AIG 2015 Annual Report Download - page 87

ITEM 7 / RESULTS OF OPERATIONS / COMMERCIAL INSURANCE
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The general operating expense ratio decreased by 0.2 points in 2015 compared to 2014, primarily due to lower employee-
related expenses partially offset by additional expense resulting from the NSM acquisition and higher technology-related
expenses.
2014 and 2013 Comparison
The combined ratio decreased by 1.4 points in 2014 compared to 2013 reflecting decreases in the expense ratio and the loss
ratio.
The accident year combined ratio, as adjusted, decreased by 0.9 points in 2014 compared 2013, primarily due to lower
expense ratio which was partially offset by a higher accident year loss ratio, as adjusted.
The accident year loss ratio, as adjusted, increased by 0.2 points in 2014, compared to 2013, primarily due to higher frequency
of non-severe losses, particularly in Property and Specialty businesses. This was partially offset by an improvement in
Financial lines, particularly in the U.S., reflecting enhanced risk selection and pricing discipline. Severe losses represented
approximately 2.8 points of the accident year loss ratio, as adjusted, in both 2014 and 2013.
The acquisition ratio decreased by 0.4 points in 2014 compared to 2013, primarily due to a reduction in expenses of personnel
engaged in sales support activities and lower premium taxes and guaranty fund and other assessments.
The general operating expense ratio decreased by 0.7 points in 2014 compared to 2013, primarily due to efficiencies from
organizational realignment initiatives, partially offset by higher technology-related expenses and an increase in bad debt
expense. In 2013, general operating expenses benefitted from an unusually low bad debt expense.
Mortgage Guaranty Results
The following table presents Mortgage Guaranty results:
Years Ended December 31, Percentage Change
(dollars in millions) 2015 2014 2013
2015 vs. 2014 2014 vs. 2013
Underwriting results:
Net premiums written $1,050 $1,024 $1,048 3 % (2)%
Increase in unearned premiums (138) (120) (239) (15) 50
Net premiums earned 912 904 809 112
Losses and loss adjustment expenses incurred 160 223 514 (28) (57)
Acquisition expenses:
Amortization of deferred policy acquisition costs 30 22 20 36 10
Other acquisition expenses 51 49 60 4(18)
Total acquisition expenses 81 71 80 14 (11)
General operating expenses 166 156 142 610
Underwriting income 505 454 73 11 NM
Net investment income 139 138 132 1 5
Pre-tax operating income 644 592 205 9189
Key metrics:
Prior year loss reserve development (favorable)/
unfavorable $(69) $(104) $30 (34)% NM%
Domestic first-lien:
New insurance written $50,842 $42,038 $49,356 21 (15)
Combined ratio 44.6 52.6 91.1
Risk in force $47,442 $42,106 $36,367 13 16
60+ day delinquency ratio on primary loans(a) 3.4 % 4.4 % 5.9 %
Domestic second-lien:
Risk in force(b) $399 $446 $1,026 (11) (57)