AIG 2014 Annual Report Download - page 278

ITEM 8 / NOTE 7. LENDING ACTIVITIES

261
Direct costs of originating commercial mortgages, commercial loans, and other loans and notes receivable, net of
nonrefundable points and fees, are deferred and included in the carrying amount of the related receivables. The amount
deferred is amortized to income as an adjustment to earnings using the interest method.
Life insurance policy loans are carried at unpaid principal amount. There is no allowance for policy loans because these loans
serve to reduce the death benefit paid when the death claim is made and the balances are effectively collateralized by the
cash surrender value of the policy.
The following table presents the composition of Mortgages and other loans receivable:
December 31, December 31,
(in millions) 2014 2013
Commercial mortgages* $ 18,909 $ 16,195
Life insurance policy loans 2,710 2,830
Commercial loans, other loans and notes receivable 3,642 2,052
Total mortgage and other loans receivable 25,261 21,077
Allowance for losses (271) (312)
Mortgage and other loans receivable, net $ 24,990 $ 20,765
* Commercial mortgages primarily represent loans for apartments, offices, retail and industrial properties, with exposures in California and New York
representing the largest geographic concentrations (14 percent and 18 percent, respectively, at December 31, 2014 and 18 percent and 17 percent, respectively,
at December 31, 2013).
The following table presents the credit quality indicators for commercial mortgage loans:
Number Percent
December 31, 2014 of Class of
(dollars in millions) Loans Apartments Offices Retail Industrial Hotel Others Total(c) To t al $
Credit Quality Indicator:
In good standing 1,007 $ 3,384 $6,100 $3,807 $1,689 $1,660 $ 1,812 $18,452 98 %
Restructured(a) 7 -343 7 - 17 - 367 2
90 days or less delinquent 6 - - 10 -- 5 15 -
>90 days delinquent or in
process of foreclosure 4 -75 - - - - 75 -
Tota l (b) 1,024 $ 3,384 $6,518 $3,824 $1,689 $1,677 $ 1,817 $18,909 100 %
Allowance for losses $ 3 $ 86 $28 $22 $6 $ 14 $159 1 %
December 31, 2013
(dollars in millions)
Credit Quality Indicator:
In good standing 978 $ 2,786 $ 4,636 $ 3,364 $ 1,607 $ 1,431 $ 1,970 $ 15,794 98 %
Restructured(a) 9 53 210 6 - - 85 354 2
90 days or less delinquent 2 - - 5 - - - 5 -
>90 days delinquent or in
process of foreclosure 6 - 42 - - - - 42 -
Tota l (b) 995 $ 2,839 $ 4,888 $ 3,375 $ 1,607 $ 1,431 $ 2,055 $ 16,195 100 %
Allowance for losses $ 10 $ 109 $ 9 $ 19 $ 3 $ 51 $ 201 1 %
(a) Loans that have been modified in troubled debt restructurings and are performing according to their restructured terms. See discussion of troubled debt
restructurings below.
(b) Does not reflect allowance for losses.
(c) Over 99 percent of the commercial mortgages held at such respective dates were current as to payments of principal and interest.
Methodology Used to Estimate the Allowance for Losses
Mortgage and other loans receivable are considered impaired when collection of all amounts due under contractual terms is
not probable. Impairment is measured using either i) the present value of expected future cash flows discounted at the loan’s
effective interest rate, ii) the loan’s observable market price, if available, or iii) the fair value of the collateral if the loan is
collateral dependent. Impairment of commercial mortgages is typically determined using the fair value of collateral while