*36740700000* PROPERTY AND CASUALTY COMPANIES - ASSOCIATION EDITION ANNUAL STATEMENT FOR THE YEAR ENDED DECEMBER 3, 07 OF THE CONDITION AND AFFAIRS OF THE AIG Insurance Company - Puerto Rico NAIC Group Code 00 00 NAIC Company Code 3674 Employer's ID Number 66-03993 (Current) (Prior) Organized under the Laws of Commonwealth of Puerto Rico, State of Domicile or Port of Entry PR Country of Domicile United States of America Incorporated/Organized 0/7/97 Commenced Business 07/08/974 Statutory Home Office 50 Muñoz Rivera Avenue, San Juan, PR, US 0098-0000 (Street and Number) (City or Town, State, Country and Zip Code) Main Administrative Office 50 Muñoz Rivera Avenue (Street and Number) San Juan, PR, US 0098-0000, 787-767-6400 (City or Town, State, Country and Zip Code) (Area Code) (Telephone Number) Mail Address P O Box 08, San Juan, PR, US 00908-8 (Street and Number or P.O. Box) (City or Town, State, Country and Zip Code) Primary Location of Books and Records 50 Muñoz Rivera Avenue (Street and Number) San Juan, PR, US 0098-0000, 787-767-6400 (City or Town, State, Country and Zip Code) (Area Code) (Telephone Number) Internet Website Address www.aig.com.pr Statutory Statement Contact Alismar Delgado, 787-767-5947 (Name) (Area Code) (Telephone Number) alismar.delgado@aig.com, 787-767-6704 (E-mail Address) (FAX Number) President Sergio Carillo OFFICERS Senior Vice President & CFO Alexis R. Sánchez Pérez Secretary Ada M. Lugo Oliveras Assistant Treasurer Miguel Díaz Rodríguez OTHER Marie L. Rodríguez Falek, Vice President Gustavo Sarabia Bihari, Vice President Lara López Valentín, Assistant Secretary DIRECTORS OR TRUSTEES Sergio Carillo Lara López Valentín Margarita López Blasini Alexis R. Sánchez Pérez Tanya Sánchez Alvarez State of County of Commonwealth of Puerto Rico Commonwealth of Puerto Rico SS: The officers of this reporting entity being duly sworn, each depose and say that they are the described officers of said reporting entity, and that on the reporting period stated above, all of the herein described assets were the absolute property of the said reporting entity, free and clear from any liens or claims thereon, except as herein stated, and that this statement, together with related exhibits, schedules and explanations therein contained, annexed or referred to, is a full and true statement of all the assets and liabilities and of the condition and affairs of the said reporting entity as of the reporting period stated above, and of its income and deductions therefrom for the period ended, and have been completed in accordance with the NAIC Annual Statement Instructions and Accounting Practices and Procedures manual except to the extent that: () state law may differ; or, () that state rules or regulations require differences in reporting not related to accounting practices and procedures, according to the best of their information, knowledge and belief, respectively. Furthermore, the scope of this attestation by the described officers also includes the related corresponding electronic filing with the NAIC, when required, that is an exact copy (except for formatting differences due to electronic filing) of the enclosed statement. The electronic filing may be requested by various regulators in lieu of or in addition to the enclosed statement. Marie L. Rodríguez Falek Alexis R. Sánchez Pérez Gustavo Sarabia Bihari Vice President Senior Vice President & CFO Vice President a. Is this an original filing? Yes [ X ] No [ ] Subscribed and sworn to before me this b. If no, day of. State the amendment number. Date filed 04/6/08 3. Number of pages attached Sworn to before me on April 6, 08, in San Juan, Puerto Rico, by Marie L. Rodríguez Falek, Guatavo Sarabia Bihari, and Alexis R. Sánchez Pérez, all of legal age, married, in their capacity as Vice President, Vice President, and Senior Vice-President & CFO of AIG Insurance Company - Puerto Rico, respectively, residents of Guaynabo, San Juan and Trujillo Alto, respectively, all of Puerto Rico, which, by not knowing them personally, I identified them by their driver's license number 780797, 6075, 44446, respectively, issued by the commonwealth of Puerto Rico.
ASSETS Assets Current Year Nonadmitted Assets 3 Net Admitted Assets (Cols. - ) Prior Year 4 Net Admitted Assets. Bonds (Schedule D) 98,649,88 98,649,88 4,7,69. Stocks (Schedule D):. Preferred stocks 0 0. Common stocks,04,399 60,790,043,609,790,875 3. Mortgage loans on real estate (Schedule B): 3. First liens 0 0 3. Other than first liens 0 0 4. Real estate (Schedule A): 4. Properties occupied by the company (less $ encumbrances) 0 0 4. Properties held for the production of income (less $ encumbrances) 0 0 4.3 Properties held for sale (less $ encumbrances) 0 0 5. Cash ($ 6,684,907, Schedule E - Part ), cash equivalents ($,488,546, Schedule E - Part ) and short-term investments ($, Schedule DA) 8,73,453 8,73,453 0,580,45 6. Contract loans (including $ premium notes) 0 0 7. Derivatives (Schedule DB) 0 0 8. Other invested assets (Schedule BA) 0 0 9. Receivable for securities 0 0 0. Securities lending reinvested collateral assets (Schedule DL) 0 0. Aggregate write-ins for invested assets 0 0 0 0. Subtotals, cash and invested assets (Lines to ) 08,07,680 60,790 07,866,890 7,08,956 3. Title plants less $ charged off (for Title insurers only) 0 0 4. Investment income due and accrued 837,74 837,74,58,875 5. Premiums and considerations: 5. Uncollected premiums and agents' balances in the course of collection 4,57,8 433,460 3,84,35 4,933,36 5. Deferred premiums and agents' balances and installments booked but deferred and not yet due (including $ earned but unbilled premiums) 0 0 5.3 Accrued retrospective premiums ($ ) and 6. Reinsurance: contracts subject to redetermination ($ ) 0 0 6. Amounts