AIG 2011 Annual Report Download - page 311

American International Group, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The following table presents the reconciliation of activity in the Liability for unpaid claims and claims
adjustment expense:
Years Ended December 31,
(in millions) 2011 2010 2009
Balance, beginning of year:
Liability for unpaid claims and claims adjustment expense $ 91,151 $ 85,386 $ 89,258
Reinsurance recoverable (19,644) (17,487) (16,803)
Total 71,507 67,899 72,455
Foreign exchange effect 353 (126) 1,416
Acquisitions(a) -1,538 -
Dispositions(b) -(87) (9,657)
Reduction of net loss reserves due to NICO transaction (1,703) --
Losses and loss expenses incurred(c):
Current year 27,590 24,074 27,354
Prior years, other than accretion of discount(d) 195 4,182 2,771
Prior years, accretion of discount 375 (181) 313
Total 28,160 28,075 30,438
Losses and loss expenses paid(c):
Current year 11,534 9,873 11,079
Prior years 15,958 15,919 15,673
Total 27,492 25,792 26,752
Activity of discontinued operations --(1)
Balance, end of year:
Net liability for unpaid claims and claims adjustment expense 70,825 71,507 67,899
Reinsurance recoverable 20,320 19,644 17,487
Total $ 91,145 $ 91,151 $ 85,386
(a) Represents the acquisition of Fuji on March 31, 2010.
(b) Transatlantic was deconsolidated in 2009, and 21st Century and HSB were sold in 2009.
(c) Includes amounts related to dispositions through the date of disposition.
(d) In 2011, includes $(414) million, $145 million and $413 million related to excess casualty, commercial specialty workers’ compensation and
environmental, respectively. In 2010, includes $1.1 billion, $793 million and $1.5 billion related to excess casualty, excess workers’ compensation
and asbestos, respectively. In 2009, includes $1.5 billion, $956 million and $151 million related to excess casualty, excess workers’ compensation
and asbestos, respectively.
The 2011 net adverse development includes loss-sensitive business, for which AIG also recognized a
$172 million loss-sensitive premium adjustment.
The 2010 net adverse loss development for prior accident years primarily relates to the asbestos, excess casualty,
excess workers’ compensation and primary workers’ compensation. Further, this charge primarily relates to
accident years 2007 and prior (accident years before the financial crisis in 2008) and a significant amount relates
to accident 2005 and prior (accident years prior to the start of the managed reduction in these long-tail lines of
business). The 2009 charge relates to excess casualty, excess workers’ compensation and asbestos lines of business.
AIG 2011 Form 10-K 297
13. LIABILITY FOR UNPAID CLAIMS AND CLAIMS ADJUSTMENT EXPENSE AND
FUTURE POLICY BENEFITS FOR LIFE AND ACCIDENT AND HEALTH
INSURANCE CONTRACTS AND POLICYHOLDER CONTRACT DEPOSITS