AIG 2011 Annual Report Download - page 65

• $604 million in unfavorable fair value adjustments on AIG’s economic interest in Maiden Lane II LLC (ML
II) and equity interest in Maiden Lane III LLC (ML III) (together, the Maiden Lane Interests);
• 2010 included a gain of $17.8 billion on sales of divested businesses, primarily consisting of a gain of
$16.3 billion from the completion of the initial public offering and listing of AIA Group Limited (AIA)
ordinary shares on the Hong Kong Stock Exchange on October 29, 2010, as well as a gain of $1.3 billion
recognized in 2010 related to the sale of AIG’s headquarters building in Tokyo in 2009 which gain had been
deferred until the expiration of certain lease provisions; and
• income in 2010 from divested businesses prior to their sale totaling $2.5 billion, primarily representing AIA.
Partially offsetting these declines were;
• a reduction in prior year adverse loss development in 2011 compared to 2010;
• a decrease in interest expense of $4.1 billion primarily resulting from the January 2011 repayment of the
FRBNY Credit Facility;
• an increase in the fair value of AIA ordinary shares; and
• a reduction in realized capital losses in 2011 compared to 2010.
In 2011, AIG recorded income from discontinued operations net of taxes of $1.5 billion, which included a
pre-tax gain of $2.0 billion recorded in the first quarter of 2011 on the sale of AIG Star Life Insurance Co., Ltd.
(AIG Star) and AIG Edison Life Insurance Company (AIG Edison) compared to a net loss of $2.1 billion in
2010, which included goodwill impairment charges of $4.6 billion associated with the sale of American Life
Insurance Company (ALICO), AIG Star and AIG Edison.
See Results of Operations herein for additional discussion of our results.
AIG substantially completed its recapitalization plan (the Recapitalization) and its asset disposition plan with
the following significant milestones in 2011:
• On January 14, 2011 (the Closing), AIG completed the Recapitalization, which included:
• repaying the $20.7 billion outstanding balance and terminating the FRBNY Credit Facility;
• applying proceeds from the AIA initial public offering and the ALICO sale to partially pay down the
preferred interests in the special purpose vehicles that held AIA and ALICO (the AIA SPV and the
ALICO SPV, respectively, and collectively, the SPVs, and such preferred interests, the SPV Preferred
Interests). As part of the Recapitalization, AIG used $6.1 billion of the cash proceeds from the sale of
ALICO to pay down a portion of the liquidation preference of the SPV Preferred Interests; and
• exchanging preferred stock held by the Department of the Treasury and the AIG Credit Facility Trust
(the Trust) for AIG common stock, par value $2.50 per share (AIG Common Stock).
• The SPV Preferred Interests were further reduced during 2011 by $11.5 billion using proceeds from the sale
of AIG Star, AIG Edison, Nan Shan Life Insurance Company, Ltd. (Nan Shan) and the MetLife, Inc.
(MetLife) securities received in the sale of ALICO. In addition, on November 1, 2011, in accordance with
the terms of the MetLife escrow agreement from the sale of ALICO, approximately $918 million was
released to AIG. These proceeds, together with an additional $53 million, were applied to pay down a
portion of the liquidation preference of the Department of the Treasury’s AIA SPV Preferred Interests. See
Note 16 to the Consolidated Financial Statements for further discussion.
• On September 2, 2011, ILFC Holdings, Inc. (ILFC Holdings), an indirect wholly-owned subsidiary of AIG,
which is intended to become a holding company for ILFC, filed a registration statement on Form S-1 with
the SEC for a proposed initial public offering. All proceeds received by AIG will be used to pay down a
portion of the liquidation preference of the Department of the Treasury’s AIA SPV Preferred Interests.
AIG 2011 Form 10-K 51
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