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STATUTORY FINANCIAL DATA AND RESTRICTIONS
12 Months Ended
Dec. 31, 2019
STATUTORY FINANCIAL DATA AND RESTRICTIONS  
STATUTORY FINANCIAL DATA AND RESTRICTIONS

20. Statutory Financial Data and Restrictions

The following table presents statutory net income (loss) and capital and surplus for our General Insurance companies and our Life and Retirement companies in accordance with statutory accounting practices:

(in millions)

 

2019

 

2018

 

2017

Years Ended December 31,

 

 

 

 

 

 

Statutory net income (loss)(a)(b):

 

 

 

 

 

 

General Insurance companies:

 

 

 

 

 

 

Domestic

$

1,482

$

(1,030)

$

(978)

Foreign

 

1,382

 

558

 

(318)

Total General Insurance companies

$

2,864

$

(472)

$

(1,296)

Life and Retirement companies:

 

 

 

 

 

 

Domestic

$

310

$

671

$

1,066

Foreign

 

3,356

 

(553)

 

21

Total Life and Retirement companies

$

3,666

$

118

$

1,087

At December 31,

 

 

 

 

 

 

Statutory capital and surplus(a)(b):

 

 

 

 

 

 

General Insurance companies:

 

 

 

 

 

 

Domestic

$

17,433

$

17,435

 

 

Foreign

 

16,230

 

15,709

 

 

Total General Insurance companies

$

33,663

$

33,144

 

 

Life and Retirement companies:

 

 

 

 

 

 

Domestic

$

9,227

$

9,454

 

 

Foreign

 

5,264

 

1,809

 

 

Total Life and Retirement companies

$

14,491

$

11,263

 

 

Aggregate minimum required statutory capital and surplus:

 

 

 

 

 

 

General Insurance companies:

 

 

 

 

 

 

Domestic

$

4,178

$

4,393

 

 

Foreign

 

8,645

 

8,456

 

 

Total General Insurance companies

$

12,823

$

12,849

 

 

Life and Retirement companies:

 

 

 

 

 

 

Domestic

$

3,383

$

3,301

 

 

Foreign

 

1,229

 

1,159

 

 

Total Life and Retirement companies

$

4,612

$

4,460

 

 

(a)Excludes discontinued operations and other divested businesses. Statutory capital and surplus and net income (loss) with respect to foreign operations are as of November 30.

(b)The 2019 amounts reflect our best estimate of the statutory net income, capital and surplus as of the date of AIG’s Form 10-K filing. In aggregate, the 2018 General Insurance companies and Life and Retirement companies statutory net income increased by $1.1 billion and the 2018 General Insurance companies and Life and Retirement companies statutory capital and surplus decreased by $1.4 billion, compared to the amounts previously reported in our Annual Report on Form 10-K for the year ended December 31, 2018, due to finalization of statutory filings and revision of prior period number presented herein.

Our insurance subsidiaries file financial statements prepared in accordance with statutory accounting practices prescribed or permitted by domestic and foreign insurance regulatory authorities. The principal differences between statutory financial statements and financial statements prepared in accordance with U.S. GAAP for domestic companies are that statutory financial statements do not reflect DAC, some bond portfolios may be carried at amortized cost, investment impairments are determined in accordance with statutory accounting practices, assets and liabilities are presented net of reinsurance, policyholder liabilities are generally valued using more conservative assumptions and certain assets are non-admitted.

For domestic insurance subsidiaries, aggregate minimum required statutory capital and surplus is based on the greater of the RBC level that would trigger regulatory action or minimum requirements per state insurance regulation. Capital and surplus requirements of our foreign subsidiaries differ from those prescribed in the U.S., and can vary significantly by jurisdiction. At both December 31, 2019 and 2018, all domestic and foreign insurance subsidiaries individually exceeded the minimum required statutory capital and surplus requirements and all domestic insurance subsidiaries individually exceeded RBC minimum required levels.

At December 31, 2019 and 2018, our domestic insurance subsidiaries used the following permitted practices that resulted in reported statutory surplus or risk-based capital that is significantly different from the statutory surplus or risk based capital that would have been reported had NAIC statutory accounting practices or the prescribed regulatory accounting practices of their respective state regulator been followed in all respects:

In 2015, a domestic life insurance subsidiary domiciled in Texas adopted a permitted statutory accounting practice to report derivatives used to hedge interest rate risk on product-related embedded derivatives at amortized cost instead of fair value. In 2018, the permitted practice was expanded to include additional derivative instruments utilized for the same purpose and to also include an additional domestic life insurance subsidiary domiciled in Texas. This permitted practice resulted in an increase in the statutory surplus of our subsidiaries of $438 million at December 31, 2018. This permitted practice expired for periods after September 30, 2019 and was not renewed.

