2007 Annual Report - AIG.com
2007 Annual Report - AIG.com
2007 Annual Report - AIG.com
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American International Group, Inc. and Subsidiaries<br />
sion to a new valuation system, as well as unlocking future<br />
assumptions and experience updates.<br />
Individual variable annuities operating in<strong>com</strong>e decreased in<br />
<strong>2007</strong> <strong>com</strong>pared to 2006 largely due to an increase in DAC<br />
amortization and sales inducement costs related to a $61 million<br />
adjustment reflecting changes in actuarial estimates. Net realized<br />
capital losses increased due to changes in the value of certain<br />
annuity product guarantees and related hedges associated with<br />
living benefit features and higher other-than-temporary impairment<br />
charges.<br />
(in millions) <strong>2007</strong> 2006<br />
Individual fixed annuities<br />
Balance at beginning of year $ 52,685 $ 53,331<br />
Deposits 5,085 5,331<br />
Surrenders and other withdrawals (7,565) (6,379)<br />
Death benefits (1,667) (1,649)<br />
Net inflows (outflows) (4,147) (2,697)<br />
Change in fair value of underlying<br />
investments, interest credited,<br />
net of fees 1,970 2,051<br />
2006 and 2005 Comparison Balance at end of year $ 50,508 $ 52,685<br />
Total Domestic Retirement Services operating in<strong>com</strong>e increased in Individual variable annuities<br />
2006 <strong>com</strong>pared to 2005 principally due to higher partnership and Balance at beginning of year $ 31,093 $ 28,267<br />
yield enhancement in<strong>com</strong>e in the individual fixed annuity product Deposits 4,472 4,266<br />
line. Group retirement products total revenues were flat in 2006 Surrenders and other withdrawals (4,158) (3,894)<br />
as improvements in partnership in<strong>com</strong>e and variable annuity fees<br />
Death benefits (497) (486)<br />
were offset by increased net realized capital losses. The flat<br />
Net inflows (outflows) (183) (114)<br />
revenues, coupled with higher amortization of deferred acquisition Change in fair value of underlying<br />
costs related to internal replacements of existing contracts into<br />
investments, interest credited,<br />
new contracts, resulted in a decrease in group retirement<br />
net of fees 2,198 2,940<br />
operating in<strong>com</strong>e. Individual variable annuity total revenues in- Balance at end of year $ 33,108 $ 31,093<br />
creased in 2006, primarily driven by higher variable annuity fees<br />
Total Domestic Retirement Services<br />
resulting from an increase in assets under management. Partially<br />
Balance at beginning of year $148,135 $140,910<br />
offsetting these higher fees was an increase in DAC amortization<br />
Deposits 17,088 16,422<br />
resulting from increased surrender activity in the first half of Surrenders and other withdrawals (18,274) (16,379)<br />
2006. In 2006, the individual annuities-runoff operating in<strong>com</strong>e Death benefits (2,426) (2,387)<br />
increased, even though the underlying reserves decreased due to<br />
Net inflows (outflows) (3,612) (2,344)<br />
increased net spreads as a result of higher investment yields<br />
Change in fair value of underlying<br />
partially offset by increased realized capital losses.<br />
investments, interest credited,<br />
The following table presents the account value roll<br />
net of fees 7,202 9,569<br />
forward for Domestic Retirement Services by product for Balance at end of year, excluding<br />
<strong>2007</strong> and 2006: runoff 151,725 148,135<br />
Individual annuities runoff<br />
(in millions) <strong>2007</strong> 2006<br />
5,690 6,326<br />
Group retirement products<br />
Balance at end of year $157,415 $154,461<br />
Balance at beginning of year $64,357 $59,312 General and separate account<br />
Deposits — annuities 5,898 5,464 reserves and mutual funds<br />
Deposits — mutual funds 1,633 1,361 General account reserve $ 88,801 $ 92,070<br />
Total Deposits 7,531 6,825<br />
Separate account reserve 60,461 55,988<br />
Surrenders and other withdrawals (6,551) (6,106) Total general and separate account<br />
Death benefits (262) (252) reserves 149,262 148,058<br />
Net inflows (outflows) 718 467<br />
Group retirement mutual funds 8,153 6,403<br />
Change in fair value of underlying<br />
investments, interest credited,<br />
net of fees 3,034 4,578<br />
Total reserves and mutual funds<br />
<strong>2007</strong> and 2006 Comparison<br />
$157,415 $154,461<br />
Balance at end of year $68,109 $64,357<br />
Domestic Retirement Services deposits increased in <strong>2007</strong> <strong>com</strong>pared<br />
to 2006 primarily reflecting higher deposits in group<br />
retirement products and individual variable annuities, partially<br />
offset by a decrease in individual fixed annuities. Group retirement<br />
deposits increased 10 percent in <strong>2007</strong> <strong>com</strong>pared to 2006 as a<br />
result of an increased focus on sales management and acquiring<br />
outside deposits. Mutual funds deposits increased 20 percent<br />
while group annuity deposits increased 8 percent. Over time,<br />
<strong>AIG</strong> <strong>2007</strong> Form 10-K 73
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