AIG 2015 Annual Report Download - page 177

ITEM 7 / ENTERPRISE RISK MANAGEMENT
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Market Risk Sensitivities
The following table provides estimates of our sensitivity to changes in yield curves, equity prices and foreign
currency exchange rates:
Balance Sheet Exposure Balance Sheet Effect
December 31, December 31, December 31, December 31,
(dollars in millions) 2015 2014 2015 2014
Sensitivity factor 100 bps parallel increase in all yield curves
Interest rate sensitive assets:
Fixed maturity securities 260,689 273,885 (14,549) (15,107)
Mortgage and other loans receivable 18,878 16,594 (1,092) (921)
Preferred stock 20 19 (1) (1)
Total interest rate sensitive assets $279,587 (a) $ 290,498 (a) $(15,642) $ (16,029)
Sensitivity factor 20% decline in stock prices and value of
alternative investments
Equity and alternative investments exposure:
Hedge funds 10,917 10,798 (2,183) (2,160)
Private equity 7,233 8,858 (1,447) (1,772)
Real estate investments 6,579 3,612 (1,316) (722)
PICC(b) 2,239 3,375 (448) (675)
Common equity 1,574 2,044 (315) (409)
Aircraft asset investments 477 651 (95) (130)
AerCap(c) -4,972 - (994)
Other investments 472 1,331 (94) (266)
Total equity and alternative investments
exposure $29,491 $ 35,641
$(5,898) $ (7,128)
Sensitivity factor 10% depreciation of all foreign currency
exchange rates against the U.S. dollar
Foreign currency-denominated net
asset position:
Great Britain pound 2,158 3,884 (216) (388)
Hong Kong dollar 2,138 2,875 (214) (288)
Euro 2,053 768 (205) (77)
All other foreign currencies 4,310 4,478 (431)
(448)
Total foreign currency-denominated net
asset position(d) $10,659 $ 12,005 $(1,066) $ (1,201)
(a) At December 31, 2015, the analysis covered $279.6 billion of $298.7 billion interest-rate sensitive assets. Excluded were $10.7 billion of loans and $3.6
billion of investments in life settlements. In addition, $4.8 billion of assets across various asset categories were excluded due to modeling limitations. At
December 31, 2014, the analysis covered $290.4 billion of $308.9 billion interest-rate sensitive assets. Excluded were $8.4 billion of loans and $3.8 billion of
investments in life settlements. In addition, $6.3 billion of assets across various asset categories were excluded due to modeling limitations.
(b) Includes our investments in PICC Group and PICC P&C.
(c) In September 2015, we sold the remainder of our ordinary shares of AerCap. Our 2014 sensitivity calculation for AerCap was based on our carrying value
rather than the stock price as of the applicable date, as we applied the equity method of accounting prior to the sale.
(d) The majority of the foreign currency exposure is reported on a one quarter lag.
Foreign currency-denominated net asset position reflects our consolidated non-U.S. dollar assets less our consolidated
non-U.S dollar liabilities on a U.S. GAAP basis. We use a bottom-up approach in managing our foreign currency exchange rate
exposures with the objective of protecting statutory capital at the regulated insurance entity level. We manage cash flow risk on
our foreign currency-denominated debt issued by AIG Parent and use a variety of techniques to mitigate this risk, including but
not limited to the execution of cross-currency swaps and the issuance of new foreign currency-denominated debt to replace
equivalent maturing debt. At the AIG Parent level, we monitor our foreign currency exposures against single currency and