AIG 2014 Annual Report Download - page 102

ITEM 7 / RESULTS OF OPERATIONS / COMMERCIAL INSURANCE

85
Institutional Markets Results
The following table presents Institutional Markets results:
Years Ended December 31, Percentage Change
(in millions) 2014 2013 2012 2014 vs. 2013 2013 vs. 2012
Revenues:
Premiums $432 $610 $458 (29)%33 %
Policy fees 187 113 102 65 11
Net investment income 1,957 2,090 2,066 (6) 1
Benefits and expenses:
Policyholder benefits and losses incurred 1,396 1,616 1,432 (14) 13
Interest credited to policyholder account balances 410 413 571 (1) (28)
Amortization of deferred policy acquisition costs 44 3 -33
Other acquisition expenses 30 36 39 (17) (8)
General operating expenses 66 64 56 314
Pre-tax operating income $670 $680 $525 (1) 30
INSTITUTIONAL MARKETS PRE-TAX OPERATING INCOME (in millions)
2014 and 2013 Comparison
Pre-tax operating income for 2014 decreased slightly compared to 2013, as a decrease in net investment income was only
partially offset by an increase in fee income. The increase in fee income was driven by growth in reserves and assets under
management, primarily from strong development of the stable value wrap business. The notional amount of stable value wrap
assets under management at December 31, 2014 grew by $7.8 billion or 32 percent from December 31, 2013, which excluded
a $2.5 billion deposit to the separate accounts for a stable value funding agreement. Growth in reserves also reflected a GIC
deposit of $450 million in the fourth quarter of 2014 under a funding agreement-backed notes issuance program, in which an
unaffiliated, non-consolidated statutory trust issues to investors medium-term notes, which are secured by GICs issued by one
of the Life Insurance Companies. Under the funding agreement-backed notes program, issuances will be made
opportunistically based upon pricing and demand available in the marketplace.
Net investment income for 2014 decreased compared to 2013, primarily due to lower net investment income from alternative
investments and from the base portfolio. The 2014 decrease in alternative investment income of $41 million compared to 2013
primarily reflected high hedge fund income in 2013 due to favorable equity market conditions. The decrease in base net
investment income in 2014 compared to 2013 primarily reflected lower base portfolio yield as a result of reinvestment in the