AIG 2013 Annual Report Download - page 299

The following table presents the reconciliation of activity in the Liability for unpaid claims and claims
adjustment expense:
Liability for unpaid claims and claims adjustment expense, beginning of year $ 91,145 $ 91,151
Reinsurance recoverable (20,320) (19,644)
Net liability for unpaid claims and claims adjustment expense, beginning of
year 70,825 71,507
Foreign exchange effect(a) (90) 353
Dispositions (11) –
Changes in net loss reserves due to retroactive asbestos reinsurance
transaction 90 (1,703)
Total 70,814 70,157
Losses and loss expenses incurred:
Current year 25,385 27,931
Prior years, other than accretion of discount(b) 421 195
Prior years, accretion of discount (63) 34
Total 25,743 28,160
Losses and loss expenses paid(c):
Current year 8,450 11,534
Prior years 19,325 15,958
Total 27,775 27,492
Balance, end of year:
Net liability for unpaid claims and claims adjustment expense 68,782 70,825
Reinsurance recoverable 19,209 20,320
Total $ 87,991 $ 91,145
(a) For the 2012 amounts, $847 million was reclassified from ‘‘Foreign exchange effect’’ to ‘‘Losses and loss expenses paid (current year)’’. The
impact of this reclassification was a decrease of $847 million for foreign exchange and loss expenses paid (current year), with no income statement
or balance sheet impact.
(b) In 2013, includes $144 million, $269 million, $498 million and $54 million related to excess casualty, environmental and pollution, primary
casualty and healthcare, respectively. In 2012, includes $157 million, $200 million, $531 million and $68 million related to excess casualty,
environmental and pollution, primary casualty and healthcare, respectively. In 2011, includes $(588) million, $385 million, $686 million and
$45 million related to excess casualty, environmental and pollution, primary casualty and healthcare, respectively
(c) Includes amounts related to dispositions through the date of disposition.
The net adverse development includes loss-sensitive business, for which we recognized $89 million, $54 million and
$172 million loss-sensitive premium adjustments for the years ended December 31, 2013, 2012 and 2011,
respectively.
At December 31, 2013, the liability for unpaid claims and claims adjustment expense reflects a net loss reserve
discount of $3.6 billion, including tabular and non-tabular calculations based upon the following assumptions:
• Certain asbestos business that was written by AIG Property Casualty is discounted, when allowed by the regulator
and when payments are fixed and determinable, based on the investment yields of the companies and the payout
pattern for this business.
• The tabular workers’ compensation discount is calculated using a 3.5 percent interest rate and the 1979 –
81 Decennial Mortality Table.
Discounting of Reserves
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AIG 2013 Form 10-K 281
ITEM 8 / NOTE 12. LIABILITY FOR UNPAID CLAIMS AND CLAIMS ADJUSTMENT EXPENSE, FUTURE
POLICY BENEFITS FOR LIFE AND ACCIDENT AND HEALTH INSURANCE CONTRACTS, AND
POLICYHOLDER CONTRACT DEPOSITS
Years Ended December 31,
(in millions) 2013 2012 2011
$ 87,991
(19,209)
68,782
(617)
(79)
22
68,108
22,171
557
(309)
22,419
7,431
18,780
26,211
64,316
17,231
$ 81,547
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