AIG 2011 Annual Report Download - page 32

The following table presents the gross liability excluding amounts for asbestos and environmental claims (before
discount), reinsurance recoverable and net liability for each calendar year and the reestimation of these amounts
as of December 31, 2011(a):
(in millions) 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Net Liability, End of
Year $ 26,709 $ 30,149 $ 37,075 $ 47,295 $57,336 $62,715 $70,026 $73,636 $69,243 $72,212 $73,264
Reinsurance Recoverable,
End of Year 13,691 15,887 14,288 12,495 16,472 14,396 13,525 14,337 15,224 16,004 15,438
Gross Liability, End of
Year 40,400 46,036 51,363 59,790 73,808 77,111 83,551 87,973 84,467 88,216 $88,702
Re-estimated Net
Liability 50,454 52,570 56,138 59,350 63,131 66,768 74,643 78,464 71,510 72,200
Re-estimated Reinsurance
Recoverable 19,314 19,361 17,220 15,472 18,646 15,589 14,572 14,337 15,224 16,004
Re-estimated Gross
Liability 69,768 71,931 73,358 74,822 81,777 82,357 89,215 92,801 86,734 88,204
Cumulative Gross
Redundancy/
(Deficiency) $(29,368) $(25,895) $(21,995) $(15,032) $(7,969) $ (5,246) $(5,664) $ (4,828) $(2,267) $ 12
(a) During 2009, Transatlantic was deconsolidated and 21st Century and HSB were sold. The sales and deconsolidation are reflected in the table
above as a reduction in December 31, 2009 net reserves of $9.6 billion and as an $8.6 billion increase in paid losses for the years 2000 through
2008 to remove the reserves for these divested entities from the ending balance.
(b) The increase in Net Reserves Held from 2009 to 2010 is partially attributable to the $1.7 billion in Net Reserves Held by Fuji, which was
acquired in 2010.
The Liability for unpaid claims and claims adjustment expense as reported in AIG’s Consolidated Balance Sheet
at December 31, 2011 differs from the total reserve reported in the annual statements filed with state insurance
departments and, where applicable, with foreign regulatory authorities. The differences at December 31, 2011
relate primarily to reserves for certain foreign operations not required or permitted to be reported in the United
States for statutory reporting purposes, including contingency reserves for catastrophic events. Further, statutory
practices in the United States require reserves to be shown net of applicable reinsurance recoverables. In addition,
unlike statutory financial statements, AIG’s Liability for unpaid claims and claims adjustment expense reported on
its Consolidated Balance Sheet and the amounts in the tables above exclude the effect of intercompany
transactions.
Gross loss reserves are calculated without reduction for reinsurance recoverables and represent the
accumulation of estimates for reported losses and IBNR. Management reviews the adequacy of established gross
loss reserves in the manner previously described for net loss reserves.
Additional information related to reserve development is included in Item 7. MD&A — Results of
Operations — Segment Results — Chartis Operations — Liability for Unpaid Claims and Claims Adjustment
Expense. A sensitivity analysis of loss reserves held at December 31, 2011, is included in Item 7. MD&A —
Critical Accounting Estimates — Liability for Unpaid Claims and Claims Adjustment Expense.
AIG subsidiaries operate worldwide primarily by underwriting and accepting risks for their direct account on a
gross line basis and subsequently reinsuring on either an individual risk or an aggregate basis to the extent those
risks exceed the desired retention level.
For a further discussion of reinsurance, see Item 1A. Risk Factors — Reinsurance; and Item 7. MD&A —
Enterprise Risk Management — Business Unit Risk Management — Reinsurance.
18 AIG 2011 Form 10-K
REINSURANCE ACTIVITIES