AIG 2009 Annual Report Download - page 16

American International Group, Inc., and Subsidiaries
(in millions) 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
Net Reserves Held
(Undiscounted) $25,820 $26,116 $26,709 $30,150 $37,075 $47,295 $57,336 $62,715 $70,026 $73,636 $69,243
Undiscounted Liability as of:
One year later 25,437 26,071 30,274 32,129 39,261 51,048 57,077 62,043 70,096 76,251
Two years later 26,053 29,670 32,438 35,803 46,865 52,364 57,653 62,521 72,423
Three years later 28,902 31,619 36,043 43,467 48,691 53,385 58,721 64,904
Four years later 30,014 34,102 42,348 45,510 50,140 54,908 61,195
Five years later 31,738 38,655 44,018 46,925 51,997 57,365
Six years later 34,978 40,294 45,201 48,584 54,272
Seven years later 36,283 41,213 46,685 50,786
Eight years later 36,889 42,459 48,761
Nine years later 37,795 44,219
Ten years later 39,199
Net Redundancy/(Deficiency) (13,379) (18,103) (22,052) (20,636) (17,197) (10,070) (3,859) (2,189) (2,397) (2,615)
Remaining Reserves
(Undiscounted) 6,098 7,467 9,706 11,149 13,074 15,765 22,186 31,349 41,219 52,223
Remaining Discount 511 609 723 856 988 1,124 1,309 1,552 1,893 2,261
Remaining Reserves 5,587 6,858 8,983 10,293 12,086 14,641 20,877 29,797 39,326 49,962
The following table presents the gross liability (before discount), reinsurance recoverable and net liability recorded at
each year end and the reestimation of these amounts as of December 31, 2009:
(in millions) 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
Gross Liability, End of Year $34,666 $36,777 $40,400 $46,036 $51,363 $59,790 $73,808 $77,111 $83,551 $87,973 $84,467
Reinsurance Recoverable,
End of Year 8,846 10,661 13,691 15,886 14,288 12,495 16,472 14,396 13,525 14,337 15,224
Net Liability, End of Year 25,820 26,116 26,709 30,150 37,075 47,295 57,336 62,715 70,026 73,636 69,243
Reestimated Gross Liability 55,041 62,549 68,075 70,148 71,492 72,836 79,818 80,494 86,995 90,589
Reestimated Reinsurance
Recoverable 15,842 18,330 19,314 19,362 17,220 15,471 18,623 15,590 14,572 14,338
Reestimated Net Liability 39,199 44,219 48,761 50,786 54,272 57,365 61,195 64,904 72,423 76,251
Cumulative Gross
Redundancy/(Deficiency) (20,375) (25,772) (27,675) (24,112) (20,129) (13,046) (6,010) (3,383) (3,444) (2,616)
* During 2009, Transatlantic was deconsolidated and 21st Century and HSB were sold. Immediately preceding these sales, the loss and loss expense
reserves for these entities totaled $9.6 billion. As a result of the sales and deconsolidation, these obligations ceased being the responsibility of AIG.
The sales and deconsolidation are reflected in the table above as a reduction in December 31, 2009 net reserves of $9.6 billion and as a $8.6 billion
increase in paid losses for the years 1999 through 2008 to reflect no impact on incurred losses for these periods.
The Liability for unpaid claims and claims adjustment expense as reported in AIG’s Consolidated Balance Sheet at
December 31, 2009 differs from the total reserve reported in the Annual Statements filed with state insurance
departments and, where appropriate, with foreign regulatory authorities. The differences at December 31, 2009 relate
primarily to reserves for certain foreign operations not required to be reported in the United States for statutory
reporting purposes. Further, statutory practices in the United States require reserves to be shown net of applicable
reinsurance recoverable.
The reserve for gross losses and loss expenses is prior to reinsurance and represents the accumulation for reported
losses and IBNR. Management reviews the adequacy of established gross loss reserves in the manner previously
described for net loss reserves.
For further discussion regarding net reserves for losses and loss expenses, see Management’s Discussion and
Analysis of Financial Condition and Results of Operations — Results of Operations — Segment Results — General
Insurance Operations — Liability for unpaid claims and claims adjustment expense.
AIG 2009 Form 10-K 8