BASIS OF PRESENTATION (Policies)

12 Months Ended

Dec. 31, 2013

BASIS OF PRESENTATION

AIG Life and Retirement

AIG Life and Retirement

Advisory fee income, and the related commissions and advisory fee expenses of AIG Life and Retirement's broker dealer business, are now being presented on a gross basis within Other income and Other expenses, respectively. Previously, these amounts were included on a net basis within Policy fees in AIG's Consolidated Statements of Income and in AIG Life and Retirement's segment results.

In addition, policyholder benefits related to certain payout annuities, primarily with life contingent features, are now being presented in the Consolidated Balance Sheets as Future policy benefits for life and accident and health insurance contracts instead of as Policyholder contract deposits.

Prior period amounts were conformed to the current period presentation. These changes did not affect Income from continuing operations before income tax expense, Net income attributable to AIG or Total liabilities.

Sale of ILFC

Sale of ILFC

On December 16, 2013, we entered into a definitive agreement with AerCap Holdings N.V. (AerCap) and AerCap Ireland Limited (Purchaser), a wholly-owned subsidiary of AerCap for the sale of 100 percent of the common stock of International Lease Finance Corporation (ILFC). Based on the terms of this agreement, notably AIG's interest of 46 percent of the common shares of AerCap upon consummation of the sale of ILFC to AerCap, we determined ILFC no longer met the criteria at December 31, 2013 to be presented as a discontinued operation. ILFC's results are reflected in Aircraft leasing revenue and Aircraft leasing expenses and the loss associated with the 2012 classification of ILFC as held for sale is included in Net loss on sale of properties and divested businesses in the Consolidated Statements of Income. The assets and liabilities of ILFC are classified as held-for-sale at December 31, 2013 and 2012 in the Consolidated Balance Sheets. See Note 4 herein for further discussion.

Use of Estimates

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:

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classification of ILFC as held for sale and related fair value measurement;

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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;

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liability for unpaid claims and claims adjustment expense;

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reinsurance assets;

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valuation of future policy benefit liabilities and timing and extent of loss recognition;

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valuation of liabilities for guaranteed benefit features of variable annuity products;

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estimated gross profits to value deferred acquisition costs for investment-oriented products;

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impairment charges, including other-than-temporary impairments on available for sale securities, impairments on investments in life settlements and goodwill impairment;

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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 condition, results of operations and cash flows could be materially affected.