AIG 2008 Annual Report Download - page 277

The analysis of the future policy benefits and policyholder contract deposits liabilities was as follows:
2008 2007
At December 31,
(In millions)
Future policy benefits:
Long duration contracts ...................................... $141,623 $135,521
Short duration contracts ...................................... 711 866
Total ...................................................... $142,334 $136,387
Policyholder contract deposits:
Annuities................................................. $139,126 $140,444
Guaranteed investment contracts ............................... 14,821 25,321
Universal life products ....................................... 29,277 27,114
Variable products ........................................... 24,965 46,407
Corporate life products ...................................... 2,259 2,124
Other investment contracts .................................... 16,252 17,049
Total ...................................................... $226,700 $258,459
Long duration contract liabilities included in future policy benefits, as presented in the preceding table, result
primarily from life products. Short duration contract liabilities are primarily accident and health products. The
liability for future life policy benefits has been established based upon the following assumptions:
• Interest rates (exclusive of immediate/terminal funding annuities), which vary by territory, year of issuance
and products, range from 1.0 percent to 11.0 percent within the first 20 years. Interest rates on immediate/
terminal funding annuities are at a maximum of 11.5 percent and grade to not greater than 6.0 percent.
• Mortality and surrender rates are based upon actual experience by geographical area modified to allow for
variations in policy form. The weighted average lapse rate, including surrenders, for individual and group
life approximated 6.8 percent.
• The portions of current and prior net income and of current unrealized appreciation of investments that can
inure to the benefit of AIG are restricted in some cases by the insurance contracts and by the local insurance
regulations of the jurisdictions in which the policies are in force.
• Participating life business represented approximately 15 percent of the gross insurance in force at
December 31, 2008 and 21 percent of gross premiums and other considerations in 2008. The amount of
annual dividends to be paid is determined locally by the boards of directors. Provisions for future dividend
payments are computed by jurisdiction, reflecting local regulations.
The liability for policyholder contract deposits has been established based on the following assumptions:
• Interest rates credited on deferred annuities, which vary by territory and year of issuance, range from
1.4 percent to, including bonuses, 13.0 percent. Less than 1.0 percent of the liabilities are credited at a rate
greater than 9.0 percent. Current declared interest rates are generally guaranteed to remain in effect for a
period of one year though some are guaranteed for longer periods. Withdrawal charges generally range from
zero percent to 12.0 percent grading to zero over a period of zero to 15 years.
• Domestically, guaranteed investment contracts (GICs) have market value withdrawal provisions for any
funds withdrawn other than benefit responsive payments. Interest rates credited generally range from
1.2 percent to 9.0 percent. The vast majority of these GICs mature within three years.
• Interest rates on corporate life insurance products are guaranteed at 4.0 percent and the weighted average rate
credited in 2008 was 5.0 percent.
AIG 2008 Form 10-K 271
American International Group, Inc., and Subsidiaries
Notes to Consolidated Financial Statements — (Continued)