AIG 2008 Annual Report Download - page 279

The vast majority of AIG’s exposure on guarantees made to variable contract holders arises from
GMDB. Details concerning AIG’s GMDB exposures were as follows:
Net Deposits
Plus a Minimum
Return
Highest Contract
Value Attained
(Dollars in billions)
December 31, 2008
Account value(a) .................................... $50$11
Amount at risk(b) .................................... 13 5
Average attained age of contract holders by product . ......... 38 - 69 years 55 - 71 years
Range of guaranteed minimum return rates ................. 3 - 10%
December 31, 2007
Account value(a) .................................... $ 66 $ 17
Amount at risk(b) .................................... 5 1
Average attained age of contract holders by product . ......... 38-69years 55 - 72 years
Range of guaranteed minimum return rates ................. 3-10%
(a) Included in Policyholder contract deposits in the consolidated balance sheet.
(b) Represents the amount of death benefit currently in excess of Account value.
The following summarizes GMDB liabilities for guarantees on variable contracts reflected in the general
account.
2008 2007
Years Ended
December 31,
(In millions)
Balance, beginning of year ............................................ $463 $406
Reserve increase ................................................... 351 111
Benefits paid ...................................................... (97) (54)
Balance, end of year ................................................ $717 $463
The GMDB liability is determined each period end by estimating the expected value of death benefits in excess
of the projected account balance and recognizing the excess ratably over the accumulation period based on total
expected assessments. AIG regularly evaluates estimates used and adjusts the additional liability balance, with a
related charge or credit to benefit expense, if actual experience or other evidence suggests that earlier assumptions
should be revised.
The following assumptions and methodology were used to determine the GMDB liability at December 31,
2008:
• Data used was up to 1,000 stochastically generated investment performance scenarios.
• Mean investment performance assumptions ranged from three percent to approximately ten percent
depending on the block of business.
• Volatility assumptions ranged from eight percent to 23 percent depending on the block of business.
• Mortality was assumed at between 50 percent and 103 percent of various life and annuity mortality tables.
• For domestic contracts, lapse rates vary by contract type and duration and ranged from zero percent to
40 percent. For foreign contracts, lapse rates ranged from zero percent to 15 percent depending on the type of
contract.
AIG 2008 Form 10-K 273
American International Group, Inc., and Subsidiaries
Notes to Consolidated Financial Statements — (Continued)