AIG 2013 Annual Report Download - page 131

enhancements and expanded distribution as well as a more favorable competitive environment. The surrender rate
for this product line improved in 2013 compared to 2012 due to the significant increase in average reserves driven by
strong sales and positive equity market performance.
Retail Mutual Fund deposits and net flows increased in 2013 and 2012 compared to 2011, driven primarily by sales
of our Focused Dividend Strategy product offerings.
Group Retirement net flows, which include net flows from mutual funds in group retirement plans, decreased in
2013 and 2012 compared to 2011, and were negative in 2013, primarily as a result of higher surrenders of individual
participant contracts as well as higher large group surrenders. As discussed above, premiums and deposits for this
product line included increases in mutual fund deposits largely offset by lower annuity deposits.
The following table presents reserves for selected product lines by surrender charge category at
December 31, 2013 and 2012, and surrender rates for 2013 and 2012:
No surrender charge(b) $ 56,047 $ 26,662 $ 1,909
0% – 2% 1,242 3,695 14,824
Greater than 2% – 4% 1,400 3,383 2,148
Greater than 4% 4,878 22,256 10,842
Non-surrenderable 693 3,066 1,343
Total reserves $ 64,260 $ 59,062 $ 31,066
Surrender rates 8.7% 6.3% 10.3%
(a) Excludes mutual fund assets under management of $15.1 billion and $11.8 billion at December 31, 2013 and 2012, respectively.
(b) Group Retirement Products include reserves of approximately $6.2 billion and $6.0 billion at December 31, 2013 and 2012, respectively, that are
subject to 20 percent annual withdrawal limitations.
We invest primarily in fixed maturity securities issued by corporations, municipalities and other governmental
agencies; structured securities collateralized by, among other assets, residential and commercial real estate; and
commercial mortgage loans. Income from these investments, as well as cash and short term investments, is included
in our measure of base net investment income, after excluding certain items such as call and tender income,
mortgage prepayment fees, change in accretion of discount for certain high credit quality structured securities and
impairment charges on investments in leased commercial aircraft.
In addition, we seek to enhance our returns through investments in a diversified portfolio of private equity funds,
hedge funds and affordable housing partnerships. Although these alternative investments are subject to periodic
earnings fluctuations, they have historically achieved yields in excess of the fixed maturity portfolio yields. Our
investment portfolio also includes, to a lesser extent, common and preferred stocks and yield-enhancement items,
such as our investment in PICC Group and securities for which the fair value option has been elected, as well as ML
II prior to its liquidation in 2012.
Our fundamental investment strategy is to maintain a diversified, high quality portfolio of fixed maturity securities with
the intent to largely match the characteristics of our liabilities, including duration, which is a measure of sensitivity to
changes in interest rates. The investment portfolio of each product line is tailored to the specific characteristics of its
insurance liabilities, and as a result, certain portfolios are shorter in duration and others are longer in duration. See
Investments for additional discussion of our asset liability management process.
Institutional Net Flows
AIG Life and Retirement Investments and Spread Management
Investments
..................................................................................................................................................................................................................................
AIG 2013 Form 10-K 113
ITEM 7 / RESULTS OF OPERATIONS / AIG LIFE AND RETIREMENT
2013 2012
Group Individual Retirement Group Individual Retirement
At December 31, Retirement Fixed Income Retirement Fixed Income
(in millions) Products(a) Annuities Solutions Products(a) Annuities Solutions
$ 60,962 $ 30,906 $ 2,065
1,508 2,261 16,839
1,967 4,349 2,734
5,719 16,895 19,039
315 2,758 67
$ 70,471 $ 57,169 $ 40,744
9.0% 6.6% 8.7%
..................................................................................................................................................................................
............................................................................................................................................................................................
............................................................................................................................................................................................