AIG 2015 Annual Report Download - page 219

ITEM 7 / CRITICAL ACCOUNTING ESTIMATES
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(b) Includes available for sale and other securities.
Level 3 Assets and Liabilities
Assets and liabilities recorded at fair value in the Consolidated Balance Sheets are measured and classified in a hierarchy for
disclosure purposes consisting of three “levels” based on the observability of inputs available in the marketplace used to
measure the fair value. See Note 4 to the Consolidated Financial Statements for additional information.
The following table presents the amount of assets and liabilities measured at fair value on a recurring basis and
classified as Level 3:
December 31, Percentage December 31, Percentage
(in billions) 2015 of Total 2014 of Total
Assets $42.4 8.5 %$ 44.4 8.6 %
Liabilities 3.1 0.8 2.9 0.7
Level 3 fair value measurements are based on valuation techniques that use at least one significant input that is unobservable.
We consider unobservable inputs to be those for which market data is not available and that are developed using the best
information available about the assumptions that market participants would use when valuing the asset or liability. Our
assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment.
We classify fair value measurements for certain assets and liabilities as Level 3 when they require significant unobservable
inputs in their valuation, including contractual terms, prices and rates, yield curves, credit curves, measures of volatility,
prepayment rates, default rates, mortality rates and correlations of such inputs.
See Note 4 to the Consolidated Financial Statements for discussion of the valuation methodologies for assets and liabilities
measured at fair value, as well as a discussion of transfers of Level 3 assets and liabilities.