AIG 2013 Annual Report Download - page 134

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 minimum interest rate guarantees of 1 percent.
• Universal life insurance interest rate guarantees are generally 2 to 3 percent on new non-indexed products and
zero to 2 percent on new indexed products, and are designed to be sufficient to meet targeted net investment
spreads. We are in the process of lowering the minimum guaranteed interest rates on new products, and expect
this process to be substantially completed in 2014.
Active management of renewal crediting rates is done under contractual provisions in our annuity and universal
life products that were designed to allow crediting rates to be reset at pre-established intervals subject to minimum
crediting rate guarantees. We have adjusted, and will continue to adjust, crediting rates to maintain targeted net
investment spreads on both new business and in-force business where crediting rates are above minimum
guarantees. In addition to annuity and universal life products, certain traditional long-duration products for which we
do not have the ability to adjust interest rates, such as payout annuities, are exposed to reduced earnings and
potential loss recognition reserve increases in a prolonged low interest rate environment. See AIG Life and
Retirement Reserves and DAC — Other Reserve Changes for additional discussion of loss recognition.
Included in 2012 was an additional $110 million of interest credited expense resulting from a comprehensive review
of reserves for the GIC portfolio.
As indicated in the table below, approximately 73 percent of our annuity and universal life account values were at
their minimum crediting rates as of December 31, 2013, an increase from 63 percent at December 31, 2012. These
products have minimum guaranteed interest rates as of December 31, 2013 ranging from 1 percent to 5.5 percent,
with the higher rates representing guarantees on older products.
The following table presents our universal life and fixed annuity account values by contractual minimum
guaranteed interest rate and current crediting rates:
Universal life insurance
1% $ 52 $ – $ 1 $ 53
> 1% – 2% 32 60 194 286
> 2% – 3% 374 255 1,313 1,942
> 3% – 4% 2,079 349 1,385 3,813
> 4% – 5% 4,164 196 – 4,360
> 5% – 5.5% 309 – – 309
Subtotal $ 7,010 $ 860 $ 2,893 $ 10,763
Fixed annuities*
1% $ 2,922 $ 5,248 $ 7,430 $ 15,600
> 1% – 2% 13,266 3,118 5,580 21,964
> 2% – 3% 32,671 191 2,672 35,534
> 3% – 4% 13,676 93 60 13,829
> 4% – 5% 8,116 – 4 8,120
> 5% – 5.5% 232 – 5 237
Subtotal $ 70,883 $ 8,650 $ 15,751 $ 95,284
Total $ 77,893 $ 9,510 $ 18,644 $ 106,047
Percentage of total 73% 9% 18% 100%
*Fixed annuities include fixed options within variable annuities sold in Group Retirement and Retirement Income Solutions product lines.
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AIG 2013 Form 10-K116
ITEM 7 / RESULTS OF OPERATIONS / AIG LIFE AND RETIREMENT
Current Crediting Rates
December 31, 2013 1-50 Basis More than 50
Contractual Minimum Guaranteed At Contractual Points Above Basis Points
Interest Rate Minimum Minimum Above Minimum
(in millions) Guarantee Guarantee Guarantee Total
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