recoverable from reinsurers 5,648,38 5,648,38 5,64,34 6. Funds held by or deposited with reinsured companies 0 0 6.3 Other amounts receivable under reinsurance contracts 0 0 7. Amounts receivable relating to uninsured plans 0 0 8. Current federal and foreign income tax recoverable and interest thereon 0 0 8. Net deferred tax asset 5,88,66 3,65,980,9,636,5,937 9. Guaranty funds receivable or on deposit 0 0 0. Electronic data processing equipment and software 03,473 03,473 76,889. Furniture and equipment, including health care delivery assets ($ ),09,85,09,85 0 0. Net adjustment in assets and liabilities due to foreign exchange rates 0 0 3. Receivables from parent, subsidiaries and affiliates 78,393 78,393 0 0 4. Health care ($ ) and other amounts receivable 0 0 5. Aggregate write-ins for other than invested assets,073,58,073,58 0 0 6. Total assets excluding Separate Accounts, Segregated Accounts and Protected Cell Accounts (Lines to 5) 37,768,438 7,57,966 30,50,47 4,598,307 7. From Separate Accounts, Segregated Accounts and Protected Cell Accounts 0 0 8. Total (Lines 6 and 7) 37,768,438 7,57,966 30,50,47 4,598,307 0. 0. 03. DETAILS OF WRITE-INS 98. Summary of remaining write-ins for Line from overflow page 0 0 0 0 99. Totals (Lines 0 thru 03 plus 98)(Line above) 0 0 0 0 50. Prepaids, Other Accounts Receivable 47,55 47,55 0 0 50. Transfer Suspense Accounts 5,44 5,44 0 0 503. Amounts Billed and Receivable under High Deductible Policies 380,56 380,56 0 0 598. Summary of remaining write-ins for Line 5 from overflow page 50,000 50,000 0 0 599. Totals (Lines 50 thru 503 plus 598)(Line 5 above),073,58,073,58 0 0
LIABILITIES, SURPLUS AND OTHER FUNDS Current Year Prior Year. Losses (Part A, Line 35, Column 8) 4,668,354 6,07,77. Reinsurance payable on paid losses and loss adjustment expenses (Schedule F, Part, Column 6) 0 0 3. Loss adjustment expenses (Part A, Line 35, Column 9) 3,806,40 5,50,490 4. Commissions payable, contingent commissions and other similar charges 468,3 955,333 5. Other expenses (excluding taxes, licenses and fees) 0,970,534,30,474 6. Taxes, licenses and fees (excluding federal and foreign income taxes) 97,79 39,565 7. Current federal and foreign income taxes (including $ 530,4 on realized capital gains (losses)) 934,794,580,4 7. Net deferred tax liability 8. Borrowed money $ and interest thereon $ 9. Unearned premiums (Part A, Line 38, Column 5) (after deducting unearned premiums for ceded reinsurance of $ 5,074,000 and including warranty reserves of $ and accrued accident and health experience rating refunds including $ for medical loss ratio rebate per the Public Health Service Act) 6,660,465 8,8,3 0. Advance premium. Dividends declared and unpaid:. Stockholders 440,667. Policyholders. Ceded reinsurance premiums payable (net of ceding commissions) 7,430,000 3,360,000 3. Funds held by company under reinsurance treaties (Schedule F, Part 3, Column 9) 0 0 4. Amounts withheld or retained by company for account of others 47,6 447,706 5. Remittances and items not allocated 6. Provision for reinsurance (including $ 0 certified) (Schedule F, Part 8) 439,5 3,46 7. Net adjustments in assets and liabilities due to foreign exchange rates 8. Drafts outstanding 9. Payable to parent, subsidiaries and affiliates 6,7,99 3,740,585 0. Derivatives 0 0. Payable for securities. Payable for securities lending 3. Liability for amounts held under uninsured plans 4. Capital notes $ and interest thereon $ 5. Aggregate write-ins for liabilities,49,009 5,36,75 6. Total liabilities excluding protected cell liabilities (Lines through 5) 43,757,57 50,5,863 7. Protected cell liabilities 8. Total liabilities (Lines 6 and 7) 43,757,57 50,5,863 9. Aggregate write-ins for special surplus funds 55,438,40 6,478,789 30. Common capital stock,600,000,600,000 3. Preferred capital stock 3. Aggregate write-ins for other than special surplus funds 0 0 33. Surplus notes 34. Gross paid in and contributed surplus 7,973,70 9,090,70 35. Unassigned funds (surplus) 0,74,085 7,0,935 36. Less treasury stock, at cost: 36. shares common (value included in Line 30 $ ) 36. shares preferred (value included in Line 3 $ ) 37. Surplus as regards policyholders (Lines 9 to 35, less 36) (Page 4, Line 39) 86,753,5 9,37,444 38. TOTALS (Page, Line 8, Col. 3) 30,50,47 4,598,307 DETAILS OF WRITE-INS 50. Deferred net commission 64,36 990,435 50. Other liabilities and unprocessed items 398,6 3,88,497 503. Guaranty fund assessments payable 45,07 454,793 598. Summary of remaining write-ins for Line 5 from overflow page 0 0 599. Totals (Lines 50 thru 503 plus 598)(Line 5 above),49,009 5,36,75 90. Reserve for catastrophe insurance losses pursuant to chapter 5 of Insurance Code of Puerto Rico 55,438,40 6,478,789 90. 903. 998. Summary of remaining write-ins for Line 9 from overflow page 0 0 999. Totals (Lines 90 thru 903 plus 998)(Line 9 above) 55,438,40 6,478,789 30. 30. 303. 398. Summary of remaining write-ins for Line 3 from overflow page 0 0 399. Totals (Lines 30 thru 303 plus 398)(Line 3 above) 0 0 3
