AIG 2011 Annual Report Download - page 120

The following table presents a summary of asbestos and environmental claims count activity:
2011 2010 2009
As of or for the Years Ended
December 31, Asbestos Environmental Combined Asbestos Environmental Combined Asbestos Environmental Combined
Claims at beginning of year 4,933 4,087 9,020 5,417 5,994 11,411 5,780 6,674 12,454
Claims during year:
Opened 141 207 348 502 354 856 615 983 1,598
Settled (183) (83) (266) (247) (125) (372) (243) (215) (458)
Dismissed or otherwise resolved (289) (429) (718) (739) (2,136) (2,875) (735) (1,448) (2,183)
Other* 841 - 841 ------
Claims at end of year 5,443 3,782 9,225 4,933 4,087 9,020 5,417 5,994 11,411
* Represents an administrative change to the method of determining the number of open claims, which had no effect on carried reserves.
Survival Ratios – Asbestos and Environmental
The following table presents AIG’s survival ratios for asbestos and environmental claims at December 31, 2011,
2010 and 2009. The survival ratio is derived by dividing the current carried loss reserve by the average payments
for the three most recent calendar years for these claims. Therefore, the survival ratio is a simplistic measure
estimating the number of years it would be before the current ending loss reserves for these claims would be paid
off using recent year average payments. The significant increase in the gross and net survival ratios at
December 31, 2010 compared to December 31, 2009 relates to the reserve increases recorded in 2010. In addition,
AIG’s survival ratio for asbestos claims was negatively affected by certain favorable settlements during 2008 and
2007. These settlements reduced gross and net asbestos survival ratios at December 31, 2010 by approximately
0.1 years and 0.3 years, respectively; and reduced gross and net asbestos survival ratios at December 31, 2009 by
approximately 0.9 years and 1.9 years, respectively.
Many factors, such as aggressive settlement procedures, mix of business and level of coverage provided, have a
significant effect on the amount of asbestos and environmental reserves and payments and the resultant survival
ratio. Moreover, as discussed above, the primary basis for AIG’s determination of its reserves are not survival
ratios, but instead the ground-up and top-down analysis. Thus, caution should be exercised in attempting to
determine reserve adequacy for these claims based simply on this survival ratio.
The following table presents survival ratios for asbestos and environmental claims, separately and combined,
which were based upon a three-year average payment:
2011 2010 2009
Years Ended December 31, Gross Net* Gross Net Gross Net
Survival ratios:
Asbestos 9.1 10.3 8.6 9.2 4.7 3.7
Environmental 2.9 3.1 3.7 3.2 4.5 3.5
Combined 8.4 9.3 8.1 8.4 4.7 3.7
* Survival ratios are calculated consistent with the basis of presentation in the reserve activity table above, which excludes the effects of the NICO
cession.
SunAmerica Operations
SunAmerica offers a comprehensive suite of products and services to individuals and groups including term life,
universal life, A&H products, fixed and variable deferred annuities, fixed payout annuities, mutual funds and
financial planning. SunAmerica offers its products and services through a diverse, multi-channel distribution
network that includes banks, national, regional and independent broker-dealers, affiliated financial advisors,
independent marketing organizations, independent and career insurance agents, structured settlement brokers,
benefit consultants and direct to-consumer platforms.
In managing SunAmerica, AIG analyzes the operating performance of each business using Operating income
(loss), which is before net realized capital gains (losses) and related DAC and SIA amortization. Operating
income (loss) is not a substitute for pre-tax income determined in accordance with U.S. GAAP. However, AIG
believes that the presentation of Operating income (loss) enhances the understanding of the underlying
profitability of the ongoing operations of SunAmerica. The reconciliations to pre-tax income are provided in the
tables that follow.
106 AIG 2011 Form 10-K