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American International Group, Inc.
2013 Annual Report

Table of contents

  • Page 1
    American International Group, Inc. 2013 Annual Report

  • Page 2
    ... a general insurance agency, American Asiatic Underwriters, in a two-room office in Shanghai, China. Ninety-five years later, AIG - which traces its roots to that small Shanghai operation - is a global insurer, with approximately 64,000 employees serving customers worldwide. Today, AIG continues...

  • Page 3
    ... million Donations made by AIG's Matching Grants Program to match employees' gifts to charitable organizations in 2013 58,300+ Loans modified, helping families in the U.S. keep their homes 300,000+ Financial professionals who make up the AIG Life and Retirement distribution organization More than...

  • Page 4
    ... leveraging all of our resources across every business to add value to our overall organization: • AIG Property Casualty had growth in pre-tax operating income, attributable to an improvement in underwriting results and an increase in net investment income, partially offset by the impact of higher...

  • Page 5
    ...-record sales of variable annuities, fixed annuities, and retail mutual funds. • United Guaranty Corporation saw net premiums written rise in 2013. The business also paid a $90 million cash dividend to AIG Parent in 2013, its first since 2010. • AIG announced an agreement to sell International...

  • Page 6
    ... the last few years, there is still work to be done. For example, the current stock price still lags well behind book value. Consistent with the Board's role of representing the best interests of both the company and its shareholders, one of our goals is to make AIG an investment worth keeping, and...

  • Page 7
    ... to AIG After-tax operating income attributable to AIG Balance sheet: Total assets Shareholders' equity Book value per share(1) Book value per share, excluding Accumulated other comprehensive income (AOCI) Key metrics: AIG Property Casualty combined ratio AIG Property Casualty accident year combined...

  • Page 8
    ... with PICC Life in 2013, we already had a product being marketed to Chinese Americans throughout the U.S. in both Cantonese and Mandarin. It was as if the product had originally been designed for exactly the consumers that PICC was looking to reach in China. AIG's Quality of Life...Insurance® does...

  • Page 9
    AIG provides coverage for a scientific expedition to the North Pole in the 1950s. 7

  • Page 10
    ... customers plan for the future. One of the ways we do that is by selling insurance products that customers hope they will never use. Yet, when they need us, we are ready to make good on our promises. AIG Property Casualty paid an average of more than $100 million in claims each business day in 2013...

  • Page 11
    Employees in Indonesia unload supplies to be ï¬,own to Banda Aceh following the 2004 tsunami in South Asia. 9

  • Page 12
    ... able to make the most of retirement ...the person just starting to think about retirement ...the employee of a company in China who falls ill while based in Angola and must be ï¬,own to a South African hospital for treatment. Giving back is an important part of AIG's identity. In 2013, nearly 5,000...

  • Page 13
    Artwork by John Olsen 11

  • Page 14
    ... and Managing Director Miller Buckfire & Co., LLC Robert H. Benmosche President and Chief Executive Officer American International Group, Inc. John H. Fitzpatrick Secretary General The Geneva Association Former Chief Financial Officer, Head of the Life and Health Reinsurance Business Group, and...

  • Page 15
    American International Group, Inc. Form 10-K

  • Page 16

  • Page 17
    ..., 2013 Commission file number 1-8787 26OCT201220500047 American International Group, Inc. (Exact name of registrant as specified in its charter) Delaware (State or other jurisdiction of incorporation or organization) 175 Water Street, New York, New York (Address of principal executive offices) 13...

  • Page 18

  • Page 19
    AMERICAN INTERNATIONAL GROUP, INC. ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 2013 TABLE OF CONTENTS FORM 10-K Item Number Description Page ...PART I ...Item 1. Business • AIG's Global Insurance Operations • A Review of Liability for Unpaid Claims and Claims Adjustment Expense ...

  • Page 20
    ... offerings include products and services that help businesses and individuals protect their assets, manage risks and provide for retirement security. AIG common stock is listed on the New York Stock Exchange and the Tokyo Stock Exchange. AIG's key strengths include: World class insurance franchises...

  • Page 21
    ... benefitting from its strong capital position. AIG Life and Retirement AIG Life and Retirement is a premier provider of protection, investment and income solutions for financial and retirement security. It is among the largest life insurance, annuity and retirement services businesses in the United...

  • Page 22
    ...gains. Revenues for AIG Life and Retirement include premiums, policy fees, net investment income, advisory fees, legal settlements and net realized capital gains. For financial information concerning our reportable segments, including geographic areas of operation and changes made in 2013, see Note...

  • Page 23
    ...offerings of AIG Common Stock in 2012 $25 mn Repurchased warrants in 2013 previously issued to the Department of the Treasury in 2008 and 2009 EXITED FROM GOVERNMENT OWNERSHIP 17FEB201414390656 (a) Pre-tax operating income, accident year loss ratio, as adjusted, and book value per share excluding...

  • Page 24
    ... legal entity structure, optimize our reinsurance program and improve tax efficiency... Investment Strategy: Execute our investment strategy, which includes increased asset diversification and yield-enhancement opportunities that meet our capital, liquidity, risk and return objectives...6 AIG 2013...

  • Page 25
    ...Consumer Insurance Percent of 2013 Net premiums written by product line (dollars in millions) Casualty $8,145 39% Financial lines $4,259 20% 23% 18% Property $4,708 Personal Lines $6,931 51% 49% Accident & Health $6,621 Specialty $3,730 14FEB201422462674 14FEB201420411057 ...AIG 2013 Form...

  • Page 26
    ... 1 / BUSINESS / AIG PROPERTY CASUALTY ... Commercial Insurance Product Lines Casualty: Includes general liability, commercial automobile liability, workers' compensation, excess casualty and crisis management insurance. Casualty also includes risk management and other customized structured programs...

  • Page 27
    ... with PICC Life Insurance Company Limited (PICC Life) and India with the Tata Group. EMEA Europe Middle East Africa $6.8 bn 20% Americas U.S., Canada Latin America and the Caribbean $17.9 bn 52% Asia Pacific Japan Other Asia Pacific nations $9.7 bn 28% 15FEB201401073754 AIG Property Casualty...

  • Page 28
    ... for business with the foreign insurance operations of large global insurance groups and local companies in specific market areas and product types. Insurance companies compete through a combination of risk acceptance criteria, product pricing, service and terms and conditions. AIG Property Casualty...

  • Page 29
    ..., risk and return objectives... Operational Initiatives: Continue to streamline our life insurance and annuity operations and systems into a lower-cost, more agile model that provides superior service and ease of doing business for customers and producers... Effective Risk and Capital Management...

  • Page 30
    ... financial measure that includes direct and assumed premiums as well as deposits received on universal life insurance, investment-type annuity contracts, guaranteed investment contracts (GICs) and mutual funds. See Item 7. MD&A - Results of Operations - AIG Life and Retirement Operations - AIG Life...

  • Page 31
    ... income, medical excess (stop loss) and worksite universal life and critical illness and accident coverage. Institutional Markets: Products primarily include stable value wrap products, structured settlement and terminal funding annuities, high net worth products, corporate- and bank-owned life...

  • Page 32
    ... major insurance operating companies: American General Life Insurance Company, The Variable Annuity Life Insurance Company and The United States Life Insurance Company in the City of New York. AIG Life and Retirement 2013 Sales by Distribution Channel VALIC Financial Advisors AIG Direct & Other...

  • Page 33
    ... financial ratings. AIG Life and Retirement helps ensure financial and retirement security for more than 18 million customers. AIG Life and Retirement Competitive Strengths and Challenges Our competitive strengths are: Long-standing market leading positions in many of our product lines and key...

  • Page 34
    ... of premium payment plans. UGC's primary product is private mortgage insurance. The coverage we provide - which is called mortgage guaranty insurance, mortgage insurance, or simply ''MI'', protects lenders against the increased risk of borrower default related to high loan-to-value (LTV) mortgages...

  • Page 35
    ... in the United States. Mortgage Guaranty Competitive Strengths and Challenges Our competitive strengths are: History - 50 years of service to the mortgage industry Financial strength - strong capital position and highly rated mortgage insurer Risk-based pricing strategy - provides products that are...

  • Page 36
    ... the AIA ordinary shares retained following the AIA initial public offering and the MetLife, Inc. (MetLife) securities that were received as consideration from the sale of American Life Insurance Company (ALICO) and the fair value gains or losses, prior to the Federal Reserve Bank of New York (FRBNY...

  • Page 37
    ... of prior year net loss reserves for calendar years 2003 through 2013 for each balance sheet in that period. The information in the table is presented in accordance with reporting requirements of the Securities and Exchange Commission (SEC). This table should be interpreted with care by those...

  • Page 38
    ... and Environmental Reserves. The Liability for unpaid claims and claims adjustment expense as reported in AIG's Consolidated Balance Sheet at December 31, 2013 differs from the total reserve reported in the annual statements filed with state insurance departments and, where applicable, with foreign...

  • Page 39
    ... - Results of Operations - Segment Results - AIG Property Casualty Operations - Liability for Unpaid Claims and Claims Adjustment Expense - Asbestos and Environmental Reserves. REINSURANCE ACTIVITIES ...Reinsurance is used primarily to manage overall capital adequacy and mitigate the insurance loss...

  • Page 40
    ... stock, real estate, hedge funds and other alternative investments. We generate significant revenues in our AIG Property Casualty and AIG Life and Retirement operations from investment activities. The majority of assets backing our insurance liabilities at AIG consist of intermediate and long...

  • Page 41
    ... BUSINESS ... The following table summarizes the investment results of AIG's insurance operations. Years Ended December 31, (in millions) Annual Average Investments(a) Net Investment Income Pre-tax Return on Average Investments(b) AIG Property Casualty: 2013 2012 2011 AIG Life and Retirement: 2013...

  • Page 42
    ... and corporate governance and incorporate them into IAIS' Insurance Core Principles (ICPs). The FSB also charged IAIS with developing a template for measuring systemic risks posed by insurer groups. Based on IAIS' assessment template, the FSB identified AIG as a global systemically important insurer...

  • Page 43
    ... and such regulations will affect the financial markets generally, impact our businesses, results of operations, cash flows or financial condition, or require us to raise additional capital or result in a downgrade of our credit ratings. On July 8, 2013, AIG received notice from the U.S. Treasury...

  • Page 44
    ... cases, issuers of asset-backed securities if such securities have equity-like characteristics. The Volcker Rule, as adopted, contains an exemption for proprietary trading and ''covered fund'' sponsorship or investment by a regulated insurance company or its affiliate for the general account of the...

  • Page 45
    ... of the amounts paid by us into state guaranty funds). We cannot predict whether these actions will become effective or the effect they may have on the financial markets or on our business, results of operations, cash flows, financial condition and credit ratings. However, it is possible that such...

  • Page 46
    ... systemic risks posed by insurer groups. The IAIS has requested data from selected insurers around the world to determine which elements of the insurance sector, if any, could materially and adversely impact other parts of the global financial services sector (e.g., commercial and investment banking...

  • Page 47
    ... of their business on terms that may not always allow foreign insurers, including our subsidiaries, full compensation. In some countries, regulations governing constitution of technical reserves and remittance balances may hinder remittance of profits and repatriation of assets. ...AIG 2013 Form 10...

  • Page 48
    ... and Note 19 to the Consolidated Financial Statements. OUR COMPETITIVE ENVIRONMENT ...Our businesses operate in a highly competitive global environment. Principal sources of competition are insurance companies, banks, and other non-bank financial institutions. We consider our principal competitors...

  • Page 49
    ... Chief Investment Officer Executive Vice President - Life and Retirement Senior Vice President and Chief Corporate Actuary 69 66 57 62 56 74 72 68 72 56 66 62 69 60 60 50 55 54 51 47 70 36 48 56 47 2009 2011 2011 2013 2009 2009 2005 2010 2009 2008 2010 2009 2013 2011 1992 2013 2010 2005 2013 2010...

  • Page 50
    ... December 2010 as Senior Vice President and Chief Risk Officer. Prior to that, he was a partner in the Finance and Risk practice of Oliver Wyman Financial Services and served as Canadian Market Manager since 2006. Kevin T. Hogan joined AIG as Chief Executive Officer of AIG Global Consumer Insurance...

  • Page 51
    ... • limitations on our ability to recover deferred tax assets; • a decline in new business levels and renewals; • a decline in insured values caused by a decrease in activity at client organizations; • an increase in liability for future policy benefits due to loss recognition on certain long...

  • Page 52
    ... other asset-backed securities and commercial mortgage loans. We also have significant exposures to financial institutions and, in particular, to money center and global banks; U.S. state and local government issuers and authorities; PICC Group and PICC P&C, as a result of our strategic investments...

  • Page 53
    ..., but are not limited to, general liability, commercial automobile liability, environmental, workers' compensation, excess casualty and crisis management coverages, insurance and risk management programs for large corporate customers and other customized structured insurance products, as well as...

  • Page 54
    ... business, results of operations, financial condition and liquidity. For additional information on our reinsurance, see Item 7. MD&A - Enterprise Risk Management - Insurance Operations Risks - AIG Property Casualty Key Insurance Risks - Reinsurance Recoverable. LIQUIDITY, CAPITAL AND CREDIT ...Our...

