AIG 2010 Annual Report Download - page 317

American International Group, Inc., and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
• Certain asbestos business that was written by Chartis is discounted based on the investment yields of the
companies and the payout pattern for this business.
The discount comprises the following: $790 million — tabular discount for workers’ compensation in Chartis
U.S. and $2.27 billion — non-tabular discount for workers’ compensation in Chartis U.S.; and $162 million —
non-tabular discount for asbestos for Chartis.
Future policy benefits
The following table presents the components of future policy benefits:
At December 31,
(in millions) 2010 2009
Future policy benefits:
Long duration and structured settlement contracts $30,992 $115,638
Short duration contracts 276 363
Total future policy benefits $31,268 $116,001
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 on the basis of the following assumptions:
• Interest rates (exclusive of immediate/terminal funding annuities), which vary by territory, year of issuance
and products, range from 1 percent to 9.7 percent within the first 20 years. Interest rates on immediate/
terminal funding annuities are at a maximum of 13.5 percent and grade to not greater than 0.3 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
was approximately 4.1 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 2.6 percent of the gross insurance in force at
December 31, 2010 and 2.7 percent of gross Premiums and other considerations in 2010. The amount of
annual dividends to be paid is approved locally by the boards of directors of the life companies. Provisions
for future dividend payments are computed by jurisdiction, reflecting local regulations.
Policyholder contract deposits
The following table presents policyholder contract deposits liabilities:
At December 31,
(in millions) 2010 2009
Policyholder contract deposits:
Annuities $ 92,672 $138,844
Universal life products 12,569 31,030
Guaranteed investment contracts 8,491 8,747
Variable products 2,217 24,196
Corporate life products 2,203 2,247
Other investment contracts 3,221 15,064
Total policyholder contract deposits $121,373 $220,128
AIG 2010 Form 10-K 301