AIG 2011 Annual Report Download - page 97

Consumer Insurance is transacted in most major foreign currencies. The following table summarizes the effect of
changes in foreign currency exchange rates on the growth of Consumer Insurance net premiums written:
Years Ended December 31, 2011 vs. 2010 2010 vs. 2009
Increase in original currency(a)(b) 14.7% 17.8%
Foreign exchange effect 6.0 3.8
Increase as reported in U.S. dollars 20.7% 21.6%
(a) Computed using a constant exchange rate for each period.
(b) Primarily due to the effect of the Fuji acquisition.
Consumer Insurance Underwriting Ratios
The following table presents the Consumer Insurance combined ratios based on GAAP data and the impact of
catastrophe losses, prior year development and related reinstatement premiums and premium adjustments on
loss-sensitive contracts on the Consumer Insurance consolidated loss and combined ratios:
Increase (Decrease)
Years Ended December 31, 2011 2010 2009 2011 vs. 2010 2010 vs. 2009
Loss ratio 66.0 61.0 58.7 5.0 2.3
Catastrophe losses and reinstatement premiums (5.3) (0.6) - (4.7) (0.6)
Prior year development net of premium adjustments and including
reserve discount (0.7) 0.6 (0.8) (1.3) 1.4
Loss ratio, as adjusted 60.0 61.0 57.9 (1.0) 3.1
Expense ratio 36.5 38.1 40.8 (1.6) (2.7)
Combined ratio 102.5 99.1 99.5 3.4 (0.4)
Catastrophe losses and reinstatement premiums (5.3) (0.6) - (4.7) (0.6)
Prior year development net of premium adjustments and including
reserve discount (0.7) 0.6 (0.8) (1.3) 1.4
Combined ratio, adjusted 96.5 99.1 98.7 (2.6) 0.4
The following table presents the components of net prior year adverse development for Consumer Insurance:
Years Ended December 31,
(in millions) 2011 2010 2009
Gross prior year adverse (favorable) loss development $86$ (66) $ 75
Net prior year adverse (favorable) loss development $86$ (66) $ 75
Loss Ratios
The loss ratio increased in 2011 compared to 2010, primarily due to increased catastrophe losses in 2011.
During 2011, Consumer Insurance recorded net prior year adverse loss development of $86 million, primarily due
to programs in the U.S. and Canada region that are not being renewed. This compares to net prior year favorable
loss development of $66 million in 2010.
The increase in the loss ratio in 2010 compared to 2009 reflects the effect of Fuji in 2010 and increased claims
in Japan and Europe. In 2010, Consumer Insurance recorded favorable net prior year loss development of
$66 million primarily due to favorable development in the Asia Pacific region. This compares to net prior year
adverse loss development in 2009 of $75 million primarily due to reserve development in Japan and Latin
America.
For a more detailed discussion of Net Prior Year Loss Development, see the Liability for Unpaid Claims and
Claims Adjustment Expense section that follows.
AIG 2011 Form 10-K 83