AIG 2013 Annual Report Download - page 326

The NAIC Model Regulation ‘‘Valuation of Life Insurance Policies’’ (Regulation XXX) requires U.S. life insurers to
establish additional statutory reserves for term life insurance policies with long-term premium guarantees and
universal life policies with secondary guarantees (ULSGs). In addition, NAIC Actuarial Guideline 38 (Guideline AXXX)
clarifies the application of Regulation XXX as to these guarantees, including certain ULSGs.
On September 11, 2013, the NYDFS announced it would no longer implement a modified principles-based reserving
approach for certain in-force ULSGs, which had been developed by a Joint Working Group of the NAIC. As a result,
New York-licensed insurers are required to record additional reserves on a statutory basis for ULSG products issued
between July 1, 2005 and December 31, 2012. The decision from the NYDFS does not affect reserves for products
issued on or after January 1, 2013. AIG Life and Retirement does not currently offer individual level term life
insurance or ULSGs in the state of New York. AIG Life and Retirement recorded approximately $200 million of
additional reserves on a statutory basis at December 31, 2013 to fully comply with the NYDFS decision. Our AIG Life
and Retirement insurance subsidiaries, including our New York-domiciled insurance subsidiary, continue to maintain
capital well in excess of regulatory minimum required capital and surplus levels. In 2013, our AIG Life and
Retirement New York-domiciled insurance subsidiary paid dividends totaling $404 million, which were ultimately
distributed to AIG Parent.
AIG Life and Retirement manages the capital impact on its life insurers of statutory reserve requirements under
Regulation XXX and Guideline AXXX through intercompany reinsurance transactions. The affiliated life insurers
providing reinsurance capacity to AIG Life and Retirement are fully licensed insurance companies and are not formed
under captive insurance laws. Under one of these intercompany reinsurance arrangements, certain Regulation XXX
and Guideline AXXX reserves related to new and in-force business are ceded to an affiliated U.S. life insurer, which
is a licensed life insurer in the state of Missouri and an accredited reinsurer in the state of Texas. As an accredited
reinsurer, this affiliated life insurer is not required to post any collateral such as letters of credit or assets in trust.
Under the other intercompany reinsurance arrangement, certain Regulation XXX and Guideline AXXX reserves
related to a closed block of in-force business are ceded to an affiliated off-shore life insurer, which is licensed as a
class E insurer under Bermuda law. Bermuda law permits the off-shore life insurer to record an asset that effectively
reduces the statutory reserves for the assumed reinsurance to the level that would be required under U.S. GAAP.
Letters of credit are used to support the credit for reinsurance provided by the affiliated off-shore life insurer. The
letters of credit are subject to reimbursement by AIG Parent in the event of a drawdown. See Note 8 for additional
information regarding these letters of credit.
Payments of dividends to us by our insurance subsidiaries are subject to certain restrictions imposed by regulatory
authorities. With respect to our domestic insurance subsidiaries, the payment of any dividend requires formal notice
to the insurance department in which the particular insurance subsidiary is domiciled. For example, unless permitted
by the Superintendent of Financial Services, property casualty companies domiciled in New York generally may not
pay dividends to shareholders that, in any 12-month period, exceed the lesser of 10 percent of such company’s
statutory policyholders’ surplus or 100 percent of its ‘‘adjusted net investment income,’’ for the previous year, as
defined. Generally, less severe restrictions applicable to both property casualty and life insurance companies exist in
most of the other states in which our insurance subsidiaries are domiciled. Under the laws of many states, an insurer
may pay a dividend without prior approval of the insurance regulator when the amount of the dividend is below
certain regulatory thresholds. Other foreign jurisdictions may restrict the ability of our foreign insurance subsidiaries to
pay dividends. Various other regulatory restrictions also limit cash loans and advances to us by our subsidiaries.
Largely as a result of these restrictions, approximately $47.6 billion of the statutory capital and surplus of our
consolidated insurance subsidiaries were restricted from transfer to AIG Parent without prior approval of state
insurance regulators at December 31, 2013.
To our knowledge, no AIG insurance company is currently on any regulatory or similar ‘‘watch list’’ with regard to
solvency.
Our ability to pay dividends has not been subject to any contractual restrictions since the cancellation of our Series G
Preferred Stock in May 2011. See Note 16 herein for additional information about our ability to pay dividends to our
shareholders.
Subsidiary Dividend Restrictions
Parent Company Dividend Restrictions
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AIG 2013 Form 10-K308
ITEM 8 / NOTE 19. STATUTORY FINANCIAL DATA AND RESTRICTIONS
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