AIG 2015 Annual Report Download - page 221

GLOSSARY
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Expense ratio Sum of acquisition expenses and general operating expenses, divided by net premiums earned.
First-Lien Priority over all other liens or claims on a property in the event of default on a mortgage.
General operating expense ratio General operating expenses divided by net premiums earned. General operating expenses
are those costs that are generally attributed to the support infrastructure of the organization and include but are not limited to
personnel costs, projects and bad debt expenses. General operating expenses exclude losses and loss adjustment expenses
incurred, acquisition expenses, and investment expenses.
GIC/GIA Guaranteed Investment Contract/Guaranteed Investment Agreement A contract whereby the seller provides a
guaranteed repayment of principal and a fixed or floating interest rate for a predetermined period of time.
G-SII Global Systemically Important Insurer An insurer that is deemed globally systemically important (that is, of such size,
market importance and global interconnectedness that the distress or failure of the insurer would cause significant dislocation
in the global financial system and adverse economic consequences across a range of countries) by the Financial Stability
Board, in consultation with and based on a methodology developed by the International Association of Insurance Supervisors.
IBNR Incurred But Not Reported Estimates of claims that have been incurred but not reported to us.
ISDA Master Agreement An agreement between two counterparties, which may have multiple derivative transactions with
each other governed by such agreement, that generally provides for the net settlement of all or a specified group of these
derivative transactions, as well as pledged collateral, through a single payment, in a single currency, in the event of a default
on, or affecting any, one derivative transaction or a termination event affecting all, or a specified group of, derivative
transactions.
LAE Loss Adjustment Expenses The expenses of settling claims, including legal and other fees and the portion of general
expenses allocated to claim settlement costs.
Loss Ratio Losses and loss adjustment expenses incurred divided by net premiums earned. Loss adjustment expenses are
directly attributed to settling and paying claims of insureds and include, but are not limited to, legal fees, adjuster’s fees, and
claims department personnel costs.
Loss reserve development The increase or decrease in incurred losses and loss adjustment expenses as a result of the re-
estimation of liability for unpaid losses and loss adjustment expenses at successive valuation dates for a given group of
claims.
Loss reserves Liability for unpaid losses and loss adjustment expenses. The estimated ultimate cost of settling claims
relating to insured events that have occurred on or before the balance sheet date, whether or not reported to the insurer at that
date.
LTV Loan-to-Value Ratio Principal amount of loan amount divided by appraised value of collateral securing the loan.
Master netting agreement An agreement between two counterparties who have multiple derivative contracts with each other
that provides for the net settlement of all contracts covered by such agreement, as well as pledged collateral, through a single
payment, in a single currency, in the event of default on or upon termination of any one such contract.
Net premiums written Represent the sales of an insurer, adjusted for reinsurance premiums assumed and ceded, during a
given period. Net premiums earned are the revenue of an insurer for covering risk during a given period. Net premiums written
are a measure of performance for a sales period, while Net premiums earned are a measure of performance for a coverage
period.
Nonbank SIFI Nonbank Systemically Important Financial Institutions Financial institutions are deemed nonbank systemically
important (that is, the failure of the financial institution could pose a threat to the financial stability of the United States) by the
Financial Stability Oversight Council based on a three-stage analytical process.
Noncontrolling interest The portion of equity ownership in a consolidated subsidiary not attributable to the controlling parent
company.
Policy fees An amount added to a policy premium, or deducted from a policy cash value or contract holder account, to reflect
the cost of issuing a policy, establishing the required records, sending premium notices and other related expenses.
Pool A reinsurance arrangement whereby all of the underwriting results of the pool members are combined and then shared
by each member in accordance with its pool participation percentage. Prior to January 1, 2014, AIG maintained two pools, the
admitted lines pool and the surplus lines pool. Effective January 1, 2014, these two pools were merged into the combined
pool.