AIG 2012 Annual Report Download - page 212

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GLOSSARY
Accident year The annual calendar accounting period in which loss events occurred, regardless of when the losses
are actually reported, booked or paid.
Accident year combined ratio, as adjusted the combined ratio excluding catastrophe losses and related
reinstatement premiums, prior year development, net of premium adjustments, and the impact of reserve discounting.
Accident year loss ratio, as adjusted the loss ratio excluding catastrophe losses and related reinstatement
premiums, prior year development, net of premium adjustments and the impact of reserve discount. Catastrophe
losses are generally weather or seismic events having a net impact on AIG Property Casualty in excess of
$10 million each.
Acquisition ratio acquisition costs divided by net premiums earned. Acquisition costs are those costs incurred to
acquire new and renewal insurance contracts and also include the amortization of VOBA. Acquisition costs vary with
sales and include, but are not limited to, commissions, premium taxes, direct marketing costs, certain costs of
personnel engaged in sales support activities such as underwriting, and the change in deferred acquisition costs.
Acquisition costs that are incremental and directly related to successful sales efforts are deferred and recognized
over the coverage periods of related insurance contracts. Acquisition costs that are not incremental and directly
related to successful sales efforts are recognized as incurred.
Admitted insurer A company licensed to transact insurance business within a state.
AIG – After-tax operating income (loss) is derived by excluding the following items from net income (loss): income
(loss) from discontinued operations, net loss (gain) on sale of divested businesses, income from divested businesses,
legacy FIN 48 and other tax adjustments, legal reserves (settlements) related to ‘‘legacy crisis matters,’’ deferred
income tax valuation allowance (releases) charges, amortization of the Federal Reserve Bank of New York prepaid
commitment fee asset, changes in fair value of AIG Life and Retirement fixed income securities designated to hedge
living benefit liabilities, change in benefit reserves and deferred policy acquisition costs (DAC), value of business
acquired (VOBA), and sales inducement assets (SIA) related to net realized capital (gains) losses, (gain) loss on
extinguishment of debt, net realized capital (gains) losses, non-qualifying derivative hedging activities, excluding net
realized capital (gains) losses and bargain purchase gain. ‘‘Legacy crisis matters’’ include favorable and unfavorable
settlements related to events leading up to and resulting from our September 2008 liquidity crisis. It also includes
legal fees incurred by AIG as the plaintiff in connection with such legal matters.
AIG Life and Retirement – Operating income (loss) Operating income (loss) is derived by excluding the following
items from net income (loss): legal settlements related to legacy crisis matters, changes in fair values of fixed
maturity securities designated to hedge living benefit liabilities, net realized capital (gains) losses, and changes in
benefit reserves and DAC, VOBA, and SIA related to net realized capital (gains) losses.
AIG Life and Retirement – Premiums, deposits and other considerations includes life insurance premiums and
deposits on annuity contracts and mutual funds.
AIG Property Casualty – Net premiums written represent the sales of an insurer, adjusted for reinsurance
premiums assumed and ceded, during a given period. Net premiums earned are the revenue of an insurer for
covering risk during a given period. Net premiums written are a measure of performance for a sales period while Net
premiums earned are a measure of performance for a coverage period. From the period in which the premiums are
written until the period in which they are earned, the amount is presented as Unearned premium reserves in the
Consolidated Balance Sheet.
AIG Property Casualty – Operating income (loss) In 2012, AIG Property Casualty revised its non-GAAP income
measure from underwriting income (loss) to operating income (loss), which includes both underwriting income (loss)
and net investment income, but not net realized capital (gains) losses or other (income) expense, legal settlements
related to legacy crisis matters and bargain purchase gain. Underwriting income (loss) is derived by reducing net
premiums earned by claims and claims adjustment expense and underwriting expenses, which consist of the
acquisition costs and general operating expenses.
Assume, assumed reinsurance, assuming company An insurance company that accepts all or part of a ceding
company’s insurance or reinsurance on a risk or exposure is referred to as the assuming company.
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AIG 2012 Form 10-K 195
ITEM 7 / GLOSSARY