AIG 2009 Annual Report Download - page 335

American International Group, Inc., and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
the same. Conversely, a 100 basis point decrease in the discount rate or expected long-term rate of return would
increase the 2010 expense by approximately $110 million and $41 million, respectively, with all other items remaining
the same.
Curtailments and Settlements
In connection with the sale of HSB on March 31, 2009, AIG recognized in income as part of the net gain from the
sale, a net settlement gain of $57 million due to the transfer of certain HSB-sponsored pension plans in the first
quarter.
In connection with the sale of 21st Century Insurance Group on July 1, 2009, AIG remeasured certain of its
domestic pension and postretirement plans to determine the curtailment and settlement effects. The assumptions
used in the remeasurement were the same as those disclosed below except for the discount rate. The discount rate
used was 6.25 percent, which was derived from the rounded unadjusted Citigroup Pension Discount Curve at June 30,
2009. The remeasurement resulted in a decrease to Accumulated other comprehensive loss of approximately
$123 million and a net loss of approximately $59 million, which was reflected in the loss from the sale of 21st Century.
The remeasurement did not have a significant effect on the estimated 2009 expense for the AIG U.S. Retirement
Plan.
Assumptions
The following table summarizes the weighted average assumptions used to determine the benefit obligations:
Pension Postretirement
Non-U.S. Plans*U.S. Plans Non-U.S. Plans*U.S. Plans
December 31, 2009
Discount rate 1.75 - 11.25% 6.00% 2.00 - 9.25% 6.00%
Rate of compensation increase 1.50 - 8.00% 4.00% 3.00 - 6.00% 4.00%
December 31, 2008
Discount rate 2.00 - 15.00% 6.00% 1.50 - 7.25% 6.00%
Rate of compensation increase 2.50 - 10.00% 4.25% 3.00 - 4.00% 4.25%
* The non-U.S. plans reflect those assumptions that were most appropriate for the local economic environments of each of the subsidiaries providing
such benefits.
The following table summarizes assumed health care cost trend rates for the U.S. plans:
At December 31, 2009 2008
Following year:
Medical (before age 65) 8.00% 9.00%
Medical (age 65 and older) 7.00% 7.00%
Ultimate rate to which cost increase is assumed to decline 4.50% 5.00%
Year in which the ultimate trend rate is reached:
Medical (before age 65) 2027*2018
Medical (age 65 and older) 2027*2018
* Increase in ultimate trend rate is based on the current expectation of future increases in medical and prescriptions drug costs.
327 AIG 2009 Form 10-K