AIG 2012 Annual Report Download - page 95

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2012 2011 2010
$7,000
$6,762
$5,572
$5,774
$7,181
$6,969
Personal lines
Accident & Health
WORLDWIDE NET PREMIUMS WRITTEN BY LINE OF BUSINESS
Total 2012 NPW (in millions) $34,436
Commercial Insurance
2012 2011 2010
$3,872
$3,552
$3,811
$9,820
$3,959
$3,576
$4,191
$8,574
$3,718
$3,335
$3,180
$9,940
Financial lines
Specialty
Property
Casualty
Consumer Insurance
2012 and 2011 Comparison
Commercial Insurance Net Premiums Written
In 2012, Commercial Insurance focused on the execution of the previously announced strategic objectives. The
overall decrease in Casualty was partially offset by increases in all the other lines of business.
Casualty net premiums written decreased, as planned, primarily due to the execution of our strategy to improve loss
ratios. Our enhanced risk selection process, and adherence to pricing targets resulted in the non-renewal of
approximately $800 million of net premiums written, primarily within the workers’ compensation business in the
Americas, and within the Primary Casualty business in EMEA. In addition, the restructuring of the loss-sensitive
programs decreased Casualty net premiums written by approximately $260 million in 2012. The additional premiums
associated with prior year development in the loss-sensitive business also decreased by approximately $120 million.
We also entered into a quota share reinsurance treaty in the U.S. for the Excess Casualty business that decreased
net premiums written by approximately $60 million. We implemented rate increases in retained business, especially in
the U.S., that partially offset the premium decreases noted above.
Property net premiums written increased due to rate increases, primarily in the U.S., reduced catastrophe bond
purchases in 2012, and the restructuring of the per-risk reinsurance program as part of our decision to retain more
favorable risks while continuing to manage aggregate exposure. Catastrophe exposed business retained in the
Americas and Asia Pacific region also benefitted from rate increases.
We have continued the strategy, adopted in 2010, to improve the allocation of our reinsurance between traditional
reinsurance markets and capital markets. During 2011, as part of this strategy, we secured a three-year catastrophe
bond with an industry index, first occurrence trigger, providing for $575 million in protection for U.S. hurricanes and
earthquakes. The bond transaction reduced net premiums written by approximately $201 million in 2011. There were
no catastrophe bond purchases in 2012.
Specialty net premiums written increased in 2012 due to the restructuring of the aerospace reinsurance program to
retain more favorable risks while continuing to manage aggregate exposure. This increase was slightly offset by our
strategic initiatives related to improved risk selection, particularly within products provided to small and medium sized
enterprises in the Americas and EMEA regions. We continue to shift our business mix towards higher value lines,
particularly in aerospace.
Financial lines net premiums written increased, reflecting strong business growth in all regions, despite targeted
decreases where the business did not meet our risk selection and internal performance criteria. Financial lines net
premiums written for year ended December 31, 2011 benefited from a multi-year Errors and Omissions policy in the
Americas that produced net premiums written of $148 million.
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AIG 2012 Form 10-K78
ITEM 7 / RESULTS OF OPERATIONS