AIG 2011 Annual Report Download - page 91

Most of the 2009 net adverse loss development charge of $2.8 billion relates to excess casualty, excess workers’
compensation and the asbestos lines of business. Further, approximately 95 percent relates to accident years 2005
and prior.
Writings in long-tail lines of business that were the drivers of the reserve charges in 2010 and 2009 have been
reduced since 2006. In the case of asbestos, since 1985, standard policies have contained an absolute exclusion for
asbestos and pollution-related damages.
The following table presents Chartis catastrophe losses by major event:
2011 2010
Year Ended December 31, Commercial Consumer Commercial Consumer
(in millions) Insurance Insurance Total Insurance Insurance Total
Event:(a)
Tohoku Catastrophe(b) $ 667 $ 524 $ 1,191 $-$-$ -
New Zealand Christchurch earthquakes 344 7 351 ---
Chile earthquake ---289 2 291
Midwest & Southeast U.S. tornadoes 383 14 397 ---
Thailand floods 366 2 368 ---
Hurricane Irene 296 73 369 ---
All other events 525 95 620 711 64 775
Claims and claim expenses 2,581 715 3,296 1,000 66 1,066
Reinstatement premiums 11 - 11 10 -- 10
Total catastrophe-related charges $ 2,592 $ 715 $ 3,307 $ 1,010 $ 66 $ 1,076
(a) Events shown in the above table are catastrophic events, for which the net impact to Chartis is in excess of $200 million each. All other events
include 13 events in 2010 and 14 events in 2011 that are considered catastrophic but the net impact of which remains below the $200 million
itemization threshold. Catastrophe losses for 2009 are not presented above as there was one significant catastrophe event, flooding in the
Southwestern United States, totaling $53 million for Commercial Insurance.
(b) On March 11, 2011, a major earthquake occurred near the northeast coast of Honshu, Japan, triggering a tsunami in the Pacific Ocean. This
disaster is referred to as the Tohoku Catastrophe.
Expense Ratios
The expense ratio decreased in 2011 compared to 2010, primarily due to the effect of including Fuji results for
a full year and the effects of foreign exchange. These decreases were partially offset by Chartis’ increased
investments in a number of strategic initiatives during 2011, including the implementation of improved regional
governance and risk management capabilities, the implementation of global accounting and claims systems,
preparation for Solvency II and certain other legal entity restructuring initiatives.
The expense ratio increased in 2010 compared to 2009 primarily due to Chartis’ strategy to continue the
enhancement and build-out of its financial systems. In addition, during 2010 Chartis recorded increased expenses
relating to long-term incentive programs that will continue to align employee performance incentive programs with
profitability, capital management, risk management, and other performance measures. Further, increased
acquisition expenses reflect increased regulatory assessments, more specifically in the workers’ compensation lines,
and new marketing agreements with select strategic distribution partners. These increases were partially offset by
an overall decline in the expense ratio relating to the acquisition of Fuji.
Chartis Investing and Other Results
Chartis manages and accounts for its invested assets on a legal entity basis in conformity with regulatory
requirements. Within a legal entity, invested assets are available to pay claims and expenses of both Commercial
Insurance and Consumer Insurance operating segments as well as Chartis Other. Invested assets are not
segregated or otherwise separately identified for the Commercial and Consumer Insurance operating segments.
AIG 2011 Form 10-K 77