AIG 2012 Annual Report Download - page 114

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The following table provides a summary of reserve activity, including estimates for applicable IBNR, relating
to asbestos and environmental claims:
Asbestos:
Liability for unpaid claims and claims adjustment expense at beginning of
year $ 5,526 $ 2,223 $ 3,236 $ 1,151
Change in net loss reserves due to retroactive reinsurance:
Paid losses recoverable under retroactive reinsurance contracts – 111 – –
Re-estimation of amounts recoverable under retroactive reinsurance
contracts(a) – (1,814) – –
Change in net loss reserves due to retroactive reinsurance – (1,703) – –
Dispositions – – (17) (8)
Loss and loss expenses incurred:
Prior years, undiscounted 2 2 3,326 1,479
Change in discount 190 74 (386) (162)
Losses and loss expenses incurred(b) 192 76 2,940 1,317
Losses and loss expenses paid(b) (492) (236) (633) (237)
Other changes – 177 – –
Liability for unpaid claims and claims adjustment expense at end of year $ 5,226 $ 537 $ 5,526 $ 2,223
Environmental:
Liability for unpaid claims and claims adjustment expense at beginning of
year $ 240 $ 127 $ 338 $ 159
Dispositions – – (27) (10)
Losses and loss expenses incurred 33 27 23 24
Losses and loss expenses paid (69) (35) (94) (46)
Liability for unpaid claims and claims adjustment expense at end of year $ 204 $ 119 $ 240 $ 127
Combined:
Liability for unpaid claims and claims adjustment expense at beginning of
year $ 5,766 $ 2,350 $ 3,574 $ 1,310
Change in net loss reserves due to retroactive reinsurance:
Paid losses recoverable under retroactive reinsurance contracts – 111 – –
Re-estimation of amount recoverable under retroactive reinsurance
contracts – (1,814) – –
Change in net loss reserves due to retroactive reinsurance – (1,703) – –
Dispositions – – (44) (18)
Losses and loss expenses incurred:
Undiscounted 35 29 3,349 1,503
Change in discount 190 74 (386) (162)
Losses and loss expenses incurred 225 103 2,963 1,341
Losses and loss expenses paid (561) (271) (727) (283)
Other changes – 177 – –
Liability for unpaid claims and claims adjustment expense at end of year $ 5,430 $ 656 $ 5,766 $ 2,350
(a) Re-estimation of amounts recoverable under retroactive reinsurance contracts includes effect of changes in reserve estimates and changes in
discount. Additionally, the 2011 Net amount includes the effect on net loss reserves of the initial cession to NICO.
(b) These amounts exclude benefit from retroactive reinsurance.
Transfer of Domestic Asbestos Liabilities
On June 17, 2011, we completed a transaction under which the bulk of AIG Property Casualty’s net domestic
asbestos liabilities were transferred to NICO, a subsidiary of Berkshire Hathaway, Inc. This was part of our ongoing
strategy to reduce our overall loss reserve development risk. This transaction covers potentially volatile U.S.-related
asbestos exposures. It does not, however, cover asbestos accounts that we believe have already been reserved to
their limit of liability or certain other ancillary asbestos exposure assumed by AIG Property Casualty subsidiaries.
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AIG 2012 Form 10-K 97
2012 2011 2010
As of or for the Years Ended December 31,
(in millions) Gross Net Gross Net Gross Net
$ 5,226 $ 537
– 111
– (21)
–90
(10) (10)
11
83 37
84 38
(404) (228)
––
$ 4,896 $ 427
$ 204 $ 119
(1) (1)
150 75
(44) (30)
$ 309 $ 163
$ 5,430 $ 656
– 111
– (21)
–90
(11) (11)
151 76
83 37
234 113
(448) (258)
––
$ 5,205 $ 590
ITEM 7 / RESULTS OF OPERATIONS