AIG 2009 Annual Report Download - page 274

American International Group, Inc., and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The following table presents premiums for AIG’s life insurance and retirement services operations:
Domestic Life Insurance & Foreign Life Insurance &
Years Ended December 31, Retirement Services Retirement Services Eliminations Total
(in millions) 2009 2008 2007 2009 2008 2007 2009 2008 2007 2009 2008 2007
Gross premiums $ 5,816 $ 7,951 $ 7,534 $ 23,381 $25,171 $22,171 $(4)$-$-$ 29,193 $ 33,122 $ 29,705
Ceded premiums (1,056) (1,078) (1,044) (823) (756) (719) 4--(1,875) (1,834) (1,763)
Total $ 4,760 $ 6,873 $ 6,490 $ 22,558 $24,415 $21,452 $-$-$-$ 27,318 $ 31,288 $ 27,942
Life Insurance recoveries, which reduced death and other benefits, approximated $843 million, $896 million and
$1.1 billion, respectively, for the years ended December 31, 2009, 2008 and 2007.
The following table presents Life insurance in force ceded to other insurance companies:
At December 31,
(in millions) 2009 2008 2007
Life insurance in force ceded $339,183 $ 384,538 $ 402,654
Life Insurance assumed represented less than 0.1 percent, 0.1 percent and 0.1 percent of gross Life insurance in
force at December 31, 2009, 2008 and 2007, respectively, and combined domestic and foreign life insurance and
retirement services premiums assumed represented 0.1 percent, 0.2 percent and 0.1 percent of gross premiums for the
years ended December 31, 2009, 2008 and 2007, respectively.
AIG’s Domestic Life Insurance & Retirement Services operations utilize internal and third-party reinsurance
relationships to manage insurance risks and to facilitate capital management strategies. Pools of highly-rated third-
party reinsurers are utilized to manage net amounts at risk in excess of retention limits. AIG’s Domestic Life
Insurance companies also cede excess, non-economic reserves carried on a statutory-basis only on certain term and
universal life insurance policies and certain fixed annuities to an offshore affiliate.
AIG generally obtains letters of credit in order to obtain statutory recognition of its intercompany reinsurance
transactions. For this purpose, AIG has a $2.5 billion syndicated letter of credit facility outstanding at December 31,
2009, all of which relates to life intercompany reinsurance transactions. AIG has also obtained approximately
$2.3 billion of letters of credit on a bilateral basis all of which relates to life intercompany reinsurance transactions. All
of these approximately $4.8 billion of letters of credit are due to mature on December 31, 2015.
Reinsurance Security
AIG’s third-party reinsurance arrangements do not relieve AIG from its direct obligation to its insureds. Thus, a
credit exposure exists with respect to both general and life reinsurance ceded to the extent that any reinsurer fails to
meet the obligations assumed under any reinsurance agreement. AIG holds substantial collateral as security under
related reinsurance agreements in the form of funds, securities, and/or letters of credit. A provision has been recorded
for estimated unrecoverable reinsurance. AIG has been largely successful in prior recovery efforts.
AIG evaluates the financial condition of its reinsurers and establishes limits per reinsurer through AIG’s Credit
Risk Committee. AIG believes that no exposure to a single reinsurer represents an inappropriate concentration of risk
to AIG, nor is AIG’s business substantially dependent upon any single reinsurer.
AIG 2009 Form 10-K 266