AIG 2014 Annual Report Download - page 37

ITEM 1 / BUSINESS
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significant judgments, the emergence of latent exposures, and changes in medical cost trends. For example, the original
undiscounted reserve of $48.8 billion at December 31, 2004, was re-estimated to $66.2 billion at December 31, 2014. The
amount of the development related to losses settled or re-estimated in 2014, but incurred in 2011, is included in the cumulative
development amount for years 2011, 2012 and 2013. Any increase or decrease in the estimate is reflected in operating results
in the period in which the estimate is changed.
The middle of the table shows Net Deficiency. This is the aggregate change in estimates over the period of years covered by
the table. For example, the net loss reserve deficiency of $17.4 billion for 2004 is the difference between the original
undiscounted reserve of $48.8 billion at December 31, 2004 and the $66.2 billion of re-estimated reserves at December 31,
2014. The net deficiency amounts are cumulative; in other words, the amount shown in the 2013 column includes the amount
shown in the 2012 column, and so on. Conditions and trends that have affected development of the liability in the past may not
necessarily occur in the future. Accordingly, it generally is not appropriate to extrapolate future development based on
this table.
The bottom portion of the table shows the Paid (Cumulative) amounts during successive years related to the undiscounted
loss reserves. For example, as of December 31, 2014, AIG had paid a total of $55.4 billion of the $66.2 billion in re-estimated
reserves for 2004, resulting in Remaining Reserves (Undiscounted) of $10.8 billion for 2004. Also included in this section are
the Remaining Reserves (Undiscounted) and the Remaining Discount for each year.
As discussed in footnotes (a) and (b) below, the calendar year distribution of these Paid (Cumulative) amounts are estimates
that are affected by certain transactions. These payment amounts may differ from the actual losses paid for a given accident
year.
The following table presents loss reserves and the related loss development for 2004 through 2014 and consolidated
gross liability (before discount), reinsurance recoverable and net liability recorded for each calendar year, and the
re-estimation of these amounts as of December 31, 2014.(a)
(in millions) 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Net Reserves Held(b) $ 47,253 $ 57,476 $62,630 $69,288 $72,455 $67,899 $71,507 $ 70,825 $ 68,782 $64,316 $61,612
Discount (in Reserves Held) 1,553 2,110 2,264 2,429 2,574 2,655 3,217 3,183 3,246 3,555 3,077
Net Reserves Held (Undiscounted) 48,806 59,586 64,894 71,717 75,029 70,554 74,724 74,008 72,028 67,871 $64,689
Net undiscounted Reserve
re-estimated as of:
One year later 53,486 59,533 64,238 71,836 77,800 74,736 74,919 74,429 72,585 68,574
Two years later 55,009 60,126 64,764 74,318 82,043 74,529 75,502 75,167 73,571
Three years later 56,047 61,242 67,303 78,275 81,719 75,187 76,023 76,212
Four years later 57,618 63,872 70,733 78,245 82,422 76,058 77,031
Five years later 60,231 67,102 70,876 79,098 83,135 77,054
Six years later 63,348 67,518 71,572 79,813 84,100
Seven years later 63,928 68,233 72,286 80,770
Eight years later 64,532 69,023 73,356
Nine years later 65,261 70,029
Ten years later 66,162
Net Deficiency on net reserves held (17,356) (10,443) (8,462) (9,053) (9,071) (6,500) (2,307) (2,204) (1,543) (703)
Net Deficiency related to asbestos
and environmental (A&E) (3,157) (2,228) (2,019) (2,000) (1,951) (1,799) (297) (268) (192) (124)
Net Deficiency excluding A&E (14,199) (8,215) (6,443) (7,053) (7,120) (4,701) (2,010) (1,936) (1,351) (579)
Paid (Cumulative) as of:
One year later 14,910 15,326 14,862 16,531 24,267 15,919 ,66117 19,235 18,758 17,745
Two years later 24,377 25,152 24,388 31,791 36,164 28,428 30,620 31,766 31,265
Three years later 31,296 32,295 34,647 40,401 46,856 38,183 40,091 41,464
Four years later 36,804 40,380 40,447 48,520 53,616 45,382 47,379
Five years later 43,162 44,473 46,474 53,593 58,513 51,104
Six years later 46,330 49,552 50,391 57,686 62,734
Seven years later 50,462 52,243 53,545 61,221
Eight years later 52,214 54,332 56,424
Nine years later 53,693 56,516
Ten years later 55,375