AIG 2015 Annual Report Download - page 300

ITEM 8 / NOTE 12. INSURANCE LIABILITIES
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Provisions for future dividend payments are computed by jurisdiction, reflecting local regulations. The portions of current and
prior net income and of current unrealized appreciation of investments that can inure to our benefit are restricted in some
cases by the insurance contracts and by the local insurance regulations of the jurisdictions in which the policies are in force.
Certain products are subject to experience adjustments. These include group life and group medical products, credit life
contracts, accident and health insurance contracts/riders attached to life policies and, to a limited extent, reinsurance
agreements with other direct insurers. Ultimate premiums from these contracts are estimated and recognized as revenue with
the unearned portions of the premiums recorded as liabilities in Other policyholder funds. Experience adjustments vary
according to the type of contract and the territory in which the policy is in force and are subject to local regulatory guidance.
13. VARIABLE LIFE AND ANNUITY CONTRACTS
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.
Policy values for variable products and investment contracts are expressed in terms of investment units. Each unit is linked to
an asset portfolio. The value of a unit increases or decreases based on the value of the linked asset portfolio. The current
liability at any time is the sum of the current unit value of all investment units in the separate accounts, plus any liabilities for
guaranteed minimum death benefits or guaranteed minimum withdrawal benefits included in Future policy benefits or
Policyholder contract deposits, respectively.
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
(Loss) 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 accumulation benefits (GMAB). 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, so the exposure to the guaranteed amount for each feature is independent of the exposure from other features
(except a surviving spouse who has a rider to potentially collect both a GMDB upon their spouse’s death and a GMWB during
their lifetime). 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.
Account balances of variable annuity contracts with guarantees were invested in separate account investment
options as follows:
At December 31,
(in millions) 2015 2014
Equity funds $ 39,284 $ 40,811
Bond funds 7,261 7,566
Balanced funds 24,849 22,354
Money market funds 826 797
Tot al $ 72,220 $ 71,528