AIG 2015 Annual Report Download - page 139

ITEM 7 / INSURANCE RESERVES / NON-LIFE INSURANCE COMPANIES
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International Casualty (Excess and Primary Casualty) and Specialty
During 2015, we recognized $155 million of adverse prior year development, primarily due to three large product liability claims
in our Casualty and Specialty lines totaling approximately $115 million. Two of these claims arose in Japan, which is unusual
for our portfolio in that market.
During 2014 and 2013, we had $97 million and $91 million of favorable development, respectively. The favorable development
in each year was due to lower than expected loss emergence in many classes and countries outside the U.S., with the majority
from various countries in the EMEA region.
Financial Lines – International
During 2014 we implemented an enhanced claims operating model in Europe and Australasia which has provided our
actuaries with more detailed case reserve data and analysis, enabling AIG’s actuaries to react sooner to case development
than in prior years.
During 2015, we recognized $47 million of adverse prior year development, driven by increased claims emergence and related
updates to the assumptions for loss development factors and expected loss ratios used in the annual detailed valuation review
for these reserves, primarily related to Europe and Australasia risks.
During 2014, we recognized $182 million of adverse development in the international Financial Lines segments, driven by
large claims emergence in the U.K., Australasia and Europe. Multiple accident years contributed to this total, but it was
concentrated most heavily in accident years 2008-2011. The Australasia emergence was due to a number of specific large
losses in the Australia and New Zealand D&O business. In Europe, adverse prior year loss reserve development was
concentrated in the D&O class of business, where we have observed a greater incidence of severe claims compared with prior
years, and the Professional class of business, with large losses from one insured.
During 2013, we recognized $74 million of adverse development, all of which stemmed from losses in the D&O books in
Europe, UK and Australasia, with the other segments showing modest favorable development. The development we
recognized can be directly linked to a small number of specific claims booked throughout the year.
Natural Catastrophes
During 2015 and 2014, we experienced favorable property catastrophe prior year development of $52 million and $102 million,
respectively, in our U.S. and Canada business, primarily due to favorable development from several U.S. events in accident
year 2013. We also experienced favorable property catastrophe prior year loss reserve development of $44 million and $77
million from our international property class of business for 2015 and 2014, respectively.
During 2013, we experienced adverse development from Storm Sandy totaling $108 million, or 5.4 percent of the 2012
estimate. This development resulted from higher severities on a small number of large and complex commercial claims driven
by a number of factors including the extensive damage caused to properties in the downtown New York metropolitan area.
Mortgage Guaranty
Mortgage Guaranty business includes domestic first liens (96 percent of total reserves) and run-off books in second liens,
student loans and international.
During 2015, we recognized $69 million of favorable prior year loss reserve development driven by lower than expected
frequency due to improving cure rates. Post-claim recoveries also contributed to favorable prior year development.
During 2014, we recognized $104 million of favorable prior year loss reserve development driven primarily by the benefit of a
settlement with a mortgage lender, steady increases in year-over-year first lien cure rates, a reflection of the improved