AIG 2013 Annual Report Download - page 110

The accident year combined ratio, as adjusted, improved by 3.6 points for the year ended December 31, 2013.
The improvement in the accident year loss ratio, as adjusted, reflects the realization of benefits from the continued
execution of our multi-faceted strategy to enhance risk selection, pricing discipline, exposure management and claims
processing. Although the execution of these strategies resulted in a reduction of Casualty net premiums written in
both the Americas and EMEA regions, it also improved the accident year loss ratio, as adjusted. Severe losses
represented approximately 2.8 points compared to 1.4 points in the prior year, and are included in the accident year
loss ratio, as adjusted. In 2013, one single event, totaling $131 million, accounted for approximately 0.6 points of the
increase.
The acquisition ratio decreased by 0.5 points in the year ended December 31, 2013 primarily due to a change in
business mix and reinsurance structures.
The general operating expense ratio increased by 0.3 points in 2013, compared to the prior year. The increase in
employee incentive plan expense contributed approximately 1.0 point to the increase in the general operating
expense ratio. A reduction in bad debt expense in 2013 represented a decrease to the general operating ratio of
approximately 0.8 points compared to the prior year.
The accident year combined ratio, as adjusted, increased by 2.3 points for the year ended December 31, 2013.
The accident year loss ratio, as adjusted, increased by 1.2 points, primarily due to the effect of higher losses
associated with a warranty retail program, group accident, and travel business in the U.S. and Canada, which in the
aggregate increased the loss ratio by 1.6 points. This was partially offset by improvements in automobile and
personal property, as a result of rate and underwriting actions taken in current and prior years. The higher losses
associated with a warranty retail program were largely offset by a decrease in related profit sharing arrangement.
The acquisition ratio increased by 0.5 points, primarily due to the combined effect of a lower net premiums earned
base, change in business mix and higher costs in growth-targeted lines of business. This was partially offset by a
reduction in a profit sharing arrangement in a warranty retail program.
The general operating expense ratio increased by 0.6 points compared to the prior year. The general operating
expense ratio increased primarily due to the increase in employee incentive compensation expense previously
discussed, partially offset by lower infrastructure project costs.
The accident year combined ratio, as adjusted, improved by 1.2 points in 2012.
The improvement in the accident year loss ratio, as adjusted, in 2012, reflects the realization of benefits from the
continued execution of our multi-faceted strategy to enhance risk selection, pricing discipline, 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 improved due to rate strengthening and restructuring and
re-underwriting of certain products. Property improved due to rate strengthening, enhanced engineering and exposure
management.
The acquisition ratio increased by 2.0 points primarily due to our strategy of growing higher value lines, which
typically incur higher acquisition costs, and the restructuring of our Casualty lines, especially the loss-sensitive
business in the U.S. In addition, ceding commissions decreased as a result of restructuring of the Property and
Specialty reinsurance program as part of the strategic decision to retain more profitable business while continuing to
manage aggregate exposures.
2013 and 2012 Comparison
Commercial Insurance Ratios
Consumer Insurance Ratios
2012 and 2011 Comparison
Commercial Insurance Ratios
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AIG 2013 Form 10-K92
ITEM 7 / RESULTS OF OPERATIONS / AIG PROPERTY CASUALTY
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