U.S.-based American International Group Inc. (AIG) is one of the world’s largest insurance…

U.S.-based American International Group Inc. (AIG) is one of the world’s largest insurance companies, offering property-casualty, life insurance, and retirement services to customers in more than 130 countries. In its 2010 10-K report to the SEC, it discloses the following information on the loss reserves created for claims originating in 2000: (In millions)Net Reserves Held in 2000: … $ 26,971Cumulative net liability paid as of:One year later ……… $ 9,709Two years later……… 17,149Three years later……… 21,930Four years later……… 26,090Five years later……… 29,473Six years later ……… 32,421Seven years later ……… 34,660Eight years later ……… 36,497Nine years later ……… 38,943Ten years later ………40,153Net reserves for 2000 re-estimated as of:One year later……… $ 26,979Two years later……… 30,696Three years later………32,732Four years later……… 36,210Five years later……… 41,699Six years later ……… 43,543Seven years later……… 44,475Eight years later……… 45,767Nine years later……… 47,682Ten years later ……… 50,422Net Redundancy (Deficiency) ………$ (23,451)Was the initial estimate for loss reserves originating in 2000 too low or too high? How has the firm updated its estimate of this obligation over time? What percentage of the original liability remains outstanding for 2000 claims at the end of 2010? As a financial analyst, what questions would you have for the CFO on its 2000 liability?View Solution:
U S based American International Group Inc AIG is one of the