AIG 2009 Annual Report Download - page 108

American International Group, Inc., and Subsidiaries
The following table presents a summary of asbestos and environmental claims count activity:
2009 2008 2007
As of or for the Years Ended
December 31, Asbestos Environmental Combined Asbestos Environmental Combined Asbestos Environmental Combined
Claims at beginning of year 5,780 6,674 12,454 6,563 7,652 14,215 6,878 9,442 16,320
Claims during year:
Opened 615 983 1,598 639 1,065 1,704 656 937 1,593
Settled (243) (215) (458) (219) (207) (426) (150) (179) (329)
Dismissed or otherwise
resolved (735) (1,448) (2,183) (1,203) (1,836) (3,039) (821) (2,548) (3,369)
Claims at end of year 5,417 5,994 11,411 5,780 6,674 12,454 6,563 7,652 14,215
Survival Ratios — Asbestos and Environmental
The following table presents AIG’s survival ratios for asbestos and environmental claims at December 31, 2009,
2008 and 2007. The survival ratio is derived by dividing the current carried loss reserve by the average payments for
the three most recent calendar years for these claims. Therefore, the survival ratio is a simplistic measure estimating
the number of years it would be before the current ending loss reserves for these claims would be paid off using recent
year average payments. The December 31, 2009 gross asbestos survival ratio is lower than the ratio at December 31,
2008 because the more recent periods included in the rolling average reflect higher claims payments. In addition,
AIG’s survival ratio for asbestos claims was negatively affected by certain favorable settlements during 2008 and 2007.
These settlements reduced gross and net asbestos survival ratios at December 31, 2009 by approximately 0.9 years and
1.9 years, respectively; reduced gross and net asbestos survival ratios at December 31, 2008 by approximately 1.1 years
and 2.4 years, respectively; and reduced gross and net asbestos survival ratios at December 31, 2007 by approximately
1.3 years and 2.6 years, respectively. Many factors, such as aggressive settlement procedures, mix of business and level
of coverage provided, have a significant effect on the amount of asbestos and environmental reserves and payments
and the resultant survival ratio. Moreover, as discussed above, the primary basis for AIG’s determination of its
reserves is not survival ratios, but instead the ground-up and top-down analysis. Thus, caution should be exercised in
attempting to determine reserve adequacy for these claims based simply on this survival ratio.
The following table presents AIG’s survival ratios for asbestos and environmental claims, separately and combined,
which were based upon a three-year average payment:
Years Ended December 31, Gross Net
2009
Survival ratios:
Asbestos 4.7 3.7
Environmental 4.5 3.5
Combined 4.7 3.7
2008
Survival ratios:
Asbestos 5.2 3.7
Environmental 4.4 3.5
Combined 5.1 3.7
2007
Survival ratios:
Asbestos 7.1 5.6
Environmental 4.7 3.7
Combined 6.7 5.2
AIG 2009 Form 10-K 100