  • Page 55
    ... fixed income securities and certain structured securities, private company securities, private equity funds and hedge funds, mortgage loans, finance receivables and real estate. Collectively, investments in these assets had a fair value of $49 billion at December 31, 2013. Adverse real estate...

  • Page 56
    .... Finally, downturns in equity markets, increased equity volatility or reduced interest rates could result in an increase in the liabilities associated with the guaranteed benefits, reducing our net income and shareholders' equity. See Note 13 to the Consolidated Financial Statements and Item 7. MD...

  • Page 57
    ... to complete the sale of the common stock of ILFC on the agreed terms. On December 16, 2013, AIG and AIG Capital Corporation (Seller), a wholly-owned direct subsidiary of AIG, entered into a definitive agreement (the AerCap Share Purchase Agreement) with AerCap Holdings N.V. (AerCap) and AerCap...

  • Page 58
    ... to access these systems to perform necessary business functions, including providing insurance quotes, processing premium payments, making changes to existing policies, filing and paying claims, administering variable annuity products and mutual funds, providing customer support and managing our...

  • Page 59
    ...-law RBC standards that apply at the legal entity level, and such capital calculations may be made on bases other than the statutory statements of our insurance subsidiaries. See ''Our status as a savings and loan holding company and a systemically important financial institution, as well as the...

  • Page 60
    ... systemic risks posed by insurer groups. The IAIS has requested data from selected insurers around the world to determine which elements of the insurance sector, if any, could materially and adversely impact other parts of the global financial services sector (e.g., commercial and investment banking...

  • Page 61
    ... owned by such shareholders at any time during the prior three years (calculated on a rolling basis). An entity that experiences an ownership change generally will be subject to an annual limitation on its pre-ownership change tax losses and credits carryforwards equal to the equity value of the...

  • Page 62
    ... may limit a shareholder's ability to realize a premium over the market price of AIG Common Stock in connection with any stock transaction. Changes in tax laws could increase our corporate taxes, reduce our deferred tax assets or make some of our products less attractive to consumers. Changes in tax...

  • Page 63
    ... of business with existing customers and counterparties. General insurance and life insurance companies compete through a combination of risk acceptance criteria, product pricing, and terms and conditions. Retirement services companies compete through crediting rates and the issuance of guaranteed...

  • Page 64
    ... benefit plan costs based on assumed discount rates, expected rates of return on plan assets, expected increases in compensation levels and trends in health care costs. Changes in these assumptions, including from the impact of a sustained low interest rate environment, may result in increased...

  • Page 65
    ... Financial Statements for additional geographic information. See Note 6 to the Consolidated Financial Statements for total carrying values of cash and securities deposited by our insurance subsidiaries under requirements of regulatory authorities. Operations outside the U.S. and Canada and assets...

  • Page 66
    ... on the payment of dividends to AIG by some of its insurance subsidiaries, see Item 1A. Risk Factors - Liquidity, Capital and Credit - AIG Parent's ability to access funds from our subsidiaries is limited, and Note 19 to the Consolidated Financial Statements. EQUITY COMPENSATION PLANS ...Our table...

  • Page 67
    ...,453 $ - 49 50 $49 - 7,565,549 727,904 8,293,453 $808 440 403 $403 On August 1, 2013, our Board of Directors authorized the repurchase of shares of AIG Common Stock, with an aggregate purchase price of up to $1.0 billion, from time to time in the open market, private purchases, through forward...

  • Page 68
    ITEM 5 / MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES ... Five-Year Cumulative Total Shareholder Returns Value of $100 Invested on December 31, 2008 $250 $200 $150 $100 $50 $0 2008 2009 2010 2011 2012 2013 Years Ending S&P 500 ...

  • Page 69
    ... share Year-end balance sheet data: Total investments Total assets Long-term debt Total liabilities Total AIG shareholders' equity Total equity Book value per share(a) Book value per share, excluding Accumulated other comprehensive income (loss)(a) AIG Property Casualty combined ratio Other data...

  • Page 70
    ...losses subject to U.S. income taxes recorded from 2008 through 2010. See Note 23 to the Consolidated Financial Statements for further discussion. Aircraft Leasing ...We determined ILFC no longer met the criteria at December 31, 2013 to be presented in discontinued operations. ILFC operating results...

  • Page 71
    ... FINANCIAL DATA ... income (loss), which is a non-GAAP measure. See Item 7. MD&A - Use of Non-GAAP Measures for additional information.* At December 31, (in millions, except per share data) 2013 2012 2011 2010 2009 Total AIG shareholders' equity Recapitalization Value on conversion of equity units...

  • Page 72
    ...subject as a savings and loan holding company (SLHC), as a systemically important financial institution (SIFI) and as a global systemically important insurer (G-SII); • concentrations in AIG's investment portfolios; • actions by credit rating agencies; • judgments concerning casualty insurance...

  • Page 73
    ...Segment Results AIG Property Casualty Operations Liability for Unpaid Claims and Claims Adjustment Expense AIG Life and Retirement Operations Other Operations Discontinued Operations Overview Analysis of Sources and Uses of Cash Liquidity and Capital Resources of AIG Parent and Subsidiaries Credit...

  • Page 74
    ...tax adjustments, legal reserves (settlements) related to ''legacy crisis matters,'' deferred income tax valuation allowance (releases) charges, changes in fair value of AIG Life and Retirement fixed maturity securities designated to hedge living benefit liabilities (net of interest expense), changes...

  • Page 75
    ...on life-contingent payout annuities, as well as deposits received on universal life, investment-type annuity contracts, guaranteed investment contracts (GICs) and mutual funds. • Other Operations - Pre-tax operating income (loss): pre-tax income (loss) excluding certain legal reserves (settlements...

  • Page 76
    ... P&C shares, which are accounted for under the fair value option. AIG Life and Retirement reported growth in premiums and deposits primarily due to strong sales of annuities in our Retirement Income Solutions and Fixed Annuities product lines and increased Retail Mutual Fund sales. Pre-tax operating...

  • Page 77
    ... share attributable to AIG (diluted) After-tax operating income attributable to AIG Key metrics: AIG Property Casualty combined ratio AIG Property Casualty accident year combined ratio, as adjusted AIG Life and Retirement premiums and deposits AIG Life and Retirement assets under management Mortgage...

  • Page 78
    ... EXECUTIVE SUMMARY ...TOTA L R EVEN U ES (in millions) I NCOME FROM CONTINUING OP E RATIONS (in millions) $68,678 $71,021 $65,105 $18,863 $9,008 $3,699 2013 2012 2011 2013 2012 2011 NE T I N C O M E A TTR I BUT ABL E T O AI G (in millions) NET INCOME PER COMMON SHARE ATTRIBUTABLE TO AIG...

  • Page 79
    ... (in millions) P RE -TAX OP E RATING INCOME BY S E GME NT (in millions) $1,793 $4,812 $6,762 $6,635 $2,086 $5,095 $(511) 2013 2012 2011 2013 2012 $4,160 $1,148 $4,147 $3,277 $(1,704) 2011 AIG Property Casualty AIG Life and Retirement Other Operations TOTA L A SSETS (in millions) LONG-TE RM DE...

  • Page 80
    ... in cash dividends and loan repayments from AIG Life and Retirement subsidiaries. Our Board of Directors authorized the repurchase of shares of AIG Common Stock on August 1, 2013, with an aggregate purchase price of up to $1.0 billion, from time to time in the open market, private purchases, through...

  • Page 81
    ... life settlements, including investment income and impairment losses, were reclassified from AIG Property Casualty operations to AIG's Other Operations. Also, as a result of the interest in AerCap to be acquired by AIG in connection with the announced agreement to sell ILFC to AerCap, ILFC operating...

  • Page 82
    ...legal entity structure, optimize our reinsurance program and improve tax efficiency. Investment Strategy - Execute our investment strategy, which includes increased asset diversification and yield-enhancement opportunities that meet our liquidity, capital, risk and return objectives. ...64 AIG 2013...

  • Page 83
    ...helps inform our risk appetite, pricing and loss mitigation decisions. As part of our strategy to expand our consumer operations in growth economies, on May 29, 2013, we entered into a joint venture agreement with PICC Life, a subsidiary of PICC Group, to form an agency distribution company in China...

  • Page 84
    ... jurisdictions. See Segment Results - AIG Property Casualty Operations - AIG Property Casualty Results - AIG Property Casualty Net Investment Income and Net Realized Capital Gains (Losses) and Note 6 to the Consolidated Financial Statements for additional information. ...66 AIG 2013 Form 10-K

  • Page 85
    ... products. Low interest rates may also affect future investment margins, and may affect the recoverability and amortization rate of DAC assets in our variable annuity, fixed annuity and universal life businesses. While long-term interest rates remain low relative to historical levels, the increase...

  • Page 86
    ... those with guarantee features, to provide additional solutions for consumers approaching retirement. Sales of our fixed annuities are expected to benefit in 2014 from anticipated increasing interest rates and steepening of the yield curve, as these market conditions make fixed annuity products more...

  • Page 87
    ... will result in an appropriately priced, high-quality book of business. UGC plans to continue to execute this strategy in 2014. The business generated under this strategy, which was initiated during 2009, accounts for approximately 53 percent of net premiums earned in 2013. ...AIG 2013 Form 10...

  • Page 88
    ..., short-term investments, fixed maturity securities issued by corporations, U.S. government and government sponsored entities and mortgage and asset backed securities. The value of these assets is impacted by macro-economic trends in U.S. and core European markets, including corporate credit spreads...

  • Page 89
    ... operations: Years Ended December 31, (in millions) Revenues: Premiums Policy fees Net investment income Net realized capital gains Aircraft leasing revenue Other income Total revenues Benefits, claims and expenses: Policyholder benefits and claims incurred Interest credited to policyholder account...

  • Page 90
    ...-tax income from insurance operations of $5.1 billion, $6.5 billion and $213 million from AIG Property Casualty, AIG Life and Retirement and Mortgage Guaranty in 2013, respectively, compared to pre-tax income of $2.0 billion, $3.8 billion and $15 million for these operations in 2012. Net investment...

  • Page 91
    ...adjustments Legal reserves (settlements) related to legacy crisis matters Deferred income tax valuation allowance releases Amortization of FRBNY prepaid commitment fee asset Changes in fair value of AIG Life and Retirement fixed maturity securities designated to hedge living benefit liabilities, net...

  • Page 92
    ...Consolidation and eliminations Total pre-tax income (loss) Pre-tax operating income (loss): AIG Property Casualty AIG Life and Retirement Total reportable segments Other Operations: Mortgage Guaranty Global Capital Markets Direct Investment book Retained interests Corporate & Other Consolidation and...

  • Page 93
    ... benefits and claims incurred, from the subsequent reinvestment of the proceeds from these sales at lower yields. Other Operations - Other Operations reported a decline in pre-tax loss in 2013 compared to 2012. The pre-tax loss in 2013 included impairment on investments in life settlements, a loss...

  • Page 94
    ...Pre-tax Income Comparison for 2012 and 2011 AIG Property Casualty - Pre-tax income decreased slightly in 2012 compared to 2011 due to higher acquisition costs as a result of the change in business mix from Commercial Insurance to Consumer Insurance and higher general operating expenses and lower net...

  • Page 95
    ...) 2012 2011 2013 AIG Property Casualty Pre-tax income Net realized capital gains Legal settlements* Other (income) expense - net Pre-tax operating income AIG Life and Retirement Pre-tax income Legal settlements* Changes in fair value of fixed maturity securities designated to hedge living benefit...

  • Page 96
    ITEM 7 / RESULTS OF OPERATIONS ... P R E- TA X I NCO ME (L O S S ) (in millions) A I G P RO P E R T Y C A S U A L T Y P RE -TAX OP E RATING INCOME (LOS S ) (in millions) AIG PROPERTY CASUALTY $5,133 $4,812 $2,023 $2,100 $1,793 $1,148 2013 2012 2011 2013 2012 2011 A I G LI F E AND RE T ...

  • Page 97
    ......Pre-tax Operating Income increased in 2013, compared to the prior year, due to lower catastrophe losses, improvements in underwriting results and strong investment performance. AIG Property Casualty continued to shift its mix of business to higher value products and regions, while benefiting from...

  • Page 98
    ... loss Net investment income Pre-tax operating income (loss) Net realized capital gains Legal settlement Other income (expense) - net Pre-tax income Total AIG Property Casualty Underwriting results: Net premiums written (Increase) decrease in unearned premiums Net premiums earned Claims and claims...

  • Page 99
    ... Consumer Consumer $2,097 $877 $292 $624 2012 $1,269 2011 Other 2013 2012 2011 2013 19FEB201414081482 * The operations reported as part of Other do not have meaningful levels of Net premiums written. 2013 and 2012 Comparison AIG Property Casualty Results Pre-tax operating income increased...

  • Page 100
    ... 2011 Comparison AIG Property Casualty Results Pre-tax operating income increased in 2012, compared to the prior year, primarily due to a decrease in catastrophe losses to $2.7 billion from $3.3 billion in the prior year. In addition, net investment income increased due to asset ...82 AIG 2013 Form...

  • Page 101
    .... Consumer Insurance Results Pre-tax operating income increased in 2012, compared to the prior year, reflecting a reduction in underwriting loss as well as an increase in allocated net investment income resulting primarily from the strategic group benefits partnership with AIG Life and Retirement...

