AIG 2010 Annual Report Download - page 90

American International Group, Inc., and Subsidiaries
2009 and 2008 Comparison
Policyholder benefits and claims incurred decreased in 2009 compared to 2008 due to:
• a reduction of $4.0 billion due to dispositions in 2009 noted above;
• catastrophe-related losses of $53 million in 2009 compared to $1.8 billion in 2008 (losses in 2008 were
primarily related to hurricanes Ike and Gustav); and
• the effects of lower production levels for Chartis and SunAmerica.
These decreases were partially offset by:
• higher incurred policy losses and benefits expenses for AIA due to policyholder trading gains of $2.3 billion
in 2009 compared to policyholder trading losses of $3.5 billion in 2008 as discussed above in Net Investment
Income; and
• adverse development from prior years in Chartis U.S. primarily for excess casualty and excess workers’
compensation and increased current year losses in Chartis International from exposure to financial lines
claims.
Policy Acquisition and Other Insurance Expenses
2010 and 2009 Comparison
Policy acquisition and other insurance expenses decreased slightly in 2010 compared to 2009 as a result of a
reduction of $947 million related to the dispositions in 2009 noted above, partially offset by increased expenses at
Chartis, primarily resulting from the consolidation of Fuji noted above.
2009 and 2008 Comparison
Policy acquisition and other insurance expenses decreased in 2009 compared to 2008 primarily due to:
• a reduction of $1.9 billion due to dispositions in 2009 noted above;
• a reduction of $3.3 billion due to goodwill impairment charges recorded in 2008 from Chartis U.S., primarily
related to goodwill of HSB, SunAmerica and Other businesses; and
• the effects of lower production levels for Chartis, SunAmerica’s domestic retirement services business and
AIA.
Interest Expense
Interest expense decreased in 2010 primarily due to lower interest expense on the FRBNY Credit Facility
reflecting a reduced weighted average interest rate on borrowings, a lower average outstanding balance and a
decline in amortization of the prepaid commitment fee asset as set forth below. Interest expense decreased in
2009 compared to 2008 primarily due to lower interest expense on the FRBNY Credit Facility reflecting a reduced
weighted average interest rate on borrowings. However, because the facility was outstanding for the full year in
2009 compared to only 107 days in 2008, the favorable impact was largely offset.
Years Ended December 31,
(dollars in millions) 2010 2009 2008
Weighted average interest rate* 3.3% 4.5% 10.6%
Average outstanding balance (excluding paid in kind interest)* $18,775 $37,358 $52,439
Periodic amortization of prepaid commitment fee asset* $ 1,766 $ 3,174 $ 2,703
Accelerated amortization of prepaid commitment fee asset* $ 1,705 $ 5,185 $ 6,576
* The FRBNY Credit Facility was repaid in full and terminated upon the closing of the Recapitalization on January 14, 2011.
74 AIG 2010 Form 10-K