AIG 2007 Annual Report Download - page 126

American International Group, Inc. and Subsidiaries
Management’s Discussion and Analysis of
Financial Condition and Results of Operations Continued
Domestic Retirement Services Results
Domestic Retirement Services results, presented on a sub-product basis for 2007, 2006 and 2005 were as follows:
Premiums and Net Net Realized
Other Investment Capital Gains Total Operating
(in millions) Considerations Income (Losses) Revenues Income
2007
Group retirement products $ 446 $ 2,280 $ (451) $ 2,275 $ 696
Individual fixed annuities 96 3,664 (829) 2,931 530
Individual variable annuities 627 166 (45) 748 122
Individual annuities — runoff* 21 387 (83) 325 (1)
Total $ 1,190 $ 6,497 $ (1,408) $ 6,279 $ 1,347
2006
Group retirement products $ 386 $ 2,279 $ (144) $ 2,521 $ 1,017
Individual fixed annuities 122 3,581 (257) 3,446 1,036
Individual variable annuities 531 202 5 738 193
Individual annuities — runoff* 18 426 (8) 436 77
Total $ 1,057 $ 6,488 $ (404) $ 7,141 $ 2,323
2005
Group retirement products $ 351 $ 2,233 $ (67) $ 2,517 $ 1,055
Individual fixed annuities 97 3,346 (214) 3,229 858
Individual variable annuities 467 217 4 688 189
Individual annuities — runoff* 22 430 — 452 62
Total $ 937 $ 6,226 $ (277) $ 6,886 $ 2,164
Percentage Increase/(Decrease) 2007 vs. 2006:
Group retirement products 16% —% —% (10)% (32)%
Individual fixed annuities (21) 2 — (15) (49)
Individual variable annuities 18 (18) — 1 (37)
Individual annuities — runoff 17 (9) — (25) —
Total 13% —% —% (12)% (42)%
Percentage Increase/(Decrease) 2006 vs. 2005:
Group retirement products 10% 2% —% —% (4)%
Individual fixed annuities 26 7 — 7 21
Individual variable annuities 14 (7) 25 7 2
Individual annuities — runoff (18) (1) — (4) 24
Total 13% 4% —% 4% 7%
* Primarily represents runoff annuity business sold through discontinued distribution relationships.
2007 and 2006 Comparison realized capital losses due to higher other-than-temporary impair-
ment charges and an increase in DAC amortization related to both
Total revenues and operating income for Domestic Retirement an increase in surrenders and to policy changes adding guaran-
Services declined in 2007 compared to 2006 primarily due to teed minimum withdrawal benefit riders to existing contracts.
increased net realized capital losses. Net realized capital losses Operating income was also negatively affected in 2007 by an
for Domestic Retirement Services increased due to higher other- $18 million adjustment, primarily reflecting changes in actuarial
than-temporary impairment charges of $1.2 billion in 2007 estimates from the conversion to a new valuation system. These
compared to $368 million in 2006 and sales to reposition assets were partially offset by higher variable annuity fees which resulted
in certain investment portfolios for both group retirement products from an increase in separate account assets compared to 2006.
and individual fixed annuities, as well as from changes in the Individual fixed annuities operating income in 2007 decreased
value of certain individual variable annuity product guarantees and compared to 2006 as a result of net realized capital losses due
related hedges associated with living benefit features. Changes in to higher other-than-temporary impairment charges partially offset
actuarial estimates, including DAC unlockings and refinements to by increases in partnership income. The decline in operating
estimates resulting from actuarial valuation system enhance- income also reflected higher DAC amortization and sales induce-
ments, resulted in a net decrease to operating income of ment costs related to increased surrenders and a $33 million
$112 million in 2007. charge reflecting changes in actuarial estimates from the conver-
Group retirement products operating income in 2007 de-
creased compared to 2006 primarily as a result of increased net
72 AIG 2007 Form 10-K