STATEMENT OF INCOME Current Year UNDERWRITING INCOME Prior Year. Premiums earned (Part, Line 35, Column 4),830,65 5,83,830 DEDUCTIONS:. Losses incurred (Part, Line 35, Column 7),737,499,35,904 3. Loss adjustment expenses incurred (Part 3, Line 5, Column ) (57,375) 47,606 4. Other underwriting expenses incurred (Part 3, Line 5, Column ) 6,406, 7,637,566 5. Aggregate write-ins for underwriting deductions 0 0 6. Total underwriting deductions (Lines through 5) 8,986,335 9,0,076 7. Net income of protected cells 8. Net underwriting gain or (loss) (Line minus Line 6 plus Line 7),844,80 6,8,754 INVESTMENT INCOME 9. Net investment income earned (Exhibit of Net Investment Income, Line 7),448,897,670,579 0. Net realized capital gains or (losses) less capital gains tax of $ (Exhibit of Capital Gains (Losses) ) (,65,0) (495,665). Net investment gain (loss) (Lines 9 + 0) (,0,33),74,94 OTHER INCOME. Net gain (loss) from agents or premium balances charged off (amount recovered $ amount charged off $ ) 0 0 3. Finance and service charges not included in premiums 4. Aggregate write-ins for miscellaneous income 0 0 5. Total other income (Lines through 4) 0 0 6. Net income before dividends to policyholders, after capital gains tax and before all other federal and foreign income taxes (Lines 8 + + 5),64,967 7,987,668 7. Dividends to policyholders 8. Net income, after dividends to policyholders, after capital gains tax and before all other federal and foreign income taxes (Line 6 minus Line 7),64,967 7,987,668 9. Federal and foreign income taxes incurred,36,959,974,843 0. Net income (Line 8 minus Line 9)(to Line ) 35,008 5,0,85 CAPITAL AND SURPLUS ACCOUNT. Surplus as regards policyholders, December 3 prior year (Page 4, Line 39, Column ) 9,37,444 85,550,99. Net income (from Line 0) 35,008 5,0,85 3. Net transfers (to) from Protected Cell accounts 4. Change in net unrealized capital gains or (losses) less capital gains tax of $ 58,83,34,73 (3,00) 5. Change in net unrealized foreign exchange capital gain (loss) 6. Change in net deferred income tax (55,545) (47,598) 7. Change in nonadmitted assets (Exhibit of Nonadmitted Assets, Line 8, Col. 3),495,576,008,76 8. Change in provision for reinsurance (Page 3, Line 6, Column minus Column ) (7,968) 69,6 9. Change in surplus notes 30. Surplus (contributed to) withdrawn from protected cells 3. Cumulative effect of changes in accounting principles 3. Capital changes: 3. Paid in 3. Transferred from surplus (Stock Dividend) 3.3 Transferred to surplus 33. Surplus adjustments: 33. Paid in 33. Transferred to capital (Stock Dividend) 33.3 Transferred from capital 34. Net remittances from or (to) Home Office (,7,000),00,70 35. Dividends to stockholders (440,667) 36. Change in treasury stock (Page 3, Lines 36. and 36., Column minus Column ) 0 0 37. Aggregate write-ins for gains and losses in surplus (8,64,03) (90,049) 38. Change in surplus as regards policyholders for the year (Lines through 37) (4,69,9) 5,8,45 39. Surplus as regards policyholders, December 3 current year (Line plus Line 38) (Page 3, Line 37) 86,753,5 9,37,444 050. 050. 0503. DETAILS OF WRITE-INS 0598. Summary of remaining write-ins for Line 5 from overflow page 0 0 0599. Totals (Lines 050 thru 0503 plus 0598)(Line 5 above) 0 0 40. 40. 403. 498. Summary of remaining write-ins for Line 4 from overflow page 0 0 499. Totals (Lines 40 thru 403 plus 498)(Line 4 above) 0 0 370. Reserve for catastrophe insurance losses pursuant to chapter 5 of Insurance Code of Puerto Rico (8,9,690) 370. Post Retirement SSAP 9 Transition Balance (557,6) (7,95) 3703. Out of Period 440,667 3798. Summary of remaining write-ins for Line 37 from overflow page (7,847) (6,854) 3799. Totals (Lines 370 thru 3703 plus 3798)(Line 37 above) (8,64,03) (90,049) 4
CASH FLOW Current Year Prior Year Cash from Operations. Premiums collected net of reinsurance 5,,665 5,98,33. Net investment income 3,43,673 3,5,07 3. Miscellaneous income 0 0 4. Total (Lines through 3) 8,56,338 8,70,403 5. Benefit and loss related payments 4,0,99 3,969,980 6. Net transfers to Separate Accounts, Segregated Accounts and Protected Cell Accounts 0 0 7. Commissions, expenses paid and aggregate write-ins for deductions 9,966,333 7,34,435 8. Dividends paid to policyholders 0 0 9. Federal and foreign income taxes paid (recovered) net of $,965,000 tax on capital gains (losses),97,307 976,964 0. Total (Lines 5 through 9) 7,059,559,6,379. Net cash from operations (Line 4 minus Line 0) (8,533,) 6,449,04 Cash from Investments. Proceeds from investments sold, matured or repaid:. Bonds 64,848,5 8,45,0. Stocks,6,34 0.3 Mortgage loans 0 0.4 Real estate 0 0.5 Other invested assets 0 0.6 Net gains or (losses) on cash, cash equivalents and short-term investments 0 0.7 Miscellaneous proceeds 0 0.8 Total investment proceeds (Lines. to.7) 67,074,49 8,45,0 3. Cost of investments acquired (long-term only): 3. Bonds 50,937,3 9,403,506 3. Stocks 0 46,060 3.3 Mortgage loans 0 0 3.4 Real estate 0 0 3.5 Other invested assets 0 0 3.6 Miscellaneous applications 0 0 3.7 Total investments acquired (Lines 3. to 3.6) 50,937,3 9,864,566 4. Net increase (decrease) in contract loans and premium notes 0 0 5. Net cash from investments (Line.8 minus Line 3.7 minus Line 4) 6,37,07 (9,43,446) Cash from Financing and Miscellaneous Sources 6. Cash provided (applied): 6. Surplus notes, capital notes 0 0 6. Capital and paid in surplus, less treasury stock (,7,000),00,70 6.3 Borrowed funds 0 0 6.4 Net deposits on deposit-type contracts and other insurance liabilities 0 0 6.5 Dividends to stockholders 440,667 0 6.6 Other cash provided (applied) (8,453,8) 5,43,39 7. Net cash from financing and miscellaneous sources (Lines 6. to 6.4 minus Line 6.5 plus Line 6.6) (0,00,795) 6,45, RECONCILIATION OF CASH, CASH EQUIVALENTS AND SHORT-TERM INVESTMENTS 8. Net change in cash, cash equivalents and short-term investments (Line, plus Lines 5 and 7) (,406,999) 3,450,690 9. Cash, cash equivalents and short-term investments: 9. Beginning of year 0,580,45 7,9,76 9. End of period (Line 8 plus Line 9.) 8,73,453 0,580,45 Note: Supplemental disclosures of cash flow information for non-cash transactions: 5
