AIG 2012 Annual Report Download - page 213

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Basel I, Basel II and Basel III set of capital and liquidity standards for international financial institution established
by the Basel Committee on Banking Supervision.
BET Binomial Expansion Technique A model that generates expected loss estimates for CDO tranches and derives
a credit rating for those tranches.
Book Value Per Share Excluding Accumulated Other Comprehensive Income (loss) (AOCI) is used to show the
amount of our net worth on a per-share basis. Book Value Per Share Excluding AOCI is derived by dividing Total
AIG shareholders’ equity, excluding AOCI, by Total common shares outstanding.
Case reserves Claim department estimates of anticipated future payments to be made on each specific individual
reported claim.
Casualty insurance Insurance that is primarily associated with the losses caused by injuries to third persons,
i.e., not the insured, and the legal liability imposed on the insured as a result.
Cede, ceded reinsurance, ceding company An insurance company that reinsures its risk with another, is referred
to as the ceding company.
Combined ratio Sum of the loss ratio and the acquisition and general operating expense ratios.
CSA Credit Support Annex A legal document that provides for collateral postings at various ratings and threshold
levels.
DAC Deferred Policy Acquisition Costs Deferred costs that are incremental and directly related to the successful
acquisition of new business or renewal of existing business.
Expense ratio Sum of acquisition costs and general operating expenses, divided by net premiums earned.
First-Lien Priority over all other liens or claims on a property in the event of default on a mortgage.
General operating expense ratio general operating expenses divided by net premiums earned. General operating
expenses are those costs that are generally attributed to the support infrastructure of the organization and include
but are not limited to personnel costs, projects and bad debt expenses. General operating expenses exclude claims
adjustment expenses, acquisition expenses, and investment expenses.
GIC/GIA Guaranteed Investment Contract/Guaranteed Investment Agreement A contract whereby the seller provides
a guaranteed repayment of principal and a fixed or floating interest rate for a predetermined period of time.
IBNR Incurred But Not Reported Estimates of claims that have been incurred but not reported to us.
IFS Insurer Financial Strength ratings IFS ratings measure the ability of an insurance company to meet its
obligations to contract holders and policyholders.
LAE Loss Adjustment Expenses The expenses of settling claims, including legal and other fees and the portion of
general expenses allocated to claim settlement costs.
Long-Tail Reserves Reserves for claims that may be reported or settled several years after the coverage period
has expired for these classes of businesses. Long-tail casualty classes of business include excess and umbrella
liability, D&O, professional liability, medical malpractice, workers’ compensation, general liability, products liability and
related classes.
Loss Ratio Claims and claims adjustment expenses incurred divided by net premiums earned. Claims adjustment
expenses are directly attributed to settling and paying claims of insureds and include, but are not limited to, legal
fees, adjuster’s fees, and claims department personnel costs.
Loss reserve development The increase or decrease in incurred claims and claim adjustment expenses as a result
of the re-estimation of claims and claim adjustment expense reserves at successive valuation dates for a given group
of claims.
Loss reserves Liability for unpaid claims and claims adjustment expense. The estimated ultimate cost of settling
claims relating to insured events that have occurred on or before the balance sheet date, whether or not reported to
the insurer at that date.
LTV Loan-to-Value Ratio Principal amount of loan amount divided by appraised value of collateral securing the loan.
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AIG 2012 Form 10-K196
ITEM 7 / GLOSSARY