AIG 2011 Annual Report Download - page 313

American International Group, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
• Mortality and surrender rates are based upon actual experience modified to allow for variations in policy
form. The weighted average lapse rate, including surrenders, for individual and group life was approximately
5.3 percent.
• The portions of current and prior Net income and of current unrealized appreciation of investments that can
inure to the benefit of AIG are restricted in some cases by the insurance contracts and by the local
insurance regulations of the jurisdictions in which the policies are in force.
• Participating life business represented approximately 2.2 percent of the gross insurance in force at
December 31, 2011 and 4.8 percent of gross Premiums and other considerations in 2011. The amount of
annual dividends to be paid is approved locally by the boards of directors of the life companies. Provisions
for future dividend payments are computed by jurisdiction, reflecting local regulations.
The following table presents policyholder contract deposits liabilities:
At December 31,
(in millions) 2011 2010
Policyholder contract deposits:
Annuities $ 98,657 $ 92,672
Universal life products 12,917 12,569
Guaranteed investment contracts 6,788 8,491
Variable products – fixed account option 3,181 2,217
Corporate life products 2,239 2,203
Other investment contracts 3,116 3,221
Total policyholder contract deposits $ 126,898 $ 121,373
The liability for policyholder contract deposits has been established based on the following assumptions:
• Interest rates credited on deferred annuities, which vary by year of issuance, range from 1 percent to,
including bonuses, 9 percent. Current declared interest rates are generally guaranteed to remain in effect for
a period of one year though some are guaranteed for longer periods. Withdrawal charges generally range
from zero percent to 20 percent grading to zero over a period of zero to 15 years.
• Guaranteed investment contracts (GICs) have market value withdrawal provisions for any funds withdrawn
other than benefit responsive payments. Interest rates credited generally range from 0.4 percent to
8.5 percent. The majority of these GICs mature within five years.
• Interest rates on corporate life insurance products are guaranteed at 3 percent and the weighted average
rate credited in 2011 was 4.8 percent.
• The universal life funds have credited interest rates of 1 percent to 8 percent and guarantees ranging from
1 percent to 5.5 percent depending on the year of issue. Additionally, universal life funds are subject to
surrender charges that amount to 10.3 percent of the aggregate fund balance grading to zero over a period
not longer than 20 years.
• For variable products and investment contracts, policy values are expressed in terms of investment units.
Each unit is linked to an asset portfolio. The value of a unit increases or decreases based on the value of the
linked asset portfolio. The current liability at any time is the sum of the current unit value of all investment
units plus any liability for guaranteed minimum death or withdrawal benefits.
Certain products are subject to experience adjustments. These include group life and group medical products,
credit life contracts, accident and health insurance contracts/riders attached to life policies and, to a limited extent,
AIG 2011 Form 10-K 299
POLICYHOLDER CONTRACT DEPOSITS