  • Page 102
    ...of business: Years Ended December 31, (in millions) Percentage Change 2013 2012 2011 2013 vs. 2012 2012 vs. 2011 Commercial Insurance Casualty Property Specialty Financial lines Total net premiums written Consumer Insurance Accident & Health Personal lines Total net premiums written Other Total AIG...

  • Page 103
    ... in all the other lines of business. Casualty net premiums written decreased in 2012, compared to the prior year, as planned, primarily due to the execution of our strategy to improve loss ratios. Our enhanced risk selection process, and adherence to pricing targets resulted in the non-renewal...

  • Page 104
    ...direct marketing operations, as well as pricing and underwriting actions in Europe. Personal lines net premiums written increased in 2012, compared to the prior year, primarily due to the execution of our strategic initiative to grow higher value lines of business in non-automobile products and rate...

  • Page 105
    ...AIG Property Casualty's net premiums written by region: Percentage Change in U.S. dollars 2013 2012 Percentage Change in Original Currency Years Ended December 31, (in millions) 2011 2013 vs. 2012 2012 vs. 2011 2013 vs. 2012 2012 vs. 2011 Commercial Insurance: Americas Asia Pacific EMEA Total net...

  • Page 106
    ... in all lines of Consumer Insurance. 2012 and 2011 Comparison The Americas net premiums written decreased primarily due to the restructuring of the Commercial Insurance Casualty book of business primarily in workers' compensation and loss-sensitive business, slightly offset by rate increases. These...

  • Page 107
    ...adjustments Accident year combined ratio, as adjusted Total AIG Property Casualty Loss ratio Catastrophe losses and reinstatement premiums Prior year development net of premium adjustments Net reserve discount benefit (charge) Accident year loss ratio, as adjusted Acquisition ratio General operating...

  • Page 108
    ITEM 7 / RESULTS OF OPERATIONS / AIG PROPERTY CASUALTY ...COMMERCIAL INSURANCE RATIOS C OMBIN ED RATIO AC C I D EN T YEAR C OM BI N ED R AT I O, AS AD J U ST ED 109.1 100.5 12.5 16.1 71.9 2.8 3.5 2013 80.3 1.4 10.9 2012 12.2 16.6 108.5 9.8 14.6 G e n e r a l o p e r a t ing expense ratio A c q u...

  • Page 109
    ITEM 7 / RESULTS OF OPERATIONS / AIG PROPERTY CASUALTY ... The following tables present AIG Property Casualty accident year catastrophe losses by region and number of events: Catastrophes(a) # of Events Asia Pacific (in millions) Americas EMEA Total Year Ended December 31, 2013 Flooding ...

  • Page 110
    ... exposure management and claims processing. Although the execution of these strategies resulted in a reduction of Casualty net premiums written, it also improved the accident year loss ratio as we remediated our primary and excess Casualty books in both the Americas and EMEA regions. Financial lines...

  • Page 111
    ... Change 2013 2012 2011 2013 vs. 2012 2012 vs. 2011 Net Investment Income by Component Interest and dividends Alternative investments Fair value option assets Other income (expense) - net Total net investment income Net Investment Income by Operating Segment Commercial Insurance Consumer Insurance...

  • Page 112
    ... to Commercial Insurance and Consumer Insurance, but are reported as part of the Other category. 2013 and 2012 Comparison Net Investment Income Net investment income is influenced by a number of factors, including equity market performance, changes in overall asset allocation, changes in the timing...

  • Page 113
    ... 2012 Other liability occurrence (including asbestos and environmental) International Workers' compensation (net of discount) Other liability claims made Property Auto liability Products liability Medical malpractice Mortgage guaranty / credit Accident and health Commercial multiple peril Aircraft...

  • Page 114
    ... the components of net loss reserves by business unit: December 31, (in millions) 2013 2012 AIG Property Casualty: Commercial Insurance Casualty Financial lines Specialty Property Total Commercial Insurance(a) Consumer Insurance Personal lines Accident and health Total Consumer Insurance Other...

  • Page 115
    ...and domiciliary states of the participants of the combined pool, a portion of the workers' compensation reserves currently held net in New York subsidiaries and discounted pursuant to New York discounting rules, will be transferred to Lexington Insurance Company (Lexington), ...AIG 2013 Form 10-K 97

  • Page 116
    ... was a decrease of $847 million for foreign exchange and loss expenses paid (current year), with no income statement or balance sheet impact. (b) See tables below for details of prior year development by business unit, accident year and major class of business. ...98 AIG 2013 Form 10-K

  • Page 117
    ...) Prior accident year development by major class of business: Commercial Insurance U.S.: Excess casualty Financial lines including professional liability On-going specialty, excluding pollution products On-going pollution products Primary casualty: Loss-sensitive Other Healthcare Property excluding...

  • Page 118
    ... development in 2013, 2012 and 2011 of those classes of business that experienced significant prior accident year development during the three-year period. See Critical Accounting Estimates for a description of our loss reserving process. Excess Casualty The excess casualty segment presents unique...

  • Page 119
    ... of primary workers' compensation, which indicated that prior year development was flat after taking into account the initiatives that our claim function has undertaken to manage high risk claims. During 2013, for primary general liability, we increased our reserves for prior years by approximately...

  • Page 120
    ... experienced claim activity in line with expectations. Healthcare business written by AIG Property Casualty's Americas region produced moderate favorable development in 2011. Healthcare loss reserves have benefited from favorable market conditions and an improved legal environment in accident years...

  • Page 121
    ... year 2012 was driven primarily by consumer lines and lower losses in domestic commercial property, while the favorable development from accident year 2010 was primarily the result of favorable claims emergence from domestic excess casualty and from liability and financial lines coverage policies...

  • Page 122
    ... of multiple policy periods for individual claims; • claims filed under the non-aggregate premises or operations section of general liability policies; • the number of insureds seeking bankruptcy protection and the effect of prepackaged bankruptcies; • diverging legal interpretations; and...

  • Page 123
    ... 31, (in millions) 2013 Gross Net 2012 Gross Net 2011 Gross Net Asbestos: Liability for unpaid claims and claims adjustment expense at beginning of year Change in net loss reserves due to retroactive reinsurance: Paid losses recoverable under retroactive reinsurance contracts Re-estimation of...

  • Page 124
    ... claims at December 31, 2013, 2012 and 2011. The survival ratio is derived by dividing the current carried loss reserve by the average payments for the three most recent calendar years for these claims. Therefore, the survival ratio is a simplistic measure estimating the ...106 AIG 2013 Form...

  • Page 125
    ... to 2012, primarily from strong sales of annuities in our Retirement Income Solutions and Fixed Annuities product lines and increased Retail Mutual Fund sales. The improvement in Retirement Income Solutions resulted from our efforts to increase sales while managing risk by meeting the strong market...

  • Page 126
    ... and insurance expenses Pre-tax operating income Legal settlements Changes in benefit reserves and DAC, VOBA and SIA related to net realized capital gains (losses) Net realized capital gains (losses) Pre-tax income Total AIG Life and Retirement Revenue: Premiums Policy fees Net investment income...

  • Page 127
    ... AIG Life and Retirement Results Pre-tax operating income increased in 2013 compared to 2012, reflecting higher fee income from variable annuities driven by growth in assets under management, continued active spread management in interest rate sensitive product lines and higher net investment income...

  • Page 128
    ... reserves for the GIC portfolio. 2012 and 2011 Comparison AIG Life and Retirement Results Pre-tax operating income increased in 2012 compared to 2011, reflecting active spread management in interest rate sensitive product lines and higher net investment income. The increase in net investment income...

  • Page 129
    ... presents premiums and deposits by operating segment and product line: Percentage Change Years Ended December 31, (in millions) 2013 2012 2011 2013 vs. 2012 2012 vs. 2011 Retail Life Insurance and A&H Fixed Annuities Retirement Income Solutions Retail Mutual Funds Closed blocks Total premiums and...

  • Page 130
    ... Group Retirement product lines, represent deposits less withdrawals. The following table summarizes net flows for our investment product lines: Years Ended December 31, (in millions) 2013 2012 2011 Net flows Fixed Annuities Retirement Income Solutions Retail Mutual Funds Group Retirement Total net...

  • Page 131
    ... 2013 and 2012, respectively, that are subject to 20 percent annual withdrawal limitations. AIG Life and Retirement Investments and Spread Management ...Investments ...We invest primarily in fixed maturity securities issued by corporations, municipalities and other governmental agencies; structured...

  • Page 132
    ...presents the fixed maturity security portfolio of AIG Life and Retirement categorized by composite AIG credit rating, at fair value: December 31, 2013 (in millions) Other Fixed Maturity Securities Mortgage Backed, Asset Backed and Collateralized Composite AIG Credit Rating Total* Investment grade...

  • Page 133
    ... rates, resulting in an overall increase in deposits for 2013 compared to 2012. In the historically low interest rate environment experienced in 2013 and 2012, we have continued to pursue new sales of life and annuity products at targeted net investment spreads. We have a dynamic product management...

  • Page 134
    ... RESULTS OF OPERATIONS / AIG LIFE AND RETIREMENT ... are re-priced or no longer sold. Additionally, current products with higher minimum rate guarantees have been re-filed with lower rates as permitted under state insurance product regulations. • New sales of fixed annuity products generally have...

  • Page 135
    ...fair value of fixed maturity securities designated to hedge living benefit liabilities, which are excluded from Pre-tax operating income, are a component of AIG Life and Retirement's dynamic hedging program designed to manage economic risk exposure associated with changes in equity markets, interest...

  • Page 136
    ... Total insurance reserves and group mutual fund assets under management Total AIG Life and Retirement: Balance at beginning of year, gross Premiums and deposits Surrenders and withdrawals Death, and other contract benefits Subtotal Change in fair value of underlying assets and reserve accretion, net...

  • Page 137
    ... / AIG LIFE AND RETIREMENT ... Other Reserve Changes ...Other reserve changes in the table above include loss recognition, primarily on certain long-term payout annuity contracts. In connection with our program to utilize capital loss carryforwards, we sold investment securities in 2013 and 2012...

  • Page 138
    ... in long-term asset growth rate assumptions for Group Retirement variable annuity products, which was driven by sustained favorable equity market performance. The result of the comprehensive annual review, which was completed in the third quarter of 2013, was a $118 million net increase in Pre-tax...

  • Page 139
    ...Corporate & Other operating loss Consolidation and eliminations Total Other operations pre-tax operating income (loss) Legal reserves Legal settlements(b) Loss on extinguishment of debt Aircraft Leasing Net loss on sale of divested businesses Deferred gain on FRBNY credit facility Changes in benefit...

  • Page 140
    ... Change 2013 2012 2011 2013 vs. 2012 2012 vs. 2011 Underwriting results: Net premiums written Increase in unearned premiums Net premiums earned Claims and claims adjustment expenses incurred Underwriting expenses Underwriting income (loss) Net investment income Pre-tax operating income (loss) Net...

  • Page 141
    ... principal balance of the insured mortgages, increased 33 percent due to elevated levels of refinancing activity during 2013 and the acceptance of UGC's risk-based pricing model by approximately 300 new lenders. 2012 and 2011 Comparison Mortgage Guaranty recorded pre-tax operating income in 2012...

  • Page 142
    ...end of the second quarter of 2011. Direct Investment Book Results ...The following table presents Direct Investment book results: Years Ended December 31, (in millions) Percentage Change 2013 2012 2011 2013 vs. 2012 2012 vs. 2011 Pre-tax operating income Legal settlements Loss on extinguishment of...

  • Page 143
    ... in the securities' value, due to market conditions, from December 31, 2010 through the date of their sale in the first quarter of 2011. Corporate and Other Results ...2013 and 2012 Comparison Corporate & Other reported an increase in pre-tax operating losses in 2013 compared to 2012 primarily due...

  • Page 144
    ... Aircraft Leasing reported a pre-tax loss in 2013 compared to pre-tax income in 2012, primarily due to certain adjustments to ILFC's assets and liabilities classified as held for sale. See Note 4 to the Consolidated Financial Statements for more information regarding Aircraft Leasing. 2012 and 2011...

  • Page 145
    ...7 / RESULTS OF OPERATIONS / OTHER OPERATIONS ... reserves recorded for potential exposure under aircraft assets value guarantees and an increase in depreciation expense due to the change in depreciable lives and residual value of certain aircraft. Net Loss on Sale of Divested Businesses ...In 2012...

  • Page 146
    ...other legal restrictions could limit our ability to transfer funds freely, either to or from our subsidiaries. Depending on market conditions, regulatory and rating agency considerations and other factors, we may take various liability and capital management actions. Liability management actions may...

  • Page 147
    ...in cash dividends from Mortgage Guaranty. Infrequent events at our insurance subsidiaries including capital management initiatives at AIG Property Casualty and proceeds from legal settlements at AIG Life and Retirement resulted in higher than usual dividends. • Legal Settlements On August 26, 2013...

  • Page 148
    ...: Change in policyholder contract balances Repayments of long-term debt Federal Reserve Bank of New York credit facility repayments Repayment of Department of Treasury SPV Preferred Interests Repayment of Federal Reserve Bank of New York SPV Preferred Interests Purchases of AIG Common Stock Net cash...

  • Page 149
    ...) 2013 2012 2011 Summary: Net cash provided by (used in) operating activities Net cash provided by investing activities Net cash used in financing activities Effect of exchange rate changes on cash Increase (decrease) in cash Cash at beginning of year Change in cash of businesses held for sale...

