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SEGMENT INFORMATION
 12 Months Ended
Dec. 31, 2016
SEGMENT INFORMATION  
SEGMENT INFORMATION

3. Segment Information

We report our results of operations consistent with the manner in which our chief operating decision makers review the business to assess performance and allocate resources.

In the fourth quarter of 2016, we finalized our plan to reorganize our operating model into “modular”, more self-contained business units. Prior to the fourth quarter of 2016, we reported our results as follows:

  • Commercial Insurance business included our Property Casualty operating segment;
  • Consumer Insurance business included our Retirement, Life and Personal Insurance operating segments
  • Corporate and Other category consisted of businesses and items not allocated to our operating segments, including United Guaranty and Institutional Markets.

We now report our results of operations as follows:

Commercial Insurance

Commercial Insurance business is presented as two operating segments:

  • Liability and Financial Lines — Liability products include general liability, environmental, commercial automobile liability, workers’ compensation, excess casualty and crisis management insurance products. Liability also includes risk-sharing and other customized structured programs for large corporate and multinational customers. Financial Lines products include professional liability insurance for a range of businesses and risks, including directors and officers liability (D&O), fidelity, employment practices, fiduciary liability, cybersecurity risk, kidnap and ransom, and errors and omissions insurance (E&O).
  • Property and Special Risks — Property products include commercial, industrial and energy-related property insurance products and services that cover exposures to man-made and natural disasters, including business interruption. Specialty products include aerospace, political risk, trade credit, surety and marine insurance, and various small and medium sized enterprises insurance lines.

Consumer Insurance

Consumer Insurance business is presented as four operating segments:

  • Individual Retirement — consists of fixed annuities, fixed index annuities, variable annuities and retail mutual funds.
  • Group Retirement — consists of group mutual funds, group fixed annuities, group variable annuities, individual annuity and investment products, financial planning and advisory services.
  • Life Insurance — primary products in the U.S. include term life and universal life insurance.
  • Personal Insurance — consists of personal auto and property insurance, voluntary and sponsor-paid personal accident and supplemental health products for individuals, employees, associations and other organizations, a broad range of travel insurance products and services for leisure and business travelers as well as extended warranty insurance covering electronics, appliances, and HVAC industries.

Other Operations

The Other Operations category consists of:

  • Institutional Markets — consists of stable value wrap products, structured settlement and terminal funding annuities, corporate- and bank-owned life insurance and guaranteed investment contracts (GICs).
  • Income from assets held by AIG Parent and other corporate subsidiaries.
  • General operating expenses not attributable to specific reporting segments.
  • Interest expense.
  • United Guaranty — Mortgage insurance protects mortgage lenders and investors against the increased risk of borrower default related to high loan-to-value mortgages. The sale of this business was completed on December 31, 2016.
  • Fuji Life — consists of term insurance, life insurance, endowment policies and annuities. On November 14, 2016, we entered into an agreement to sell our Japan life insurance business, AIG Fuji Life Insurance Company, Ltd. (AFLI), to FWD Group, the insurance arm of Pacific Century Group.

Legacy Portfolio

The Legacy Portfolio segment consists of:

Legacy Insurance Lines represent exited or discontinued product lines, policy forms or distribution channels.

  • Legacy Property and Casualty Run-Off Insurance Lines — include excess workers’ compensation, asbestos and environmental exposures.
  • Legacy Life Insurance Run-Off Lines — include whole life, long term care and exited Accident & Health product lines. Also includes certain structured settlement, terminal funding and single premium immediate annuities written prior to April 2012.
  • Legacy Investments — include investment classes that AIG has placed into run-off (life settlements, Legacy Global Real Estate, the Direct Investment book) and equity-like securities with high yield/ high-risk characteristics.

On December 31, 2016, we completed the sale of UGC to Arch. See Note 1 for a further discussion.

