AIG 2006 Annual Report Download - page 82

American International Group, Inc. and Subsidiaries
Management’s Discussion and Analysis of
Financial Condition and Results of Operations Continued
cost of losses and statutory expenses, respectively. The com- ally earned ratably over the policy period. Thus, the net unearned
bined ratio is the sum of the loss ratio and the expense ratio. The premium reserve is not fully recognized in income as net
combined ratio presents the total cost per $100 of premium premiums earned until the end of the policy period.
production. A combined ratio below 100 demonstrates underwrit- The underwriting environment varies from country to country,
ing profit; a combined ratio above 100 demonstrates underwriting as does the degree of litigation activity. Regulation, product type
loss. and competition have a direct effect on pricing and consequently
Net premiums written are initially deferred and earned based on profitability as reflected in underwriting profit and statutory
upon the terms of the underlying policies. The net unearned general insurance ratios.
premium reserve constitutes deferred revenues which are gener-
General Insurance Results
General Insurance operating income is comprised of statutory underwriting results, changes in DAC, net investment
income and realized capital gains and losses. Operating income, as well as net premiums written, net premiums
earned, net investment income and realized capital gains (losses) and statutory ratios for 2006, 2005 and 2004 were
as follows:
(in millions, except ratios) 2006 2005 2004
Net premiums written:
Domestic General
DBG $24,345 $23,128 $22,506
Transatlantic 3,633 3,466 3,749
Personal Lines 4,654 4,653 4,354
Mortgage Guaranty 866 628 607
Foreign General(a) 11,368 9,997 9,407
Total $44,866 $41,872 $40,623
Net premiums earned:
Domestic General
DBG $23,936 $22,602 $21,215
Transatlantic 3,604 3,385 3,661
Personal Lines 4,645 4,634 4,291
Mortgage Guaranty 740 533 539
Foreign General(a) 10,526 9,655 8,831
Total $43,451 $40,809 $38,537
Net investment income(b):
Domestic General
DBG $ 3,411 $ 2,403 $ 1,965
Transatlantic 435 343 307
Personal Lines 225 217 186
Mortgage Guaranty 140 123 120
Intercompany adjustments and eliminations — net 11—
Foreign General 1,484 944 618
Total $ 5,696 $ 4,031 $ 3,196
Realized capital gains (losses) $59 $ 334 $ 228
Operating income (loss)(b)(c)(d):
Domestic General
DBG $ 5,985 $ (646) $ 777
Transatlantic 589 (39) 282
Personal Lines 432 195 357
Mortgage Guaranty 328 363 399
Foreign General(e) 3,088 2,427 1,344
Reclassifications and eliminations (10) 15 18
Total $10,412 $ 2,315 $ 3,177
Statutory underwriting profit (loss)(c)(d)(g):
Domestic General
DBG $ 2,450 $ (3,227) $ (1,500)
Transatlantic 129 (434) (77)
Personal Lines 204 (38) 136
Mortgage Guaranty 188 249 234
Foreign General(e) 1,437 1,285 643
Total $ 4,408 $ (2,165) $ (564)
(continued)
32 AIG 2006 Form 10-K