  • Page 150
    ... as capital support agreements as a result of our intention to manage capital flows between AIG Parent and its subsidiaries through internal, Board-approved policies and guidelines rather than CMAs. See AIG Property Casualty, AIG Life and Retirement and Other Operations - Mortgage Guaranty below for...

  • Page 151
    ... assets. AIG Property Casualty's subsidiaries' liquidity resources are held in the form of cash, short-term investments and publicly traded, investment grade rated fixed maturity securities. National Union Fire Insurance Company of Pittsburgh, Pa. (NUFI) is a member of the Federal Home Loan Bank...

  • Page 152
    ... insurance subsidiaries through internal, Board-approved policies and guidelines. AIG Property Casualty paid cash and non-cash dividends totaling $4.3 billion to AIG Parent in 2013, including $2.6 billion of cash dividends in the fourth quarter of 2013. For the years ended December 31, 2013 and 2012...

  • Page 153
    ... insurance subsidiaries through internal, Board-approved policies and guidelines. In 2013, AIG Life and Retirement provided $4.4 billion of liquidity to AIG Parent in the form of cash dividends and loan repayments, including $1.3 billion of liquidity in the fourth quarter of 2013, which was funded...

  • Page 154
    ... to be funded by AIG Parent. From time to time, we may utilize cash allocated to the DIB that is not required to meet the risk target for the DIB for general corporate purposes unrelated to the DIB. The DIB's assets consist primarily of cash, short-term investments, fixed maturity securities issued...

  • Page 155
    ... operations Loss reserves Insurance and investment contract liabilities Borrowings Interest payments on borrowings Operating leases Other long-term obligations Total Other and Held for Sale Borrowings(a) Interest payments on borrowings Operating leases Aircraft purchase commitments Other long-term...

  • Page 156
    ... Mortgage Guaranty subsidiaries maintain adequate financial resources to meet the actual required payments under these obligations. Insurance and Investment Contract Liabilities ...Insurance and investment contract liabilities, including GIC liabilities, relate to AIG Life and Retirement businesses...

  • Page 157
    ... in asset sales agreements. See Note 15 to the Consolidated Financial Statements for further information on indemnification obligations. (b) Includes commitments to invest in private equity funds, hedge funds and mutual funds and commitments to purchase and develop real estate in the United States...

  • Page 158
    ... Statements. Indemnification Agreements ...We are subject to financial guarantees and indemnity arrangements in connection with our sales of businesses. These arrangements may be triggered by declines in asset values, specified business contingencies, the realization of contingent liabilities...

  • Page 159
    ... are direct obligations of AIG Parent. (c) Primarily represents adjustments to the fair value of debt. (d) At December 31, 2013, includes debt of consolidated investments primarily held through AIG Global Real Estate Investment Corp., AIG Property Casualty U.S., AIG Credit Corp. and AIG Life and...

  • Page 160
    ...relative standing within the major rating categories. (d) AIG guarantees all obligations of AIG Financial Products Corp. and AIG Funding, Inc. These credit ratings are current opinions of the rating agencies. They may be changed, suspended or withdrawn at any time by the rating agencies as a result...

  • Page 161
    ... structured securities, other fixed maturity securities and mortgage loans with favorable risk versus return characteristics to improve yields and increase net investment income. • Net investment income benefited from higher returns on alternative investments primarily due to strong equity market...

  • Page 162
    ... assets of comparable duration, to the extent practicable. • Fixed maturity securities held by the domestic insurance companies included in AIG Property Casualty consist of a mix of tax-exempt municipal bonds and taxable instruments that meet our current risk-return, tax, liquidity, credit quality...

  • Page 163
    ... calculated on the basis of their fair value: Available for Sale December 31, 2013 December 31, 2012 Other December 31, 2013 December 31, 2012 Total December 31, 2013 December 31, 2012 Rating: Other fixed maturity securities AAA AA A BBB Below investment grade Non-rated Total Mortgage-backed...

  • Page 164
    ... stock, at fair value Mortgage and other loans receivable, net of allowance Other invested assets Short-term investments Total investments* Cash Total invested assets December 31, 2012 Fixed maturity securities: Bonds available for sale, at fair value Other bond securities, at fair value Equity...

  • Page 165
    ... fixed maturity securities in AIG Property Casualty's domestic operations, a modest portion of surplus is allocated to alternative investments, including private equity and hedge funds. These investments provide a combination of added diversification and attractive long-term returns. AIG Life...

  • Page 166
    ... credit exposures to non-U.S. governments and their agencies, financial institutions and local governments for our fixed maturity securities: (in millions) December 31, 2013 December 31, 2012 Japan Canada Germany France Netherlands Norway Mexico South Korea United Kingdom Sweden Other Total...

  • Page 167
    ITEM 7 / INVESTMENTS ... The following table presents the fair value of our aggregate United Kingdom and European credit exposures by major sector for our fixed maturity securities: December 31, 2013 Financial Institution NonFinancial Corporates Structured Products December 31, 2012 Total (in ...

  • Page 168
    ...2012 Financial institutions: Money Center /Global Bank Groups Regional banks - other Life insurance Securities firms and other finance companies Insurance non-life Regional banks - North America Other financial institutions Utilities Communications Consumer noncyclical Capital goods Energy Consumer...

  • Page 169
    ... for sale investments by year of vintage: Fair Value at December 31, 2013 Fair Value at December 31, 2012 (in millions) Total RMBS 2013 2012 2011 2010 2009 2008 and prior* Total RMBS Agency 2013 2012 2011 2010 2009 2008 and prior Total Agency Alt-A 2010 2008 and prior Total Alt-A Subprime 2008 and...

  • Page 170
    ... average expected life was 7 years at December 31, 2013 and 6 years at December 31, 2012. Our underwriting practices for investing in RMBS, other asset-backed securities and CDOs take into consideration the quality of the originator, the manager, the servicer, security credit ratings, underlying...

  • Page 171
    ... securities, partially offset by changes in net unrealized losses. The following table presents the fair value of our CMBS holdings by rating agency designation and by vintage year: Below Investment Grade Non-Rated (in millions) AAA AA A BBB Total December 31, 2013 Year: 2013 2012 2011 2010...

  • Page 172
    ... CDO available for sale investments by collateral type: Fair value at December 31, 2013 Fair value at December 31, 2012 (in millions) Collateral Type: Bank loans (CLO) Synthetic investment grade Other Subprime ABS Total $ 4,613 - 529 - $ 5,142 $ 2,579 25 643 10 $ 3,257 ...154 AIG 2013 Form 10-K

  • Page 173
    ... table presents the commercial mortgage loan exposure by location and class of loan based on amortized cost: Number of Loans Class Apartments Offices Retails Industrials Hotels Others Percent of Total Total (dollars in millions) December 31, 2013 State: California New York New Jersey Florida Texas...

  • Page 174
    ... by investment type: Years Ended December 31, (in millions) 2013 2012 2011 Fixed maturity securities, available for sale Equity securities, available for sale Private equity funds and hedge funds Subtotal Investments in life settlements Aircraft trusts Other investments Real estate Total $ 173...

  • Page 175
    ...charges recorded in earnings on fixed maturity securities, equity securities, private equity funds and hedge funds. Other-than-temporary impairment charges by reportable segment and impairment type: Reportable Segment (in millions) AIG Property Casualty AIG Life and Retirement Other Operations Total...

  • Page 176
    ... CMBS Other Fixed Maturity Equities/Other Invested Assets* Total For the Year Ended December 31, 2013 Impairment Type: Severity Change in intent Foreign currency declines Issuer-specific credit events Adverse projected cash flows Total For the Year Ended December 31, 2012 Impairment Type: Severity...

  • Page 177
    ... on private equity funds, hedge funds and direct private equity investments. We recorded other-than-temporary impairment charges in the years ended December 31, 2013, 2012 and 2011 related to: • issuer-specific credit events; • securities for which we have changed our intent from hold to sell...

  • Page 178
    ... gains from sales of securities. The change in net unrealized gains and losses on investments in 2012 were primarily attributable to the appreciation in the fair value of bonds available for sale due to continued improvements in financial market conditions and significant narrowing of credit spreads...

  • Page 179
    ...Board. Our Chief Risk Officer (CRO) reports to both the FRMC and AIG's Chief Executive Officer (CEO). The Group Risk Committee (the GRC) is the senior management group charged with assessing all significant risk issues on a global basis to protect our financial strength, optimize our intrinsic value...

  • Page 180
    ... senior AIG executives with expertise in legal, compliance, technology, human resources, finance and operational risk, as well as business continuity management and the chief risk officers of our business units. Business Unit Risk and Capital Committees: Each of our major insurance businesses...

  • Page 181
    ... a number of processes at the business unit and corporate level focused on capturing our material risks and key areas of focus for follow-up risk management actions. In 2013, we initiated a more formal and integrated bottom-up risk identification and assessment process down to the product-line level...

  • Page 182
    ... to counterparties, insurance risk cessions to third parties, financial guarantees and letters of credit. Governance ...Our credit risks are managed at the corporate level within ERM. ERM is assisted by credit functions headed by highly experienced credit officers in the business units, whose...

  • Page 183
    ...in publicly-traded shares, investments in private equity, hedge funds and mutual funds, exchangetraded funds and other equity-linked capital market instruments as well as other equity-linked insurance products, including but not limited to equity-indexed annuities, variable annuities, universal life...

  • Page 184
    ... from a unit change in a market risk input. Examples of such sensitivities include a one basis point increase in yield on fixed maturity securities, a one basis point increase in credit spreads on fixed maturity securities, and a one percent increase in price on equity securities. Scenario analysis...

  • Page 185
    ... in fixed maturity securities of $1.0 billion, and a decrease in mortgage and other loans receivable of $0.8 billion. Exposures to equity and alternative investment prices include investments in common stock, preferred stocks, mutual funds, hedge funds, private equity funds, commercial real estate...

  • Page 186
    ... net asset position at December 31, 2013 increased 13.7 percent, or $1.2 billion, compared to December 31, 2012. This was primarily due to an increase in our Hong Kong dollar position of $523 million and $337 million resulting from AIG Life and Retirement's and AIG Property Casualty's investments...

  • Page 187
    ... management actions. However, the market conditions in effect at that time may not permit us to achieve an increase in liquidity sources or a reduction in liquidity requirements. We strive to manage our liquidity prudently at a legal entity level across AIG Parent and the operating companies. Key...

  • Page 188
    ... use of reinsurance, both internal and third-party; and • review and establishment of reserves. We closely manage insurance risk by monitoring and controlling the nature and geographic location of the risks in each line of business underwritten, the terms and conditions of the underwriting and the...

  • Page 189
    ..., accident and health, aviation and management liability. We manage risks in the general insurance segment through aggregations and limitations of concentrations at multiple levels: policy, line of business, geography, industry and legal entity. • Life Insurance & Retirement Services (AIG Life and...

  • Page 190
    ... reinsurance program is as of January 1, 2014. AIG Property Casualty natural catastrophe modeled losses relative to an industry benchmark over different return periods are presented in the chart below. AIG Property Casualty natural catastrophe net modeled losses across all ...172 AIG 2013 Form 10-K

  • Page 191
    ... attacks. Our largest terrorism exposures are in New York City, and estimated losses are largely driven by the Property and Workers' Compensation lines of business. At our largest exposure location, modeled losses for a five-ton bomb attack net of the Terrorism Risk Insurance Program Reauthorization...

  • Page 192
    ...Our exposure to terrorism risk is mitigated by TRIPRA in addition to limited private reinsurance protections. TRIPRA covers terrorist attacks in the United States only and excludes certain lines of business as specified by applicable law. TRIPRA covers 85 percent of insured losses above a deductible...

  • Page 193
    ... prices. It affects equity-linked insurance products, including but not limited to equity-indexed annuities, variable annuities (and associated guaranteed living and death benefits), universal life insurance, and variable universal life insurance. It also affects our equity ...AIG 2013 Form 10-K 175

  • Page 194
    ... GCM reports the results of its operations to and reviews future strategies with AIG's senior management. GCM Derivative Transactions ...A counterparty may default on any obligation to us, including a derivative contract. Credit risk is a consequence of extending credit and/or carrying trading and...

  • Page 195
    ... Accounting Estimates below and Note 11 to the Consolidated Financial Statements for additional discussion related to derivative transactions. Aircraft Leasing ...Risks inherent in ILFC's business, which are managed at the business unit level, include the following: • that there will be no market...

  • Page 196
    ... held for sale and discontinued operations accounting at December 31, 2012 and, consequently, we recorded a $4.4 billion after-tax loss for the year ended December 31, 2012. As of December 15, 2013, the closing of the ILFC Transaction had not occurred and on December 16, 2013, AIG Parent and Seller...

  • Page 197
    ... accounting at December 31, 2013. Because we expect to hold approximately 46 percent of the common stock of AerCap upon closing of the transaction, however, ILFC does not qualify for discontinued operations presentation in the Consolidated Statements of Income. Consequently, ILFC's operating results...

  • Page 198
    ...property, personal lines and certain casualty classes. Long-tail casualty classes of business include excess and umbrella liability, D&O, professional liability, medical malpractice, workers' compensation, general liability, products liability and related classes. Short-Tail Reserves For operations...

