AIG 2013 Annual Report Download - page 116

domiciled in Delaware. New York discounting rules generally do not permit non-tabular discounting on IBNR and only
prescribes a 5 percent rate for application to case reserves. We also expect to receive a permitted practice from the
Delaware Department of Insurance to allow discounting on the same basis as Pennsylvania domiciled companies
described above. The $100 million anticipated impact arises from the application of non-tabular discount to the IBNR
transferred out of New York companies to Pennsylvania and Delaware companies, offset partially by a decrease in
the effective discount rate from the 5 percent prescribed rate in New York.
AIG net loss reserves represent our best estimate of our liability for net losses and loss expenses as of
December 31, 2013. While we regularly review the adequacy of established loss reserves, there can be no
assurance that our ultimate loss reserves will not develop adversely and materially exceed our loss reserves as of
December 31, 2013. In our opinion, such adverse development and resulting increase in reserves are not likely to
have a material adverse effect on our consolidated financial condition, although such events could have a material
adverse effect on our consolidated results of operations for an individual reporting period.
The following table presents the rollforward of net loss reserves:
Net liability for unpaid claims and claims adjustment expense at beginning of year $ 70,825 $ 71,507
Foreign exchange effect(a) (90) 353
Other, including dispositions (11) –
Change due to retroactive asbestos reinsurance transaction 90 (1,703)
Losses and loss expenses incurred:
Current year, undiscounted 25,385 27,931
Prior years unfavorable development, undiscounted(b) 421 195
Change in discount (63) 34
Losses and loss expenses incurred 25,743 28,160
Losses and loss expenses paid:
Current year(a) 8,450 11,534
Prior years 19,325 15,958
Losses and loss expenses paid 27,775 27,492
Net liability for unpaid claims and claims adjustment expense at end of year $ 68,782 $ 70,825
(a) For the 2012 amounts, $847 million was reclassified from ‘‘Foreign exchange effect’’ to ‘‘Losses and loss expenses paid (current year)’’. The
impact of this reclassification was a decrease of $847 million for foreign exchange and loss expenses paid (current year), with no income statement
or balance sheet impact.
(b) See tables below for details of prior year development by business unit, accident year and major class of business.
Annual Reserving Conclusion
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AIG 2013 Form 10-K98
ITEM 7 / RESULTS OF OPERATIONS / LIABILITY FOR UNPAID CLAIMS AND CLAIMS ADJUSTMENT EXPENSE
Years Ended December 31,
(in millions) 2013 2012 2011
$ 68,782
(617)
(79)
22
22,171
557
(309)
22,419
7,431
18,780
26,211
$ 64,316
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