AIG 2010 Annual Report Download - page 131

American International Group, Inc., and Subsidiaries
2010 and 2009 Comparison
Surrender rates have improved compared to the prior year for group retirement products, individual fixed
annuities and individual variable annuities as surrenders have returned to more normal levels. Surrender rates for
individual fixed annuities have decreased significantly in 2010 due to the low interest rate environment and the
relative competitiveness of interest credited rates on the existing block of fixed annuities versus interest rates on
alternative investment options available in the marketplace. Surrender rates for group retirement products are
expected to increase in 2011 as certain large group surrenders are anticipated.
2009 and 2008 Comparison
Surrenders and other withdrawals increased in 2009 for group retirement products primarily due to higher large
group surrenders. However, surrender rates and withdrawals have improved for individual fixed annuities and
individual variable annuities.
The following table presents reserves by surrender charge category and surrender rates:
2010 2009
Group Individual Individual Group Individual Individual
At December 31, Retirement Fixed Variable Retirement Fixed Variable
(in millions) Products* Annuities Annuities Products* Annuities Annuities
No surrender charge $ 52,742 $ 14,006 $ 11,859 $ 47,854 $ 11,444 $11,161
0% - 2% 1,292 3,510 4,083 1,509 3,054 4,094
Greater than 2% - 4% 1,754 5,060 2,040 1,918 5,635 2,066
Greater than 4% 2,753 22,777 7,361 3,213 23,885 6,758
Non-Surrenderable 792 3,136 238 850 3,184 558
Total reserves $ 59,333 $ 48,489 $ 25,581 $ 55,344 $ 47,202 $24,637
Surrender rates 10.3% 7.4% 11.4% 12.3% 14.4% 12.1%
* Excludes mutual funds of $9.0 billion and $8.1 billion in 2010 and 2009, respectively.
Financial Services Operations
AIG’s Financial Services subsidiaries engage in diversified activities including commercial aircraft leasing and
the remaining Capital Markets portfolios, which are conducted through ILFC and AIGFP, respectively. Following
the classification of AGF as discontinued operations in the third quarter of 2010 (see Note 4 to the Consolidated
Financial Statements), AIG’s remaining consumer finance businesses are now reported in AIG’s Other operations
category as part of Divested businesses.
As discussed in Note 3 to the Consolidated Financial Statements, in order to align financial reporting with
changes made during the third quarter of 2010 to the manner in which AIG’s chief operating decision makers
review the businesses to make decisions about resources to be allocated and to assess performance, changes were
made to AIG’s segment information. During the third quarter of 2010, AIG’s Asset Management Group
undertook the management responsibilities for non-derivative assets and liabilities of the Capital Markets’
businesses of the Financial Services segment. These assets and liabilities are being managed on a spread basis, in
concert with the MIP. Accordingly, gains and losses related to these assets and liabilities, primarily consisting of
credit valuation adjustment gains and losses are reported in AIG’s Other operations category as part of Asset
Management — Direct Investment business. Also, intercompany interest related to loans from AIG Funding Inc.
(AIG Funding) to AIGFP is no longer being allocated to Capital Markets from Other operations.
The remaining Capital Markets derivatives business continues to be reported in the Financial Services segment
as part of Capital Markets results.
AIG 2010 Form 10-K 115