  • Page 199
    ... accident years. We record quarterly changes in loss reserves for each of AIG Property Casualty's classes of business. The overall change in our loss reserves is based on the sum of the changes for all classes of business. For most long-tail classes of business, the quarterly loss reserve changes...

  • Page 200
    ...an ultimate loss estimate of $7 million. Subtracting any reported paid losses and loss expense would result in the indicated loss reserve for this class. Under the ''Bornhuetter Ferguson'' methods, the expected loss ratio is applied only to the expected unreported portion of ...182 AIG 2013 Form 10...

  • Page 201
    ... must consist of homogeneous types of claims for which loss severity trends from one year to the next are reasonably consistent. Generally these methods work best for high frequency, low severity classes of business such as personal auto. Structural drivers analytics seek to explain the underlying...

  • Page 202
    ... of various runoff claims management strategies that have been developed by AIG's run-off unit. Overall, our loss reserve reviews for long-tail classes typically utilize a combination of both loss development and expected loss ratio methods, supplemented by structural drivers analysis of frequency...

  • Page 203
    ... underlying product aggregate limits are reviewed separately due to the unique emergence patterns of losses relating to these claims. The expected loss ratios used for recent accident years are based on the projected ultimate loss ratios of prior years, adjusted for rate changes, estimated loss cost...

  • Page 204
    ... mature accident years. For the year-end 2013 loss reserve review, claims projections for accident years 2012 and prior were used. ...Workers' Compensation We generally use a combination of loss development methods and expected loss ratio methods for workers' compensation. We segment the data by...

  • Page 205
    ...of recently enacted health care reform on workers' compensation costs; • underlying policy pricing, terms and conditions; • claims settlement trends that can materially alter the mix and ultimate cost of claims; • changes in claims reporting and management practices of insureds and their third...

  • Page 206
    ... development methods may be given limited weight for the five or more most recent accident years. Expected loss ratio methods are used for the more recent accident years for these classes. The loss experience for primary general liability business is generally reviewed at a level that is believed to...

  • Page 207
    ... experience is marked by very low frequency and high severity. Because of the limited number of claims, loss development methods are not relied upon. The expected loss ratios and loss development assumptions used are based upon the results of prior accident years for this business as well as for...

  • Page 208
    ... produced higher cure rates of delinquent loans in 2013, particularly in the most recent accident periods that may not continue in 2014. In addition, these loan modifications may re-default resulting in new losses for Mortgage Guaranty if adverse economic conditions were to return. In addition to...

  • Page 209
    ... our gross and net loss and loss expense liability from those events. These analyses may include a combination of approaches, including modeling estimates, ground-up claim analysis, loss evaluation reports from on-site field adjusters, and market share estimates. ... ...AIG 2013 Form 10-K 191

  • Page 210
    ..., terms and conditions, claims handling practices, and large loss impact when determining the methods, assumptions and the estimations. This multi-disciplinary process engages underwriting, claims, risk management, business unit executives and senior management and involves several iterative levels...

  • Page 211
    ... excess casualty class of business due to the long-tail nature of the claims and therefore is applied across many accident years. Thus, there is the potential for the reserves with respect to a number of accident years (the expected loss ratio years) to be significantly affected by changes in loss...

  • Page 212
    ...is reasonably likely that actual loss cost trends applicable to the year-end 2013 loss reserve review for excess workers' compensation will range five percent lower or higher than this estimated loss trend. Excess workers' compensation is an extremely long-tail class of business, with a much greater...

  • Page 213
    ...reinsurance. Future Policy Benefits for Life and Accident and Health Insurance Contracts (AIG Life and Retirement) ...Long-duration traditional products include whole life insurance, term life insurance, accident and health insurance, long-term care insurance, and certain payout annuities for which...

  • Page 214
    ... for long-term care insurance, we consider historical experience as to the frequency and level of rate increases approved by state regulators. In connection with our program to utilize capital loss carryforwards, we sold investment securities in 2013 and 2012. These and other investment sales with...

  • Page 215
    ... for equity market returns, volatility and mortality. For a further discussion of the risks related to guaranteed benefit features of variable annuities, our dynamic hedging program and risks of AIG's unhedged exposures, see Item 1A. - Risk Factors - Business and Operations. ...AIG 2013 Form 10...

  • Page 216
    ... fair value estimates of the living benefit guarantees include assumptions such as equity market returns, interest rates, market volatility, and policyholder behavior. See Note 13 to the Consolidated Financial Statements for additional information on how we reserve for variable annuity products with...

  • Page 217
    ...The net increase in Retail pre-tax operating income was primarily due to a favorable adjustment in our Fixed Annuities product line from updated spread assumptions due to active management of crediting rates and higher future investment yields than those previously assumed. In the Life Insurance and...

  • Page 218
    ... equity markets and volatility primarily impact individual variable annuities in our Retirement Income Solutions and Group Retirement product lines. The effect of changes in mortality primarily impacts the universal life insurance business. December 31, 2013 (in millions) Guaranteed Benefits Reserve...

  • Page 219
    ...Statements for additional information about the measurement of fair value of financial assets and financial liabilities and our accounting policy regarding the incorporation of credit risk in fair value measurements. The following table presents the fair value of fixed maturity and equity securities...

  • Page 220
    ... certain fixed maturity securities and certain other invested assets, as well as a discussion of transfers of Level 3 assets and liabilities. Super Senior Credit Default Swap Portfolio ...Certain entities included in GCM wrote credit protection on the super senior risk layer of collateralized loan...

  • Page 221
    ... on universal life, investment-type annuity contracts, guaranteed investment contracts and mutual funds. AIG Life and Retirement - Surrender rate represents annualized surrenders and withdrawals as a percentage of average reserves. AIG Property Casualty - Net premiums written represent the sales of...

  • Page 222
    ...and the legal liability imposed on the insured as a result. Catastrophe losses are generally weather or seismic events having a net impact on AIG Property Casualty in excess of $10 million each. Combined ratio Sum of the loss ratio and the acquisition and general operating expense ratios. CSA Credit...

  • Page 223
    ...-tax operating income (loss): pre-tax income (loss) excluding certain legal reserves (settlements) related to legacy crisis matters, (gain) loss on extinguishment of debt, Net realized capital (gains) losses, net loss (gain) on sale of divested businesses and properties, change in benefit reserves...

  • Page 224
    ... AIA ordinary shares retained following the AIA Group Limited initial public offering and the MetLife, Inc. securities that were received as consideration from the sale of American Life Insurance Company and the fair value gains or losses, prior to the FRBNY liquidation of Maiden Lane III LLC assets...

  • Page 225
    ... and Health Insurance ABS Asset-Backed Security CDO Collateralized Debt Obligation CDS Credit Default Swap CLO Collateralized Loan Obligations CMA Capital Maintenance Agreement CMBS Commercial Mortgage-Backed Securities FASB Financial Accounting Standards Board FRBNY Federal Reserve Bank of New York...

  • Page 226
    ... DISCLOSURES ABOUT MARKET RISK ...The information required by this item is set forth in the Enterprise Risk Management section of Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations and is incorporated herein by reference. ...208 AIG 2013 Form 10-K

  • Page 227
    ... Life and Annuity Contracts Debt Contingencies, Commitments and Guarantees Equity Noncontrolling Interests Earnings Per Share Statutory Financial Data and Restrictions Share-based and Other Compensation Plans Employee Benefits Ownership Income Taxes Recapitalization Quarterly Financial Information...

  • Page 228
    ITEM 8 / REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM ... REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Board of Directors and Shareholders of American International Group, Inc.: In our opinion, the consolidated financial statements listed in the accompanying index ...

  • Page 229
    AMERICAN INTERNATIONAL GROUP, INC. CONSOLIDATED BALANCE SHEETS (in millions, except for share data) Assets: Investments: Fixed maturity securities: Bonds available for sale, at fair value (amortized cost: 2013 - $248,531; 2012 - $246,149) Other bond securities, at fair value (See Note 6) Equity ...

  • Page 230
    ... and insurance expenses Interest expense Aircraft leasing expenses Loss on extinguishment of debt Net loss on sale of properties and divested businesses Other expenses Total benefits, claims and expenses Income (loss) from continuing operations before income tax expense (benefit) Income tax expense...

  • Page 231
    AMERICAN INTERNATIONAL GROUP, INC. CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) Years Ended December 31, (in millions) 2013 2012 2011 Net income Other comprehensive income (loss), net of tax Change in unrealized appreciation (depreciation) of fixed maturity investments on which other-than...

  • Page 232
    ...net income attributable to noncontrolling nonvoting, callable, junior and senior preferred interests held by the Federal Reserve Bank of New York (FRBNY) of $0, $0 and $74 million in 2013, 2012 and 2011, respectively. See Accompanying Notes to Consolidated Financial Statements. ...214 AIG 2013 Form...

  • Page 233
    ...assets Changes in operating assets and liabilities: Property casualty and life insurance reserves Premiums and other receivables and payables - net Reinsurance assets and funds held under reinsurance treaties Capitalization of deferred policy acquisition costs Current and deferred income taxes - net...

  • Page 234
    ... customers through one of the most extensive worldwide property-casualty networks of any insurer. In addition, AIG companies are leading providers of life insurance and retirement services in the United States. AIG Common Stock, par value $2.50 per share (AIG Common Stock), is listed on the New York...

  • Page 235
    ... the net deferred tax asset; • liability for unpaid claims and claims adjustment expense; • reinsurance assets; • valuation of future policy benefit liabilities and timing and extent of loss recognition; • valuation of liabilities for guaranteed benefit features of variable annuity products...

  • Page 236
    ... unrealized market valuation gains and losses associated with the Global Capital Markets (GCM) super senior credit default swap (CDS) portfolio, advisory fee income from AIG Life and Retirement's broker dealer business, income from the Direct Investment book (DIB), as well as legal settlements of...

  • Page 237
    ... estate, other fixed assets, capitalized software costs, goodwill, intangible assets other than goodwill, and restricted cash. We offer sales inducements, which include enhanced crediting rates or bonus payments to contract holders (bonus interest) on certain annuity and investment contract products...

  • Page 238
    ... policyholder funds on deposit that encompass premium deposits and similar items, including liabilities for dividends arising out of participating business, reserves for experience-rated group products and unearned revenue reserves (URR). URR consist of front end loads on interestsensitive contracts...

  • Page 239
    ...dollars generally using rates of exchange prevailing at the balance sheet date of each respective subsidiary and the related translation adjustments are recorded as a separate component of Accumulated other comprehensive income, net of any related taxes, in Total AIG shareholders' equity. Functional...

  • Page 240
    ...cumulative translation adjustment into net income when a parent sells all or a part of its investment in a foreign entity or no longer holds a controlling financial interest in a subsidiary or net assets that are a business (other than a sale of in-substance real estate) within a foreign entity. The...

  • Page 241
    ... Insurance operating segments based on an internal investment income allocation model. The model estimates investable funds based primarily on loss reserves and allocated capital. Commencing in the first quarter of 2013, AIG Property Casualty began applying similar duration and risk-free yields...

  • Page 242
    ... Retirement, Group Benefits and Institutional Markets. The Institutional Markets product line consists of stable value wrap products, structured settlement and terminal funding annuities, high net worth products, guaranteed investment contracts (GICs), and corporate- and bank-owned life insurance...

  • Page 243
    ... 2013 AIG Property Casualty Commercial Insurance Consumer Insurance Other Total AIG Property Casualty AIG Life and Retirement Retail Institutional Total AIG Life and Retirement Other Operations Mortgage Guaranty Global Capital Markets Direct Investment book Corporate & Other Aircraft Leasing...

  • Page 244
    ... 2012 AIG Property Casualty Commercial Insurance Consumer Insurance Other Total AIG Property Casualty AIG Life and Retirement Retail Institutional Consolidation and Elimination Total AIG Life and Retirement Other Operations Mortgage Guaranty Global Capital Markets Direct Investment book Corporate...

  • Page 245
    ... of ILFC assets and liabilities held-for-sale on the Consolidated Balance Sheets as of December 31, 2013 and 2012: December 31, 2013 December 31, 2012 (in millions) Assets: Equity securities Mortgage and other loans receivable, net Flight equipment primarily under operating leases, net of...

  • Page 246
    ... Shan Life Insurance Company, Ltd. (Nan Shan) to a Taiwan-based consortium. The transaction was consummated on August 18, 2011 for net proceeds of $2.15 billion in cash. We recorded a pre-tax loss of $1.0 billion for the year ended December 31, 2011 largely offsetting Nan Shan operating results for...

  • Page 247
    ... BUSINESSES AND DISCONTINUED OPERATIONS ... The following table presents the components of income from discontinued operations: Years Ended December 31, (in millions) 2012 2011 2013 Revenues: Premiums Net investment income Net realized capital gains Other income Total revenues Benefits, claims...

  • Page 248
    ... liabilities, including consideration of the impact of non-performance risk. Fixed Maturity Securities ...Whenever available, we obtain quoted prices in active markets for identical assets at the balance sheet date to measure fixed maturity securities at fair value. Market price data is generally...

  • Page 249
    ... by government sponsored entities and corporate entities. Equity Securities Traded in Active Markets ...Whenever available, we obtain quoted prices in active markets for identical assets at the balance sheet date to measure equity securities at fair value. Market price data is generally obtained...

