AIG 2014 Annual Report Download - page 94

ITEM 7 / RESULTS OF OPERATIONS / COMMERCIAL INSURANCE
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Gulf of Mexico and Caribbean named storms, and U.S. and Canadian earthquakes. To fund its potential obligations to us,
Tradewynd Re Ltd. issued three tranches of notes. The transaction provides Property Casualty and Personal Insurance with
fully collateralized coverage against losses from those events on a per-occurrence basis through December 2016. Catastrophe
bond reinsurance transactions reduced net premiums written by $56 million and $140 million in 2014 and 2013, respectively.
Specialty net premiums written decreased slightly in 2014, compared to 2013 primarily reflecting lower retention and rate
decline in the EMEA region. This decline was largely offset by new business increases related to targeted growth products,
including growth in small- and medium-sized enterprise markets in the Americas region.
Financial lines net premiums written increased in 2014, compared to 2013 reflecting growth in new business related to
targeted growth products across all regions, as well as a favorable rate environment in the U.S.
2013 and 2012 Comparison
Casualty net premiums written decreased in 2013, compared to 2012, primarily due to the execution of our strategy to
enhance risk selection, particularly in the Americas and EMEA, as well as to increase specific reinsurance purchases to better
manage our exposures. Changes in reinsurance strategy decreased net premiums written by approximately $185 million in
2013, compared to 2012. We implemented rate increases in retained business, especially in the U.S., that partially offset these
premium decreases.
Property net premiums written increased in 2013, compared to 2012, primarily due to growth in new business across all
regions, favorable retention in renewal businesses and increases in coverage limits and changes to our per-risk reinsurance
program to retain more favorable risks, while continuing to manage aggregate exposure. Catastrophe-exposed businesses in
the Americas also benefitted from rate increases.
The increase in net premiums written was partially offset by the effect of catastrophe bond transactions which provide
coverage for several years with ceded written premium recognized at the inception of the transaction. In 2013, we entered into
two multi-year catastrophe bond transactions, which provide $525 million of indemnity protection, in the aggregate, against
U.S., Caribbean and Gulf of Mexico named storms, and U.S. and Canadian earthquakes through the end of 2018. These
transactions reduced net premiums written in 2013 by $140 million. There was no similar reduction in 2012 as our previous
catastrophe bond issuance occurred in the fourth quarter of 2011.
Specialty net premiums written increased in 2013 compared to 2012, primarily due to rate increases in environmental
business, small-and medium-sized enterprise markets in the Americas region, and new business growth in EMEA. Additionally,
the restructuring of our reinsurance program to retain more favorable risks while continuing to manage aggregate exposure,
increased net premiums written by $144 million in 2013, compared to 2012.
Financial lines net premiums written increased in 2013 compared to 2012, reflecting growth in new business related to
targeted growth products, particularly in the EMEA region as well as an improved rate environment globally. Global
professional indemnity net premiums written increased by $86 million in 2013 compared to 2012, due to improved rates, strong
new business growth and the restructuring of our reinsurance program, as part of our decision to retain more favorable risks
while continuing to manage aggregate exposure.
See Part I. Item 1 Business – Reinsurance Activities for further discussion on catastrophe bond transactions.