Effective December 31, 2019 and subsequent reporting periods through September 30, 2020, a domestic life insurance subsidiary domiciled in Texas adopted a permitted statutory accounting practice to recognize an admitted asset related to the notional value of coverage defined in an excess of loss (XoL) reinsurance agreement, net of specified amounts. This reinsurance agreement has a 20 year term and provides coverage to the subsidiary for aggregate claims incurred during the agreement term associated with guaranteed minimum withdrawal benefits on certain fixed index annuities exceeding an attachment point defined in the treaty. The permitted practice allows the subsidiary to manage its reserves in a manner more in line with anticipated principle-based reserving requirements once they have been developed. This permitted practice resulted in an increase in the statutory surplus of this subsidiary of approximately $285 million at December 31, 2019. The subsidiary may seek continuation of the permitted practice beyond September 30, 2020, subject to the approval of its domiciliary regulator.

As described in Note 14, our domestic property and casualty insurance subsidiaries domiciled in New York, Pennsylvania and Delaware discount non-tabular workers’ compensation reserves based on applicable prescribed or approved regulations, or in the case of our Delaware subsidiary, based on a permitted practice. This practice did not have a material impact on our statutory surplus, statutory net income (loss) or risk-based capital.

Regulation XXX requires U.S. life insurers to establish additional statutory reserves for term life insurance policies with long-term premium guarantees and universal life policies with secondary guarantees (ULSGs). In addition, Guideline AXXX clarifies the application of Regulation XXX as to these guarantees, including certain ULSGs.

Domestic life insurance subsidiaries manage the capital impact of statutory reserve requirements under Regulation XXX and Guideline AXXX through unaffiliated and affiliated reinsurance transactions. The affiliated life insurers providing reinsurance capacity for such transactions are fully licensed insurance companies and are not formed under captive insurance laws.

Under the other intercompany reinsurance arrangement, certain Regulation XXX and Guideline AXXX reserves related to a closed block of in-force business are ceded to an affiliated off-shore life insurer, which is licensed as a class E insurer under Bermuda law. This reinsurance arrangement does not meet the criteria for reinsurance accounting under U.S. GAAP; therefore, deposit accounting is applied by the assuming off-shore life insurer. Letters of credit are used to support the credit for reinsurance provided by the affiliated off-shore life insurer.

For additional information regarding these letters of credit see Note 9 herein.

Subsidiary Dividend Restrictions

Payments of dividends to us by our insurance subsidiaries are subject to certain restrictions imposed by regulatory authorities. With respect to our domestic insurance subsidiaries, the payment of any dividend requires formal notice to the insurance department in which the particular insurance subsidiary is domiciled. For example, unless permitted by the Superintendent of Financial Services, property casualty companies domiciled in New York generally may not pay dividends to shareholders that, in any 12-month period, exceed the lesser of 10 percent of such company’s statutory policyholders’ surplus or 100 percent of its “adjusted net investment income,” for the previous year, as defined. Generally, less severe restrictions applicable to both property casualty and life insurance companies exist in most of the other states in which our insurance subsidiaries are domiciled. Under the laws of many states, an insurer may pay a dividend without prior approval of the insurance regulator when the amount of the dividend is below certain regulatory thresholds. Other foreign jurisdictions may restrict the ability of our foreign insurance subsidiaries to pay dividends. Various other regulatory restrictions also limit cash loans and advances to us by our subsidiaries.

Largely as a result of these restrictions, approximately $44.1 billion of the statutory capital and surplus of our consolidated insurance subsidiaries were restricted from transfer to AIG Parent without prior approval of state insurance regulators at December 31, 2019.

To our knowledge, no AIG insurance company is currently on any regulatory or similar “watch list” with regard to solvency.

Parent Company Dividend Restrictions

At December 31, 2019, our ability to pay dividends is not subject to any significant contractual restrictions, but remains subject to regulatory restrictions.

For additional information about our ability to pay dividends to our shareholders see Note 18 herein.