AIG 2014 Annual Report Download - page 298

ITEM 8 / NOTE 13. INSURANCE LIABILITIES
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Other policyholder funds also include provisions for future dividends to participating policyholders, accrued in accordance with
all applicable regulatory or contractual provisions. Participating life business represented approximately 1.9 percent of the
gross insurance in force at December 31, 2014 and 3.7 percent of gross Premiums and other considerations in 2014. The
amount of annual dividends to be paid is approved locally by the boards of directors of the insurance companies. Provisions
for future dividend payments are computed by jurisdiction, reflecting local regulations. The portions of current and prior net
income and of current unrealized appreciation of investments that can inure to our benefit are restricted in some cases by the
insurance contracts and by the local insurance regulations of the jurisdictions in which the policies are in force.
Certain products are subject to experience adjustments. These include group life and group medical products, credit life
contracts, accident and health insurance contracts/riders attached to life policies and, to a limited extent, reinsurance
agreements with other direct insurers. Ultimate premiums from these contracts are estimated and recognized as revenue with
the unearned portions of the premiums recorded as liabilities in Other policyholder funds. Experience adjustments vary
according to the type of contract and the territory in which the policy is in force and are subject to local regulatory guidance.
14. VARIABLE LIFE AND ANNUITY CONTRACTS
We report variable contracts within the separate accounts when investment income and investment gains and losses accrue
directly to, and investment risk is borne by, the contract holder and the separate account meets additional accounting criteria to
qualify for separate account treatment. The assets supporting the variable portion of variable annuity and variable universal life
contracts that qualify for separate account treatment are carried at fair value and reported as separate account assets, with an
equivalent summary total reported as separate account liabilities.
Policy values for variable products and investment contracts are expressed in terms of investment units. Each unit is linked to
an asset portfolio. The value of a unit increases or decreases based on the value of the linked asset portfolio. The current
liability at any time is the sum of the current unit value of all investment units in the separate accounts, plus any liabilities for
guaranteed minimum death benefits or guaranteed minimum withdrawal benefits included in Future policy benefits or
Policyholder contract deposits, respectively.
Amounts assessed against the contract holders for mortality, administrative and other services are included in revenue. Net
investment income, net investment gains and losses, changes in fair value of assets, and policyholder account deposits and
withdrawals related to separate accounts are excluded from the Consolidated Statements of Income, Comprehensive Income
(Loss) and Cash Flows.
Variable annuity contracts may include certain contractually guaranteed benefits to the contract holder. These guaranteed
features include guaranteed minimum death benefits (GMDB) that are payable in the event of death, and living benefits that
are payable in the event of annuitization, or, in other instances, at specified dates during the accumulation period. Living
benefits include guaranteed minimum income benefits (GMIB), guaranteed minimum withdrawal benefits (GMWB) and
guaranteed minimum account value benefits (GMAV). A variable annuity contract may include more than one type of
guaranteed benefit feature; for example, it may have both a GMDB and a GMWB. However, a policyholder can only receive
payout from one guaranteed feature on a contract containing a death benefit and a living benefit, i.e. the features are mutually
exclusive. A policyholder cannot purchase more than one living benefit on one contract. The net amount at risk for each
feature is calculated irrespective of the existence of other features; as a result, the net amount at risk for each feature is not
additive to that of other features.
Account balances of variable annuity contracts with guarantees were invested in separate account investment options as
follows:
At December 31,
(in millions) 2014 2013
Equity funds $ 40,811 $ 40,497
Bond funds 7,566 7,458
Balanced funds 22,354 16,384
Money market funds 797 867
Tota l $ 71,528 $ 65,206