AIG 2006 Annual Report Download - page 101

American International Group, Inc. and Subsidiaries
Survival Ratios — Asbestos and Environmental Life Insurance & Retirement Services
Operations
The following table presents AIG’s survival ratios for asbestos and
environmental claims for year-end 2006, 2005 and 2004. The AIG’s Life Insurance & Retirement Services subsidiaries offer a
survival ratio is derived by dividing the year end carried loss wide range of insurance and retirement savings products both
reserve by the average payments for the three most recent domestically and abroad.
calendar years for these claims. Therefore, the survival ratio is a Domestically, AIG’s Life Insurance & Retirement Services
simplistic measure estimating the number of years it would be operations offer a broad range of protection products, such as life
before the current ending loss reserves for these claims would be insurance and group life and health products, including disability
paid off using recent year average payments. The December 31, income products and payout annuities, which include single
2006 survival ratio is lower than the ratio at December 31, 2005 premium immediate annuities, structured settlements and termi-
because the more recent periods included in the rolling average nal funding annuities. Home service operations include an array of
reflect higher claims payments. Many factors, such as aggressive life insurance, accident and health and annuity products sold
settlement procedures, mix of business and level of coverage primarily through career agents. In addition, home service in-
provided, have a significant effect on the amount of asbestos and cludes a small block of runoff property and casualty coverage.
environmental reserves and payments and the resultant survival Retirement services include group retirement products, individual
ratio. Thus, caution should be exercised in attempting to deter- fixed and variable annuities sold through banks, broker-dealers
mine reserve adequacy for these claims based simply on this and exclusive sales representatives, and annuity runoff opera-
survival ratio. tions, which include previously acquired ‘‘closed blocks’’ and
other fixed and variable annuities largely sold through distribution
AIG’s survival ratios for asbestos and environmental
relationships that have been discontinued.
claims, separately and combined were based upon a
Overseas, AIG’s Life Insurance & Retirement Services opera-
three-year average payment. These ratios for the years
tions include insurance and investment-oriented products such as
ended December 31, 2006, 2005 and 2004 were as
whole and term life, investment linked, universal life and endow-
follows:
ments, personal accident and health products, group products
Gross Net including pension, life and health, and fixed and variable
2006 annuities.
Survival ratios: AIG’s Life Insurance & Retirement Services subsidiaries report
Asbestos 11.7 12.9 their operations through the following major internal reporting
Environmental 5.3 4.5 units and business units:
Combined 10.3 10.3
2005 Foreign Life Insurance & Retirement Services
Survival ratios:
Asbestos 15.9 19.8 Japan and Other*
Environmental 6.9 6.2 (ALICO
Combined 13.0 14.2
(AIG Star Life
2004 (AIG Edison Life
Survival ratios:
Asbestos 10.7 13.5 Asia
Environmental 6.5 6.8 (AIA
Combined 9.1 10.5
(Nan Shan
(AIRCO
(Philamlife
Domestic Life Insurance
(AIG American General
(USLIFE
(AGLA
Domestic Retirement Services
(VALIC
(AIG Annuity
(AIG SunAmerica
* Japan and Other consists of all operations in Japan and the
operations of ALICO and its subsidiaries worldwide.
Form 10-K 2006 AIG 51