AIG 2008 Annual Report Download - page 118

individual fixed annuities deposits decreased after the AIG ratings downgrades. Individual variable annuity product
sales declined due to the AIG ratings downgrades and continued weakness in the equity markets.
Domestic Retirement Services surrenders and other withdrawals increased in all three product lines in 2008
compared to 2007 primarily due to the AIG ratings downgrades and AIG’s liquidity issues.
2007 and 2006 Comparison
Domestic Retirement Services deposits increased in 2007 compared 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. Individual fixed annuity sales continued to face increased competition from
bank deposit products and money market funds offering very competitive short-term rates in the 2007 yield curve
environment, and as a result deposits decreased 5 percent in 2007 compared to 2006. Individual variable annuity
deposits increased 5 percent in 2007 compared to 2006 despite the discontinuation of a major bank proprietary
product.
Domestic Retirement Services surrenders and other withdrawals increased in 2007 compared to 2006
reflecting higher surrenders in both group retirement products and individual fixed annuities. Group retirement
surrenders increased as a result of both normal maturing of the business and higher large group surrenders in 2007
compared to 2006. Individual fixed annuity surrenders and withdrawals increased in 2007 due to both an increasing
number of policies coming out of their surrender charge period and increased competition from bank deposit
products.
The following table presents Domestic Retirement Services reserves by surrender charge category and
surrender rates:
At December 31,
Group
Retirement
Products*
Individual
Fixed
Annuities
Individual
Variable
Annuities
(In millions)
2008
No surrender charge . . . .............................. $43,797 $10,287 $ 8,594
0%–2%.......................................... 1,320 3,043 3,097
Greater than 2% – 4% . . .............................. 1,714 6,711 2,187
Greater than 4% .................................... 2,710 25,110 7,663
Non-Surrenderable .................................. 1,032 3,243 2,052
Total Reserves...................................... $50,573 $48,394 $23,593
Surrender rates ....................................... 10.5% 18.8% 14.9%
2007
No surrender charge . . . .............................. $49,770 $11,316 $13,014
0%–2%.......................................... 3,284 3,534 5,381
Greater than 2% – 4% . . .............................. 3,757 7,310 5,133
Greater than 4% .................................... 2,280 24,956 9,492
Non-Surrenderable .................................. 865 3,392 88
Total Reserves...................................... $59,956 $50,508 $33,108
Surrender rates ....................................... 9.8% 14.6% 12.8%
*Excludes mutual funds of $6.3 billion and $8.2 billion in 2008 and 2007, respectively.
Surrender rates increased for group retirement products and individual variable and fixed annuities in 2008
compared to 2007 primarily due to the AIG ratings downgrades and AIG’s liquidity issues.
112 AIG 2008 Form 10-K
American International Group, Inc., and Subsidiaries