AIG 2015 Annual Report Download - page 104

ITEM 7 / RESULTS OF OPERATIONS / CONSUMER INSURANCE
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104
NET PREMIUMS WRITTEN
(in millions)
PRE-TAX OPERATING INCOME
(in millions)
2015 and 2014 Comparison
Pre-tax operating income decreased in 2015, compared to 2014, primarily due to a decrease in net investment income and
underwriting results. Catastrophe losses were $145 million in 2015 compared to $126 million in 2014. In 2015, net favorable
prior year loss reserve development was $19 million compared to $77 million in 2014.
Acquisition expenses decreased in 2015 compared to 2014. Excluding the effect of foreign exchange, acquisition expenses
increased due to higher acquisition costs, primarily in automobile and property businesses, and higher profit share expenses
related to warranty service programs, partially offset by a decrease in non-deferred direct marketing expenses. The non-
deferred direct marketing expenses, excluding commissions, for 2015 were approximately $292 million, and, excluding the
impact of foreign exchange, decreased by approximately $71 million from 2014.
General operating expenses decreased in 2015 compared to 2014, primarily due to the effect of foreign exchange and
reflected an ongoing focus on cost efficiency.
Net investment income decreased in 2015 compared to 2014, primarily due to the continued impact of low interest rates
resulting in yields on new purchases that were lower than the weighted average yield of the overall portfolio, negative
performance of alternative investments in hedge funds, the strengthening of the U.S. dollar against most major foreign
currencies, and lower allocation of net investment income.
See MD&A — Investments for additional information on the Non-Life Insurance Companies invested assets, investment
strategy, and asset-liability management process.
2014 and 2013 Comparison
Pre-tax operating income increased in 2014 compared to 2013, primarily due to a decrease in current accident year losses
and lower general operating expenses, partially offset by higher catastrophe losses and lower net favorable prior year loss
reserve development, higher acquisition expenses and a decrease in net investment income. Catastrophe losses were
$126 million in 2014, compared to $77 million in 2013. The accident year losses include severe losses of approximately $54
million in 2014 compared to $17 million in 2013. Net favorable loss reserve development was $77 million in 2014 compared to
$155 million in 2013, and included approximately $7 million of favorable loss reserve development from Storm Sandy
compared to $41 million in 2013. Foreign exchange did not have a significant impact on the pre-tax operating income
compared to 2013.