AIG 2015 Annual Report Download - page 287

ITEM 8 / NOTE 8. DEFERRED POLICY ACQUISITION COSTS
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profitability is substantially lower than estimated, AIG’s DAC, VOBA and SIA may be subject to an impairment charge and
AIG’s results of operations could be significantly affected in future periods.
9. VARIABLE INTEREST ENTITIES
A variable interest entity (VIE) is a legal entity that does not have sufficient equity at risk to finance its activities without
additional subordinated financial support or is structured such that equity investors lack the ability to make significant decisions
relating to the entity’s operations through voting rights or do not substantively participate in the gains and losses of the entity.
Consolidation of a VIE by its primary beneficiary is not based on majority voting interest, but is based on other criteria
discussed below.
We enter into various arrangements with VIEs in the normal course of business and consolidate the VIEs when we determine
we are the primary beneficiary. This analysis includes a review of the VIE’s capital structure, related contractual relationships
and terms, nature of the VIE’s operations and purpose, nature of the VIE’s interests issued and our involvement with the entity.
When assessing the need to consolidate a VIE, we evaluate the design of the VIE as well as the related risks the entity was
designed to expose the variable interest holders to.
For VIEs with attributes consistent with that of an investment company or a money market fund, the primary beneficiary is the
party or group of related parties that absorbs a majority of the expected losses of the VIE, receives the majority of the
expected residual returns of the VIE, or both.
For all other VIEs, the primary beneficiary is the entity that has both (1) the power to direct the activities of the VIE that most
significantly affect the entity’s economic performance and (2) the obligation to absorb losses or the right to receive benefits that
could be potentially significant to the VIE. While also considering these factors, the consolidation conclusion depends on the
breadth of our decision-making ability and our ability to influence activities that significantly affect the economic performance of
the VIE.
Balance Sheet Classification and Exposure to Loss
The following table presents the total assets and total liabilities associated with our variable interests in consolidated
VIEs, as classified in the Consolidated Balance Sheets:
(in millions)
Real Estate
and
Investment
Entities(d) Securitization Vehicles
Structured
Investment
Vehicle
Affordable
Housing
Partnerships Other Total
December 31, 2015
Assets:
Bonds available for sale $ - $ 10,309 $ - $ - $ 15 $10,324
Other bond securities - 5,756 387 - 24 6,167
Mortgage and other loans receivable 11,960 -- 132 2,093
Other invested assets 489 477 -2,608 24 3,598
Other(a) 29 1,349 94 293 159 1,924
Total assets(b)(e) $ 519 $19,851 $481 $2,901 $ 354 $24,106
Liabilities:
Long-term debt $ - $ 1,025 $53 $1,513 $ 6 $ 2,597
Other(c) 34 236 1 214 71 556
Total liabilities(e) $ 34 $1,261 $54 $1,727 $ 77 $3,153