AIG 2013 Annual Report Download - page 222

related to legacy crisis matters and bargain purchase gain. Underwriting income (loss) is derived by reducing net
premiums earned by claims and claims adjustment expenses incurred, acquisition expenses and general operating
expenses.
BET Binomial Expansion Technique A model that generates expected loss estimates for CDO tranches and derives
a credit rating for those tranches.
Book Value Per Common Share Excluding Accumulated Other Comprehensive Income (loss) (AOCI) is a
non-GAAP measure and is used to show the amount of our net worth on a per-share basis. Book Value Per
Common Share Excluding AOCI is derived by dividing Total AIG shareholders’ equity, excluding AOCI, by Total
common shares outstanding.
Casualty insurance Insurance that is primarily associated with the losses caused by injuries to third persons,
i.e., not the insured, 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 Support Annex A legal document that provides for collateral postings at various ratings and threshold
levels.
CVA Credit Valuation Adjustment The CVA adjusts the valuation of derivatives to account for nonperformance risk of
our counterparty with respect to all net derivative assets positions. Also, the CVA reflects the fair value movement in
the DIB’s asset portfolio that is attributable to credit movements only without the impact of other market factors such
as interest rates and foreign exchange rates. Finally, the CVA also accounts for our own credit risk, in the fair value
measurement of all net derivative liabilities positions and liabilities where AIG has elected the fair value option, when
appropriate.
DAC Deferred Policy Acquisition Costs Deferred costs that are incremental and directly related to the successful
acquisition of new business or renewal of existing business.
DAC Related to Unrealized Appreciation (Depreciation) of Investments An adjustment to DAC for investment-
oriented products, equal to the change in DAC amortization that would have been recorded if fixed maturity and
equity securities available for sale had been sold at their stated aggregate fair value and the proceeds reinvested at
current yields (also referred to as ‘‘shadow DAC’’). The change in this adjustment, net of tax, is included with the
change in net unrealized appreciation (depreciation) of investments that is credited or charged directly to Other
comprehensive income (loss).
Deferred Gain on Retroactive Reinsurance Retroactive reinsurance is a reinsurance contract in which an assuming
entity agrees to reimburse a ceding entity for liabilities incurred as a result of past insurable events. If the amount of
premium paid by the ceding reinsurer is less than the related ceded loss reserves, the resulting gain is deferred and
amortized over the settlement period of the reserves. Any related development on the ceded loss reserves
recoverable under the contract would increase the deferred gain if unfavorable, or decrease the deferred gain if
favorable.
Expense ratio Sum of acquisition expenses and general operating expenses, divided by net premiums earned.
First-Lien Priority over all other liens or claims on a property in the event of default on a mortgage.
General operating expense ratio general operating expenses divided by net premiums earned. General operating
expenses are those costs that are generally attributed to the support infrastructure of the organization and include
but are not limited to personnel costs, projects and bad debt expenses. General operating expenses exclude claims
adjustment expenses, acquisition expenses, and investment expenses.
GIC/GIA Guaranteed Investment Contract/Guaranteed Investment Agreement A contract whereby the seller provides
a guaranteed repayment of principal and a fixed or floating interest rate for a predetermined period of time.
G-SII Global Systemically Important Insurer An insurer that is deemed globally systemically important (that is, of such
size, market importance and global interconnectedness that the distress or failure of the insurer would cause
significant dislocation in the global financial system and adverse economic consequences across a range of
countries) by the Financial Stability Board, in consultation with and based on a methodology developed by the
International Association of Insurance Supervisors.
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AIG 2013 Form 10-K204
GLOSSARY
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