AIG 2015 Annual Report Download - page 88

ITEM 7 / RESULTS OF OPERATIONS / COMMERCIAL INSURANCE
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(a) Based on number of policies.
(b) Represents the full amount of second-lien loans insured reduced for contractual aggregate loss limits on certain pools of loans, which is usually 10 percent of
the full amount of loans insured in each pool. Certain second-lien pools have reinstatement provisions, which will expire as the loan balances are repaid.
PRE-TAX OPERATING INCOME
(in millions)
DOMESTIC FIRST-LIEN NEW INSURANCE WRITTEN ON
MORTGAGE LOANS
(in millions)
The following table presents Mortgage Guaranty first-lien results:
Years Ended December 31, Percentage Change
(dollars in millions) 2015 2014 2013
2015 vs. 2014 2014 vs. 2013
Underwriting results:
Net premiums written $990 $929 $950 7 % (2)%
Increase in unearned premiums (137) (117) (256) (17) 54
Net premiums earned 853 812 694 517
Losses and loss adjustment expenses incurred 174 233 462 (25) (50)
Acquisition expenses:
Amortization of deferred policy acquisition costs 29 21 16 38 31
Other acquisition expenses 52 49 60 6(18)
Total acquisition expenses 81 70 76 16 (8)
General operating expenses 150 124 95 21 31
Underwriting income 448 385 61 16 NM
Net investment income 127 124 116 2 7
Pre-tax operating income $575 $509 $177 13 %188 %
2015 and 2014 Comparison
Pre-tax operating income increased in 2015 compared to 2014 due to an increase in first-lien net premiums earned as a
result of higher new insurance written increasing the amount of insurance in-force, an acceleration of earnings on the
cancellations of single premium business for which a return premium is generally not required, and a decline in incurred
losses from lower delinquency rates and higher cure rates. Offsetting these increases in operating income was a reduction in
favorable prior year loss development of $35 million primarily related to a settlement with a large lender which resulted in $64
million of favorable prior year loss development in 2014.