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 />
Notes to Consolidated Financial Statements Continued<br />
5. Reinsurance<br />
Life Insurance assumed represented less than 0.1 percent,<br />
Continued<br />
0.1 percent and 0.8 percent of gross Life Insurance in force at<br />
December 31, <strong>2007</strong>, 2006 and 2005, respectively, and Life<br />
General Insurance premiums written and earned were<br />
Insurance & Retirement Services premiums assumed represented<br />
<strong>com</strong>prised of the following:<br />
0.1 percent, 0.1 percent and 0.3 percent of gross premiums and<br />
Years Ended December 31, other considerations for the years ended December 31, <strong>2007</strong>,<br />
(in millions) <strong>2007</strong> 2006 2005<br />
2006 and 2005, respectively.<br />
Premiums written:<br />
<strong>AIG</strong>’s Domestic Life Insurance & Retirement Services opera-<br />
Direct $ 52,055 $ 49,609 $ 46,689 tions utilize internal and third-party reinsurance relationships to<br />
Assumed 6,743 6,671 6,036 manage insurance risks and to facilitate capital management<br />
Ceded (11,731) (11,414) (10,853) strategies. Pools of highly-rated third-party reinsurers are utilized<br />
Total $ 47,067 $ 44,866 $ 41,872 to manage net amounts at risk in excess of retention limits. <strong>AIG</strong>’s<br />
Domestic Life Insurance <strong>com</strong>panies also cede excess, non-<br />
Premiums earned:<br />
economic reserves carried on a statutory-basis only on certain<br />
Direct $ 50,403 $ 47,973 $ 45,794<br />
term and universal life insurance policies and certain fixed<br />
Assumed 6,530 6,449 5,921<br />
Ceded (11,251) (10,971) (10,906)<br />
annuities to an offshore affiliate.<br />
<strong>AIG</strong> generally obtains letters of credit in order to obtain<br />
Total $ 45,682 $ 43,451 $ 40,809<br />
statutory recognition of its inter<strong>com</strong>pany reinsurance transactions.<br />
For this purpose, <strong>AIG</strong> has a $2.5 billion syndicated letter of credit<br />
For the years ended December 31, <strong>2007</strong>, 2006 and 2005,<br />
facility outstanding at December 31, <strong>2007</strong>, all of which relates to<br />
reinsurance recoveries, which reduced loss and loss expenses<br />
life inter<strong>com</strong>pany reinsurance transactions.<br />
incurred, amounted to $9.0 billion, $8.3 billion and $20.7 billion,<br />
<strong>AIG</strong> is also a party to a 364-day bilateral revolving credit facility<br />
respectively.<br />
for an aggregate amount of $3.2 billion. The facility can be drawn<br />
Life Reinsurance<br />
in the form of letters of credit with terms of up to eight years. At<br />
December 31, <strong>2007</strong>, approximately $3.0 billion principal amount<br />
Life reinsurance is effected principally under yearly renewable of letters of credit are outstanding under this facility, of which<br />
term treaties. The premiums with respect to these treaties are approximately $2.1 billion relates to life inter<strong>com</strong>pany reinsurance<br />
considered prepaid reinsurance premiums and are recognized as transactions. <strong>AIG</strong> has also obtained approximately $377 million of<br />
a reduction of premiums earned over the contract period in<br />
letters of credit on a bilateral basis.<br />
proportion to the protection provided. Amounts recoverable from<br />
life reinsurers are estimated in a manner consistent with the Reinsurance Security<br />
assumptions used for the underlying policy benefits and are<br />
<strong>AIG</strong>’s third-party reinsurance arrangements do not relieve <strong>AIG</strong> from<br />
presented as a <strong>com</strong>ponent of reinsurance assets.<br />
its direct obligation to its insureds. Thus, a credit exposure exists<br />
Life Insurance & Retirement Services premiums were with respect to both general and life reinsurance ceded to the<br />
<strong>com</strong>prised of the following:<br />
extent that any reinsurer fails to meet the obligations assumed<br />
under any reinsurance agreement. <strong>AIG</strong> holds substantial collateral<br />
Years Ended December 31,<br />
(in millions) <strong>2007</strong> 2006 2005 as security under related reinsurance agreements in the form of<br />
funds, securities, and/or letters of credit. A provision has been<br />
Gross premiums $34,585 $32,247 $30,818<br />
recorded for estimated unrecoverable reinsurance. <strong>AIG</strong> has been<br />
Ceded premiums (1,778) (1,481) (1,317)<br />
largely successful in prior recovery efforts.<br />
Premiums $32,807 $30,766 $29,501 <strong>AIG</strong> evaluates the financial condition of its reinsurers and<br />
establishes limits per reinsurer through <strong>AIG</strong>’s Credit Risk Commit-<br />
Life Insurance recoveries, which reduced death and other<br />
tee. <strong>AIG</strong> believes that no exposure to a single reinsurer reprebenefits,<br />
approximated $1.1 billion, $806 million and $770 milsents<br />
an inappropriate concentration of risk to <strong>AIG</strong>, nor is <strong>AIG</strong>’s<br />
lion, respectively, for the years ended December 31, <strong>2007</strong>, 2006<br />
business substantially dependent upon any single reinsurer.<br />
and 2005.<br />
Life Insurance in-force ceded to other insurance<br />
<strong>com</strong>panies was as follows:<br />
At December 31,<br />
(in millions) <strong>2007</strong> 2006 2005<br />
Life Insurance in force<br />
ceded $402,654 $408,970 $365,082<br />
158 <strong>AIG</strong> <strong>2007</strong> Form 10-K