AIG 2012 Annual Report Download - page 107

.....................................................................................................................................................................................
Discounting of Reserves
The following table presents the components of AIG Property Casualty’s loss reserve discount included
above:
U.S. workers’ compensation:
Tabular $ 777
Non-tabular 2,318
Asbestos 88
Total $ 3,183
See Note 13 to the Consolidated Financial Statements for additional information on discounting of loss reserves.
The following table presents the net reserve discount benefit (charge):
Change in loss reserve discount – current accident year $ 342 $ 381
Change in loss reserve discount – prior year development (22) 527
Accretion of reserve discount (354) (346)
Net reserve discount benefit (charge) $ (34) $ 562
The benefit from the change in discount in the year ended December 31, 2012 includes a $100 million increase in
the reserve discount due to the commutation of an internal reinsurance treaty, under which a U.S. subsidiary
previously ceded workers’ compensation claims to a non-U.S. subsidiary. AIG discounts its loss reserves related to
workers’ compensation business written by its U.S. domiciled subsidiaries as permitted by the domiciliary statutory
regulatory authorities. As a result of the commutation, the reserves for these claims are now recorded in a U.S.
insurance subsidiary and accordingly are being discounted commencing in the three-month period ended June 30,
2012. The commutation was implemented as part of AIG Property Casualty’s efforts to simplify its internal
reinsurance arrangements.
Annual Reserving Conclusion
AIG net loss reserves represent our best estimate of our liability for net losses and loss expenses as of
December 31, 2012. While AIG regularly reviews the adequacy of established loss reserves, there can be no
assurance that AIG’s ultimate loss reserves will not develop adversely and materially exceed AIG’s loss reserves as
of December 31, 2012. In our opinion, such adverse development and resulting increase in reserves are not likely to
have a material adverse effect on AIG’s consolidated financial condition, although such events could have a material
adverse effect on AIG’s consolidated results of operations for an individual reporting period.
..................................................................................................................................................................................................................................
AIG 2012 Form 10-K90
$ 801
2,394
51
$ 3,246
Years Ended December 31,
(in millions) 2012
$ 348
87
(372)
$63
December 31,
(in millions) 2012 2011
2011 2010
ITEM 7 / RESULTS OF OPERATIONS