In the second quarter of 2015, a United Guaranty subsidiary and certain of our property casualty companies entered into a 50 percent quota share reinsurance agreement whereby the United Guaranty subsidiary (1) ceded 50 percent of the risk relating to policies written in 2014 that were current as of January 1, 2015 and (2) ceded 50 percent of the risk relating to all policies written in 2015 and 2016, each in exchange for a 30 percent ceding commission and reimbursements of 50 percent of the losses and loss adjustment expenses incurred on covered policies. Beginning in the third quarter of 2016, the effect of this intercompany reinsurance arrangements is included in the results of Property and Special Risks and Other Operations for all periods presented. Previously, this arrangement was eliminated for purposes of segment reporting. Concurrent with the closing of the sale of UGC, we amended and restated this arrangement and expect the results of this arrangement to continue to be reported in Property and Special Risks.

Investment income of the Property Casualty Insurance Companies is attributed to the Liability and Financial Lines, Property and Special Risks and Personal Insurance operating segments based on an internal investment income allocation model. The model estimates investable funds based primarily on loss reserves and unearned premiums. Investment income of the Life Insurance Companies is attributed to the Individual Retirement, Group Retirement and Life Insurance operating segments as well as the Institutional Markets business and the Legacy Life Insurance Run-Off Lines based on invested assets in segregated product line portfolios; income from invested assets in excess of liabilities is allocated to product lines based on internal capital estimates.

We evaluate segment performance based on operating revenues and pre-tax operating income (loss). Operating revenues and pre-tax operating income (loss) is derived by excluding certain items from total revenues and net income (loss) attributable to AIG, respectively. See the table below for the items excluded from operating revenues and pre-tax operating income (loss).

Legal Entities

Certain of our management activities, such as investment management, enterprise risk management, liquidity management and capital management are conducted on a legal entity basis. We group our insurance-related legal entities into two categories: Property Casualty Insurance Companies, and Life Insurance Companies.

Property Casualty Insurance Companies include the following major operating companies: National Union Fire Insurance Company of Pittsburgh, Pa. (National Union); American Home Assurance Company (American Home); Lexington Insurance Company (Lexington); Fuji Fire and Marine Insurance Company Limited (Fuji Fire); American Home Assurance Company, Ltd. (American Home Japan); AIU Insurance Company, Ltd. (AIUI Japan); AIG Asia Pacific Insurance, Pte, Ltd.; and AIG Europe Limited.

Life Insurance Companies include the following major operating companies: American General Life Insurance Company (American General Life), The Variable Annuity Life Insurance Company (VALIC) and The United States Life Insurance Company in the City of New York (U.S. Life).

The following table presents AIG’s continuing operations by operating segment:

NetPre-Tax
TotalInvestmentInterestAmortizationOperating
(in millions) RevenuesIncomeExpenseof DACIncome (Loss)
2016
Commercial Insurance
Liability and Financial Lines$13,270$2,700$10$1,098$(2,649)
Property and Special Risks8,0985687951(86)
Total Commercial Insurance21,3683,268172,049(2,735)
Consumer Insurance
Individual Retirement5,7583,878492982,269
Group Retirement2,7692,14627129931
Life Insurance3,8181,03513182(37)
Personal Insurance11,704286112,072686
Total Consumer Insurance24,0497,3451002,6813,849
Other Operations4,01877098376(748)
Legacy Portfolio5,2502,9132601081,007
AIG Consolidation and elimination(494)(351)(100)(117)42
Total AIG Consolidated operating revenues and pre-tax
operating income$54,191$13,945$1,260$4,797$1,415
Reconciling Items from pre-tax operating income to
pre-tax income (loss):
Changes in fair value of securities used to hedge guaranteed
living benefits120120--120
Changes in benefit reserves and DAC, VOBA and SIA related to
net realized capital gains---(276)195
Other income (expense) - net----42
Loss on extinguishment of debt----(74)
Net realized capital gains(1,944)---(1,944)
Income from divested businesses----545
Non-operating litigation reserves and settlements44---41
Reserve development related to non-operating run-off insurance
business-----
Net loss reserve discount benefit (charge)----427
Pension expense related to a one-time lump sum payment to
former employees----(147)
Restructuring and other costs----(694)
Other(44)----
Revenues and Pre-tax income (loss)$52,367$14,065$1,260$4,521$(74)
2015
Commercial Insurance
Liability and Financial Lines$14,684$2,818$5$1,439$(661)
Property and Special Risks8,45260339101,226
Total Commercial Insurance23,1363,42182,349565
Consumer Insurance
Individual Retirement6,4503,805274311,812
Group Retirement2,8342,19215501,100
Life Insurance3,7711,0347311(51)
Personal Insurance11,47532551,97068
Total Consumer Insurance24,5307,356542,7622,929
Other Operations4,6507061,03049(567)
Legacy Portfolio5,7712,9282801021,133
AIG Consolidation and elimination(496)(315)(91)(26)(76)
Total AIG Consolidated operating revenues and pre-tax
operating income$57,591$14,096$1,281$5,236$3,984

