AIG 2009 Annual Report Download - page 275

American International Group, Inc., and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
9. Deferred Policy Acquisition Costs
The following table presents a rollforward of deferred policy acquisition costs:
Years Ended December 31,
(in millions) 2009 2008 2007
General Insurance operations:
Balance, beginning of year $ 5,114 $ 5,407 $ 4,977
Dispositions(a) (418) --
Acquisition costs deferred 6,522 7,370 8,661
Amortization expense (6,741) (7,428) (8,235)
Increase (decrease) due to foreign exchange and other 398 (235) 4
Balance, end of year $ 4,875 $ 5,114 $ 5,407
Domestic Life Insurance & Retirement Services operations:
Balance, beginning of year $14,447 $12,270 $11,657
Dispositions(b) (479) --
Acquisition costs deferred 1,014 1,655 1,636
Amortization (charged) or credited to pre-tax income(c) (1,553) (522) (1,488)
Change in unrealized gains (losses) on securities(d) (960) 1,158 444
Increase (decrease) due to foreign exchange (10) (114) 85
Other(e) (1,361) - (64)
Subtotal $11,098 $14,447 $12,270
Consolidation and eliminations 49 55 62
Balance, end of year(f) $11,147 $14,502 $12,332
Foreign Life Insurance & Retirement Services operations:
Balance, beginning of year $26,166 $26,175 $21,153
Dispositions(b) -(16) -
Acquisition costs deferred 4,713 5,212 5,146
Amortization (charged) or credited to pre-tax income(c) (3,790) (4,071) (2,062)
Change in unrealized gains (losses) on securities(d) (731) 252 285
Increase (decrease) due to foreign exchange 2,043 (234) 818
Other(e) (248) (1,075) 136
Activity of discontinued operations (39) (77) 699
Reclassified to Assets of businesses held for sale (3,322) --
Balance, end of year(f) $24,792 $26,166 $26,175
Total deferred policy acquisition costs $40,814 $45,782 $43,914
(a) Transatlantic was deconsolidated during the second quarter of 2009, 21st Century was sold in the third quarter of 2009 and HSB was sold during the
first quarter of 2009.
(b) AIG Life Canada was sold in the second quarter of 2009 and Brazil operations were sold in the fourth quarter of 2008.
(c) In 2007, amortization expense increased $101 million for Domestic Life Insurance & Retirement Services and decreased by $469 million for Foreign
Life Insurance & Retirement Services related to changes in actuarial estimates, which was mostly offset in Policyholder benefits and claims incurred.
(d) In 2009, includes increase of $1.3 billion and $187 million related to the cumulative effect of adopting a new other-than-temporary impairments
accounting standard for Domestic Life Insurance & Retirement Services and Foreign Life Insurance & Retirement Services, respectively.
(e) In 2009, includes decrease of $1.3 billion and $187 million related to the cumulative effect of adopting a new other-than-temporary impairments
accounting standard for Domestic Life Insurance & Retirement Services and Foreign Life Insurance & Retirement Services, respectively. In 2008,
primarily represents the cumulative effect of adopting a new accounting standard addressing the fair value option for financial assets and financial
liabilities for Foreign Life Insurance & Retirement Services.
(f) Includes $86 million, $1.0 billion, and $(112) million for Domestic Life Insurance & Retirement Services at December 31, 2009, 2008 and 2007,
respectively, and $(352) million, $377 million, and $116 million for Foreign Domestic Life Insurance & Retirement Services at December 31, 2009,
2008 and 2007, respectively, related to the effect of net unrealized gains and losses on available for sale securities.
267 AIG 2009 Form 10-K