UNDERWRITING AND INVESTMENT EXHIBIT Line of Business PART - PREMIUMS EARNED Net Premiums Written per Column 6, Part B Unearned Premiums Dec. 3 Prior Year - per Col. 3, Last Year s Part 3 Unearned Premiums Dec. 3 Current Year - per Col. 5 Part A 4 Premiums Earned During Year (Cols. + - 3). Fire 60,430 93,949 94,44 360,35. Allied lines 838,368 70,84 99,97,58,635 3. Farmowners multiple peril 0 0 4. Homeowners multiple peril,9 0 764,57 5. Commercial multiple peril 347,456 83,638 0,533 49,56 6. Mortgage guaranty 0 0 8. Ocean marine 30,534 35,43 5,9 4,838 9. Inland marine (33,349) 6,6 5,46 (30,549) 0. Financial guaranty 0 0. Medical professional liability - occurrence 0 0. Medical professional liability - claims-made 0 0. Earthquake 75,38 66,055 34,966 666,7 3. Group accident and health,7,49 8,039 6,64 4. Credit accident and health (group and individual) 0 0 5. Other accident and health 6 0 6 6. Workers' compensation 53,833 64,30 44,976 73,087 7. Other liability - occurrence,46,96,30,347,004,9,443,5 7. Other liability - claims-made 5,657,87 4,6,364 4,00,9 6,76,35 7.3 Excess workers' compensation 0 0 8. Products liability - occurrence 76,944 06,696 3,597 70,043 8. Products liability - claims-made 0 0 9., 9. Private passenger auto liability 0 0 0 9.3, 9.4 Commercial auto liability 58,787 30,85 7, 567,48. Auto physical damage 3,04 0,936 56,534 77,46. Aircraft (all perils) 0 0 3. Fidelity 409,50 38,738 96,705 45,553 4. Surety (,60) 3 (,030) 6. Burglary and theft,333 0,8 9,6 3,499 7. Boiler and machinery 6,9 3,78 8,35 3,35 8. Credit 0 0 9. International 0 0 30. Warranty 0 0 3. Reinsurance - nonproportional assumed property 0 0 3. Reinsurance - nonproportional assumed liability 0 0 33. Reinsurance - nonproportional assumed financial lines 0 0 34. Aggregate write-ins for other lines of business 0 0 0 0 35. TOTALS 9,669,867 8,8,3 6,660,465,830,65 340. 340. 3403. DETAILS OF WRITE-INS 3498. Summary of remaining write-ins for Line 34 from overflow page 0 0 0 0 3499. Totals (Lines 340 thru 3403 plus 3498)(Line 34 above) 0 0 0 0 6
UNDERWRITING AND INVESTMENT EXHIBIT Line of Business PART A - RECAPITULATION OF ALL PREMIUMS 3 Amount Unearned (Running One Year or Less from Date of Policy) (a) Amount Unearned (Running More Than One Year from Date of Policy) (a) Earned But Unbilled Premium 4 Reserve for Rate Credits and Retrospective Adjustments Based on Experience 5 Total Reserve for Unearned Premiums Cols. + + 3 + 4. Fire 94,44 94,44. Allied lines 99,97 99,97 3. Farmowners multiple peril 0 4. Homeowners multiple peril 764 764 5. Commercial multiple peril 0,533 0,533 6. Mortgage guaranty 0 8. Ocean marine 5,9 5,9 9. Inland marine 5,46 5,46 0. Financial guaranty 0. Medical professional liability - occurrence 0. Medical professional liability - claims-made 0. Earthquake 34,966 34,966 3. Group accident and health 8,039 8,039 4. Credit accident and health (group and individual) 0 5. Other accident and health 0 6. Workers' compensation 44,976 44,976 7. Other liability - occurrence,004,9,004,9 7. Other liability - claims-made 4,00,9 4,00,9 7.3 Excess workers' compensation 0 8. Products liability - occurrence 3,597 3,597 8. Products liability - claims-made 0 9., 9. Private passenger auto liability 0 9.3, 9.4 Commercial auto liability 7, 7,. Auto physical damage 56,534 56,534. Aircraft (all perils) 0 3. Fidelity 96,705 96,705 4. Surety 6. Burglary and theft 9,6 9,6 7. Boiler and machinery 8,35 8,35 8. Credit 0 9. International 0 30. Warranty 0 3. Reinsurance - nonproportional assumed property 0 3. Reinsurance - nonproportional assumed liability 0 33. Reinsurance - nonproportional assumed financial lines 0 34. Aggregate write-ins for other lines of business 0 0 0 0 0 35. TOTALS 6,660,465 0 0 0 6,660,465 36. Accrued retrospective premiums based on experience 37. Earned but unbilled premiums 38. Balance (Sum of Line 35 through 37) 6,660,465 340. 340. 3403. DETAILS OF WRITE-INS 3498. Summary of remaining write-ins for Line 34 from overflow page 0 0 0 0 0 3499. Totals (Lines 340 thru 3403 plus 3498)(Line 34 above) 0 0 0 0 0 (a) State here basis of computation used in each case 7
UNDERWRITING AND INVESTMENT EXHIBIT PART B - PREMIUMS WRITTEN Line of Business Reinsurance Assumed Reinsurance Ceded 6 3 4 5 Net Premiums Written Direct Business (a) From Affiliates From Non-Affiliates To Affiliates To Non-Affiliates Cols. ++3-4-5. Fire 4,600,94,350 4,9,5,79 60,430. Allied lines 7,95,84 6,749 5,570,70 903,95 838,368 3. Farmowners multiple peril 0 0 4. Homeowners multiple peril 7,3 4,9,9 5. Commercial multiple peril,06,734 759,78 347,456 6. Mortgage guaranty 0 0 8. Ocean marine 388,64 6,754 96,354 30,534 9. Inland marine 0,567,68 0,784,70 4,76 (33,349) 0. Financial guaranty 0 0. Medical professional liability - occurrence 0. Medical professional liability - claims-made 0. Earthquake 4,687, 9,450 3,93,739 497,694 75,38 3. Group accident and health 06,039 93,37,7 4. Credit accident and health (group and individual) 0 0 5. Other accident and health 6 6 6. Workers' compensation 53,004 99,7 53,833 7. Other liability - occurrence 6,84,503 5,695,307,46,96 7. Other liability - claims-made 8,368,958,7,086 5,657,87 7.3 Excess workers' compensation 0 0 8. Products liability - occurrence,034,75 757,77 76,944 8. Products liability - claims-made 0 9., 9. Private passenger auto liability 0 0 9.3, 9.4 Commercial auto liability,547,734,08,947 58,787. Auto physical damage 38,08 05,94 3,04. Aircraft (all perils) 0 0 3. Fidelity,0,988 63,468 409,50 4. Surety,00 3,6 (,60) 6. Burglary and theft 3,006 8,673,333 7. Boiler and machinery 97,95 37,54 33,505 6,9 8. Credit 0 0 9. International 0 30. Warranty 0 0 3. Reinsurance - nonproportional assumed property XXX 0 3. Reinsurance - nonproportional assumed liability XXX 0 33. Reinsurance - nonproportional assumed financial lines XXX 0 34. Aggregate write-ins for other lines of business 0 0 0 0 0 0 35. TOTALS 58,387,579 0 7,549 46,977,48,767,843 9,669,867 340. 340. 3403. DETAILS OF WRITE-INS 3498. Summary of remaining write-ins for Line 34 from overflow page 0 0 0 0 0 0 3499. Totals (Lines 340 thru 3403 plus 3498)(Line 34 above) 0 0 0 0 0 0 (a) Does the company's direct premiums written include premiums recorded on an installment basis? Yes [ ] No [ ] If yes:. The amount of such installment premiums $. Amount at which such installment premiums would have been reported had they been reported on an annualized basis $ 8
