AIG 2006 Annual Report Download - page 102

American International Group, Inc. and Subsidiaries
Management’s Discussion and Analysis of
Financial Condition and Results of Operations Continued
Life Insurance & Retirement Services Results
Life Insurance & Retirement Services results for 2006, 2005 and 2004 were as follows:
Net Realized
GAAP Investment Capital Gains Total Operating
(in millions) Premiums Income (Losses) Revenues Income
2006
Foreign Life Insurance & Retirement Services $24,036 $ 9,173 $ 707 $33,916 $ 6,792
Domestic Life Insurance 5,543 3,778 (215) 9,106 917
Domestic Retirement Services 1,057 6,488 (404) 7,141 2,323
Total $30,636 $19,439 $ 88 $50,163 $10,032
2005
Foreign Life Insurance & Retirement Services $23,016 $ 8,175 $ 84 $31,275 $ 5,245
Domestic Life Insurance 5,447 3,733 35 9,215 1,495
Domestic Retirement Services 937 6,226 (277) 6,886 2,164
Total $29,400 $18,134 $(158) $47,376 $ 8,904
2004
Foreign Life Insurance & Retirement Services $21,917 $ 5,834 $ 372 $28,123 $ 4,848
Domestic Life Insurance 5,376 3,459 (120) 8,715 1,023
Domestic Retirement Services 795 5,976 (207) 6,564 2,054
Total $28,088 $15,269 $ 45 $43,402 $ 7,925
invested assets. Realized capital gains increased $246 million
The following table presents the Insurance In-force for
in 2006 compared to 2005. In addition, operating income in
Life Insurance & Retirement Services for the years
2006 includes charges of $125 million for the adverse Superior
ended December 31, 2006, 2005 and 2004:
National arbitration ruling (see Note 12(c) of Notes to Consoli-
Years Ended December 31, dated Financial Statements) and $66 million related to the
(in millions) 2006 2005 2004 exiting of the domestic financial institutions credit life business.
Foreign $1,162,699 $1,027,682 $1,085,843
Domestic* 907,901 825,151 772,251
2005 and 2004 Comparison
Total $2,070,600 $1,852,833 $1,858,094
Life Insurance & Retirement Services revenues, including real-
* Domestic insurance in-force for 2005 includes the effect of the non-
ized capital losses of $158 million, grew $4.0 billion to
renewal of a single large group life case of $36 billion.
$47.4 billion. The increase in revenues reflects growth in the
underlying global Life Insurance & Retirement Services busi-
2006 and 2005 Comparison
nesses. Operating income grew $979 million in 2005, reflecting
Life Insurance & Retirement Service revenues increased growth in both domestic and overseas operations. In 2005, the
$2.8 billion in 2006, to $50.2 billion. The increased revenues Domestic Life Insurance reporting unit per formed well in its life
reflect growth in the underlying global Life Insurance & Retire- insurance and payout annuities businesses, but results were
ment Services businesses. Revenues include the positive effect offset by restructuring efforts in both home services and group
of out of period adjustments related to the accounting for life/health. The Domestic Retirement Services reporting unit
certain interests in unit investment trusts totaling $240 million faced a challenging environment in 2005, resulting in lower
in 2006. Operating income grew by $1.1 billion from 2005, to deposits and increased surrender rates. The Foreign Life
$10.0 billion, reflecting higher revenues and out of period Insurance & Retirement Services reporting unit had improved
reductions of policy benefits expense of $163 million resulting operating income in 2005 helped by higher net investment
from corrections of par policyholder dividend reserves and income, lower acquisition and operating expenses in life insur-
allocations between participating and non-participating accounts, ance and strong growth in annuities, partially offset by lower
both of which were related to remediation efforts. Net invest- realized capital gains and higher incurred policy benefit costs.
ment income increased $1.3 billion, reflecting growth in the
underlying global business and the related increased level of
52 AIG 2006 Form 10-K