AIG 2015 Annual Report Download - page 220

GLOSSARY
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Glossary
Accident year The annual calendar accounting period in which loss events occurred, regardless of when the losses are
actually reported, booked or paid.
Accident year combined ratio, as adjusted The combined ratio excluding catastrophe losses and related reinstatement
premiums, prior year development, net of premium adjustments, and the impact of reserve discounting.
Accident year loss ratio, as adjusted The loss ratio excluding catastrophe losses and related reinstatement premiums, prior
year development, net of premium adjustments, and the impact of reserve discounting.
Acquisition ratio Acquisition costs divided by net premiums earned. Acquisition costs are those costs incurred to acquire new
and renewal insurance contracts and also include the amortization of VOBA and DAC. Acquisition costs vary with sales and
include, but are not limited to, commissions, premium taxes, direct marketing costs, certain costs of personnel engaged in
sales support activities such as underwriting.
Base Spread Net investment income excluding income from alternative investments and enhancements, less interest credited
excluding amortization of sales inducement assets.
Base Yield Net investment income excluding income from alternative investments and enhancements, as a percentage of
average base invested asset portfolio, which excludes alternative investments, other bond securities and certain other
investments for which the fair value option has been elected.
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 AOCI and Book Value Per Common Share Excluding AOCI and DTA are
non-GAAP measures and are 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. Book Value Per Common Share, Excluding AOCI and DTA is derived by dividing Total AIG shareholders’ equity,
excluding AOCI and DTA, 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 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 generally associated with an ISDA Master Agreement that provides for collateral
postings which could vary depending on 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 AIGFP'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 derivative net
liability 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”).
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.