AIG 2013 Annual Report Download - page 121

complex commercial claims driven by a number of factors including the extensive damage caused to properties in the
downtown New York metropolitan area.
During 2012, we experienced favorable development from the Tohoku Catastrophe due to commercial claim
severities being less than previously reserved.
See Item 7. MD&A — Critical Accounting Estimates — Liability for Unpaid Claims and Claims Adjustment Expense
for further discussion of our loss reserving process.
The following table summarizes development, (favorable) or unfavorable, of incurred losses and loss
expenses for prior years, net of reinsurance, by accident year:
Prior accident year development by accident year:
Accident Year
2012 $–$–
2011 (162) –
2010 (75) 402
2009 (45) 117
2008 (150) (294)
2007 157 (172)
2006 (20) (273)
2005 112 (164)
2004 33 (16)
2003 and prior 571 595
Total prior year unfavorable development $ 421 $ 195
For 2013, the favorable development from accident 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 that are on a claims-made basis. The adverse development from accident year 2011 was driven by large
losses in financial lines and adverse development in primary casualty including loss-sensitive business. The adverse
development from accident year 2009 was driven by large losses in financial lines and adverse development in
primary casualty including loss-sensitive business. Also for the same periods, the adverse development from accident
years 2003 and prior was primarily driven by loss development on toxic claims tort construction general liability
claims and pollution product claims.
For 2012, the favorable development from accident year 2011 was driven primarily by the favorable development on
natural catastrophes, primarily the Tohoku Catastrophe, and the adverse development from accident years 2003 and
prior was primarily the result of the increase in reserves on runoff pollution product business (policies written between
1987and 2003).
For 2011, the adverse development from accident years 2003 and prior was largely driven by runoff pollution
products (written between 1987and 2003) and toxic tort claims. Adverse development from accident year 2010 was
largely driven by primary workers’ compensation and loss-sensitive primary business. Favorable development from
accident years 2005 to 2008 was driven by financial lines, claims-made excess classes and other casualty classes.
For certain categories of claims (e.g., construction defect claims and environmental claims) and for reinsurance
recoverables, losses may sometimes be reclassified to an earlier or later accident year as more information about the
date of occurrence becomes available to AIG. These reclassifications are shown as development in the respective
years in the table above.
Net Loss Development by Accident Year
..................................................................................................................................................................................................................................
AIG 2013 Form 10-K 103
ITEM 7 / RESULTS OF OPERATIONS / LIABILITY FOR UNPAID CLAIMS AND CLAIMS ADJUSTMENT EXPENSE
Years Ended December 31,
(in millions) 2013 2012 2011
$ (181)
217
(350)
157
(1)
–
(75)
61
62
667
$ 557
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