AIG 2007 Annual Report Download - page 130

American International Group, Inc. and Subsidiaries
Management’s Discussion and Analysis of
Financial Condition and Results of Operations Continued
(in millions) 2007 2006 2005
Total:
Fixed maturities, including short-term investments $16,750 $15,909 $15,119
Equity securities 161 112 61
Interest on mortgage and other loans 1,423 1,252 1,175
Partnership income — excluding Synfuels 823 599 416
Partnership loss — Synfuels (101) (107) (143)
Unit investment trusts(a) 442 264 4
Other(b) 394 350 413
Total investment income before policyholder income and trading gains 19,892 18,379 17,045
Policyholder investment income and trading gains(c) 2,903 2,017 2,021
Total investment income 22,795 20,396 19,066
Investment expenses 454 372 389
Net investment income(d) $22,341 $20,024 $18,677
(a) Includes the effect of an out of period UCITS adjustment in 2006, which increased net investment income by $240 million and operating income by
$169 million.
(b) Includes real estate income, income on non-partnership invested assets, securities lending and Foreign Life Insurance & Retirement Services’ equal
share of the results of AIG Credit Card Company (Taiwan).
(c) Relates principally to assets held in various trading securities accounts that do not qualify for separate account treatment under SOP 03-1. These
amounts are principally offset by an equal change included in incurred policy losses and benefits.
(d) Includes call and tender income.
2007 and 2006 Comparison AIG generates income tax credits as a result of investing in
synthetic fuel production (synfuels) related to the partnership
Net investment income increased $2.3 billion, or 12 percent in income (loss) shown in the above table and records those
2007 compared to 2006 as the invested asset base grew for benefits separately from segment operating results in its consoli-
fixed maturities, equity securities and mortgage and other loans. dated provision for income taxes. The amounts of those income
In addition, yield enhancement activity increased compared to tax credits were $84 million, $127 million and $203 million for
2006. Net investment income from UCITS in 2006 included a 2007, 2006 and 2005, respectively. These tax credits will no
$240 million out of period increase. Policyholder trading gains in- longer be generated after December 31, 2007. Synfuel production
creased in 2007 compared to 2006 principally due to an increase has ceased and the investments have been fully written off as of
in assets under management, partially offset by trading account December 31, 2007.
losses of $150 million on certain investment-linked products in
the U.K. Net investment income for certain operations include 2006 and 2005 Comparison
investments in structured notes linked to emerging market
sovereign debt that incorporates both interest rate risk and Net investment income increased 7 percent in 2006 compared to
currency risk. These investments generated income of $45 million 2005 as income from fixed maturities, equity securities and
in 2007 compared to losses of $8 million in 2006. In addition, mortgage and other loans income rose as the underlying invested
period to period comparisons of investment income for some asset base grew. Net investment income in 2006 also included
investment activities, particularly partnership income, are affected the out of period increase relating to UCITS of $240 million.
by yield enhancement activity. See Invested Assets for further
information.
76 AIG 2007 Form 10-K