  • Page 250
    ... are generally audited annually. We consider observable market data and perform certain control procedures to validate the appropriateness of using the net asset value as a fair value measurement. The fair values of other investments carried at fair value, such as direct private equity holdings, are...

  • Page 251
    ... regarding expected market rates of return, market volatility, correlations of market index returns to funds, fund performance, discount rates and policyholder behavior. With respect to embedded policy derivatives in our equity-indexed annuity and life contracts, option pricing models are used...

  • Page 252
    ... default time and expected loss. This information is used to project cash flow streams and to determine the expected losses of the portfolio. In addition to calculating an estimate of the fair value of the super senior CDO security referenced in the credit default swaps using our internal model...

  • Page 253
    ...for a market return and the uncertainty inherent in the model inputs. The change in fair value of these policyholder contract deposits is recorded as Policyholder benefits and claims incurred in the Consolidated Statements of Income. Long-Term Debt ...The fair value of non-structured liabilities is...

  • Page 254
    ... Mutual funds Total equity securities available for sale Other equity securities Mortgage and other loans receivable Other invested assets Derivative assets: Interest rate contracts Foreign exchange contracts Equity contracts Commodity contracts Credit contracts Other contracts Counterparty netting...

  • Page 255
    ... Mutual funds Total equity securities available for sale Other equity securities Mortgage and other loans receivable Other invested assets Derivative assets: Interest rate contracts Foreign exchange contracts Equity contracts Commodity contracts Credit contracts Other contracts Counterparty netting...

  • Page 256
    ... liabilities, net: Interest rate contracts Equity contracts Commodity contracts Credit contracts Other contracts Total derivative liabilities, net Long-term debt Total Fair Value Beginning of Year(a) Other Comprehensive Income (Loss) Purchases, Sales, Issues and Settlements, Net Gross Transfers...

  • Page 257
    ...Preferred stock Total equity securities available for sale Mortgage and other loans receivable Other invested assets Total Liabilities: Policyholder contract deposits Derivative liabilities, net: Interest rate contracts Foreign exchange contracts Equity contracts Commodity contracts Credit contracts...

  • Page 258
    ... securities Equity securities available for sale Mortgage and other loans receivable Other invested assets Total assets Liabilities: Policyholder contract deposits Derivative liabilities, net Long-term debt(c) Total liabilities (a) There were no issuances during year ended December 31, 2013 and 2012...

  • Page 259
    ... (e.g., changes in market interest rates) and unobservable (e.g., changes in unobservable long-dated volatilities) inputs. Transfers of Level 3 Assets and Liabilities ...We record transfers of assets and liabilities into or out of Level 3 at their fair values as of the end of each reporting period...

  • Page 260
    ... service providers and from internal valuation models. Because input information from third-parties with respect to certain Level 3 instruments (primarily CDO/ABS) may not be reasonably available to us, balances shown below may not equal total amounts reported for such Level 3 assets and liabilities...

  • Page 261
    ... be used by market participants when valuing these assets and liabilities. (c) Information received from third-party valuation service providers. (d) Yield was the only input available for $6.6 billion of total fair value at December 31, 2012. The ranges of reported inputs for Corporate debt, RMBS...

  • Page 262
    ... annuity products and certain enhancements to interest crediting rates based on market indices within equity-indexed annuities and guaranteed investment contracts (GICs). GMWB represents our largest exposure of these embedded derivatives, although the carrying value of the liability fluctuates...

  • Page 263
    ... life will increase the fair value measurement of the liability. Investments in Certain Entities Carried at Fair Value Using Net Asset Value per Share ...The following table includes information related to our investments in certain other invested assets, including private equity funds, hedge funds...

  • Page 264
    ...) Gain (Loss) 2013 2012 2011 Assets: Mortgage and other loans receivable Bond and equity securities Other securities - ML II interest Other securities - ML III interest Retained interest in AIA Alternative investments(a) Other, including Short-term investments Liabilities: Long-term debt(b) Other...

  • Page 265
    ...quarterly, annually or when events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable. These assets include cost and equity-method investments, investments in life settlements, collateral securing foreclosed loans and real estate and other fixed assets...

  • Page 266
    ... Long-term debt December 31, 2012 Assets: Mortgage and other loans receivable Other invested assets Short-term investments Cash Liabilities: Policyholder contract deposits associated with investment-type contracts Other liabilities Long-term debt Level 1 Level 2 Level 3 Total Carrying Value...

  • Page 267
    ... in Net investment income (for insurance subsidiaries) or Other income (for Other Operations). Investments in fixed maturity and equity securities are recorded on a trade-date basis. Premiums and discounts arising from the purchase of bonds classified as available for sale are treated as yield...

  • Page 268
    ... stock Mutual funds Total equity securities available for sale Total December 31, 2012 Bonds available for sale: U.S. government and government sponsored entities Obligations of states, municipalities and political subdivisions Non-U.S. governments Corporate debt Mortgage-backed, asset-backed...

  • Page 269
    ... declines, we performed fundamental credit analysis on a security-by-security basis, which included consideration of credit enhancements, expected defaults on underlying collateral, review of relevant industry analyst reports and forecasts and other available market data. ...AIG 2013 Form 10-K 251

  • Page 270
    ...For the year ended December 31, 2013, 2012 and 2011, the aggregate fair value of available for sale securities sold was $35.9 billion, $40.3 billion and $44.0 billion, which resulted in net realized capital gains of $2.5 billion, $3.1 billion and $2.1 billion, respectively. ...252 AIG 2013 Form 10...

  • Page 271
    ...) 2013 2012 Alternative investments(a) Mutual funds Investment real estate(b) Aircraft asset investments(c) Investments in life settlements All other investments Total (b) Net of accumulated depreciation of $513 million and $469 million in 2013 and 2012, respectively. (c) Consist primarily of AIG...

  • Page 272
    ... the years ended December 31, 2012 and 2011. Summarized Financial Information of AIA ...The following is summarized financial information of AIA: Year Ended December 31, (in millions) 2011 Operating results: Total revenues Total expenses Net income $ $ 13,802 (12,436) 1,366 ...254 AIG 2013 Form...

  • Page 273
    ... value option has been elected: Years Ended December 31, (in millions) 2013 2012 2011 Operating results: Total revenues Total expenses Net income At December 31, (in millions) $ 19,181 $ 9,438 $ 12,749 (5,183) (3,530) (5,515) $ 13,666 $ 4,255 $ 9,219 2013 2012 Balance sheet: Total assets Total...

  • Page 274
    ...the yield, as applicable. • Dividend income from common and preferred stock and distributions from other investments. • Realized and unrealized gains and losses from investments in other securities and investments for which we elected the fair value option. • Earnings from private equity funds...

  • Page 275
    ... Change in fair value of AIA securities including realized gain Change in the fair value of MetLife securities prior to their sale Equity securities Interest on mortgage and other loans Alternative investments* Real estate Other investments Total investment income Investment expenses Net investment...

  • Page 276
    ...) 2013 2012 Increase (decrease) in unrealized appreciation (depreciation) of investments: Fixed maturities Equity securities Other investments Total increase (decrease) in unrealized appreciation (depreciation) of investments* * Excludes net unrealized gains attributable to businesses held for sale...

  • Page 277
    ...temporary (severity losses). Other Invested Assets Our investments in private equity funds and hedge funds are evaluated for impairment similar to the evaluation of equity securities for impairments as discussed above. Such evaluation considers market conditions, events and ...AIG 2013 Form 10-K 259

  • Page 278
    ... improvement rates, we revised our estimate of future net cash flows from the investments in life settlements. This resulted in a significant increase in the number of investments in life settlements identified as impaired as of December 31, 2013. Our investments in aircraft assets and real estate...

  • Page 279
    ... for the securities transferred by us, counterparties transfer assets to us, such as cash or high quality fixed maturity securities. Collateral levels are monitored daily and are generally maintained at an agreed-upon percentage of the fair value of the transferred securities during the life of the...

  • Page 280
    ...transaction as a sale of the security and reported the obligation to repurchase the security as a derivative contract. The fair value of securities transferred under repurchase agreements accounted for as sales was $2.1 billion at December 31, 2011. Effective January 1, 2012, the level of collateral...

  • Page 281
    ... the credit quality indicators for commercial mortgage loans: Number of Loans 978 9 2 6 995 $ $ Class Apartments $ Offices Retail Industrial $ Hotel Others Total(c) Percent of Total $ 98% 2 - - 100% 1% December 31, 2013 (dollars in millions) Credit Quality Indicator: In good standing Restructured...

  • Page 282
    ...value ratio or the ratio of the loan balance to the estimated value of the property, property occupancy, profile of the borrower and of the major property tenants, economic trends in the market where the property is located, and condition of the property. These factors and the resulting risk ratings...

  • Page 283
    ... and net of ceded reinsurance: 2013 At December 31, (in millions) As Reported Net of Reinsurance 2012 As Reported Net of Reinsurance Liability for unpaid claims and claims adjustment expense(a) Future policy benefits for life and accident and health insurance contracts Reserve for unearned premiums...

  • Page 284
    ... of Reinsurance assets. The following table presents premiums for our long-duration insurance and retirement services operations: Years Ended December 31, (in millions) AIG Life and Retirement 2013 2012 2011 Divested Businesses 2013 2012 2011 2013 Total 2012 2011 Gross premiums Ceded premiums Net...

  • Page 285
    ... benefits and claims incurred. Groupings for loss recognition testing are consistent with our manner of acquiring and servicing the business and applied by product groupings. We perform separate loss recognition tests for traditional life products, payout annuities and long-term care products...

  • Page 286
    ... at each balance sheet date, as if the securities had been sold at their stated aggregate fair value and the proceeds reinvested at current yields. Similarly, for long-duration traditional insurance contracts, if the assets supporting the liabilities maintain a temporary net unrealized gain position...

  • Page 287
    ... (losses), primarily in AIG Life and Retirement. In 2013, 2012 and 2011, amortization expense related to Net realized capital gains (losses) increased by $23 million, $119 million and $274 million, respectively. DAC, VOBA and SIA for insurance-oriented and investment-oriented products are reviewed...

  • Page 288
    ... VIEs with attributes consistent with that of an investment company or a money market fund, the primary beneficiary is the party or group of related parties that absorbs a majority of the expected losses of the VIE, receives the majority of the expected residual returns of the VIE, or both. For all...

  • Page 289
    ...Balance Sheets: Real Estate and Investment Funds(c) Structured Investment Vehicles Affordable Housing Partnerships (in millions) Securitization Vehicles Other Total December 31, 2013 Assets: Bonds available for sale Other bond securities Mortgage and other loans receivable Other invested assets...

  • Page 290
    ..., 2013 and 2012, $2.8 billion and $2.5 billion, respectively, of our total unconsolidated VIE assets were recorded as Other invested assets. Real Estate and Investment Funds ...Through our insurance operations and AIG Global Real Estate, we are an investor in various real estate investment entities...

  • Page 291
    ... ILFC acts as servicer for the aircraft owned by these entities. Commercial Loans Vehicles ...We sponsor one VIE that has issued a variable funding note backed by a commercial loan collateralized by individual life insurance assets. As of December 31, 2013, total consolidated assets and liabilities...

  • Page 292
    ... as part of our financial risk management programs and as part of our investment operations. Interest rate, currency, equity and commodity swaps, credit contracts (including the super senior credit default swap portfolio), swaptions, options and forward transactions are accounted for as derivatives...

  • Page 293
    ... liabilities in the Consolidated Balance Sheets: December 31, 2013 Derivative Assets (in millions) Global Capital Markets derivatives: AIG Financial Products AIG Markets Total Global Capital Markets derivatives Non-Global Capital Markets derivatives(a) Total derivatives, gross Counterparty netting...

  • Page 294
    ...adjustment recorded in Other income and Net realized capital gains (losses) following the discontinuation of hedge accounting. Includes a $2 million loss, for the year ended December 31, 2013, recorded in Interest credited to policyholder account balances, representing the accretion on GIC contracts...

  • Page 295
    ... (Losses) Recognized in Earnings 2013 2012 2011 Years Ended December 31, (in millions) By Derivative Type: Interest rate contracts(a) Foreign exchange contracts Equity contracts(b) Commodity contracts Credit contracts Other contracts Total By Classification: Policy fees Net investment income Net...

  • Page 296
    ... the protected loans and debt securities, exceeded a specified threshold amount or level of ''first losses.'' The following table presents the net notional amount, fair value of derivative (asset) liability and unrealized market valuation gain (loss) of the super senior credit default swap portfolio...

  • Page 297
    ... as part of their financial risk management. Interest rate derivatives (such as interest rate swaps) are used to manage interest rate risk associated with embedded derivatives contained in insurance contract liabilities, fixed maturity securities, outstanding mediumand long-term notes as well as...

  • Page 298
    ... 31, 2013 and 2012, respectively, and both have remaining stated maturity dates that extend to 2052. 12. LIABILITY FOR UNPAID CLAIMS AND CLAIMS ADJUSTMENT EXPENSE, FUTURE POLICY BENEFITS FOR LIFE AND ACCIDENT AND HEALTH INSURANCE CONTRACTS, AND POLICYHOLDER CONTRACT DEPOSITS ...Liability for Unpaid...

