AIG 2015 Annual Report Download - page 146

ITEM 7 / INSURANCE RESERVES / NON-LIFE INSURANCE COMPANIES
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Claim Counts — Asbestos and Environmental
The following table presents a summary of asbestos and environmental claims count activity:
As of or for the Years 2015 2014 2013
Ended December 31, Asbestos Environmental Combined Asbestos Environmental Combined Asbestos Environmental Combined
Claims at beginning of year 4,049 1,240 5,289 4,680 1,517 6,197 5,230 1,614 6,844
Claims during year:
Opened 279 209 488 130 126 256 83 306 389
Settled (310) (182) (492) (216) (163) (379) (194) (154) (348)
Dismissed or otherwise
resolved (509) (350) (859) (545) (240) (785) (439) (249) (688)
Other - - - - - - - - -
Claims at end of year 3,509 917 4,426 4,049 1,240 5,289 4,680 1,517 6,197
Survival Ratios — Asbestos and Environmental
The following table presents AIG’s survival ratios for asbestos and environmental claims at December 31, 2015, 2014 and
2013. The survival ratio is derived by dividing the current carried loss reserve by the average payments for the three most
recent calendar years for these claims. Therefore, the survival ratio is a simplistic measure estimating the number of years it
would take before the current ending loss reserves for these claims would be paid off using recent year average payments.
Many factors, such as aggressive settlement procedures, reinsurance commutations, mix of business and level of coverage
provided, have a significant effect on the amount of asbestos and environmental reserves and payments and the resulting
survival ratio. Additionally, we primarily base our determination of these reserves based on ground-up and top-down analyses,
and not on survival ratios. The net Asbestos survival ratio for 2015 was significantly impacted by both the increase in net loss
reserves as a result of our ground-up review, as well as the by the large ceded reinsurance commutation executed in the fourth
quarter of 2015, the proceeds of which were booked a negative paid loss.
The following table presents survival ratios for asbestos and environmental claims, separately and combined, which
were based upon a three-year average payment:
Years Ended December 31, 2015 2014 2013
Gross Net*Gross Net* Gross Net*
Survival ratios:
Asbestos 6.6 15.0 8.3 7.6 10.6 10.5
Environmental 7.6 6.4 5.0 4.3 4.6 3.9
Combined 6.8 13.1 7.9 7.1 9.8 9.4
* Survival ratios are calculated consistent with the basis on historical reserve excluding the effects of the NICO reinsurance transaction.
Life Insurance Companies DAC and Reserves
The following section provides discussion of deferred policy acquisition costs and insurance reserves for Life Insurance
Companies.
Update of Actuarial Assumptions
The Life Insurance Companies review and update estimated gross profit assumptions used to amortize DAC and related items
for investment-oriented products at least annually. Estimated gross profit assumptions include net investment income and
spreads, net realized capital gains and losses, fees, surrender charges, expenses, and mortality gains and losses. If the
assumptions used for estimated gross profits change significantly, DAC and related reserves (which may include VOBA, SIA,
guaranteed benefit reserves and unearned revenue reserve) are recalculated using the new assumptions, and any resulting