AIG 2011 Annual Report Download - page 87

Chartis Results
The following table presents Chartis results:
Percentage Change
Years Ended December 31,
(in millions) 2011 2010 2009 2011 vs. 2010 2010 vs. 2009
Underwriting results:
Net premiums written $ 34,840 $ 31,612 $ 30,653 10% 3%
Decrease in unearned premiums 849 909 1,608 (7) (43)
Net premiums earned 35,689 32,521 32,261 10 1
Claims and claims adjustment expenses incurred 27,949 27,867 25,362 - 10
Underwriting expenses 10,972 10,114 9,497 8 6
Underwriting loss (3,232) (5,460) (2,598) 41 (110)
Investing and other results:
Net investment income 4,348 4,392 3,292 (1) 33
Net realized capital gains (losses) 587 (49) (530) NM 91
Bargain purchase gain -332 - NM NM
Other income (expense) – net* (5) 669 - NM NM
Pre-tax income (loss) $ 1,698 $ (116) $ 164 NM% NM%
* Includes gain on divested properties of $669 million in 2010.
2011 and 2010 Comparison
Chartis recognized pre-tax income in 2011 compared to a pre-tax loss in 2010 primarily due to the decrease in
the loss ratio, partially offset by the effect of increased catastrophe losses in 2011, detailed as follows:
• Net prior year adverse loss development, net of premiums and loss-sensitive premium adjustments, decreased
from $4.3 billion in 2010 to $72 million in 2011.
• The combined ratio declined to 109.0 in 2011 from 116.8 in 2010. Catastrophe losses were $3.3 billion in
2011 compared to $1.1 billion in 2010. The combined ratio, excluding catastrophe losses, was 99.8 in 2011,
compared to 113.5 in 2010, a 13.7 point improvement.
• Net realized capital gains on sales of fixed maturity securities increased in connection with Chartis’ strategy
to better align investment allocations with current overall performance and income tax planning objectives.
Also, Chartis realized an increase in net premiums written primarily related to the acquisition of Fuji, which
Chartis began consolidating on July 1, 2010, and in the Commercial Insurance property lines, which experienced
improved pricing and modifications to its reinsurance program.
2010 and 2009 Comparison
Chartis reported a pre-tax loss in 2010 compared to pre-tax income in 2009 primarily due to the increase in the
net prior year adverse loss development, net of premiums and loss-sensitive premium adjustments, from
$2.8 billion in 2009 to $4.3 billion in 2010. In addition, catastrophe losses increased by $1.0 billion. These were
partially offset by an increase in net premiums written, primarily related to the Fuji acquisition, as well as
improved market conditions and the impact of gains in 2010 related to the acquisition of Fuji and the sale of the
Otemachi Building.
Chartis Net Premiums Written
Net premiums written are the sales of an insurer, adjusted for reinsurance premiums assumed and ceded, during
a given period. Net premiums earned are the revenue of an insurer for covering risk during a given period. Net
premiums written are a measure of performance for a sales period while net premiums earned are a measure of
performance for a coverage period. From the period in which the premiums are written until the period in which
they are recognized, the amount is part of the unearned premium reserve.
AIG 2011 Form 10-K 73