AIG 2009 Annual Report Download - page 118

American International Group, Inc., and Subsidiaries
2008 and 2007 Comparison
Premiums and other considerations increased primarily due to growth in new business related to life insurance
products in Japan and Korea, as well as group credit life sales in Europe. Net investment income declined in 2008
compared to 2007 largely due to policyholder trading losses of $6.8 billion in 2008 compared to gains of $2.9 billion in
2007. The increase in policy acquisition and other expenses was due to higher DAC amortization related to higher
surrender benefits as a result of the implementation of the new fair value option accounting standard in 2008, benefits
related to actuarial adjustments in 2007 and the effect of foreign exchange.
Pre-tax income before net realized capital gains (losses) for Foreign Life Insurance & Retirement Services declined
in 2008 compared to 2007 primarily due to the following:
• higher losses of $262 million on certain investment-oriented products in the U.K. due to mark-to-market trading
losses partially offset by a positive change in benefit reserves resulting from changes to the Premier Access Bond
product following significant surrender activity as a result of the AIG liquidity issues in mid-September of 2008;
• higher benefit costs, net of related DAC unlocking, of $106 million principally related to volatility in the
Japanese equity market and declines in interest rates; and
• the project to increase standardization of AIG’s actuarial systems and processes throughout the world which
resulted in a favorable effect on pre-tax income of $154 million for 2008 compared to a charge of $39 million in
2007.
Partially offsetting these items were the following:
• the effect of growth in the underlying business in force and the positive effect of foreign exchange;
• remediation related charges of $101 million in 2007; and
• additional claims expense in 2007 of $67 million related to an industry-wide regulatory claims review in Japan.
The pre-tax loss for Foreign 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.
Foreign Life Insurance & Retirement Services Sales and Deposits*
The following table summarizes first year premium, single premium and annuity deposits for Foreign Life Insurance &
Retirement Services:
Percentage Increase (Decrease)
2009 vs 2008 2008 vs 2007
Years Ended December 31, U.S. Original U.S. Original
(in millions) 2009 2008 2007 $ Currency $ Currency
First year premium $3,711 $ 4,231 $ 4,182 (12)% (10)% 1% (2)%
Single premium 2,629 10,468 15,001 (75) (73) (30) (31)
Annuity deposits 2,504 17,238 19,092 (85) (85) (10) (11)
* Excludes divested operations.
2009 and 2008 Comparison
First year premium sales in 2009 decreased compared to 2008 primarily due to decreases in life insurance and
personal accident sales which were partially offset by higher group products sales. Life insurance sales of investment-
linked products in Asia were adversely affected by equity market performance and the negative effect of foreign
exchange translation. Life insurance sales in Japan increased as a result of sales incentives and the positive effect of
foreign exchange translation while personal accident sales declined. Group product sales increased primarily due to
large group cases in Australia.
AIG 2009 Form 10-K 110