AIG 2012 Annual Report Download - page 302

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• Mortality and surrender rates are based upon actual experience modified to allow for variations in policy form. The
weighted average lapse rate, including surrenders, for individual and group life was approximately 7.1 percent.
• Participating life business represented approximately 2.0 percent of the gross insurance in force at December 31,
2012 and 4.2 percent of gross Premiums and other considerations in 2012. The amount of annual dividends to be
paid is approved locally by the boards of directors of the life companies. Provisions for future dividend payments
are computed by jurisdiction, reflecting local regulations. The portions of current and prior Net income and of
current unrealized appreciation of investments that can inure to our benefit are restricted in some cases by the
insurance contracts and by the local insurance regulations of the jurisdictions in which the policies are in force.
Policyholder Contract Deposits
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The following table presents policyholder contract deposits liabilities:
Policyholder contract deposits:
Annuities $ 98,657
Universal life products 12,917
Guaranteed investment contracts 6,788
Variable products – fixed account option 3,181
Corporate life products 2,239
Other investment contracts 3,116
Total policyholder contract deposits $ 126,898
The liability for policyholder contract deposits has been established based on the following assumptions:
• Interest rates credited on deferred annuities, which vary by year of issuance, range from 1 percent to, including
bonuses, 9 percent. Current declared interest rates are generally guaranteed to remain in effect for a period of one
year though some are guaranteed for longer periods. Withdrawal charges generally range from zero percent to
20 percent grading to zero over a period of zero to 15 years.
• Guaranteed investment contracts (GICs) have market value withdrawal provisions for any funds withdrawn other
than benefit responsive payments. Interest rates credited generally range from 0.5 percent to 8.5 percent. The
majority of these GICs mature within four years.
• Interest rates on corporate life insurance products are guaranteed at 3 percent and the weighted average rate
credited in 2012 was 4.6 percent.
• The universal life products have credited interest rates of 1 percent to 8 percent and guarantees ranging from
1 percent to 5.5 percent depending on the year of issue. Additionally, universal life funds are subject to surrender
charges that amount to 9.7 percent of the aggregate fund balance grading to zero over a period not longer than
20 years.
• For variable products and investment contracts, policy values are expressed in terms of investment units. Each unit
is linked to an asset portfolio. The value of a unit increases or decreases based on the value of the linked asset
portfolio. The current liability at any time is the sum of the current unit value of all investment units plus any liability
for guaranteed minimum death or withdrawal benefits.
Certain products are subject to experience adjustments. These include group life and group medical products, credit
life contracts, accident and health insurance contracts/riders attached to life policies and, to a limited extent,
reinsurance agreements with other direct insurers. Ultimate premiums from these contracts are estimated and
recognized as revenue, and the unearned portions of the premiums recorded as liabilities. Experience adjustments
vary according to the type of contract and the territory in which the policy is in force and are subject to local
regulatory guidance.
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AIG 2012 Form 10-K 285
At December 31,
(in millions) 2012 2011
$ 98,544
13,045
6,178
3,936
2,284
3,130
$ 127,117
ITEM 8 / NOTE 13. LIABILITY FOR UNPAID CLAIMS AND CLAIMS ADJUSTMENT EXPENSE AND FUTURE POLICY
BENEFITS FOR LIFE AND ACCIDENT AND HEALTH INSURANCE CONTRACTS AND POLICYHOLDER CONTRACT DEPOSITS