AIG 2011 Annual Report Download - page 94

2011 and 2010 Comparison
Commercial Insurance net premiums written increased in 2011 compared to 2010 primarily due to:
• increases in Property lines driven by positive pricing trends and reinsurance modifications resulting in
increased retentions; the rate environment for Property has been particularly strong for the U.S. and the Far
East region;
• an increase in additional premiums on Commercial Casualty’s loss-sensitive business of $164 million
compared to 2010. Loss-sensitive business relates to policies whose premiums vary with the level of
underlying losses. Accordingly, in 2011, additional premiums of $172 million were recognized relating to
additional prior year losses. The corresponding 2010 period reflects the effects of additional premiums of
$8 million;
• general improvements in rates, in particular for workers’ compensation;
• continued growth and market penetration across growth economy nations; and
• improvements in foreign exchange currency rates.
Offsetting these increases was an approximately $0.6 billion decrease in net premiums written relating to the
change of certain policy forms at renewal from retrospectively rated premium structures to loss reimbursement
deductible structures.
2010 and 2009 Comparison
Commercial Insurance net premiums written decreased in 2010 compared to 2009 primarily due to:
• risk management initiatives resulting in the reduction of aggregate exposures in certain Commercial
Casualty, Property and Specialty lines of business;
• lower workers’ compensation net premiums written due to declining rates, lower employment levels,
increased competition and Chartis’ continued strategy to maintain price discipline;
• decreases in Financial lines due to declines in various classes of professional liability business, which were
negatively affected to a greater extent than other classes by the credit crisis, and Chartis’ decisions to reduce
writings within environmental coverage and not to renew a credit card indemnification program that did not
meet internal profitability targets;
• decreases in Commercial Casualty due to a combination of declines in the construction, real estate and
transportation classes and limited availability of capital for new projects, which impacted general liability and
commercial umbrella business. These were offset by improved pricing, increased new business submissions
and improved retention resulting from increased stabilization of developed economies after the financial
crisis that began in 2008; and
• effects of three-year reinsurance agreements, secured through catastrophe bonds, which provided protection
from U.S. hurricanes and earthquakes, and reduced 2010 net premiums written by approximately
$208 million.
80 AIG 2011 Form 10-K