AIG 2015 Annual Report Download - page 97

ITEM 7 / RESULTS OF OPERATIONS / CONSUMER INSURANCE
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insurance laws for new sales. As a result, new sales of fixed annuity products generally have minimum interest rate guarantees
of one percent.
Renewal crediting rate management is done under contractual provisions in annuity products that were designed to allow
crediting rates to be reset at pre-established intervals in accordance with state and federal laws and subject to minimum
crediting rate guarantees. Retirement will continue to adjust crediting rates on in-force business to mitigate the pressure on
spreads from declining base yields. In addition to deferred annuity products, certain traditional long-duration products for which
Retirement does not have the ability to adjust interest rates, such as payout annuities, are exposed to reduced earnings and
potential loss recognition reserve increases in a sustained low interest rate environment.
As of December 31, 2015, Retirement’s fixed annuity reserves, which include fixed options offered within variable annuities
sold in the Group Retirement and Retirement Income Solutions product lines as well as reserves of the Fixed Annuities product
line, had minimum guaranteed interest rates ranging from one percent to 5.5 percent, with the higher rates representing
guarantees on older in-force products. As indicated in the table below, approximately 73 percent of annuity account values
were at their minimum crediting rates as of December 31, 2015, compared to 71 percent at December 31, 2014. As a result of
disciplined pricing on new business and the run-off of older business with higher minimum crediting rates, fixed annuity
account values having contractual minimum guaranteed rates above one percent decreased to 74 percent of total fixed annuity
reserves at December 31, 2015 from 79 percent at December 31, 2014.
The following table presents fixed annuity account values by contractual minimum guaranteed interest rate and
current crediting rates:
Current Crediting Rates
December 31, 2015 1-50 Basis More than 50
Contractual Minimum Guaranteed At Contractual Points Above Basis Points
Interest Rate Minimum Minimum Above Minimum
(in millions) Guarantee Guarantee Guarantee Total
Fixed annuities
*
1% $ 5,896 $ 6,340 $ 12,635 $ 24,871
> 1% - 2% 12,659 2,341 2,974 17,974
> 2% - 3% 30,611 473 1,067 32,151
> 3% - 4% 12,231 50 10 12,291
> 4% - 5% 7,671 - 4 7,675
> 5% - 5.5% 202 - 5 207
Total $ 69,270 $ 9,204 $ 16,695 $ 95,169
Percentage of total 73 % 10 % 17 % 100 %
* Fixed annuities shown include fixed options within variable annuities sold in Group Retirement and Retirement Income Solutions product lines.
Retirement Premiums and Deposits, Surrenders and Net Flows
Premiums
For Retirement, premiums primarily represent amounts received on life-contingent payout annuities. Premiums and deposits is
a non-GAAP financial measure that includes, in addition to direct and assumed premiums, deposits received on investment-
type annuity contracts and mutual funds.
The following table presents a reconciliation of Retirement premiums and deposits to GAAP premiums:
Years Ended December 31,
(in millions) 2015 2014 2013
Premiums and deposits* $ 25,241 $ 24,023 $ 23,729
Deposits (25,078) (23,903) (23,690)
Other 5 167 149
Premiums $ 168 $ 287 $ 188