9 ANNUAL STATEMENT FOR THE YEAR 07 OF THE AIG Insurance Company - Puerto Rico UNDERWRITING AND INVESTMENT EXHIBIT PART - LOSSES PAID AND INCURRED Losses Paid Less Salvage 5 6 7 8 3 4 Net Losses Unpaid Current Year (Part A, Col. 8) Losses Incurred Current Year (Cols. 4 + 5-6) Percentage of Losses Incurred (Col. 7, Part ) to Premiums Earned (Col. 4, Part ) Reinsurance Reinsurance Net Payments Net Losses Unpaid Line of Business Direct Business Assumed Recovered (Cols. + -3 ) Prior Year. Fire 80,749 07,760 7,989,000 69,70 (607,7) (68.7). Allied lines 85,83,633 78,5,387 7,598,46 9,53 (344,766) 7,95,65 63.8 3. Farmowners multiple peril 0 0 0 0 0.0 4. Homeowners multiple peril 9,75 33,88 85,987 0 3,756 8,3 5,385. 5. Commercial multiple peril,,45 85,595 368,80 4,59 383,649 09,700 48.8 6. Mortgage guaranty 0 0 0 0 0.0 8. Ocean marine 9,30 50, 4,008 677 34,653 7,03 6. 9. Inland marine 753,67 708,569 45,0 9,578 (59,93) 4,603 (66.9) 0. Financial guaranty 0 0 0 0 0.0. Medical professional liability - occurrence 0 0 0 0.0. Medical professional liability - claims-made 0 0 0 0.0. Earthquake 9,89 5,09 4,80 55 5 3,74 0.6 3. Group accident and health 54,66 9,85 6,34,434 64,553 0, 5. 4. Credit accident and health (group and individual) 0 0 0 0 0.0 5. Other accident and health 4,993 4,993 0 6,767 (,774) (45,84.6) 6. Workers' compensation 0 0 0 (337) 337 0.5 7. Other liability - occurrence 4,084,678 3,808,034 76,644,0,45,706,859 (30,070) (.) 7. Other liability - claims-made 8,37,05 5,665,686,705,59,54,00,707,84 3,5,355 50. 7.3 Excess workers' compensation 0 0 0 0 0.0 8. Products liability - occurrence 44,000 4,75,75 3,04 68,49 (53,56) (9.8) 8. Products liability - claims-made 0 0 0 0.0 9., 9. Private passenger auto liability 0 0 3,69,3 (9,063) 0.0 9.3, 9.4 Commercial auto liability 79,5 330,78 46,074 337,66 93,307 (4,067) (0.). Auto physical damage 70,03 74,38 95,695 85,4 74,639 4.. Aircraft (all perils) 0 0 0 0 0.0 3. Fidelity 5,078 49,337 8,74 8,44 360,65 (59,470) (3.) 4. Surety 0 0 390,598 433,954 (43,356) 4,09.3 6. Burglary and theft (7,96) (7,85) (46) 0 84 (30) (.7) 7. Boiler and machinery 7,770 7,360 40 0 3,40 (,830) (39.7) 8. Credit 0 0 0 0 0.0 9. International 0 0 0 0.0 30. Warranty 0 0 0 0 0.0 3. Reinsurance - nonproportional assumed property XXX 0 0 0 0.0 3. Reinsurance - nonproportional assumed liability XXX 0 0 0 0.0 33. Reinsurance - nonproportional assumed financial lines XXX 0 0 0 0.0 34. Aggregate write-ins for other lines of business (7,747,466) 0 0 (7,747,466) 0 0 (7,747,466) 0.0 35. TOTALS 95,63,900 0 9,067,038 4,096,86 4,668,354 6,07,77,737,499 3. DETAILS OF WRITE-INS 340. Catastrophe Reserve Recovery (7,747,466) (7,747,466) (7,747,466) 340. 3403. 3498. Summary of remaining write-ins for Line 34 from overflow page 0 0 0 0 0 0 0 3499. Totals (Lines 340 thru 3403 plus 3498)(Line 34 above) (7,747,466) 0 0 (7,747,466) 0 0 (7,747,466)
0 ANNUAL STATEMENT FOR THE YEAR 07 OF THE AIG Insurance Company - Puerto Rico UNDERWRITING AND INVESTMENT EXHIBIT PART A - UNPAID LOSSES AND LOSS ADJUSTMENT EXPENSES Reported Losses Incurred But Not Reported 8 9 3 4 5 6 7 Deduct Reinsurance Recoverable Net Losses Excl. Incurred But Not Reported (Cols. + - 3) Net Unpaid Loss Adjustment Expenses Reinsurance Reinsurance Reinsurance Net Losses Unpaid Line of Business Direct Assumed Direct Assumed Ceded (Cols. 4 + 5 + 6-7). Fire 3,88,88,000,000 500. Allied lines 708,48,94 708,48,86 8 34,3 305,39 9,53 30,578 3. Farmowners multiple peril 0 0 4. Homeowners multiple peril,80,75,80,75 0 0 0 0 845 5. Commercial multiple peril 0,907,03 0,744,486 6,545 34,954 7,970 4,59 95,364 6. Mortgage guaranty 0 0 8. Ocean marine 07,687 07,00 677 50,438 50,438 677 9,83 9. Inland marine 45,05,599 45,05,40 89,863,05,853,636 9,578 350,049 0. Financial guaranty 0 0. Medical professional liability - occurrence 0 0 35. Medical professional liability - claims-made 0 0. Earthquake,335,335 0 58 03 55 749 3. Group accident and health 0,345 5,6 5,84 4,7 06,977 (a),434 4,006 4. Credit accident and health (group and individual) 0 0 5. Other accident and health 0 (a) 0 6. Workers' compensation 0 04 04 0 7. Other liability - occurrence 4,00,430 3,347,836 653,594,794,305,337,754,0,45,37,466 7. Other liability - claims-made 8,330,735 6,705,767,64,968 7,334,60 6,805,549,54,00 473,46 7.3 Excess workers' compensation 0 0 8. Products liability - occurrence 3 6,57 48,954 3,04 93,557 8. Products liability - claims-made 0 0 9., 9. Private passenger auto liability 0 3,3 44 3,69 0 9.3, 9.4 Commercial auto liability 55,563 40,95 4,6 6,485 489,930 337,66,6. Auto physical damage 3,44 3,44 0 8,583 8,498 85 3,475. Aircraft (all perils) 0 0 3. Fidelity,553,0,70,679 8,44 07,843 07,843 8,44 4,38 4. Surety 3,38,777,990,87 39,590 30,07,896 30,09,888 390,598 65,5 6. Burglary and theft 5 5 0 74 74 0 7. Boiler and machinery 0 6,603 6,603 0 7 8. Credit 0 0 9. International 0 0 30. Warranty 0 0 3. Reinsurance - nonproportional assumed property XXX 0 XXX 0 3. Reinsurance - nonproportional assumed liability XXX 0 XXX 0 33. Reinsurance - nonproportional assumed financial lines XXX 0 XXX 0 34. Aggregate write-ins for other lines of business 0 0 0 0 0 0 0 0 0 35. TOTALS,83,078,37 0,79,730,490 3,347,88 6,835,947 0 6,55,474 4,668,354 3,806,40 DETAILS OF WRITE-INS 340. 340. 3403. 3498. Summary of remaining write-ins for Line 34 from overflow page 0 0 0 0 0 0 0 0 0 3499. Totals (Lines 340 thru 3403 plus 3498)(Line 34 above) 0 0 0 0 0 0 0 0 0 (a) Including $ for present value of life indemnity claims.
