AIG 2014 Annual Report Download - page 259

ITEM 8 / NOTE 5. FAIR VALUE MEASUREMENTS

242
current liquidity in the market. The transfers of certain hedge fund investments out of Level 3 assets were primarily the result of
easing of certain fund-imposed redemption restrictions.
Transfers of Level 3 Liabilities
There were no significant transfers of derivative or other liabilities into or out of Level 3 for the years ended December 31,
2014 and 2013.
Quantitative Information about Level 3 Fair Value Measurements
The table below presents information about the significant unobservable inputs used for recurring fair value
measurements for certain Level 3 instruments, and includes only those instruments for which information about the
inputs is reasonably available to us, such as data from independent third-party valuation service providers and from
internal valuation models. Because input information from third-parties with respect to certain Level 3 instruments
(primarily CDO/ABS) may not be reasonably available to us, balances shown below may not equal total amounts
reported for such Level 3 assets and liabilities:
Fair Value at
December 31, Valuation Range
(in millions) 2014 Technique Unobservable Input(a) (Weighted Average )(a)
Assets:
Obligations of states, $ 1,178 Discounted cash flow Yield(b) 3.9% - 4.62% (4.26%)
municipalities and
political subdivisions
Corporate debt 1,145 Discounted cash flow Yield(b) 3.46% - 8.75% (6.10%)
RMBS 17,353 Discounted cash flow Constant prepayment rate(c) 0.59% - 9.35% (4.97%)
Loss severity(c) 46.04% - 79.56% (62.80%)
Constant default rate(c) 3.67% - 9.96% (6.82%)
Yield(c) 2.67% - 6.64% (4.65%)
Certain CDO/ABS 5,282 Discounted cash flow Constant prepayment rate(c) 6.40% - 12.80% (9.20%)
Loss severity(c) 42.90% - 60.30% (51.90%)
Constant default rate(c) 2.50% - 14.70% (7.80%)
Yield(c) 4.70% - 9.70% (7.10%)
CMBS 2,687 Discounted cash flow Yield(b) 0.00% - 17.29% (6.06%)
CDO/ABS - Direct Binomial Expansion Recovery rate(b) 7.00% - 36.00% (21.00%)
Investment Book 279 Technique (BET) Diversity score(b) 5 - 27 (12)
Weighted average life(b) 0.25 - 10.49 years (3.93 years)
Liabilities:
Policyholder contract
deposits 1,509 Discounted cash flow Equity implied volatility(b) 6.00% - 39.00%
Base lapse rate(b) 1.00% - 40.00%
Dynamic lapse rate(b) 0.20% - 60.00%
Mortality rate(b) 0.10% - 35.00%
Utilization rate(b) 0.50% - 30.00%
Total derivative
liabilities, net 791 BET Recovery rate(b) 5.00% - 23.00% (13.00%)