2007 Annual Report - AIG.com

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American International Group, Inc. and Subsidiaries Notes to Consolidated Financial Statements Continued 18. Employee Benefits Continued The accumulated benefit obligations for both non-U.S. and U.S. pension benefit plans at December 31, 2007 and 2006 were as follows: (in millions) 2007 2006 Non-U.S. pension benefit plans $1,504 $1,384 U.S. pension benefit plans $2,752 $2,689 Defined benefit pension plan obligations in which the projected benefit obligation was in excess of the related plan assets and in which the accumulated benefit obligation was in excess of the related plan assets at December 31, 2007 and 2006 were as follows: PBO exceeds fair value of plan assets ABO exceeds fair value of plan assets Non-U.S. Plans U.S. Plans Non-U.S. Plans U.S. Plans (in millions) 2007 2006 2007 2006 2007 2006 2007 2006 Projected benefit obligation $1,676 $1,486 $368 $3,079 $1,415 $1,465 $240 $240 Accumulated benefit obligation 1,462 1,323 317 2,689 1,277 1,311 206 204 Fair value of plan assets 855 740 113 2,760 652 723 — 11 The following table presents the components of net periodic benefit cost recognized in income and other amounts recognized in Accumulated other comprehensive income (loss) with respect to the defined benefit pension plans and other postretirement benefit plans for the year ended December 31, 2007 and 2006 (no amounts related to the adoption of FAS 158 were recognized in Accumulated other comprehensive income (loss) for the year ended 2005): Pension Postretirement Non-U.S. Plans U.S. Plans Non-U.S. Plans U.S. Plans (in millions) 2007 2006 2005 2007 2006 2005 2007 2006 2005 2007 2006 2005 Components of net periodic benefit cost: Service cost $ 90 $ 78 $ 71 $ 135 $130 $ 111 $ 5 $4 $4 $11 $ 6 $ 5 Interest cost 50 36 32 186 169 153 3 2 2 15 11 11 Expected return on assets (36) (28) (21) (216) (201) (180) — — — — — — Amortization of prior service cost (10) (9) (10) (3) (3) (3) — — — (2) (6) (6) Amortization of transitional obligation 1 1 1 — — — — — — — — — Recognition of net actuarial (gains)/losses 9 16 21 43 75 55 — — — — — — Other 1 1 7 14 6 1 — — — — — — Net periodic benefit cost $105 $ 95 $101 $ 159 $176 $ 137 $ 8 $6 $6 $24 $11 $10 Total recognized in Accumulated other comprehensive income (loss) $ (10) $ 38 — $(155) $ 24 — $(2) $— — $(7) $— $— Total recognized in net periodic benefit cost and other comprehensive income $ 95 $133 $101 $ 4 $200 $ 137 $ 6 $6 $6 $17 $11 $10 The estimated net loss and prior service credit that will be amortized from Accumulated other comprehensive income into net periodic benefit cost over the next fiscal year are $31 million and $11 million, respectively, for AIG’s combined defined benefit pension plans. For the defined benefit postretirement plans, the estimated amortization from Accumulated other comprehensive income for net loss, prior service credit and transition obligation that will be amortized into net periodic benefit cost over the next fiscal year will be less than $5 million in the aggregate. 190 AIG 2007 Form 10-K
American International Group, Inc. and Subsidiaries 18. Employee Benefits Continued Assumptions The weighted average assumptions used to determine the benefit obligations at December 31, 2007 and 2006 are as follows: Pension Postretirement Non-U.S. Plans U.S. Plans Non-U.S. Plans U.S. Plans 2007 Discount rate 2.00 - 11.00% 6.50% 2.75 - 6.50% 6.50% Rate of compensation increase 1.50 - 9.00% 4.25% 3.00 - 3.50% 4.25% 2006 Discount rate 2.25 - 10.75% 6.00% 4.00 - 5.75% 6.00% Rate of compensation increase 1.50 - 10.00% 4.25% 3.00% 4.25% The benefit obligations for non-U.S. plans reflect those assumptions that were most appropriate for the local economic environments of each of the subsidiaries providing such benefits. Assumed health care cost trend rates for the U.S. plans were as follows: 2007 2006 Following year: Medical (before age 65) 9.00% 8.00% Medical (age 65 and older) 7.00% 6.70% Ultimate rate to which cost increase is assumed to decline 5.00% 5.00% Year in which the ultimate trend rate is reached: Medical (before age 65) 2015 2013 Medical (age 65 and older) 2015 2013 A one percent point change in the assumed healthcare cost trend rate would have the following effect on AIG’s postretirement benefit obligations at December 31, 2007 and 2006: One Percent One Percent Increase Decrease (in millions) 2007 2006 2007 2006 Non-U.S. plans $12 $10 $(8) $(7) U.S. plans $ 6 $ 3 $(5) $(3) AIG’s postretirement plans provide benefits primarily in the form of defined employer contributions rather than defined employer benefits. Changes in the assumed healthcare cost trend rate are subject to caps for U.S. plans. AIG’s non-U.S. postretirement plans are not subject to caps. AIG 2007 Form 10-K 191
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AMERICAN INTERNATIONAL GROUP, INC.
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FINANCIAL HIGHLIGHTS (in millions,
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overall financial condition, althou
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Group Executive Committee We are ad
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AIG’s life insurance network is t
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We have also begun to address the e
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WHAT WE SEE The ability to see and
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The Major Accounts Practice within
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Around the world, the middle class
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WE SEE GROWTH OPPORTUNITIES IN EMER
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To grow the strength of the AIG glo
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Since 2003, the AIG Disaster Relief
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RESPECT Respect encompasses how we
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Life Insurance & Retirement Service
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Domestic Brokerage Group— Gross P
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In the summer of 2007, widespread f
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in gross premiums written. It launc
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It grew new business premiums from
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emerging markets for its services,
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ILFC—Revenues by Region Total = $
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AIG Investments acquired a 94 perce
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and changing interest rates, as wel
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American International Group, Inc.
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UNITED STATES SECURITIES AND EXCHAN
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Index of Notes to Consolidated Fina
Page 193 and 194: American International Group, Inc.
Page 243: American International Group, Inc.
Page 275 and 276: SHAREHOLDER INFORMATION Corporate H
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2007 Annual Report - AIG.com

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