  • Page 299
    ... Certain asbestos business that was written by AIG Property Casualty is discounted, when allowed by the regulator and when payments are fixed and determinable, based on the investment yields of the companies and the payout pattern for this business. • The tabular workers' compensation discount is...

  • Page 300
    ... present value of future net premiums. Included in Future policy benefits are liabilities for annuities issued in structured settlement arrangements whereby a claimant has agreed to settle a general insurance claim in exchange for fixed payments over a fixed determinable period of time with a life...

  • Page 301
    ... presents Policyholder contract deposits by product type: At December 31, (in millions) 2013 2012 Policyholder contract deposits: Life Insurance and A&H Fixed Annuities Retirement Income Solutions Group Retirement Institutional Markets All other Institutional Total Policyholder contract deposits...

  • Page 302
    ... account assets, with an equivalent summary total reported as separate account liabilities. Amounts assessed against the contract holders for mortality, administrative, and other services are included in revenue. Net investment income, net investment gains and losses, changes in fair value of assets...

  • Page 303
    ..., the annuity payments can continue beyond the guaranteed amount. The account value can also fluctuate with equity market returns on a daily basis resulting in increases or decreases in the excess of the guaranteed amount over account value. The liabilities for GMWB and GMAV, which are recorded in...

  • Page 304
    ... notes and bonds payable, which are direct obligations to AIG Parent. (c) At December 31, 2013, includes debt of consolidated investments held through AIG Global Real Estate Investment Corp., AIG Credit Corp., AIG Life and Retirement and AIG Property Casualty U.S. of $1.5 billion, $111 million, $201...

  • Page 305
    ... maturities of long-term debt (including unamortized original issue discount, hedge accounting valuation adjustments and fair value adjustments, when applicable), excluding $1.9 billion in borrowings of debt of consolidated investments: December 31, 2013 (in millions) Year Ending Total 2014 2015...

  • Page 306
    ... the trust with the same terms as the capital securities. AIG Parent guaranteed the debentures pursuant to a guarantee that is expressly subordinated to certain AIGLH senior debt securities. Under the AIG Parent guarantee, AIG Parent was not required to make any payments in respect of the debentures...

  • Page 307
    ... and certain directors and officers of AIG, AIGFP and other AIG subsidiaries have been named in various actions relating to our exposure to the U.S. residential subprime mortgage market, unrealized market valuation losses on AIGFP's super senior credit default swap portfolio, losses and liquidity...

  • Page 308
    ... and investment entities led by the British Coal Staff Superannuation Scheme, Pacific Life Funds and Pacific Select Fund, the Teachers Retirement System of the State of Illinois, 12 foreign funds and management companies, and GIC Private Limited against AIG and certain directors and officers of AIG...

  • Page 309
    ... 16, 2006 through September 16, 2008 and would allege that during this period defendants made false and misleading statements and omissions in quarterly and annual reports and during oral presentations in violation of the Ontario Securities Act. On April 17, 2009, defendants filed a motion record in...

  • Page 310
    ...Investment Corporation ...On December 9, 2009, AIG Global Real Estate Investment Corporation's (AIGGRE) former President, Kevin P. Fitzpatrick, several entities he controls, and various other single purpose entities (the SPEs) filed a complaint in the Supreme Court of the State of New York, New York...

  • Page 311
    ... 21, 2013, the parties executed a definitive and final settlement agreement. The matter was dismissed with prejudice effective December 5, 2013. AIG has made or accrued for payments required under the settlement agreement. False Claims Act Complaint ...On February 25, 2010, a complaint was filed in...

  • Page 312
    ... the Department of Housing and Urban Development (HUD) on captive reinsurance practices by lenders and mortgage insurance companies, including UGC, have been ongoing for several years. In 2011, the Consumer Financial Protection Bureau (CFPB) assumed responsibility for violations of the Real Estate...

  • Page 313
    ..., but are not limited to, general liability, commercial automobile liability, environmental, workers' compensation, excess casualty and crisis management coverages, insurance and risk management programs for large corporate customers and other customized structured insurance products, as well as...

  • Page 314
    ... the normal course of business, we enter into commitments to invest in limited partnerships, private equity funds and hedge funds and to purchase and develop real estate in the U.S. and abroad. These commitments totaled $2.4 billion at December 31, 2013. Guarantees ...Subsidiaries ...We have issued...

  • Page 315
    ..., and no material liabilities related to these arrangements have been recorded in the Consolidated Balance Sheets. See Note 4 herein for additional information on sales of businesses and asset dispositions. ALICO Sale ...Pursuant to the terms of the ALICO stock purchase agreement, we agreed to...

  • Page 316
    ... Stock(c) Increase (Decrease) (in millions) Total Effect of Recapitalization Other assets Other liabilities Federal Reserve Bank of New York credit facility Redeemable noncontrolling nonvoting, callable, junior preferred interests held by Department of Treasury AIG shareholders' equity: Preferred...

  • Page 317
    ...holding company, a systemically important financial institution under the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank) and a global systemically important insurer. In addition, dividends are payable on AIG Common Stock only when, as and if declared by our Board of Directors...

  • Page 318
    ... to time in the open market, through derivative or automatic purchase contracts or otherwise. This authorization replaced all prior AIG Common Stock purchase authorizations. We purchased a total of 3,074,031 shares of AIG Common Stock for approximately $70 million in 2011. Equity Units ...In 2011...

  • Page 319
    ... Net actuarial loss Prior service credit Deferred tax asset (liability) Total other comprehensive income (loss) Noncontrolling interests Balance, December 31, 2012 Change in unrealized appreciation (depreciation) of investments Change in deferred policy acquisition costs adjustment and other Change...

  • Page 320
    ... for the years ended December 31, 2013, 2012 and 2011: Unrealized Appreciation (Depreciation) of Fixed Maturity Investments on Which Other-ThanTemporary Credit Impairments Were Recognized Net Derivative Gains (Losses) Change in Arising from Retirement Cash Flow Plan Hedging Liabilities Activities...

  • Page 321
    ... Investments Total Unrealized appreciation (depreciation) of all other investments Investments Deferred acquisition costs adjustment Future policy benefits Total Change in retirement plan liabilities adjustment Prior-service costs Actuarial gains/(losses) Total Deferred tax asset (liability) Total...

  • Page 322
    ... income (loss), net of tax: Unrealized losses on investments Foreign currency translation adjustments Total other comprehensive income (loss), net of tax Total comprehensive income (loss) Other Balance, end of year Year Ended December 31, 2012 Balance, beginning of year Repayment to Department...

  • Page 323
    ...in our consolidated subsidiaries and includes the preferred shareholders' equity in outstanding preferred stock of ILFC, a wholly-owned subsidiary that is held for sale at December 31, 2013 and 2012. The preferred stock in ILFC consists of 1,000 shares of market auction preferred stock (MAPS) in two...

  • Page 324
    ... Years Ended December 31, (dollars in millions, except per share data) 2013 2012 2011 Numerator for EPS: Income from continuing operations Less: Net income from continuing operations attributable to noncontrolling interests: Nonvoting, callable, junior and senior preferred interests Other Total net...

  • Page 325
    ...... 19. STATUTORY FINANCIAL DATA AND RESTRICTIONS ...The following table presents statutory capital and surplus and net income for our AIG Property Casualty and AIG Life and Retirement operations in accordance with statutory accounting practices: (in millions) 2013 2012 2011 Years Ended December 31...

  • Page 326
    ... and surplus levels. In 2013, our AIG Life and Retirement New York-domiciled insurance subsidiary paid dividends totaling $404 million, which were ultimately distributed to AIG Parent. AIG Life and Retirement manages the capital impact on its life insurers of statutory reserve requirements under...

  • Page 327
    ... to new hires or as a result of a change in employee status. AIG 2010 Stock Incentive Plan ...The 2010 Plan was adopted at the 2010 Annual Meeting of Shareholders. The total number of shares of AIG Common Stock that could be granted under the 2010 Plan was 60 million. During 2013, 2012 and 2011, we...

  • Page 328
    ... non-employee directors, who serve on AIG's Board of Directors, receive share-based compensation in the form of deferred stock units (DSUs) with delivery deferred until retirement from the Board. In 2013, we granted to non-employee directors 25,735 DSUs under the 2013 Plan, and in 2012 and 2011, we...

  • Page 329
    ..., linked to AIG Common Stock, to certain of our most highly compensated employees and executive officers. After the repayment of our TARP obligations in December 2012, we no longer issue awards under these plans. Share-based cash-settled awards are recorded as liabilities until the final payout is...

  • Page 330
    ... in the value of AIG Common Stock. During 2013 and 2012, cash-settled performance-based RSUs granted and issued in March 2013 and 2012 to certain highly compensated employees will vest in two 50 percent installments on the second and third anniversary of the date of grant. Long Term Incentive Plans...

  • Page 331
    ... annualized AIG dividend yield estimated by Bloomberg Professional service as of the valuation date. (b) The expected volatilities are the implied volatilities with the nearest maturity and strike price as of the valuation date from actively traded stock options on AIG Common Stock. (c) The risk...

  • Page 332
    ... after December 31, 2012 are not eligible for retiree life insurance. The following table presents the funded status of the plans reconciled to the amount reported in the Consolidated Balance Sheets. The measurement date for most of the non-U.S. defined benefit pension and ...314 AIG 2013 Form 10-K

  • Page 333
    ... Other Fair value of plan assets, end of year Funded status, end of year Amounts recognized in the consolidated balance sheet: Assets Liabilities Total amounts recognized Pre-tax amounts recognized in Accumulated other comprehensive income: Net gain (loss) Prior service (cost) credit Total amounts...

  • Page 334
    ... U.S. Plans Non-U.S. Plans 2013 2012 2011 2013 2012 2011 Components of net periodic benefit cost: Service cost Interest cost Expected return on assets Amortization of prior service credit Amortization of net loss Curtailment (gain) loss Settlement loss Other Net periodic benefit cost Total...

  • Page 335
    ... most appropriate for the local economic environments of each of the subsidiaries providing such benefits. The following table summarizes assumed health care cost trend rates for the U.S. plans: At December 31, 2013 2012 Following year: Medical (before age 65) Medical (age 65 and older) Ultimate...

  • Page 336
    ... long term (b) limit the risk of short-term funding shortfalls and (c) maintain liquidity sufficient to address cash needs. Accordingly, the asset allocation strategy is designed to maximize the investment rate of return while managing various risk factors, including but not limited to, volatility...

  • Page 337
    ..., Target 2014 Actual 2013 Actual 2012 Asset class: Equity securities Fixed maturity securities Other investments Total 43% 28% 29% 100% 56% 25% 19% 100% 52% 26% 22% 100% The expected long-term rate of return for the plan was 7.25 percent for both 2013 and 2012. The expected rate of return is an...

  • Page 338
    ... investment grade(c) - International investment grade(c) - U.S. and international high yield(d) - Mortgage and other asset-backed securities(e) - Other fixed maturity securities - Other investment types: Hedge funds(f) - Futures 14 Private equity(g) - - Insurance contracts Total At December 31, 2012...

  • Page 339
    ... securities U.S. investment grade Mortgage and other assetbacked securities Private equity Total Non-U.S. Plan Assets: Other fixed maturity securities Insurance contracts Total Balance Beginning of year Net Realized and Unrealized Gains (Losses) Purchases Sales Issuances Settlements Transfers...

  • Page 340
    ... EMPLOYEE BENEFITS ... certain investments in hedge funds into Level 3 as a result of limited market activity due to fund-imposed redemption restrictions. During the year ended December 31, 2012, transfers of assets into Level 3 included certain other fixed maturity securities. These transfers were...

  • Page 341
    ... TAXES ... 23. INCOME TAXES ...The following table presents income (loss) from continuing operations before income tax expense (benefit) by U.S. and foreign location in which such pre-tax income (loss) was earned or incurred. Years Ended December 31, (in millions) 2013 2012 2011 U.S. Foreign Total...

  • Page 342
    ... foreign subsidiaries and joint ventures Loss reserve discount Loan loss and other reserves Unearned premium reserve reduction Employee benefits Total deferred tax assets Deferred tax liabilities: Adjustment to life policy reserves Deferred policy acquisition costs Flight equipment, fixed assets and...

  • Page 343
    ... tax asset. As a result of sales in the ordinary course of business to manage the investment portfolio and the implementation of prudent and feasible tax planning strategies during the year ended December 31, 2013, certain capital loss carryforwards primarily related to AIG Life and Retirement...

  • Page 344
    ... filed separate U.S. federal income tax returns and were not part of our U.S. consolidated income tax group. Income earned by subsidiaries operating outside the U.S. is taxed, and income tax expense is recorded, based on applicable U.S. and foreign law. The statute of limitations for all tax years...

  • Page 345
    ... financial condition. Listed below are the tax years that remain subject to examination by major tax jurisdictions: At December 31, 2013 Open Tax Years Major Tax Jurisdiction United States Australia France Japan Korea Singapore United Kingdom 2000 2009 2011 2008 2008 2011 - - - - - - 2012 2012...

  • Page 346
    ... issued to the holders of record of AIG Common Stock as of January 13, 2011, by means of a dividend, ten-year warrants to purchase a total of 74,997,778 shares of AIG Common Stock at an exercise price of $45.00 per share. We retained 67,650 of these warrants for tax withholding purposes. No warrants...

