AIG 2006 Annual Report Download - page 83

American International Group, Inc. and Subsidiaries
(in millions, except ratios) 2006 2005 2004
Domestic General(c)(d):
Loss ratio 69.1 89.6 83.9
Expense ratio 21.5 21.0 19.2
Combined ratio 90.6 110.6 103.1
Foreign General(c)(d):
Loss ratio(a) 50.5 53.7 61.6
Expense ratio(e)(f) 33.2 31.9 29.2
Combined ratio 83.7 85.6 90.8
Consolidated(c)(d):
Loss ratio 64.6 81.1 78.8
Expense ratio 24.5 23.6 21.5
Combined ratio 89.1 104.7 100.3
(a) Income statement accounts expressed in non-functional currencies are translated into U.S. dollars using average exchange rates.
(b) Includes the effect of out of period adjustments related to the accounting for certain interests in unit investment trusts in 2006. For DBG, the effect
was an increase of $66 million, and for Foreign General, the effect was an increase of $424 million.
(c) Catastrophe-related losses increased the consolidated General Insurance combined ratio for 2005 and 2004 by 7.06 points and 2.74 points,
respectively. There were no significant catastrophe-related losses in 2006. Catastrophe-related losses for 2005 and 2004 by reporting unit were as
follows:
2005 2004
Insurance Net Insurance Net
Related Reinstatement Related Reinstatement
(in millions) Losses Premium Cost Losses Premium Cost
Reporting Unit:
DBG $1,747 $122 $ 582 $ —
Transatlantic 463 45 215 —
Personal Lines 112 2 25 —
Mortgage Guaranty 10 — — —
Foreign General 293 94 232 —
Total $2,625 $263 $1,054 $ —
(d) Includes additional losses incurred and net reinstatement premiums related to prior year catastrophes of $199 million and $277 million, in 2006 and 2005,
respectively.
(e) Includes the results of wholly owned Foreign General agencies.
(f) Includes amortization of advertising costs.
(g) Statutory underwriting profit (loss) is a measure that U.S. domiciled insurance companies are required to report to their regulatory authorities. The
following table reconciles statutory underwriting profit (loss) to operating income for General Insurance for the years ended December 31, 2006, 2005
and 2004:
Domestic
Brokerage Personal Mortgage Foreign Reclassifications
(in millions) Group Transatlantic Lines Guaranty General and Eliminations Total
2006:
Statutory underwriting profit (loss) $ 2,450 $ 129 $204 $188 $1,437 $ — $ 4,408
Increase (decrease) in DAC 26 14 2 3 204 — 249
Net investment income 3,411 435 225 140 1,484 1 5,696
Realized capital gains (losses) 98 11 1 (3) (37) (11) 59
Operating income (loss) $ 5,985 $ 589 $432 $328 $3,088 $(10) $10,412
2005:
Statutory underwriting profit (loss) $(3,227) $(434) $ (38) $249 $1,285 $ — $ (2,165)
Increase (decrease) in DAC (23) 14 19 (8) 113 — 115
Net investment income 2,403 343 217 123 944 1 4,031
Realized capital gains (losses) 201 38 (3) (1) 85 14 334
Operating income (loss) $ (646) $ (39) $195 $363 $2,427 $ 15 $ 2,315
2004:
Statutory underwriting profit (loss) $(1,500) $ (77) $136 $234 $ 643 $ — $ (564)
Increase (decrease) in DAC 160 30 24 44 59 — 317
Net investment income 1,965 307 186 120 618 — 3,196
Realized capital gains (losses) 152 22 11 1 24 18 228
Operating income (loss) $ 777 $ 282 $357 $399 $1,344 $ 18 $ 3,177
Form 10-K 2006 AIG 33