AIG 2013 Annual Report Download - page 302

We report variable contracts within the separate accounts when investment income and investment gains and losses
accrue directly to, and investment risk is borne by, the contract holder and the separate account meets additional
accounting criteria to qualify for separate account treatment. The assets supporting the variable portion of variable
annuity and variable universal life contracts that qualify for separate account treatment are carried at fair value and
reported as separate account assets, with an equivalent summary total reported as separate account liabilities.
Amounts assessed against the contract holders for mortality, administrative, and other services are included in
revenue. Net investment income, net investment gains and losses, changes in fair value of assets, and policyholder
account deposits and withdrawals related to separate accounts are excluded from the Consolidated Statements of
Income, Comprehensive Income and Cash Flows.
Variable annuity contracts may include certain contractually guaranteed benefits to the contract holder. These
guaranteed features include guaranteed minimum death benefits (GMDB) that are payable in the event of death, and
living benefits that are payable in the event of annuitization, or, in other instances, at specified dates during the
accumulation period. Living benefits include guaranteed minimum income benefits (GMIB), guaranteed minimum
withdrawal benefits (GMWB) and guaranteed minimum account value benefits (GMAV). A variable annuity contract
may include more than one type of guaranteed benefit feature; for example, it may have both a GMDB and a
GMWB. However, a policyholder can only receive payout from one guaranteed feature on a contract containing a
death benefit and a living benefit, i.e. the features are mutually exclusive. A policyholder cannot purchase more than
one living benefit on one contract. The net amount at risk for each feature is calculated irrespective of the existence
of other features; as a result, the net amount at risk for each feature is not additive to that of other features.
Depending on the contract, the GMDB feature may provide a death benefit of either (a) total deposits made to the
contract less any partial withdrawals plus a minimum return (and in rare instances, no minimum return) or (b) the
highest contract value attained, typically on any anniversary date minus any subsequent withdrawals following the
contract anniversary. GMIB guarantees a minimum level of periodic income payments upon annuitization. GMDB is
our most widely offered benefit; our contracts also include GMIB to a lesser extent.
The liabilities for GMDB and GMIB, which are recorded in Future policyholder benefits, represent the expected value
of benefits in excess of the projected account value, with the excess recognized ratably over the accumulation period
based on total expected assessments, through Policyholder benefits and claims incurred. The net amount at risk for
GMDB represents the amount of benefits in excess of account value if death claims were filed on all contracts on the
balance sheet date.
The following table presents details concerning our GMDB exposures, by benefit type:
Account value $64$ 13
Net amount at risk 21
Average attained age of contract holders by
product 59 – 73 years 66 – 75 years
Range of guaranteed minimum return rates 3 – 10%
The following summarizes GMDB and GMIB liabilities related to variable annuity contracts:
Balance, beginning of year $ 445
Reserve increase 43
Benefits paid (75)
Balance, end of year $ 413
13. VARIABLE LIFE AND ANNUITY CONTRACTS
GMDB and GMIB
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AIG 2013 Form 10-K284
ITEM 8 / NOTE 13. VARIABLE LIFE AND ANNUITY CONTRACTS
2013 2012
Net Deposits Net Deposits
Plus a Minimum Highest Contract Plus a Minimum Highest ContractAt December 31,
(dollars in billions) Return Value Attained Return Value Attained
$78$ 15
11
60 – 72 years 65 – 75 years
3 – 10%
Years Ended December 31,
(in millions) 2013 2012
$ 413
32
(51)
$ 394
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