AIG 2007 Annual Report Download - page 245
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American International Group, Inc. and Subsidiaries
18. Employee Benefits
Continued
Assumptions
The weighted average assumptions used to determine the benefit obligations at December 31, 2007 and 2006 are as
follows:
Pension Postretirement
Non-U.S. Plans U.S. Plans Non-U.S. Plans U.S. Plans
2007
Discount rate 2.00 - 11.00% 6.50% 2.75 - 6.50% 6.50%
Rate of compensation increase 1.50 - 9.00% 4.25% 3.00 - 3.50% 4.25%
2006
Discount rate 2.25 - 10.75% 6.00% 4.00 - 5.75% 6.00%
Rate of compensation increase 1.50 - 10.00% 4.25% 3.00% 4.25%
The benefit obligations for non-U.S. plans reflect those assumptions that were most appropriate for the local economic environments of
each of the subsidiaries providing such benefits.
Assumed health care cost trend rates for the U.S. plans were as follows:
2007 2006
Following year:
Medical (before age 65) 9.00% 8.00%
Medical (age 65 and older) 7.00% 6.70%
Ultimate rate to which cost increase is assumed to decline 5.00% 5.00%
Year in which the ultimate trend rate is reached:
Medical (before age 65) 2015 2013
Medical (age 65 and older) 2015 2013
A one percent point change in the assumed healthcare cost trend rate would have the following effect on AIG’s
postretirement benefit obligations at December 31, 2007 and 2006:
One Percent One Percent
Increase Decrease
(in millions) 2007 2006 2007 2006
Non-U.S. plans $12 $10 $(8) $(7)
U.S. plans $6 $3 $(5) $(3)
AIG’s postretirement plans provide benefits primarily in the form of defined employer contributions rather than defined employer benefits.
Changes in the assumed healthcare cost trend rate are subject to caps for U.S. plans. AIG’s non-U.S. postretirement plans are not
subject to caps.
AIG 2007 Form 10-K 191