AIG 2005 Annual Report Download - page 183

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AMERICAN INTERNATIONAL GROUP, INC. AND SUBSIDIARIES
the accumulation period based on total expected assessments.
21. Variable Life and Annuity Contracts
AIG regularly evaluates estimates used and adjusts the addi-
Continued
tional liability balance, with a related charge or credit to
mFor domestic contracts, lapse rates vary by contract type and benefit expense, if actual experience or other evidence suggests
duration and ranged from zero percent to 40 percent. For that earlier assumptions should be revised. As of December 31,
Japan, lapse rates ranged from zero percent to 20 percent 2005, most of AIG’s GMIB exposure was transferred via
depending on the type of contract. reinsurance agreements. Contracts with GMIB not reinsured
mFor domestic contracts, the discount rate ranged from have account values of $2.8 billion with a corresponding
3.25 percent to 11 percent. For Japan, the discount rate reserve of less than $1 million.
ranged from zero percent to seven percent. AIG contracts currently include a minimal amount of
In addition to GMDB, AIG’s contracts currently include to GMAV and GMWB. GMAV and GMWB are considered to be
a lesser extent GMIB. The GMIB liability is determined each derivatives and are recognized at fair value through earnings.
period end by estimating the expected value of the annuitiza- AIG enters into derivative contracts to partially hedge the
tion benefits in excess of the projected account balance at the economic exposure that arises from GMAV and GMWB.
date of annuitization and recognizing the excess ratably over
AIG m Form 10-K 131