AIG 2009 Annual Report Download - page 110

American International Group, Inc., and Subsidiaries
2009 and 2008 Comparison
Domestic Life Insurance & Retirement Services reported an increase in pre-tax income before net realized capital
losses in 2009 compared to 2008 primarily due to the following:
• growth in net investment income as a result of growth in partnership returns ($264 million of income in 2009
compared with losses of $1.2 billion in 2008) as well as lower losses from valuation adjustments from the
investment in ML II, which offset the negative effects of higher liquidity in the investment portfolios;
• goodwill impairment charges that were $1.1 billion lower in 2009 compared to 2008; and
• DAC and SIA unlocking and related reserve strengthening charges of $601 million in 2009 in the Domestic
Retirement Services operations resulting from reductions in the long-term growth assumptions for group
retirement products and individual variable annuities, and projected increases in surrenders for individual
fixed annuities, compared to DAC and SIA charges and related reserve strengthening of $1.5 billion in 2008.
These improvements were partially offset by DAC and sale inducement assets (SIA) benefits related to net realized
capital losses of $108 million in 2009 compared to $2.5 billion in 2008.
The reduction in the pre-tax loss for Domestic Life Insurance & Retirement Services in 2009 compared to 2008
reflected a decline in net realized capital losses due principally to significant decline in other-than-temporary
impairments in 2009. See Results of Operations — Consolidated Results — Premiums and Other Considerations; —
Net Investment Income; and — Net Realized Capital Gains (Losses).
2008 and 2007 Comparison
Domestic Life Insurance & Retirement Services reported a significant decrease in pre-tax income (loss) before net
realized capital losses in 2008 compared to 2007 primarily due to the following:
• DAC and SIA unlocking and related reserve strengthening of $1.5 billion in the Domestic Retirement
Services operations resulting from the weakness in the equity markets, the significantly higher surrender
activity resulting from AIG’s liquidity issues beginning in mid-September of 2008;
• goodwill impairment charges in 2008 of $1.2 billion in the Domestic Life Insurance and Domestic Retirement
Services companies; and
• lower net investment income resulting from partnership losses in 2008, lower yield enhancement income and
reduced overall investment yield from increased levels of short-term investments.
These declines were partially offset by DAC and SIA benefits related to net realized capital losses of $2.5 billion in
2008 compared to $215 million in 2007.
The pre-tax loss for Domestic Life Insurance & Retirement Services in 2008 reflected higher net realized capital
losses compared to 2007 due principally to significant other-than-temporary impairments in 2008.
Domestic Life Insurance Results
The following table presents Domestic Life Insurance results:
Percentage Increase/(Decrease)
Years Ended December 31,
(in millions) 2009 2008 2007 2009 vs. 2008 2008 vs. 2007
Premiums and other considerations $ 4,252 $ 6,248 $ 5,836 (32)% 7%
Net investment income 3,819 3,823 4,019 - (5)
Policyholder benefits and claims incurred 5,026 6,862 6,599 (27) 4
Policy acquisition and other expenses 1,714 1,885 1,816 (9) 4
Pre-tax income before net realized capital losses 1,331 1,324 1,440 1 (8)
Net realized capital losses (712) (11,554) (796) - -
Pre-tax income (loss) $ 619 $ (10,230) $ 644 -% -%
AIG 2009 Form 10-K 102