AIG 2014 Annual Report Download - page 260

ITEM 8 / NOTE 5. FAIR VALUE MEASUREMENTS

243
Diversity score(b) 8 - 25 (13)
Weighted average life(b) 2.67 - 10.49 years (4.65 years)
Fair Value at
December 31, Valuation Range
(in millions) 2013 Technique Unobservable Input(a) (Weighted Average )(a)
Assets:
Obligations of states, $ 920 Discounted cash flow Yield(b) 4.94% - 5.86% (5.40%)
municipalities and
political subdivisions
Corporate debt 788 Discounted cash flow Yield(b) 0.00% - 14.29% (6.64%)
RMBS 14,419 Discounted cash flow Constant prepayment rate(c) 0.00% - 10.35% (4.97%)
Loss severity(c) 42.60% - 79.07% (60.84%)
Constant default rate(c) 3.98% - 12.22% (8.10%)
Yield(c) 2.54% - 7.40% (4.97%)
Certain CDO/ABS(d) 5,414 Discounted cash flow Constant prepayment rate(c) 5.20% - 10.80% (8.20%)
Loss severity(c) 48.60% - 63.40% (56.40%)
Constant default rate(c) 3.20% - 16.20% (9.00%)
Yield(c) 5.20% - 11.50% (9.40%)
CMBS 5,847 Discounted cash flow Yield(b) 0.00% - 14.69% (5.58%)
CDO/ABS - Direct Binomial Expansion Recovery rate(b) 6.00% - 63.00% (25.00%)
Investment Book 557 Technique (BET) Diversity score(b) 5 - 35 (12)
Weighted average life(b) 1.07 - 9.47 years (4.86 years)
Liabilities:
Policyholder contract
deposits 312 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) 0.50% - 40.00%
Utilization rate(b) 0.50% - 25.00%
Total derivative
liabilities, net 996 BET Recovery rate(b) 5.00% - 34.00% (17.00%)
Diversity score(b) 9 - 32 (13)
Weighted average life(b) 4.50 - 9.47 years (5.63 years)
(a) The unobservable inputs and ranges for the constant prepayment rate, loss severity and constant default rate relate to each of the individual underlying
mortgage loans that comprise the entire portfolio of securities in the RMBS and CDO securitization vehicles and not necessarily to the securitization vehicle
bonds (tranches) purchased by us. The ranges of these inputs do not directly correlate to changes in the fair values of the tranches purchased by us because
there are other factors relevant to the fair values of specific tranches owned by us including, but not limited to, purchase price, position in the waterfall, senior
versus subordinated position and attachment points.
(b) Represents discount rates, estimates and assumptions that we believe would be used by market participants when valuing these assets and liabilities.
(c) Information received from third-party valuation service providers.
The ranges of reported inputs for Corporate debt, RMBS, CDO/ABS, and CMBS valued using a discounted cash flow
technique consist of plus/minus one standard deviation in either direction from the value-weighted average. The preceding
table does not give effect to our risk management practices that might offset risks inherent in these investments.