UNDERWRITING AND INVESTMENT EXHIBIT PART 3 - EXPENSES 3 4. Claim adjustment services: Loss Adjustment Expenses Other Underwriting Expenses Investment Expenses. Direct 9,86,484 9,86,484. Reinsurance assumed 0.3 Reinsurance ceded 0,08,859 0,08,859.4 Net claim adjustment service (. +. -.3) (57,375) 0 0 (57,375). Commission and brokerage:. Direct excluding contingent 6,06,37 6,06,37. Reinsurance assumed, excluding contingent 0.3 Reinsurance ceded, excluding contingent 9,79,588 9,79,588.4 Contingent - direct 50,098 50,098.5 Contingent - reinsurance assumed 0.6 Contingent - reinsurance ceded 0.7 Policy and membership fees 0.8 Net commission and brokerage (. +. -.3 +.4 +.5 -.6 +.7) 0 (3,463,353) 0 (3,463,353) 3. Allowances to managers and agents 0 4. Advertising 65,447 65,447 5. Boards, bureaus and associations 94,446 94,446 6. Surveys and underwriting reports 0 7. Audit of assureds records 0 8. Salary and related items: 8. Salaries,89,3 4,97,87,048 8. Payroll taxes 356,49 5,8 36,773 9. Employee relations and welfare,505,876,3,58,88 0. Insurance 64,97 96 65,879. Directors fees 0. Travel and travel items 83,56,38 84,799 3. Rent and rent items 46,44 6,837 468,79 4. Equipment 538,63 7,98 546,6 5. Cost or depreciation of EDP equipment and software 95,55,4 96,666 6. Printing and stationery 4,5 630 43,5 7. Postage, telephone and telegraph, exchange and express 70,034,038 7,07 8. Legal and auditing 304,0 4,506 308,66 9. Totals (Lines 3 to 8) 0 6,5,863 94,4 6,605,977 0. Taxes, licenses and fees: 0. State and local insurance taxes deducting guaranty association credits of $ 8,794,438 0,3 0. Insurance department licenses and fees 03,98 03,98 0.3 Gross guaranty association assessments (94) (94) 0.4 All other (excluding federal and foreign income and real estate) 97,036 97,036 0.5 Total taxes, licenses and fees (0. + 0. + 0.3 + 0.4) 0 08,834,438 0,7. Real estate expenses 0. Real estate taxes 0 3. Reimbursements by uninsured plans 0 4. Aggregate write-ins for miscellaneous expenses 0 3,48,867 08,5 3,357,08 5. Total expenses incurred (57,375) 6,406, 303,703 (a) 6,55,539 6. Less unpaid expenses - current year 3,806,40 3,806,40 7. Add unpaid expenses - prior year 5,50,490 5,50,490 8. Amounts receivable relating to uninsured plans, prior year 0 9. Amounts receivable relating to uninsured plans, current year 0 30. TOTAL EXPENSES PAID (Lines 5-6 + 7-8 + 9),537,875 6,406, 303,703 8,47,789 DETAILS OF WRITE-INS 40. SERVICE FEE,580,67 38,36,68,908 40. DEPRECIATION EXPENSE 54,898 3,777 58,675 403. PROFESSIONAL FEES 07,493 64,540 37,033 498. Summary of remaining write-ins for Line 4 from overflow page 0 05,804,598 07,40 499. Totals (Lines 40 thru 403 plus 498)(Line 4 above) 0 3,48,867 08,5 3,357,08 (a) Includes management fees of $ to affiliates and $ to non-affiliates. Total
EXHIBIT OF NET INVESTMENT INCOME Collected During Year Earned During Year. U.S. Government bonds (a) 5,097 7,857. Bonds exempt from U.S. tax (a),83,77,07,673. Other bonds (unaffiliated) (a) 704,779 579,5.3 Bonds of affiliates (a). Preferred stocks (unaffiliated) (b). Preferred stocks of affiliates (b). Common stocks (unaffiliated) 7,39 7,39. Common stocks of affiliates 3. Mortgage loans (c) 4. Real estate (d) 5 Contract loans 6 Cash, cash equivalents and short-term investments (e) 30,76 30,76 7 Derivative instruments (f) 8. Other invested assets 9. Aggregate write-ins for investment income 0 0 0. Total gross investment income,05,008,75,600. Investment expenses (g) 30,65. Investment taxes, licenses and fees, excluding federal income taxes (g),438 3. Interest expense (h) 4. Depreciation on real estate and other invested assets (i) 5. Aggregate write-ins for deductions from investment income 0 6. Total deductions (Lines through 5) 303,703 7. Net investment income (Line 0 minus Line 6),448,897 DETAILS OF WRITE-INS 090. 090. 0903. 0998. Summary of remaining write-ins for Line 9 from overflow page 0 0 0999. Totals (Lines 090 thru 0903 plus 0998) (Line 9, above) 0 0 50. 50. 503. 598. Summary of remaining write-ins for Line 5 from overflow page 0 599. Totals (Lines 50 thru 503 plus 598) (Line 5, above) 0 (a) Includes $ 4,33 accrual of discount less $,767,775 amortization of premium and less $ 8,09 paid for accrued interest on purchases. (b) Includes $ accrual of discount less $ amortization of premium and less $ paid for accrued dividends on purchases. (c) Includes $ accrual of discount less $ amortization of premium and less $ paid for accrued interest on purchases. (d) Includes $ for company s occupancy of its own buildings; and excludes $ interest on encumbrances. (e) Includes $ accrual of discount less $ amortization of premium and less $ paid for accrued interest on purchases. (f) Includes $ accrual of discount less $ amortization of premium. (g) Includes $ investment expenses and $ investment taxes, licenses and fees, excluding federal income taxes, attributable to segregated and Separate Accounts. (h) Includes $ interest on surplus notes and $ interest on capital notes. (i) Includes $ depreciation on real estate and $ depreciation on other invested assets. EXHIBIT OF CAPITAL GAINS (LOSSES) 3 4 5 Total Realized Capital Gain (Loss) (Columns + ) Change in Unrealized Capital Gain (Loss) Change in Unrealized Foreign Exchange Capital Gain (Loss) Realized Gain (Loss) On Sales or Maturity Other Realized Adjustments. U.S. Government bonds 0 0 0 0 0. Bonds exempt from U.S. tax 0. Other bonds (unaffiliated) (47,7) (475,040) (5,3) 5,035 0.3 Bonds of affiliates 0 0 0 0 0. Preferred stocks (unaffiliated) 0 0 0 0 0. Preferred stocks of affiliates 0 0 0 0 0. Common stocks (unaffiliated) 0 0 0 83,437 0. Common stocks of affiliates (,8,898) 0 (,8,898),707,44 0 3. Mortgage loans 0 0 0 0 4. Real estate 0 0 0 5. Contract loans 0 6. Cash, cash equivalents and short-term investments 0 7. Derivative instruments 0 8. Other invested assets 0 0 0 0 9. Aggregate write-ins for capital gains (losses) 0 0 0 0 0 0. Total capital gains (losses) (,76,69) (475,040) (,65,09),905,93 0 DETAILS OF WRITE-INS 090. 090. 0903. 0998. Summary of remaining write-ins for Line 9 from overflow page 0 0 0 0 0 0999. Totals (Lines 090 thru 0903 plus 0998) (Line 9, above) 0 0 0 0 0
