AIG 2008 Annual Report Download - page 111

Foreign Life Insurance & Retirement Services Sales and Deposits*
First year premium, single premium and annuity deposits for Foreign Life Insurance & Retirement
Services were as follows:
2008 2007 2006 U.S. $
Original
Currency U.S. $
Original
Currency
2008 vs 2007Years Ended December 31, 2007 vs 2006
Percentage Increase (Decrease)
(In millions)
First year premium............ $ 4,815 $ 5,032 $ 4,542 (4)% (7)% 11% 9%
Single premium .............. 10,738 15,905 5,283 (32) (33) 201 183
Annuity deposits ............. 17,665 19,150 21,916 (8) (9) (13) (18)
* Excludes operations in Brazil.
2008 and 2007 Comparison
First year premium sales in 2008 declined compared to 2007 primarily due to decreases in life insurance and
personal accident sales. In Japan, life insurance sales were lower due to reduced levels of increasing term sales and
lower sales in the fourth quarter of 2008 related to AIG’s liquidity issues. Also in Japan, personal accident sales
declined in the direct marketing distribution channel due to lower response rates resulting from market saturation. In
Taiwan, regular premium life insurance sales declined due to a shift in sales to investment-linked and variable
annuity products. These declines were partially offset by increases in group products sales, particularly in Japan,
Australia and the Middle East.
Single premium sales in 2008 declined compared to 2007 primarily due to lower guaranteed income bond
deposits in the U.K. which fell as customers shifted to variable annuity products during the first three quarters of the
year and which were significantly negatively affected in the fourth quarter by AIG’s liquidity issues. Single
premium sales in Asia also dropped as customers became concerned about declining equity markets, particularly in
Taiwan, Hong Kong, Singapore and China. A new single premium personal accident and health product launched in
Japan during the first quarter of 2008 continues to perform well and sales, which started through banks, are being
expanded to the agency channels.
Annuity deposits decreased in 2008 compared to 2007 as the decline in individual variable annuity deposits
more than offset the increase in individual fixed annuity deposits. Investment-linked deposits in the U.K. decreased
significantly in the fourth quarter of 2008 due to the AIG liquidity issues. Individual variable annuity deposits in
Taiwan increased in 2008 compared to 2007 due to the launch of a new variable annuity product. In Japan,
individual fixed annuity deposits increased in 2008 compared to 2007 due primarily to a favorable exchange rate
environment for non-yen denominated products. However, AIG’s liquidity issues and the planned disposition of
AIG’s Japan life operations negatively affected deposits in the fourth quarter of 2008 as banks suspended the
distribution of AIG products. While some banks in Japan have resumed sales of annuity products, most have not.
AIG has, therefore, increased sales of annuity deposits through agents.
2007 and 2006 Comparison
First year premium sales in 2007 increased compared to 2006 in both U.S. dollar terms and original currency
primarily due to strong investment-oriented product sales in Southeast Asia. This increase was partially offset by
declines in Japan resulting from the suspension of increasing term sales and lower personal accident production
resulting from changes in local tax regulations.
Single premium sales in 2007 increased dramatically compared to 2006, driven primarily by guaranteed
income bond sales in the U.K. and investment-oriented product sales in Hong Kong and Singapore.
Annuity deposits declined in 2007 compared to 2006. Individual fixed annuity deposits were negatively
affected by an unfavorable exchange rate environment and a shift to variable annuity products. Individual variable
annuity deposits declined in 2007 compared to 2006 in both Europe and Japan. In Europe, lower deposits reflected
the effect of tax law changes that reduced tax benefits to policyholders. In Japan, lower sales resulted from increased
AIG 2008 Form 10-K 105
American International Group, Inc., and Subsidiaries