AmazonScience/document-haystack

1REINSURANCE ASSETS2In the ordinary course of business, our insurance companies may use both treaty and facultative reinsurance to minimize their net 3loss exposure to any single catastrophic loss event or to an accumulation of losses from a number of smaller events or to provide 4greater diversification of our businesses. Reinsurance assets include the balances due from reinsurance and insurance companies 5under the terms of our reinsurance agreements for paid and unpaid losses and loss adjustment expenses incurred, ceded unearned 6premiums and ceded future policy benefits for life and accident and health insurance contracts and benefits paid and unpaid. The 7estimation of reinsurance recoverables involves a significant amount of judgment. Reinsurance assets include reinsurance 8recoverables on unpaid losses and loss adjustment expenses that are estimated as part of our loss reserving process and, 9consequently, are subject to similar judgments and uncertainties as the estimation of gross loss reserves. For additional information 10on reinsurance, see Note 8 to the Consolidated Financial Statements.11GOODWILL IMPAIRMENT12Goodwill represents the future economic benefits arising from assets acquired in a business combination that are not individually 13identified and separately recognized. Goodwill is tested for impairment annually, or more frequently if circumstances indicate an 14impairment may have occurred. A qualitative assessment may be performed, considering whether events or circumstances exist that 15lead to a determination that it is not more likely than not that the fair value of an operating segment is less than its carrying value. If 16management elects to perform a quantitative assessment to determine recoverability of carrying value or is compelled to do so based 17on the results of a qualitative assessment, the estimate of fair value involves applying one or a combination of common valuation 18approaches. These include discounted expected future cash flows, market-based earnings multiples and external appraisals, among 19other methods, all of which require management judgment and are subject to uncertainty, primarily as it relates to assumptions around 20business growth, earnings projections, and cost of capital.21For additional information on goodwill impairment, see Part I, Item 1A. Risk Factors – Estimates and Assumptions and Note 12 to the 22Consolidated Financial Statements.23ALLOWANCE FOR CREDIT LOSSES ON CERTAIN INVESTMENTS24We maintain an allowance for the expected lifetime credit losses of commercial and residential mortgage loans and available for sale 25securities. The sufficiency of this allowance is reviewed quarterly using both quantitative and qualitative considerations, which are 26subject to risks and uncertainties. These considerations and the overall methodology used to estimate the allowance for credit losses 27are discussed in more detail in Note 6 and Note 7 to the Consolidated Financial Statements for available for sale securities and 28Commercial and residential loans, respectively.29FAIR VALUE MEASUREMENTS OF CERTAIN FINANCIAL ASSETS AND FINANCIAL LIABILITIES30Assets and liabilities recorded at fair value in the Consolidated Balance Sheets are measured and classified in a hierarchy for 31disclosure purposes consisting of three levels based on the observability of inputs available in the marketplace used to measure the 32fair value. We classify fair value measurements for certain assets and liabilities as Level 3 when they require significant unobservable 33inputs in their valuation. We consider unobservable inputs to be those for which market data is not available. Our assessment of the 34significance of a particular input to the fair value measurement of an asset or liability requires judgment.35For additional information about the valuation methodologies of financial instruments measured at fair value, see Note 5 to the 36Consolidated Financial Statements.37INCOME TAXES38Deferred income taxes represent the tax effect of the differences between the amounts recorded in our Consolidated Financial 39Statements and the tax basis of assets and liabilities. Our assessment of net deferred income taxes represents management’s best 40estimate of the tax consequences of various events and transactions, which can themselves be based on other accounting estimates, 41resulting in incremental uncertainty in the estimation process.42Deferred Tax Asset Recoverability43The evaluation of the recoverability of our deferred tax asset and the need for a valuation allowance requires us to weigh all positive 44and negative evidence to reach a conclusion that it is more likely than not that all or some portion of the deferred tax asset will not be 45realized. The weight given to the evidence is commensurate with the extent to which it can be objectively verified. As such, changes in 46tax laws in countries where we transact business can impact our deferred tax asset valuation allowance. We consider multiple factors 47to reliably estimate future taxable income so we can determine the extent of our ability to realize net operating losses, foreign tax 48credits, realized capital loss and other carryforwards. These factors include forecasts of future income for each of our businesses, 49which incorporate forecasts of future statutory income for our insurance companies, and actual and planned business and operational 50changes, both of which include assumptions about future macroeconomic and AIG-specific conditions and events. We subject the 51ITEM 7 | Critical Accounting Estimates5256 AIG | 2023 Form 10-K