AIG 2007 Annual Report Download - page 125

American International Group, Inc. and Subsidiaries
lines. Group life/health operating income increased in 2007 $30 million of increased amortization due to DAC unlocking to
compared to 2006. Operating income in 2007 included a reflect lower in-force amounts.
$52 million decrease in policy benefits from additional reinsurance
recoveries associated with Superior National, offset by an in- 2006 and 2005 Comparison
crease of $45 million in DAC amortization related to SOP 05-1. Premiums and other considerations for Domestic Life Insurance
The operating loss in 2006 included a $125 million charge increased in 2006 compared to 2005 and were primarily driven by
resulting from the loss of the Superior National arbitration, a growth in the life insurance business in-force and payout annuity
$66 million loss related to exiting the financial institutions credit premiums, partially offset by declining in-force business in the
business and a $25 million charge for litigation reserves. home service and group life/health lines. Domestic Life Insurance
Payout annuities premiums and other considerations increased operating income declined in 2006 compared to 2005 due to net
in 2007 compared to 2006 reflecting increased sales of struc- realized capital losses and several significant transactions de-
tured settlements and terminal funding annuities. Net investment scribed below in 2006, partially offset by continued growth in life
income increased in 2007 reflecting growth in insurance reserves insurance and payout annuity business. Operating income in 2006
and an increase in call and tender income on fixed income included a $125 million charge resulting from the loss of the
securities. Payout annuities operating income decreased slightly in Superior National arbitration and a $66 million loss related to
2007 as growth in the business was more than offset by higher exiting the financial institutions credit business both within the
net realized capital losses and by a $30 million out of period group life/health business. In addition, Domestic Life Insurance
adjustment to increase group annuity reserves for payout annui- operating income was negatively affected by $55 million in
ties. Operating income in 2006 included a $24 million increase in litigation accruals, an increase in reserves of $24 million related
reserves as various methodologies and assumptions were en- to various methodologies and assumptions which were enhanced
hanced for payout annuity reserves. in the payout annuity business and a DAC unlocking charge of
Individual fixed and runoff annuities net investment income and $30 million in the individual fixed and runoff annuities line to
operating income decreased in 2007 compared to 2006 reflecting reflect lower in-force amounts.
declining insurance reserves. Operating income in 2006 included
The following table reflects Domestic Life Insurance periodic premium sales by product for 2007, 2006 and 2005:
Percentage Increase/(Decrease)
(in millions) 2007 2006 2005 2007 vs. 2006 2006 vs. 2005
Periodic Premium Sales By Product*:
Universal life $230 $334 $271 (31)% 23%
Variable universal life 55 56 44 (2) 27
Term life 219 240 229 (9) 5
Whole life/other 913 10 (31) 30
Total $513 $643 $554 (20)% 16%
* Periodic premium represents premium from new business expected to be collected over a one-year period.
2007 and 2006 Comparison 2006 and 2005 Comparison
Domestic Life Insurance periodic premium sales declined in Domestic Life Insurance periodic premium sales increased in
2007 compared to 2006 primarily as a result of the repricing of 2006 compared to 2005 primarily reflecting growth in the
certain universal life and term products and the tightening of independent distribution platform. During the second half of 2006,
underwriting standards during the second half of 2006. In the certain universal life products were re-priced and underwriting
second half of 2007, AIG experienced positive sales growth in standards were tightened.
indexed universal life products and the sale of a large private
placement variable universal life case.
AIG 2007 Form 10-K 71