AIG 2008 Annual Report Download - page 189

modeled amounts for these perils. Losses include loss adjustment expenses and the net values include reinstatement
premiums.
At December 31, 2008 Gross
Net of 2009
Reinsurance
Net After
Income Tax
% of Consolidated
Shareholders’ Equity
(In millions)
Natural Peril:
Earthquake ........................ $7,905 $4,480 $2,912 5.5%
Tropical Cyclone* .................. $7,598 $4,518 $2,937 5.6%
* Includes hurricanes, typhoons and European Windstorms.
Gross earthquake and tropical cyclone modeled losses increased $2.3 billion and $1.8 billion, respectively,
compared to 2007 while net losses increased $1.1 billion and $1.1 billion, respectively, compared to 2007. These
increases are primarily due to exposure growth and the inclusion of Ascot.
In addition to the return period loss, AIG evaluates potential single event earthquake and hurricane losses that
may be incurred. The single events utilized are a subset of potential events identified and utilized by Lloyd’s (see
Lloyd’s Realistic Disaster Scenarios, Scenario Specifications, April 2006) and referred to as Realistic Disaster
Scenarios (RDSs). The purpose of this analysis is to utilize these RDSs to provide a reference frame and place into
context the model results. However, it is important to note that the specific events used for this analysis do not
necessarily represent the worst case loss that AIG could incur from this type of an event in these regions. The losses
associated with the RDSs are included in the following table.
Single-event modeled property and workers’ compensation losses to AIG’s worldwide portfolio of risk
for key geographic areas are set forth below. Gross values represent AIG’s liability after the application of
policy limits and deductibles, and net values represent losses after reinsurance is applied; the net losses also
include reinsurance reinstatement premiums. Both gross and net losses include loss adjustment expenses.
Gross
Net of 2009
Reinsurance
(In millions)
Natural Peril:
San Francisco Earthquake ..................................... $8,617 $4,966
Miami Hurricane ............................................ $7,912 $4,362
Northeast Hurricane.......................................... $6,128 $3,857
Los Angeles Earthquake ...................................... $7,646 $4,491
Gulf Coast Hurricane......................................... $5,410 $3,065
Japanese Earthquake ......................................... $ 747 $ 397
European Windstorm ......................................... $ 418 $ 152
Japanese Typhoon ........................................... $ 253 $ 119
AIG also monitors key international property risks utilizing modeled statistical return period losses. Based on
these simulations, the 100-year return period loss for Japanese Earthquake is $335 million gross and $180 million
net; the 100-year return period loss for European Windstorm is $577 million gross and $186 million net; and the
100-year return period loss for Japanese Typhoon is $504 million gross and $172 million net.
The losses provided above do not include Transatlantic. The one in 100-year AEP amounts for AIG’s share
(59 percent) of Transatlantic are as follows:
Gross
Net of 2009
Reinsurance
Net After
Income Tax
At December 31, 2008
(In millions)
Natural Peril:
AIG’s Share of Transatlantic Earthquake.................. $452 $406 $264
AIG’s Share of Transatlantic Tropical Cyclone ............. $618 $577 $375
AIG 2008 Form 10-K 183
American International Group, Inc., and Subsidiaries