AIG 2011 Annual Report Download - page 314

American International Group, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
reinsurance agreements with other direct insurers. Ultimate premiums from these contracts are estimated and
recognized as revenue, and the unearned portions of the premiums recorded as liabilities. Experience adjustments
vary according to the type of contract and the territory in which the policy is in force and are subject to local
regulatory guidance.
AIG reports variable contracts through separate accounts when investment income and investment gains and
losses accrue directly to, and investment risk is borne by, the contract holder (traditional variable annuities), and
the separate account qualifies for separate account treatment. AIG also reports variable annuity and life contracts
through separate accounts, or general accounts when not qualified for separate account reporting, when AIG
contractually guarantees to the contract holder (variable contracts with guarantees) either (a) total deposits made
to the contract less any partial withdrawals plus a minimum return (and in minor instances, no minimum returns)
or (b) the highest contract value attained, typically on any anniversary date minus any subsequent withdrawals
following the contract anniversary. These guarantees include benefits that are payable in the event of death,
annuitization, or, in other instances, at specified dates during the accumulation period. Such benefits are referred
to as guaranteed minimum death benefits (GMDB), guaranteed minimum income benefits (GMIB), guaranteed
minimum withdrawal benefits (GMWB) and guaranteed minimum account value benefits (GMAV). For AIG,
GMDB is the most widely offered benefit.
The assets supporting the variable portion of both traditional variable annuities and variable contracts with
guarantees are carried at fair value and reported as separate account assets with an equivalent summary total
reported as separate account liabilities when the separate account qualifies for separate account treatment. Assets
for separate accounts that do not qualify for separate account treatment are reported as trading account assets,
and liabilities are included in the respective policyholder liability account of the general account. Amounts
assessed against the contract holders for mortality, administrative, and other services are included in revenue and
changes in liabilities for minimum guarantees are included in Policyholder benefits and claims incurred in the
Consolidated Statement of Operations. Separate account net investment income, net investment gains and losses,
and the related liability changes are offset within the same line item in the Consolidated Statement of Operations
for those accounts that qualify for separate account treatment. Net investment income and gains and losses on
trading accounts for contracts that do not qualify for separate account treatment are reported in Net investment
income and are principally offset by amounts reported in Policyholder benefits and claims incurred.
The following table presents details concerning AIG’s GMDB exposures:
2011 2010
At December 31,
Net Deposits Net Deposits
Plus a Minimum Highest Contract Plus a Minimum Highest Contract
(dollars in billions) Return Value Attained Return Value Attained
Account value(a) $57$12$55$13
Amount at risk(b) 3231
Average attained age of contract holders by
product 58 - 72 years 67 - 74 years 58 - 70 years 70 - 73 years
Range of guaranteed minimum return rates 3 - 10% 3 - 10%
(a) Included in Policyholder contract deposits in the Consolidated Balance Sheet.
(b) Represents the amount of death benefit currently in excess of Account value.
300 AIG 2011 Form 10-K
14. VARIABLE LIFE AND ANNUITY CONTRACTS