AIG 2011 Annual Report Download - page 98

Expense Ratios
The expense ratio decreased in 2011 compared to 2010 primarily due to the effects of including Fuji results for
a full year. Fuji has a lower average expense ratio than the rest of the Consumer Insurance business due in part to
its business mix.
The expense ratio decreased in 2010 compared to 2009 primarily due to the net benefit from Fuji net deferred
acquisition costs, which were capitalized subsequent to the Fuji acquisition.
Chartis Other
Chartis Other Results
The following table presents Chartis Other results:
Percentage Change
Years Ended December 31,
(in millions) 2011 2010 2009 2011 vs. 2010 2010 vs. 2009
Underwriting results:
Net premiums written $30$ 90 $ 96 (67)% (6)%
(Increase) decrease in unearned premiums 39 - 4 NM NM
Net premiums earned 69 90 100 (23) (10)
Claims and claims adjustment expenses incurred 199 2,180 1,127 (91) 93
Underwriting expenses 268 191 149 40 28
Underwriting loss (398) (2,281) (1,176) 83 (94)
Investing and other results:
Net investment income 746 743 (942) - NM
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) $ 930 $ (586) $ (2,648) NM 78%
* Includes gain on divested properties of $669 million in 2010.
The following table presents the components of net prior year adverse development for Chartis Other:
Years Ended December 31,
(in millions) 2011 2010 2009
Gross prior year adverse loss development $27$ 2,322 $ 1,147
Increase in loss reserve discount 73 (162) -
Net prior year adverse loss development $ 100 $ 2,160 $ 1,147
Underwriting Results
Substantially all of the net premiums written in the above table relate to excess workers’ compensation. The
excess workers’ compensation line of business is subject to premium audits (upon the expiration of the underlying
policy) and, as a result, Chartis Other will reflect the effects of premium audit activity through subsequent years.
Given the run-off nature of the legacy lines of business and the nature of the expenses included in Chartis
Other, management has determined that traditional underwriting measures of loss ratio, expense ratio and
combined ratio do not provide an appropriate measure of underwriting performance. Therefore, underwriting
ratios are not presented for Chartis Other.
2011 and 2010 Comparison
For the year 2011 compared to 2010, the decrease in net premiums written and claims and claim adjustment
expenses reflect the effects of the run-off activities associated with the excess workers’ compensation business,
84 AIG 2011 Form 10-K