AIG 2008 Annual Report Download - page 81

Years Ended December 31,
Commercial
Insurance Transatlantic
Personal
Lines
Mortgage
Guaranty
Foreign
General
Insurance
Reclassifications
and Eliminations Total
(In millions)
2008
Statutory underwriting profit
(loss) ................. $(1,465) $ (80) $(944) $(2,666) $ 1,014 $ — $ (4,141)
Increase (decrease) in DAC . . . (90) 7 (10) 1 33 — (59)
Net investment income . . . . . . . 1,969 440 223 183 651 11 3,477
Net realized capital gains
(losses) . . . . . . . . . . . . . . . . (3,479) (428) (54) 7 (1,080) 11 (5,023)
Operating income (loss) . . . . . . $(3,065) $ (61) $(785) $(2,475) $ 618 $ 22 $ (5,746)
2007
Statutory underwriting profit
(loss) . . . . . . . . . . . . . . . . . $ 3,404 $ 165 $(191) $ (849) $ 1,544 $ — $ 4,073
Increase in DAC . . . . . . . . . . . 97 17 29 57 227 — 427
Net investment income . . . . . . . 3,879 470 231 158 1,388 6 6,132
Net realized capital gains
(losses) . . . . . . . . . . . . . . . . (75) 9 (2) (3) (22) (13) (106)
Operating income (loss) . . . . . . $ 7,305 $ 661 $ 67 $ (637) $ 3,137 $ (7) $10,526
2006
Statutory underwriting profit
(loss) . . . . . . . . . . . . . . . . . $ 2,322 $ 129 $ 204 $ 188 $ 1,565 $ — $ 4,408
Increase in DAC . . . . . . . . . . . 14 14 2 3 216 — 249
Net investment income . . . . . . . 3,411 435 225 140 1,484 1 5,696
Net realized capital gains
(losses) . . . . . . . . . . . . . . . . 98 11 1 (3) (37) (11) 59
Operating income (loss) . . . . . . $ 5,845 $ 589 $ 432 $ 328 $ 3,228 $(10) $10,412
AIG transacts business in most major foreign currencies. The following table summarizes the effect of
changes in foreign currency exchange rates on the growth of General Insurance net premiums written:
2008 2007
Years Ended
December 31,
Growth in original currency*. . .......................................... (5.5)% 3.5%
Foreign exchange effect ............................................... 1.6 1.4
Growth as reported in U.S. dollars ........................................ (3.9)% 4.9%
*Computed using a constant exchange rate for each period.
2008 and 2007 Comparison
General Insurance reported an operating loss in 2008 compared to operating income in 2007 due to declines in
underwriting results and net investment income as well as increased net realized capital losses. The combined ratio
for 2008 increased to 109.1, an increase of 19.0 points compared to the same period in 2007, primarily due to an
increase in the loss ratio of 11.3 points. The loss ratio for accident year 2008 recorded in 2008 was 6.8 points higher
than the loss ratio for accident year 2007 recorded in 2007. Catastrophe-related losses were $1.8 billion and
$276 million in 2008 and 2007, accounting for 3.4 points of the increase in the accident year loss ratio. Increases in
Mortgage Guaranty losses accounted for 2.8 points of the increase in the 2008 accident year loss ratio. The loss ratio
also increased for other property and casualty lines due to premium rate decreases and changes in loss trends.
Development from prior years increased incurred losses by $155 million in 2008 and decreased incurred losses by
$606 million in 2007. The expense ratio increased primarily due to goodwill impairment charges of $2.0 billion in
AIG 2008 Form 10-K 75
American International Group, Inc., and Subsidiaries