AIG 2015 Annual Report Download - page 58

ITEM 7 / USE OF NON-GAAP MEASURES
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After-tax operating income attributable to AIG is derived by excluding the following items from net income attributable to
AIG:
• deferred income tax valuation allowance releases and
charges;
• changes in fair value of securities used to hedge
guaranteed living benefits;
• changes in benefit reserves and deferred policy
acquisition costs (DAC), value of business acquired
(VOBA), and sales inducement assets (SIA) related to
net realized capital gains and losses;
• other income and expense — net, related to Corporate
and Other run-off insurance lines;
• loss on extinguishment of debt;
• net realized capital gains and losses;
• non-qualifying derivative hedging activities, excluding
net realized capital gains and losses;
 income or loss from discontinued operations;
 income and loss from divested businesses, including:
 gain on the sale of International Lease Finance
Corporation (ILFC); and
 certain post-acquisition transaction expenses
incurred by AerCap Holdings N.V. (AerCap) in
connection with its acquisition of ILFC and the
difference between expensing AerCap’s maintenance
rights assets over the remaining lease term as
compared to the remaining economic life of the
related aircraft and related tax effects;
 legacy tax adjustments primarily related to certain
changes in uncertain tax positions and other tax
adjustments;
• non-operating litigation reserves and settlements;
• reserve development related to non-operating run-off
insurance business; and
• restructuring and other costs related to initiatives
designed to reduce operating expenses, improve
efficiency and simplify our organization.
We use the following operating performance measures within our Commercial Insurance and Consumer Insurance
reportable segments as well as Corporate and Other.
• Commercial Insurance: Property Casualty and Mortgage Guaranty; Consumer Insurance: Personal Insurance
• Pre-tax operating income: includes both underwriting income and loss and net investment income, but excludes net
realized capital gains and losses, other income and expense — net, and non-operating litigation reserves and
settlements. Underwriting income and loss is derived by reducing net premiums earned by losses and loss adjustment
expenses incurred, acquisition expenses and general operating expenses.
• Ratios: We, along with most property and casualty insurance companies, use the loss ratio, the expense ratio and the
combined ratio as measures of underwriting performance. These ratios are relative measurements that describe, for
every $100 of net premiums earned, the amount of losses and loss adjustment expenses, and the amount of other
underwriting expenses that would be incurred. A combined ratio of less than 100 indicates underwriting income and a
combined ratio of over 100 indicates an underwriting loss. The underwriting environment varies across countries and
products, as does the degree of litigation activity, all of which affect such ratios. In addition, investment returns, local
taxes, cost of capital, regulation, product type and competition can have an effect on pricing and consequently on
profitability as reflected in underwriting income and associated ratios.
• Accident year loss and combined ratios, as adjusted: both the accident year loss and combined ratios, as adjusted,
exclude catastrophe losses and related reinstatement premiums, prior year development, net of premium adjustments,
and the impact of reserve discounting. Catastrophe losses are generally weather or seismic events having a net impact
in excess of $10 million each.