  • Page 347
    ... shares outstanding: Basic Diluted Noteworthy quarterly items - income (expense): Other-than-temporary impairments Net (gain) loss on sale of divested businesses Adjustment to federal deferred tax valuation allowance Net gain (loss) on extinguishment of debt Change in fair value of AIA securities...

  • Page 348
    ...changes. Three Months Ended March 31, 2013 (dollars in millions, except per share data) Total revenues Income (loss) from continuing operations before income taxes Income (loss) from discontinued operations, net of income taxes Earnings (loss) per common share attributable to AIG common shareholders...

  • Page 349
    ... taxes Assets held for sale Total assets Liabilities: Insurance liabilities Long-term debt Other liabilities, including intercompany balances(a)(c) Loans from subsidiaries(b) Liabilities held for sale Total liabilities Redeemable noncontrolling interests (see Note 17) Total AIG shareholders' equity...

  • Page 350
    ... Income (loss) from discontinued operations, net of income taxes Net income (loss) Less: Total net income attributable to noncontrolling interests Net income (loss) attributable to AIG Year Ended December 31, 2012 Revenues: Equity in earnings of consolidated subsidiaries* Change in fair value...

  • Page 351
    ... ...American International Group, Inc. (As Guarantor) (in millions) AIGLH Other Subsidiaries Reclassifications and Eliminations Consolidated AIG Year Ended December 31, 2011 Revenues: Equity in earnings of consolidated subsidiaries* Change in fair value of ML III Other income Total revenues...

  • Page 352
    ... Income (Loss) ...American International Group, Inc. (As Guarantor) (in millions) AIGLH Other Subsidiaries Reclassifications and Eliminations Consolidated AIG Year Ended December 31, 2013 Net income (loss) Other comprehensive income (loss) Comprehensive income (loss) Total comprehensive loss...

  • Page 353
    ... of long-term debt Repayments of long-term debt Purchase of Common Stock Intercompany loans - net Cash dividends paid Other, net Net cash (used in) financing activities Effect of exchange rate changes on cash Change in cash Cash at beginning of year Change in cash of businesses held for sale Cash...

  • Page 354
    .../ NOTE 26. INFORMATION PROVIDED IN CONNECTION WITH OUTSTANDING DEBT ...American International Group, Inc. (As Guarantor) Other Subsidiaries and Eliminations (in millions) AIGLH Consolidated AIG Year Ended December 31, 2011 Net cash (used in) provided by operating activities Net cash provided by...

  • Page 355
    ...-cash activities: ...Years Ended December 31, (in millions) 2013 2012 2011 Intercompany non-cash financing and investing activities: Capital contributions in the form of bond available for sale securities to subsidiaries through forgiveness of loans Return of capital and dividend received in the...

  • Page 356
    ... factors, including the regulatory framework applicable to us. On February 13, 2014, our Board of Directors increased the aggregate purchase amount authorized under AIG's August 1, 2013 AIG Common Stock share repurchase authorization by $1.0 billion, resulting in an aggregate remaining authorization...

  • Page 357
    ... LLP, an independent registered public accounting firm, as stated in their report, which is included in this Annual Report on Form 10-K. Changes in Internal Control Over Financial Reporting ...We continue our implementation of new technology solutions, which began in 2010, to mitigate the reliance...

  • Page 358
    ... for AIG's 2014 Annual Meeting of Shareholders, which will be filed with the SEC not later than 120 days after the close of the fiscal year pursuant to Regulation 14A. ITEM 11 / EXECUTIVE COMPENSATION ...See Item 10 herein. ITEM 12 / SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT...

  • Page 359
    ... duly caused this Annual Report on Form 10-K to be signed on its behalf by the undersigned, thereunto duly authorized, on the 20th of February, 2014. AMERICAN INTERNATIONAL GROUP, INC. By /s/ ROBERT H. BENMOSCHE (Robert H. Benmosche, President and Chief Executive Officer) KNOW ALL PERSONS BY THESE...

  • Page 360
    ... S. MILLER (Robert S. Miller) Director /s/ SUZANNE NORA JOHNSON (Suzanne Nora Johnson) Director /s/ RONALD A. RITTENMEYER (Ronald A. Rittenmeyer) Director /s/ DOUGLAS M. STEENLAND (Douglas M. Steenland) Director /s/ THERESA M. STONE (Theresa M. Stone) Director ...342 AIG 2013 Form 10-K

  • Page 361
    ...Agreement, dated as of December 8, 2010, among AIG, ALICO Holdings LLC, AIA Aurora LLC, the Federal Reserve Bank of New York, the United States Department of the Treasury and the AIG Credit Facility Trust Incorporated by reference to Exhibit 2.1 to AIG's Current Report on Form 8-K filed with the SEC...

  • Page 362
    ...of New York and AIG and its Subsidiaries, dated Current Report on Form 8-K filed with the SEC on January 18, 2006 February 9, 2006 (File No. 1-8787). (12) AIG Senior Partners Plan (amended and restated effective December 31, 2008)* Incorporated by reference to Exhibit 10.59 to AIG's Annual Report on...

  • Page 363
    ...Limited Liability Incorporated by reference to Exhibit 10.2 to AIG's Company Agreement of ALICO Holdings LLC, dated Current Report on Form 8-K filed with the SEC on as of December 1, 2009, between AIG and the Federal December 1, 2009 (File No. 1-8787). Reserve Bank of New York (21) Master Investment...

  • Page 364
    ...AIG* (47) Determination Memorandum, dated May 9, 2012, from the Office of the Special Master for TARP Executive Compensation to AIG* (48) AIG Non-Qualified Retirement Income Plan* Incorporated by reference to Exhibit 10.1 to AIG's Current Report on Form 8-K filed with the SEC on April 10, 2012 (File...

  • Page 365
    ...The United States Life Insurance Company in the City of New York Filed herewith. Filed herewith. (57) Amended and Restated Unconditional Capital Filed herewith. Maintenance Agreement, dated as of February 18, 2014, among American International Group, Inc., AIG Property Casualty Inc., AIU Insurance...

  • Page 366
    ... Maintenance Agreement, dated as of July 1, 2013, between American International Group, Inc. and United Guaranty Residential Insurance Company (61) AIG 2013 Long-Term Incentive Plan* Filed herewith. Filed herewith. Incorporated by reference to Exhibit 10.7 to AIG's Quarterly Report on Form 10...

  • Page 367
    ...** Securities Registered pursuant to Section 12(b) of the Act AIA Group Limited Consolidated Financial Statements for the year ended November 30, 2011 Interactive data files pursuant to Rule 405 of Regulation S-T: (i) the Consolidated Balance Sheets as of December 31, 2013 and December 31, 2012...

  • Page 368
    ... subdivisions Non-U.S. governments Public utilities All other corporate debt securities Mortgage-backed, asset-backed and collateralized Total fixed maturity securities Equity securities and mutual funds: Common stock: Public utilities Banks, trust and insurance companies Industrial, miscellaneous...

  • Page 369
    ...Balance Sheets - Parent Company Only Schedule II December 31, (in millions) 2013 2012 Assets: Short-term investments Other investments Total investments Cash Loans to subsidiaries* Due from affiliates - net* Deferred income taxes Investments in consolidated subsidiaries* Other assets Total assets...

  • Page 370
    ...) Statements of Income - Parent Company Only Schedule II Years Ended December 31, (in millions) 2013 2012 2011 Revenues: Equity in undistributed net income (loss) of consolidated subsidiaries* Dividend income from consolidated subsidiaries* Interest income Change in fair value of ML III Net...

  • Page 371
    ... of Cash Flows - Parent Company Only Schedule II Years Ended December 31, (in millions) 2013 2012 2011 Net cash provided by (used in) operating activities Cash flows from investing activities: Sales and maturities of investments Sales of divested businesses Purchase of investments Net change in...

  • Page 372
    ...tax asset for net operating loss, capital loss and tax credit carryforwards and valuation allowance are recorded by the Parent Company, which files the consolidated U.S. Federal income tax return, and are not allocated to its subsidiaries. Generally, as, and if, the consolidated net operating losses...

  • Page 373
    ... Premiums Policy and Contract Claims(b) Premiums and Policy Fees Net Investment Income Losses and Loss Expenses Incurred, Benefits Amortization of Deferred Policy Acquisition Costs Other Operating Expenses Net Premiums Written 2013 AIG Property Casualty AIG Life and Retirement Mortgage...

  • Page 374
    ...and 2011 and for the years then ended Percent of Amount Assumed to Net (in millions) Gross Amount Ceded to Other Companies Assumed from Other Companies Net Amount 2013 Long-duration insurance in force Premiums: AIG Property Casualty AIG Life and Retirement Mortgage Guaranty Divested businesses...

  • Page 375
    ... 31, 2013, 2012 and 2011 Additions Balance, Beginning of year Charged to Costs and Expenses Charge Offs Reclassified Activity of to Assets of Discontinued Businesses Operations Held for Sale (in millions) 2013 Allowance for mortgage and other loans receivable Allowance for premiums and insurances...

  • Page 376
    ... ratios) 2013 2012 2011 2010 2009 Earnings: Pre-tax income (loss)(a): Add - Fixed charges Adjusted Pre-tax income (loss) Fixed charges: Interest expense Portion of rent expense representing interest Interest credited to policy and contract holders Total fixed charges Preferred stock dividend...

  • Page 377
    ... Inc. AIG Shared Services Corporation AIG Life Insurance Company (Switzerland) Ltd. AIG Markets, Inc. AIG Trading Group Inc. AIG International Inc. AIUH LLC AIG Property Casualty Inc. AIG Global Claims Services, Inc. AIG Claims, Inc. Health Direct, Inc. AIG PC Global Services, Inc. AIG North America...

  • Page 378
    ..., Limited AIG MEA Holdings Limited AIG CIS Investments, LLC AIG Insurance Company, CJSC AIG Insurance Limited AIG Sigorta A.S. AIG PC European Insurance Investments Inc. Ascot Corporate Name Limited AIU Insurance Company AIG Insurance Company China Limited American International Overseas Limited AIG...

  • Page 379
    ... Inc./Groupe Garde Voyage du Canada, Inc. Travel Guard Group, Inc. WINGS International SAS AIG Property Casualty U.S., Inc. AIG Aerospace Insurance Services, Inc. AIG Specialty Insurance Company American Home Assurance Company American International Realty Corp. Pine Street Real Estate Holdings Corp...

  • Page 380
    ... Life Insurance Company AIG Advisor Group, Inc. Financial Service Corporation FSC Securities Corporation Royal Alliance Associates, Inc. SagePoint Financial, Inc. Woodbury Financial Services, Inc. SunAmerica Asset Management, LLC The United States Life Insurance Company in the City of New York...

  • Page 381
    ... Securities held by Immediate Immediate Parent(1) Valic Retirement Services Company SunAmerica Life Reinsurance Company United Guaranty Corporation AIG United Guaranty Agenzia di Assicurazione S.R.L. AIG United Guaranty Insurance (Asia) Limited AIG United Guaranty Mexico, S.A. AIG United Guaranty...

  • Page 382
    ... dated February 20, 2014 relating to the financial statements, financial statement schedules and the effectiveness of internal control over financial reporting, which appears in this Annual Report on Form 10-K. /s/ PricewaterhouseCoopers LLP New York, New York February 20, 2014 ...364 AIG 2013 Form...

  • Page 383
    ... No. 333-143992) of American International Group, Inc. of our report dated 24 February 2012 relating to the consolidated financial statements of AIA Group Limited, which appears in this Annual Report on Form 10-K. /s/ PricewaterhouseCoopers LLP Hong Kong 20 February 2014 ...AIG 2013 Form 10-K 365

  • Page 384
    ...fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: February 20, 2014 /s/ ROBERT H. BENMOSCHE Robert H. Benmosche President and Chief Executive Officer ...366 AIG 2013 Form 10-K

  • Page 385
    ...whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: February 20, 2014 /s/ DAVID L. HERZOG David L. Herzog Executive Vice President and Chief Financial Officer ...AIG 2013 Form 10-K 367

  • Page 386
    ...connection with this Annual Report on Form 10-K of American International Group, Inc. (the ''Company'') for the year ended December 31, 2013, as filed with the Securities and Exchange Commission on the date hereof (the ''Report''), I, Robert H. Benmosche, President and Chief Executive Officer of the...

  • Page 387
    ... Annual Report on Form 10-K of American International Group, Inc. (the ''Company'') for the year ended December 31, 2013, as filed with the Securities and Exchange Commission on the date hereof (the ''Report''), I, David L. Herzog, Executive Vice President and Chief Financial Officer of the Company...

  • Page 388
    ...Class Common Stock, Par Value $2.50 Per Share Warrants (expiring January 19, 2021) 5.75% Series A-2 Junior Subordinated Debentures 4.875% Series A-3 Junior Subordinated Debentures Stock Purchase Rights Name of Each Exchange on Which Registered New York Stock Exchange New York Stock Exchange New York...

  • Page 389
    ...the year ended December 31, 2013, should be directed to: Investor Relations American International Group, Inc. 175 Water Street New York, NY 10038 (212) 770-6293 Listings and Certifications Stock Market Listings New York and Tokyo Stock Exchanges NYSE common stock trading symbol: AIG Executive and...

  • Page 390
    American International Group, Inc. 175 Water Street New York, NY 10038 www.aig.com