AIG 2009 Annual Report Download - page 292

American International Group, Inc., and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Commercial Insurance; $130 million — non-tabular discount for other liability occurrence and products liability
occurrence in AIRCO for Commercial Insurance business.
Future policy benefits and policyholder contract deposits
The following table presents the analysis of the future policy benefits and policyholder contract deposits liabilities:
At December 31,
(in millions) 2009 2008
Future policy benefits:
Long duration and structured settlement contracts $115,638 $141,623
Short duration contracts 363 711
Total $116,001 $142,334
Policyholder contract deposits:
Annuities $138,844 $139,126
Guaranteed investment contracts 8,747 14,821
Universal life products 31,030 29,277
Variable products 24,196 24,965
Corporate life products 2,247 2,259
Other investment contracts 15,064 16,252
Total $220,128 $226,700
Long duration contract liabilities included in future policy benefits, as presented in the preceding table, result
primarily from life products. Short duration contract liabilities are primarily accident and health products. The liability
for future life policy benefits has been established based upon the following assumptions:
• Interest rates (exclusive of immediate/terminal funding annuities), which vary by territory, year of issuance and
products, range from 1.0 percent to 12.9 percent within the first 20 years. Interest rates on immediate/terminal
funding annuities are at a maximum of 11.5 percent and grade to not greater than 3.5 percent.
• Mortality and surrender rates are based upon actual experience by geographical area modified to allow for
variations in policy form. The weighted average lapse rate, including surrenders, for individual and group life
approximated 6.7 percent.
• The portions of current and prior Net income and of current unrealized appreciation of investments that can
inure to the benefit of AIG are restricted in some cases by the insurance contracts and by the local insurance
regulations of the jurisdictions in which the policies are in force.
• Participating life business represented approximately 12 percent of the gross insurance in force at December 31,
2009 and 18 percent of gross Premiums and other considerations in 2009. The amount of annual dividends to be
paid is determined locally by the boards of directors. Provisions for future dividend payments are computed by
jurisdiction, reflecting local regulations.
The liability for policyholder contract deposits has been established based on the following assumptions:
• Interest rates credited on deferred annuities, which vary by territory and year of issuance, range from
1.5 percent to, including bonuses, 13.0 percent. Less than 1.0 percent of the liabilities are credited at a rate
greater than 9.0 percent. Current declared interest rates are generally guaranteed to remain in effect for a
period of one year though some are guaranteed for longer periods. Withdrawal charges generally range from
zero percent to 12.0 percent grading to zero over a period of zero to 15 years.
AIG 2009 Form 10-K 284