AIG 2010 Annual Report Download - page 103

American International Group, Inc., and Subsidiaries
From a regional perspective, growth in the Far East region was driven primarily by the Fuji acquisition. The
growth economy countries, with well-established franchises and operations, continue to increase insurance
penetration and growth within Consumer and Commercial lines. The Europe region’s net premium written levels
were consistent with 2009 due to continued strong pricing discipline in a recovering soft market.
Chartis International net premiums written decreased in 2009 compared to 2008 primarily due to negative
effects of changes in foreign exchange rates, general economic conditions which continued to negatively affect new
business and the adverse effect of negative publicity regarding AIG in 2009.
AIG transacts business in most major foreign currencies. The following table summarizes the effect of changes in
foreign currency exchange rates on the growth of Chartis International net premiums written:
Years Ended December 31, 2010 vs. 2009 2009 vs. 2008
Increase (decrease) in original currency(a) 12.8%(b) (3.8)%
Foreign exchange effect 4.2 (3.8)
Increase (decrease) as reported in U.S. dollars 17.0% (7.6)%
(a) Computed using a constant exchange rate for each period.
(b) Substantially all of this increase was attributable to the Fuji acquisition.
Chartis International Underwriting Ratios
The following table presents Chartis International combined ratios:
Increase Increase
Years Ended December 31, 2010 2009 (Decrease) 2008 (Decrease)
Loss ratio 65.4 59.4 6.0 55.5 3.9
Expense ratio 38.1 40.8 (2.7) 37.2 3.6
Combined ratio 103.5 100.2 3.3 92.7 7.5
The increase in the Chartis International combined ratio in 2010 compared to 2009 primarily resulted from the
following:
• significant catastrophe-related losses in 2010. No catastrophe-related losses were recorded in the comparable
2009 period. The 2010 catastrophe-related losses of $520 million previously noted, including $10 million of
reinstatement reinsurance premiums, increased the current accident year loss ratio by 3.3 points.
• net adverse prior year loss development, which increased incurred losses by $332 million in 2010 compared
to $9 million of net adverse loss development in 2009. The increase in net adverse prior year loss
development increased the 2010 loss ratio by 2.7 points.
The following table presents the components of net prior year adverse development for Chartis International:
Years Ended December 31,
(in millions) 2010 2009 2008
Gross prior year adverse loss development $379 $ 9 $(62)
Increase in loss reserve discount (47) --
Returned/(additional) premium on loss-sensitive business ---
Net prior year adverse loss development $332 $ 9 $(62)
For a detailed discussion of Net Loss Development by class of business, see Liability for Unpaid Claims and
Claim Adjustment Expense below.
• a decrease of 2.7 points in the expense ratio resulting from the net benefits of the amortization of net
intangible liabilities relating to the acquisition of Fuji. Excluding Fuji, the 2010 expense ratio was essentially
AIG 2010 Form 10-K 87