Reconciling Items from pre-tax operating income to
pre-tax income:
Changes in fair value of securities used to hedge guaranteed
living benefits(43)(43)--(43)
Changes in benefit reserves and DAC, VOBA and SIA related to
net realized capital gains----(15)
Other income (expense) - net----(233)
Loss on extinguishment of debt----(756)
Net realized capital gains776---776
Loss from divested businesses(48)---(59)
Non-operating litigation reserves and settlements94---82
Reserve development related to non-operating run-off insurance
business----(30)
Net loss reserve discount benefit (charge)----71
Restructuring and other costs----(496)
Other(43)----
Revenues and Pre-tax income$58,327$14,053$1,281$5,236$3,281
2014
Commercial Insurance
Liability and Financial Lines$16,012$3,410$1$1,464$3,044
Property and Special Risks8,650845-1,0331,203
Total Commercial Insurance24,6624,25512,4974,247
Consumer Insurance
Individual Retirement6,7394,103143152,306
Group Retirement3,0052,3498311,229
Life Insurance3,6301,1004221290
Personal Insurance12,33937212,088381
Total Consumer Insurance25,7137,924272,6554,206
Other Operations3,5967491,29145(958)
Legacy Portfolio7,3533,245390812,576
AIG Consolidation and elimination(323)(354)9(4)(19)
Total AIG Consolidated operating revenues and pre-tax
operating income$61,001$15,819$1,718$5,274$10,052
Reconciling Items from pre-tax operating income to
pre-tax income:
Changes in fair value of securities used to hedge guaranteed
living benefits260260--260
Changes in benefit reserves and DAC, VOBA and SIA related to
net realized capital gains---56(217)
Loss on extinguishment of debt----(2,282)
Net realized capital gains739---739
Loss from divested businesses1,602---2,169
Non-operating litigation reserves and settlements804---258
Reserve development related to non-operating run-off insurance
business-----
Net loss reserve discount benefit (charge)----(478)
Restructuring and other costs-----
Other-----
Revenues and Pre-tax income$64,406$16,079$1,718$5,330$10,501

The following table presents AIG’s year-end identifiable assets and capital expenditures by legal entity category:

Year-End Identifiable AssetsCapital Expenditures
(in millions)2016201520162015
Property Casualty Insurance Companies$118,268$114,134$685$965
Life Insurance Companies207,145258,00385102
Other184,704136,487349655
AIG Consolidation and Elimination(11,853)(11,782)--
Total Assets$498,264$496,842$1,119$1,722

The following table presents AIG’s consolidated total revenues and real estate and other fixed assets, net of accumulated depreciation, by major geographic area:

Real Estate and Other Fixed Assets,
Total Revenues*Net of Accumulated Depreciation
(in millions)201620152014201620152014
U.S.$37,405$41,623$40,291$734$912$819
Europe4,6135,7726,140145171154
Japan3,6364,2933,641524449400
Other6,7136,63914,3341,2571,6031,327
Consolidated$52,367$58,327$64,406$2,660$3,135$2,700

* Revenues are generally reported according to the geographic location of the reporting unit.