AIG 2015 Annual Report Download - page 299

ITEM 8 / NOTE 12. INSURANCE LIABILITIES
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Policyholder Contract Deposits
The liability for Policyholder contract deposits is primarily recorded at accumulated value (deposits received and net transfers
from separate accounts, plus accrued interest credited at rates ranging from 0.2 percent to 9.0 percent at December 31, 2015,
less withdrawals and assessed fees). Deposits collected on investment-oriented products are not reflected as revenues,
because they are recorded directly to Policyholder contract deposits upon receipt. Amounts assessed against the contract
holders for mortality, administrative, and other services are included in revenues.
In addition to liabilities for universal life, fixed annuities, fixed options within variable annuities, annuities without life
contingencies, funding agreements and GICs, policyholder contract deposits also include our liability for (a) certain guaranteed
benefits and indexed features accounted for as embedded derivatives at fair value, (b) annuities issued in a structured
settlement arrangement with no life contingency and (c) certain contracts we have elected to account for at fair value. See
Note 13 herein for additional information on guaranteed benefits accounted for as embedded derivatives.
For universal life policies with secondary guarantees, we recognize certain liabilities in addition to policyholder account
balances. For universal life policies with secondary guarantees, as well as other universal life policies for which profits
followed by losses are expected at contract inception, a liability is recognized based on a benefit ratio of (a) the present value
of total expected payments, in excess of the account value, over the life of the contract, divided by (b) the present value of total
expected assessments over the life of the contract. For universal life policies without secondary guarantees, for which profits
followed by losses are first expected after contract inception, we establish a liability, in addition to policyholder account
balances, so that expected future losses are recognized in proportion to the emergence of profits in the earlier (profitable)
years. Universal life account balances as well as these additional liabilities related to universal life products are reported within
policyholder contract deposits in the Consolidated Balance Sheet.
Under a funding agreement-backed notes issuance program, an unaffiliated, non-consolidated statutory trust issues medium-
term notes to investors, which are secured by GICs issued to the trust by one of our Life Insurance Companies through our
Institutional Markets operating segment.
The following table presents Policyholder contract deposits of the U.S. Life Insurance Companies by product line:
At December 31,
(in millions) 2015 2014
Policyholder contract deposits:
Fixed Annuities $ 52,397 $ 53,370
Group Retirement 37,865 37,693
Life 14,028 13,717
Retirement Income Solutions 13,927 10,040
Institutional Markets 9,371 9,793
Total Policyholder contract deposits $ 127,588 $ 124,613
Other Policyholder Funds
Other policyholder funds include unearned revenue reserves (URR). URR consist of front-end loads on investment-oriented
contracts, representing those policy loads that are non-level and typically higher in initial policy years than in later policy years.
URR for investment-oriented contracts are generally deferred and amortized, with interest, in relation to the incidence of
estimated gross profits (EGPs) to be realized over the estimated lives of the contracts and are subject to the same adjustments
due to changes in the assumptions underlying EGPs as DAC. Amortization of URR is recorded in Policy fees.
Other policyholder funds also include provisions for future dividends to participating policyholders, accrued in accordance with
all applicable regulatory or contractual provisions. Participating life business represented approximately 2.2 percent of gross
insurance in force at December 31, 2015 and 2.4 percent of gross domestic premiums and other considerations in 2015. The
amount of annual dividends to be paid is approved locally by the boards of directors of the Life Insurance Companies.