AIG 2005 Annual Report Download - page 151

AMERICAN INTERNATIONAL GROUP, INC. AND SUBSIDIARIES
scribed or permitted by domestic and foreign insurance
6. Reserve for Losses and Loss Expenses and
regulatory authorities. The differences between statutory finan-
Future Life Policy Benefits and Policyholders’
cial statements and financial statements prepared in accordance
Contract Deposits with U.S. GAAP vary between domestic and foreign by
Continued jurisdiction. The principal differences are that statutory finan-
charges that amount to 11.3 percent of the aggregate fund cial statements do not reflect deferred policy acquisition costs,
balance grading to zero over a period not longer than 20 years. some bond portfolios may be carried at amortized cost, assets
and liabilities are presented net of reinsurance, policyholder
(v) For variable products and investment contracts, policy
liabilities are valued using more conservative assumptions and
values are expressed in terms of investment units. Each unit is
certain assets are non-admitted.
linked to an asset portfolio. The value of a unit increases or
AIG also recently completed its 2005 unaudited statutory
decreases based on the value of the linked asset portfolio. The
financial statements for all of its Domestic General Insurance
current liability at any time is the sum of the current unit
subsidiaries, after reviewing and agreeing with the relevant
value of all investment units plus any liability for guaranteed
state insurance regulators the statutory accounting treatment of
minimum death or withdrawal benefits. A portion of these
various items. The state regulators have permitted the Domes-
liabilities are classified in the GIC product line for segment
tic General Insurance companies to record a $724 million
reporting purposes.
reduction to opening statutory surplus as of January 1, 2005 to
(e) Certain products are subject to experience adjustments. reflect the effects of the Second Restatement.
These include group life and group medical products, credit life Statutory capital of each company continued to exceed
contracts, accident and health insurance contracts/riders at- minimum company action level requirements following the
tached to life policies and, to a limited extent, reinsurance adjustments, but AIG nonetheless contributed an additional
agreements with other direct insurers. Ultimate premiums from $750 million of capital into American Home Assurance
these contracts are estimated and recognized as revenue, and Company (American Home) effective September 30, 2005 and
the unearned portions of the premiums are held as reserves. contributed a further $2.25 billion of capital in February 2006
Experience adjustments vary according to the type of contract for a total of approximately $3 billion of capital into Domestic
and the territory in which the policy is in force and are subject General Insurance subsidiaries effective December 31, 2005.
to local regulatory guidance.
8. Investment Information
7. Statutory Financial Data
(a) Statutory Deposits: Cash and securities with carrying val-
Statutory surplus and net income for General Insurance and ues of $11.8 billion and $9.6 billion were deposited by AIG’s
Life Insurance & Retirement Services operations in accor- insurance subsidiaries under requirements of regulatory authori-
dance with regulatory accounting practices were as follows: ties as of December 31, 2005 and 2004, respectively.
Years Ended December 31, (b) Net Investment Income: An analysis of the net investment
(in millions) 2005 2004 2003 income from the General and Life Insurance & Retirement
Statutory surplus(a):Services operations follows:
General Insurance $24,508 $20,632 $20,462
Years Ended December 31,
Life Insurance & (in millions) 2005 2004 2003
Retirement Services 30,739 28,609 25,501
Fixed maturities $17,685 $15,884 $13,710
Statutory net income(a)(b):
Equity securities 1,730 621 484
General Insurance 1,713 3,028(c) 2,911
Short-term investments 494 177 94
Life Insurance &
Interest on mortgage, policy
Retirement Services(a) 4,762 4,474 3,453
and collateral loans 1,177 1,096 1,047
(a) Statutory surplus and net income with respect to foreign operations are
Other invested assets 1,905 1,444 898
reported as of their respective fiscal year ends.
Total investment income 22,991 19,222 16,233
(b) Includes realized capital gains and losses and taxes.
Investment expenses 826 757 725
(c) Includes catastrophe losses, net of tax of $660 million.
Net investment income $22,165 $18,465 $15,508
AIG’s insurance subsidiaries file financial statements pre-
pared in accordance with statutory accounting practices pre-
AIG m Form 10-K 99