AIG 2009 Annual Report Download - page 111

American International Group, Inc., and Subsidiaries
2009 and 2008 Comparison
Domestic Life Insurance premiums and other considerations declined $2.0 billion in 2009 compared to 2008
primarily due to lower sales of payout annuity products and the sale of AIG Life Canada effective April 1, 2009, which
similarly resulted in a decline in policyholder benefits and claims incurred of $1.8 billion. Policy acquisition and other
insurance expenses declined due to expense reductions, partially offset by higher restructuring costs.
Domestic Life Insurance pre-tax income before net realized capital losses increased slightly in 2009 compared to
2008 primarily due to the following:
• increase in net investment income of $48 million related to lower fair value losses in the investment in ML II
compared to 2008;
• goodwill impairment charges in 2008 of $403 million; and
• favorable mortality experience in life insurance in 2009.
Partially offsetting the increase were:
• lower net investment income due to reduced overall investment yields from increased levels of short-term
investments and an increase in partnership losses;
• a DAC benefit related to net realized capital losses of $35 million in 2009 compared to a benefit of
$364 million in 2008;
• a $33 million increase in restructuring expenses in 2009 compared to 2008; and
• a reduction in unearned revenue liability resulting in a net benefit of $22 million in 2008.
Pre-tax income for Domestic Life Insurance in 2009 compared to the pre-tax loss in 2008 reflected lower levels of
net realized capital losses in 2009, due principally to an $8.6 billion decline in other-than-temporary impairment
charges. Other-than-temporary impairment charges in 2008 included $5.5 billion of charges related to AIG’s U.S.
securities lending program which was terminated in December 2008.
2008 and 2007 Comparison
Domestic Life Insurance premiums and other considerations increased in 2008 primarily due to higher sales of
payout annuity products, which had a corresponding effect on policyholder benefits and claims incurred. Policy
acquisition and other expenses increased from 2007 as goodwill impairment charges and restructuring costs were only
partially offset by the DAC benefit related to realized capital losses.
Domestic Life Insurance pre-tax income before net realized capital losses decreased slightly in 2008 compared to
2007 primarily due to the following:
• lower net investment income, reflecting reduced overall investment yields from increased levels of short-term
investments and lower partnership and call and tender income;
• goodwill impairment charges of $403 million in 2008;
• restructuring expenses in 2008; and
• an increase of $12 million in 2008 policyholder benefit reserves related to a workers’ compensation
reinsurance program compared to a reduction in expense of $52 million in 2007.
Partially offsetting these declines were:
• growth in the underlying business in force and favorable mortality experience in life insurance;
• a DAC benefit related to realized capital losses of $364 million in 2008 compared to a benefit of $13 million in
2007;
• a reduction in unearned revenue liability resulting in a net benefit of $22 million in 2008; and
• a $30 million adjustment to increase payout annuity reserves in 2007.
103 AIG 2009 Form 10-K