or other comprehensive income and as shown in the table above excludes $22 million of net gains and $15 million
of net losses related to assets and liabilities transferred into Level 3 during 2014 and 2013, respectively, and includes
$62 million and $44 million of net gains related to assets and liabilities transferred out of Level 3 during 2014 and 2013,
respectively.
Transfers of Level 3 Assets
During the years ended December 31, 2014 and 2013, transfers into Level 3 assets primarily included certain investments in
private placement corporate debt, RMBS, CMBS, CDO/ABS, and investments in hedge funds. Transfers of private placement
corporate debt and certain ABS into Level 3 assets were primarily the result of limited market pricing information that required
us to determine fair value for these securities based on inputs that are adjusted to better reflect our own assumptions
regarding the characteristics of a specific security or associated market liquidity. The transfers of investments in RMBS, CMBS
and CDO and certain ABS into Level 3 assets were due to decreases in market transparency and liquidity for individual
security types. Certain investments in hedge funds were transferred into Level 3 due to these investments now being carried at
fair value and no longer being accounted for using the equity method of accounting due to a change in percentage ownership,
or as a result of limited market activity due to fund-imposed redemption restrictions.
During the years ended December 31, 2014 and 2013, transfers out of Level 3 assets primarily included CMBS, CDO/ABS,
RMBS, certain investments in municipal securities, private placement and other corporate debt, and investments in hedge
funds. Transfers of certain investments in municipal securities, corporate debt, RMBS, CMBS and CDO/ABS out of Level 3
assets were based on consideration of market liquidity as well as related transparency of pricing and associated observable
inputs for these investments. Transfers of certain investments in private placement corporate debt and certain ABS out of
Level 3 assets were primarily the result of using observable pricing information that reflects the fair value of those securities
without the need for adjustment based on our own assumptions regarding the characteristics of a specific security or the