AIG 2015 Annual Report Download - page 133

ITEM 7 / INSURANCE RESERVES / NON-LIFE INSURANCE COMPANIES

133
reserves for accident year 2015 increased the discount by $182 million in 2015. These increases were partially offset by a
$332 million reduction for accident years 2014 and prior, primarily from accretion of discount on reserves during 2015.
On January 1, 2014, the Non-Life Insurance Companies merged their two internal pooling arrangements into one pool, and
changed the participation percentages of the pool members resulting in a reallocation of reserves from New York domiciled
companies to those domiciled in Pennsylvania and Delaware. As a result of these changes in the participation percentages
and domiciliary states of the participants of the combined pool, the Non-Life Insurance Companies recognized a discount
benefit of $110 million in the first quarter of 2014.
Annual Reserving Conclusion
AIG net loss reserves represent our best estimate of the liability for net losses and loss adjustment expenses as of December
31, 2015. While we regularly review the adequacy of established loss reserves, there can be no assurance that our recorded
loss reserves will not develop adversely in future years and materially exceed our loss reserves as of December 31, 2015. In
our opinion, such adverse development and resulting increase in reserves are not likely to have a material adverse effect on
our consolidated financial condition, although such events could have a material adverse effect on our consolidated results of
operations for an individual reporting period.
The following table presents the rollforward of net loss reserves:
Years Ended December 31,
(in millions) 2015 2014 2013
Net liability for unpaid losses and loss adjustment expenses
at beginning of year $ 61,612 $ 64,316 $ 68,782
Foreign exchange effect (1,429) (1,061) (617)
Other, including dispositions - - (79)
Change due to retroactive asbestos reinsurance 20 141 22
Losses and loss adjustment expenses incurred:
Current year, undiscounted 20,308 21,279 22,171
Prior years unfavorable development, undiscounted* 4,119 703 557
Change in discount (71) 478 (309)
Losses and loss adjustment expenses incurred 24,356 22,460 22,419
Losses and loss adjustment expenses paid:
Current year 5,751 6,358 7,431
Prior years 18,205 17,886 18,780
Losses and loss adjustment expenses paid 23,956 24,244 26,211
Net liability for unpaid losses and loss adjustment expenses
at end of year $ 60,603 $ 61,612 $ 64,316
* See tables below for details of prior year development by business unit, accident year and major class of business.