EXHIBIT OF NON-ADMITTED ASSETS Current Year Total Nonadmitted Assets Prior Year Total Nonadmitted Assets 3 Change in Total Nonadmitted Assets (Col. - Col. ). Bonds (Schedule D) 0. Stocks (Schedule D):. Preferred stocks 0. Common stocks 60,790 877,678 76,888 3. Mortgage loans on real estate (Schedule B): 3. First liens 0 3. Other than first liens 0 4. Real estate (Schedule A): 4. Properties occupied by the company 0 4. Properties held for the production of income 0 4.3 Properties held for sale 0 5. Cash (Schedule E - Part ), cash equivalents (Schedule E - Part ) and short-term investments (Schedule DA) 0 6. Contract loans 0 7. Derivatives (Schedule DB) 0 8. Other invested assets (Schedule BA) 0 9. Receivables for securities 0 0. Securities lending reinvested collateral assets (Schedule DL) 0. Aggregate write-ins for invested assets 0 0 0. Subtotals, cash and invested assets (Lines to ) 60,790 877,678 76,888 3. Title plants (for Title insurers only) 0 4. Investment income due and accrued 0 5. Premiums and considerations: 5. Uncollected premiums and agents' balances in the course of collection 433,460 697,83 63,83 5. Deferred premiums, agents' balances and installments booked but deferred and not yet due 0 5.3 Accrued retrospective premiums and contracts subject to redetermination 0 6. Reinsurance: 6. Amounts recoverable from reinsurers 0 6. Funds held by or deposited with reinsured companies 0 6.3 Other amounts receivable under reinsurance contracts 0 7. Amounts receivable relating to uninsured plans 0 8. Current federal and foreign income tax recoverable and interest thereon 0 8. Net deferred tax asset 3,65,980 4,96,407 544,47 9. Guaranty funds receivable or on deposit 0 0. Electronic data processing equipment and software 0. Furniture and equipment, including health care delivery assets,09,85,460,04 50,389. Net adjustment in assets and liabilities due to foreign exchange rates 0 3. Receivables from parent, subsidiaries and affiliates 78,393,37,44 588,75 4. Health care and other amounts receivable 0 5. Aggregate write-ins for other than invested assets,073,58,04,86 3,98 6. Total assets excluding Separate Accounts, Segregated Accounts and Protected Cell Accounts (Lines to 5) 7,57,966 9,753,54,495,576 7. From Separate Accounts, Segregated Accounts and Protected Cell Accounts 0 8. Total (Lines 6 and 7) 7,57,966 9,753,54,495,576 DETAILS OF WRITE-INS 0. 0 0. 03. 98. Summary of remaining write-ins for Line from overflow page 0 0 0 99. Totals (Lines 0 thru 03 plus 98)(Line above) 0 0 0 50. PREPAIDS, OTHER ACCOUNTS RECEIVABLE 47,55 548,838 3,86 50. TRANSFER/SUSPENSE ACCOUNTS 5,44 5,46 503. GUARANTY FUND ASSESSMENTS INVOICED RECEIVABLE 0 0 598. Summary of remaining write-ins for Line 5 from overflow page 530,56 530,56 0 599. Totals (Lines 50 thru 503 plus 598)(Line 5 above),073,58,04,86 3,98 3
ANNUAL STATEMENT FOR THE YEAR 07 OF THE AIG INSURANCE COMPANY PUERTO RICO NOTES TO FINANCIAL STATEMENTS Note - Summary of Significant Accounting Policies and Going Concern A. Accounting Practices, Impact of NAIC/State Differences The accompanying financial statements of AIG Insurance Company Puerto Rico (the Company or AIGPR) have been prepared on the basis of accounting practices prescribed or permitted by the Insurance Department of the Commonwealth of Puerto Rico (the IDCPR). Insurance companies domiciled in the Commonwealth of Puerto Rico are required to prepare their statutory financial statements in accordance with the National Association Insurance Commissioners' (the NAIC) Accounting Practices and Procedures Manual subject to any deviations prescribed or permitted by the IDCPR. Difference between Puerto Rico prescribed or permitted practices and NAIC statutory accounting practices (NAIC SAP) which affect the Company are the deferred income tax arising from temporary difference resulting from contributions to the Catastrophe Loss Reserve. The effect of that item was to increase the policyholders surplus on the Puerto Rico basis reported in these financial statements over that which would have been reported on the NAIC SAP basis. A reconciliation of the Company's net income and policyholders' surplus between the amount presented in the accompanying financial statements Commonwealth of Puerto Rico basis and NAIC SAP follow: Description Net Income, Commonwealth of Puerto Rico basis State Prescribed Practices that are an increase/(decrease) State Permitted Practices that are an increase/(decrease) Net Income, NAIC SAP basis SSAP # F/S F/S Line Page # /3/07 /3/06 4 0 $ 35,008 $ 5,0,85 $ 35,008 $ 5,0,85 Policyholders' surplus, Commonwealth of Puerto Rico Effect of state prescribed practices Not recognize deferred tax liability for catastrophe reserve trust fund contributions Effect of state permitted practices Policyholders' surplus, NAIC SAP basis 3 37 $ 86,753,5 $ 9,37,444 N/A N/A N/A (,005,0) (3,534,704) $ 74,748,94 $ 77,837,740 B. Use of Estimates The preparation of financial statements requires management to make estimates and assumptions that affect the amounts reported in these financial statements and notes. Actual results could differ from these estimates. C. Accounting Policies Direct, assumed and ceded premiums are earned over the terms of the related policies and reinsurance contracts. Unearned premiums are established to cover the unexpired portion of premiums written. Such reserves are computed by pro rata methods for direct and ceded business and are based on reports received from ceding companies for reinsurance assumed. Premiums receivable are primarily due from agents and policyholders and are charged off when specific balances are determined to be uncollectible. After calculation of non-admitted amounts, an evaluation is made to determine if any allowance for doubtful accounts is required. In the calculation of nonadmitted amounts, Puerto Rico regulations (see Note A) do not permit the consideration of the unearned premium offset on policyholder balances. The Company writes audit and retrospective business which results in premiums being billed in arrears. Estimates are made of ultimate annual premiums to be paid on these variably priced policies and accruals made for any additional premiums to be collected or refunded. These accruals are reflected within premiums receivable as earned but unbilled premiums or accrued retrospective premiums. Expenses incurred in connection with acquiring new insurance business, including acquisition costs such as sales commissions, are charged to operations as incurred. Expenses incurred are reduced for ceding allowances received or receivable. The Company routinely assesses the collectability of premium receivables. Based upon company experience, any uncollectible premium receivables as of December 3, 07 are not expected to exceed the non-admitted amounts and, therefore, no additional provision for uncollectible amounts has been recorded. The potential for any additional loss is not believed to be material to the Company s financial position. Net investment income earned consists primarily of interest, dividends and rent income less investment related expense. Interest is recognized on an accrual basis and dividends are recognized on an ex-dividend basis. Rental income includes an imputed rent for the Company s occupancy of its own buildings. Net realized capital gains (losses) are recognized on a specific identification basis when securities are sold, redeemed or otherwise disposed. Realized capital losses include write downs for impairments considered to be other than temporary. 4
