AIG 2012 Annual Report Download - page 304

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related charge or credit to benefit expense, if actual experience or other evidence suggests that earlier assumptions
should be revised.
The following assumptions and methodology were used to determine the GMDB liability at December 31, 2012:
• Data used was up to 1,000 stochastically generated investment performance scenarios.
• Mean investment performance assumptions ranged from three percent to approximately ten percent depending on
the block of business.
• Volatility assumption was 16 percent.
• Mortality was assumed to be between 50 percent and 88 percent of the 1994 variable annuity minimum
guaranteed death benefit table for recent experience.
• Lapse rates vary by contract type and duration and ranged from zero percent to 37 percent.
• The discount rate ranged from 3.75 percent to 10 percent and is based on the growth rate assumption for the
underlying contracts in effect at the time of policy issuance.
In addition to GMDB, our contracts currently include to a lesser extent GMIB. The GMIB liability is determined each
period end by estimating the expected value of the annuitization benefits in excess of the projected account balance
at the date of annuitization and recognizing the excess ratably over the accumulation period based on total expected
assessments. We periodically evaluate estimates used and adjust the additional liability balance, with a related
charge or credit to benefit expense, if actual experience or other evidence suggests that earlier assumptions should
be revised.
In addition, our contracts currently include GMAV and GMWB benefits. GMAV and GMWB features are considered to
be embedded derivatives and are recognized at fair value through earnings. We enter into derivative contracts to
economically hedge a portion of the exposure that arises from GMAV and GMWB benefits. At December 31, 2012,
we had $19.8 billion of account values and $1.3 billion of net amount at risk that was attributable to variable
annuities with GMAV and GMWB benefits. See Note 6 herein for additional fair value disclosures.
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AIG 2012 Form 10-K 287
ITEM 8 / NOTE 14. VARIABLE LIFE AND ANNUITY CONTRACTS