BASIS OF PRESENTATION

12 Months Ended

Dec. 31, 2014

BASIS OF PRESENTATION

BASIS OF PRESENTATION

1. BASIS OF PRESENTATION

American International Group, Inc. (AIG) is a leading global insurance organization serving customers in more than 100 countries and jurisdictions. AIG companies serve commercial, institutional and individual customers through one of the most extensive worldwide property-casualty networks of any insurer. In addition, AIG companies are leading providers of life insurance and retirement services in the United States. AIG Common Stock, par value $2.50 per share (AIG Common Stock), is listed on the New York Stock Exchange (NYSE: AIG) and the Tokyo Stock Exchange. Unless the context indicates otherwise, the terms “AIG,” “we,” “us” or “our” mean American International Group, Inc. and its consolidated subsidiaries and the term “AIG Parent” means American International Group, Inc. and not any of its consolidated subsidiaries.

The consolidated financial statements include the accounts of AIG Parent, our controlled subsidiaries (generally through a greater than 50 percent ownership of voting rights of a voting interest entity), and variable interest entities (VIEs) of which weare the primary beneficiary. Equity investments in entities that we do not consolidate, including corporate entities in which wehave significant influence and partnership and partnership-like entities in which we havemore than minor influence over operating and financial policies, are accounted for under the equity method unless we have elected the fair value option.

Certain of our foreign subsidiaries included in the consolidated financial statements report on different annual fiscal year bases, in most cases ending November 30. The effect on our consolidated financial condition and results of operations of all material events occurring at these subsidiaries between such fiscal year end and December 31st for all periods presented in these consolidated financial statements has been recorded.

The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States(GAAP). All material intercompany accounts and transactions have been eliminated.

Segment changes are discussed in Note 3 herein.

Presentation Changes

Policy fees related to features accounted for as embedded derivatives in variable annuity products, including guaranteed minimum withdrawal benefits and guaranteed minimum account value benefits, are included in the fair value measurement of embedded derivatives. Effective December 31, 2014, we reclassifiedfees related to these embedded derivatives to Net realized capital gains, with no effect to the fair value measurement of the embedded derivatives, Income from continuing operations, Net income attributable to AIG, or Shareholders’ equity. Accordingly, a portion of prior period policy fees have been reclassified to Net realized capital gains to conform to the current period presentation. See Note 14 herein for our accounting policy and Note 5 for a discussion of the fair value measurement of embedded policy derivatives, including policy on classification of fees.

Revisions were made to change the classification of certain miscellaneous income from General operating and other expenses to Premiums and of certain broker-dealer fees from General operating and other expenses to Other income, to conform with the current period presentation, with no effect to Income from continuing operations or Net income attributable to AIG.

Sale of ILFC

On May 14, 2014, we completed the sale of 100 percent of the common stock of International Lease Finance Corporation (ILFC) to AerCap Ireland Limited, a wholly owned subsidiary of AerCap Holdings N.V. (AerCap), in exchange for total consideration of approximately $7.6 billion, including cash and 97.6 million newly issued AerCap common shares (the AerCap Transaction). The total value of the consideration was based in part on AerCap’s closing price per share of $47.01 on May 13, 2014. ILFC’s results of operations are reflected in Aircraft leasing revenue and Aircraft leasing expenses in the Consolidated Statements of Income through the date of the completion of the sale. ILFC’s assets and liabilities were classified as held-for-sale at December 31,2013 in the Consolidated Balance Sheets. See Note4 herein for further discussion.

Use of Estimates

The preparation of financial statements in accordance with GAAP requires the application of accounting policies that often involve a significant degree of judgment. Accounting policies that we believe are most dependent on the application of estimates and assumptions are considered our critical accounting estimates and are related to the determination of:

• classification of ILFC as held for sale and related fair value measurement for applicable years;
• income tax assets and liabilities, including recoverability of our net deferred tax asset and the predictability of future tax operating profitability of the character necessary to realize the net deferred tax asset;
• liability for unpaid losses and loss adjustment expenses;
• reinsurance assets;
• valuation of future policy benefit liabilities and timing and extent of loss recognition;
• valuation of liabilities for guaranteed benefit features of variable annuity products;
• estimated gross profits to value deferred acquisition costs for investment-oriented products;
• impairment charges, including other-than-temporary impairments onavailable for sale securities, impairments on investments in life settlements and goodwill impairment;
• liability for legal contingencies; and
• fair value measurements of certain financial assets and liabilities.

These accounting estimates require the use of assumptions about matters, some of which are highly uncertain at the time of estimation. To the extent actual experience differs from the assumptions used, our consolidated financial conditions, results of operations and cash flows could be materially affected.