2007 Annual Report - AIG.com

American International Group, Inc. and Subsidiaries
A summary of reserve activity, including estimates for applicable IBNR, relating to asbestos and environmental claims
separately and combined at December 31, 2007, 2006 and 2005 appears in the table below. The vast majority of such
claims arise from policies written in 1984 and prior years. The current environmental policies that AIG underwrites on a
claims-made basis have been excluded from the table below.
2007 2006 2005
(in millions) Gross Net Gross (e) Net Gross (e) Net
Asbestos:
Reserve for losses and loss expenses at beginning of year $4,523 $1,889 $4,501 $1,840 $2,622 $1,060
Losses and loss expenses incurred (a) 96 5 572 267 2,206 (b) 903 (b)
Losses and loss expenses paid (a) (755) (440) (550) (218) (327) (123)
Reserve for losses and loss expenses at end of year $3,864 $1,454 $4,523 $1,889 $4,501 $1,840
Environmental:
Reserve for losses and loss expenses at beginning of year $ 629 $ 290 $ 969 $ 410 $1,018 $ 451
Losses and loss expenses incurred (a) 10 13 (231) (59) 47 (c) 27 (c)
Losses and loss expenses paid (a) (124) (66) (109) (61) (96) (68)
Reserve for losses and loss expenses at end of year $ 515 $ 237 $ 629 $ 290 $ 969 $ 410
Combined:
Reserve for losses and loss expenses at beginning of year $5,152 $2,179 $5,470 $2,250 $3,640 $1,511
Losses and loss expenses incurred (a) 106 18 341 208 2,253 (d) 930 (d)
Losses and loss expenses paid (a) (879) (506) (659) (279) (423) (191)
Reserve for losses and loss expenses at end of year $4,379 $1,691 $5,152 $2,179 $5,470 $2,250
(a) All amounts pertain to policies underwritten in prior years, primarily to policies issued in 1984 and prior.
(b) Includes increases to gross losses and loss expense reserves of $2.0 billion and increases to net losses and loss expense reserves of $843 million
for the fourth quarter of 2005.
(c) Includes increases to gross losses and loss expense reserves of $56 million and increases to net losses and loss expense reserves of $30 million for
the fourth quarter of 2005.
(d) Includes increases to gross losses and loss expense reserves of $2.0 billion and increases to net losses and loss expense reserves of $873 million
for the fourth quarter of 2005.
(e) Gross amounts were revised from the previous presentation to reflect the inclusion of certain reserves not previously identified as asbestos and
environmental related. This revision had no effect on net reserves.
The gross and net IBNR included in the reserve for losses and loss expenses, relating to asbestos and environmental
claims separately and combined, at December 31, 2007, 2006 and 2005 were estimated as follows:
2007 2006 2005
(in millions) Gross Net Gross * Net Gross * Net
Asbestos $2,701 $1,145 $3,270 $1,469 $3,458 $1,465
Environmental 325 131 378 173 625 266
Combined $3,026 $1,276 $3,648 $1,642 $4,083 $1,731
* Gross amounts were revised from the previous presentation to reflect the inclusion of certain reserves not previously identified as asbestos and
environmental related. This revision had no effect on net reserves.
A summary of asbestos and environmental claims count activity for the years ended December 31, 2007, 2006 and
2005 was as follows:
2007 2006 2005
Asbestos Environmental Combined Asbestos Environmental Combined Asbestos Environmental Combined
Claims at beginning of year 6,878 9,442 16,320 7,293 9,873 17,166 7,575 8,216 15,791
Claims during year:
Opened 656 937 1,593 643 1,383 2,026 854 5,253 6,107
Settled (150) (179) (329) (150) (155) (305) (67) (219) (286)
Dismissed or otherwise
resolved (821) (2,548) (3,369) (908) (1,659) (2,567) (1,069) (3,377) (4,446)
Claims at end of year 6,563 7,652 14,215 6,878 9,442 16,320 7,293 9,873 17,166
AIG 2007 Form 10-K 61