NOTES TO FINANCIAL STATEMENTS Note - Summary of Significant Accounting Policies and Going Concern (Continued) Real estate investments are classified in the balance sheet as properties occupied by the company, properties held for the production of income and properties held for sale. Properties occupied by the company and properties held for the production of income is carried at depreciated cost less encumbrances. Properties held for sale are carried at the lower of depreciated cost or fair value less estimated cost to sell. This value would also be net of any encumbrance. The fair values of properties held for the production of income and held for sale are based upon quoted market prices, if available. If quoted market prices are unavailable, fair values are based upon market appraisals performed every five years using certified valuation techniques. Fair values for these properties will be immediately determined whenever circumstances indicate that the carrying amounts may not be recoverable. Fair values of properties occupied by the company will be measured only if circumstances indicate that the financial condition of the Company is in question. In addition, the Company uses the following accounting policies:. Short-term investments are stated at amortized value using the interest method.. Investment grade bonds not backed by other loans are stated at amortized value using the interest method. Investment grade bonds with NAIC designations of 3 through 6 are stated at the lower of amortized value or fair value. 3. As of December 3, 07 and 06, the Company had no investments in common stocks, other than in stocks of subsidiary and affiliates. 4. Investment grade perpetual preferred stocks are stated at fair value. Non-investment grade preferred stocks are stated at the lower amortized value or fair value. 5. As of December 3, 07 and 06, the Company had no mortgage loans on real estate. 6. Investment grade loan-backed securities are stated at amortized value. The retrospective adjustment method is used to value all loan-backed securities. Non-investment grade loanbacked securities are stated at lower of amortized value or fair value. 7. Investments in subsidiary and affiliated companies are stated as follows: Foreign insurance subsidiary, AIG Seguros Colombia SA, is stated at equity value adjusted to a statutory basis and AIG Seguros Mexico is stated at cost as of December 3, 06. AIG Seguros Colombia SA and AIG Seguros Mexico investment are not reported as of December 3, 07. 8. As of December 3, 07 and 06, the Company had no investments in joint ventures or in partnerships. 9. As of December 3, 07 and 06, the Company had no derivatives. 0. The Company does not anticipate investment income when evaluating the need for premium deficiency reserves.. Unpaid losses and loss adjustment expenses include an amount determined from individual case estimates and loss reports and an amount, based on past experience, for losses incurred but not reported. Such liabilities are necessarily based on assumptions and estimates and while management believes the amounts are adequate, the ultimate liability may be in excess of or less than the amount provided. The methods for making such estimates and for establishing the resulting liabilities are continually reviewed and any adjustments are reflected in the period determined.. The Company has a written capitalization policy for prepaid expenses and purchase of items such as electronic data processing equipment, software, furniture vehicles, other equipment and leasehold improvements. The predefined capitalization thresholds under this policy have not changed from those of the prior year. 3. The Company does not write major medical insurance with prescription drug coverage. D. Going Concern Not applicable 4.
NOTES TO FINANCIAL STATEMENTS Note - Accounting Changes and Corrections of Errors During the current year s financial statement preparation, the Company discovered an error in the compiling and reporting of investment in affiliate for the prior year. In prior year s financial statements the company presented in Gross Paid in and Contributed Surplus (line 34 of Liabilities, Surplus and Other Funds) an overstatement of $,7,000. The Company reported in Unassigned Funds (Surplus) (line 35 of Liabilities, Surplus and Other Funds) an understatement $,7,000. The discovered error has no impact in Net Admitted Assets, Liabilities, Surplus and Net Income therefore the Company is correcting the discovered error in the current accounting period. Note 3 - Business Combinations and Goodwill Note 4 - Discontinued Operations Note 5 - Investments A. Mortgage Loans B. Debt Restructuring C. Reverse Mortgages D. Loan-Backed Securities E. Repurchase Agreements and/or Securities Lending Transactions F. Real Estate G. Low Income Housing Tax Credits 4.
NOTES TO FINANCIAL STATEMENTS Note 5 Investments (Continued) H. Restricted Assets. Restricted Assets (including pledged) summarized by restricted asset category Restricted Asset Category Subject to contractual a. obligation for which liability is not shown Collateral held under b. security lending agreements Subject to repurchase c. agreements Subject to reverse d. repurchase agreements Subject to dollar e. repurchase agreements f. Subject to dollar reverse repurchase agreements Gross (Admitted & Nonadmitted) Restricted Current Year Current Year Percentage 6 7 8 9 3 4 5 0 Protected Cell Gross G/A Supporting Total Protected Admitted Account Increase/(Decre Total Total Admitted (Admitted & Total General Protected Cell Cell Account Total Total From Restricted to Assets ase) Nonadmitted Restricted Nonadmitted) Account (G/A) Account Restricted ( plus 3) Prior Year Total Admitted Supporting G/A (5 minus 6) Restricted (5 minus 8) Restricted to Activity Assets Assets Activity Total Assets - - - 0.0% 0.0% - - - 0.0% 0.0% - - - 0.0% 0.0% - - - 0.0% 0.0% - - - 0.0% 0.0% - - - 0.0% 0.0% Placed under option g. contracts - - - 0.0% 0.0% Letter stock or securities restricted as h. to sale - excluding - - - 0.0% 0.0% FHLB capital stock i. FHLB capital stock - - - 0.0% 0.0% j. On deposit with states $,489,97 $,489,97 $,60,59 $ 39,658 $,489,97.8%.9% On deposit with other k. regulatory bodies - - - 0.0% 0.0% Pledged collateral to l. FHLB (including assets backing funding agreements) - - - 0.0% 0.0% Pledged as collateral m. not captured in other - - - 0.0% 0.0% categories n. Other restricted assets 55,438,40 55,438,40 6,478,789 (7,040,379) 55,438,40 40.3% 4.4% o. Total Restricted Assets $ 57,98,37 $ - $ - $ - $ 57,98,37 $ 64,639,048 $ (6,70,7) $ - $ 57,98,37 4.% 44.3%. Detail of assets pledged as collateral not captured in other categories (reported on line k above) 3. Detail of other restricted assets (reported on line l above) Restricted Asset Category Gross (Admitted & Nonadmitted) Restricted Current Year Percentage 6 7 9 3 4 5 0 Protected Cell Gross G/A Supporting Total Protected Account Increase/(Decre Total Admitted (Admitted & Protected Cell Cell Account Total Total From Assets ase) Restricted Nonadmitted) Account Restricted ( plus 3) Prior Year Supporting G/A (5 minus 6) (5 minus 8) Restricted to Activity Assets Activity Total Assets Total General Account (G/A) Admitted Restricted to Total Admitted Assets Reserve For Catastrophe Insurance Losses Pursuant To Chapter 5 Of Insurance Code Of Puerto Rico $ 55,438,40 $ 55,438,40 $ 6,478,789 $ (7,040,379) $ 55,438,40 40.3% 4.4% Total $ 55,438,40 $ - $ - $ - $ 55,438,40 $ 6,478,789 $ (7,040,379) $ 55,438,40 40.3% 4.4% I. Working Capital Finance Investments J. Offsetting and Netting of Assets and Liabilities K. Structured Notes L. 5* Securities Investment Number of 5* Securitites Aggregate BACV Aggregate Fair Value Current Year Prior Year Current Year Prior Year Current Year Prior Year Bonds - AC $ 49,75 $ 58,87 $ 49,75 $ 58,87 Bonds - FV LB&SS - AC LB&SS - FV Preferred Stock - AC Preferred Stock - FV Total $ 49,75 $ 58,87 $ 49,75 $ 58,87 4.3