AIG 2007 Annual Report Download - page 127

American International Group, Inc. and Subsidiaries
sion to a new valuation system, as well as unlocking future (in millions) 2007 2006
assumptions and experience updates.
Individual fixed annuities
Individual variable annuities operating income decreased in
Balance at beginning of year $ 52,685 $ 53,331
2007 compared to 2006 largely due to an increase in DAC
Deposits 5,085 5,331
amortization and sales inducement costs related to a $61 million
Surrenders and other withdrawals (7,565) (6,379)
adjustment reflecting changes in actuarial estimates. Net realized Death benefits (1,667) (1,649)
capital losses increased due to changes in the value of certain
Net inflows (outflows) (4,147) (2,697)
annuity product guarantees and related hedges associated with
Change in fair value of underlying
living benefit features and higher other-than-temporary impairment
investments, interest credited,
charges.
net of fees 1,970 2,051
2006 and 2005 Comparison Balance at end of year $ 50,508 $ 52,685
Individual variable annuities
Total Domestic Retirement Services operating income increased in
Balance at beginning of year $ 31,093 $ 28,267
2006 compared to 2005 principally due to higher partnership and
Deposits 4,472 4,266
yield enhancement income in the individual fixed annuity product
Surrenders and other withdrawals (4,158) (3,894)
line. Group retirement products total revenues were flat in 2006 Death benefits (497) (486)
as improvements in partnership income and variable annuity fees
Net inflows (outflows) (183) (114)
were offset by increased net realized capital losses. The flat
Change in fair value of underlying
revenues, coupled with higher amortization of deferred acquisition
investments, interest credited,
costs related to internal replacements of existing contracts into
net of fees 2,198 2,940
new contracts, resulted in a decrease in group retirement
operating income. Individual variable annuity total revenues in- Balance at end of year $ 33,108 $ 31,093
creased in 2006, primarily driven by higher variable annuity fees Total Domestic Retirement Services
resulting from an increase in assets under management. Partially Balance at beginning of year $148,135 $140,910
offsetting these higher fees was an increase in DAC amortization Deposits 17,088 16,422
resulting from increased surrender activity in the first half of Surrenders and other withdrawals (18,274) (16,379)
2006. In 2006, the individual annuities-runoff operating income Death benefits (2,426) (2,387)
increased, even though the underlying reserves decreased due to Net inflows (outflows) (3,612) (2,344)
increased net spreads as a result of higher investment yields Change in fair value of underlying
partially offset by increased realized capital losses. investments, interest credited,
net of fees 7,202 9,569
The following table presents the account value roll
forward for Domestic Retirement Services by product for Balance at end of year, excluding
2007 and 2006: runoff 151,725 148,135
Individual annuities runoff 5,690 6,326
(in millions) 2007 2006
Balance at end of year $157,415 $154,461
Group retirement products
General and separate account
Balance at beginning of year $64,357 $59,312
reserves and mutual funds
Deposits — annuities 5,898 5,464
General account reserve $ 88,801 $ 92,070
Deposits — mutual funds 1,633 1,361
Separate account reserve 60,461 55,988
Total Deposits 7,531 6,825
Total general and separate account
Surrenders and other withdrawals (6,551) (6,106)
reserves 149,262 148,058
Death benefits (262) (252)
Group retirement mutual funds 8,153 6,403
Net inflows (outflows) 718 467
Total reserves and mutual funds $157,415 $154,461
Change in fair value of underlying
investments, interest credited,
net of fees 3,034 4,578 2007 and 2006 Comparison
Balance at end of year $68,109 $64,357 Domestic Retirement Services deposits increased in 2007 com-
pared to 2006 primarily reflecting higher deposits in group
retirement products and individual variable annuities, partially
offset by a decrease in individual fixed annuities. Group retirement
deposits increased 10 percent in 2007 compared to 2006 as a
result of an increased focus on sales management and acquiring
outside deposits. Mutual funds deposits increased 20 percent
while group annuity deposits increased 8 percent. Over time,
AIG 2007 Form 10-K 73