AIG 2014 Annual Report Download - page 90

ITEM 7 / RESULTS OF OPERATIONS
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For Commercial Insurance — Property Casualty and Consumer Insurance — Personal Insurance, we estimate investable
funds based primarily on loss reserves, unearned premiums and a capital allocation for each operating segment. The net
investment income allocation is calculated based on the estimated investable funds and risk-free yields (plus a liquidity
premium) consistent with the approximate duration of the liabilities, and excludes net investment income associated with the
run-off insurance lines reported in Corporate and Other. The remaining excess is attributed to Commercial Insurance —
Property Casualty and Consumer Insurance — Personal Insurance based on the relative net investment income previously
allocated.
For Commercial Insurance — Institutional Markets, Consumer Insurance — Retirement and Consumer Insurance — Life, net
investment income is attributed based on invested assets from segregated product line portfolios. Invested assets in excess of
liabilities are allocated to product lines based on internal capital estimates.
Property Casualty, International Life and Personal Insurance's business is transacted in most major foreign
currencies. The following table presents the average of the quarterly weighted average exchange rates of the
currencies that have the most significant impact on our businesses:
Years Ended December 31, Percentage Change
Rate for 1 USD 2014 2013 2012 2014 vs. 2013 2013 vs. 2012
Currency:
JPY
104.43 95.86 79.32 9 % 21 %
EUR
0.75 0.76 0.78 (1) % (3) %
GBP
0.61 0.64 0.63 (5) % 2 %
COMMERCIAL INSURANCE
Commercial Insurance Results
The following table presents Commercial Insurance results:
Years Ended December 31, Percentage Change
(in millions) 2014 2013 2012 2014 vs. 2013 2013 vs. 2012
Revenues:
Premiums $22,221 $ 22,096 $ 22,021 1 % - %
Policy fees 187 113 102 65 11
Net investment income 6,393 6,653 6,163 (4) 8
Benefits and expenses:
Policyholder benefits and losses incurred 16,575 17,002 18,870 (3) (10)
Interest credited to policyholder account balances 410 413 571 (1) (28)
Amortization of deferred policy acquisition costs 2,512 2,418 2,692 4 (10)
General operating and other expenses* 3,794 4,049 3,938 (6) 3
Pre-tax operating income $5,510 $ 4,980 $ 2,215 11 % 125 %
* Includes general operating expenses, commissions and other acquisition expenses.
Commercial Insurance Results by Operating Segment
Commercial Insurance presents its financial information in three operating segments – Property Casualty, Mortgage Guaranty
and Institutional Markets. The following section provides a comparative discussion of Commercial Insurance Results of
Operations for 2014, 2013 and 2012 by operating segment.