AIG 2011 Annual Report Download - page 76

through three reportable segments: Chartis, SunAmerica Financial Group (SunAmerica), and Aircraft Leasing.
Through these reportable segments, AIG provides insurance, financial and investment products and services to
both businesses and individuals in more than 130 countries. AIG’s subsidiaries serve commercial, institutional and
individual customers through an extensive property-casualty and life insurance and retirement services network.
Aircraft Leasing includes commercial aircraft and equipment leasing. AIG’s Other operations category consists of
businesses and items not allocated to AIG’s reportable segments.
During 2011, AIG experienced significant favorable developments, including the completion of the
Recapitalization in January 2011, the wind-down of AIGFP’s portfolios, the sale of certain life insurance
businesses, emergence from cumulative losses in recent years and a return to sustainable operating profits within
its primary operations. Notably:
• AIG released approximately $16.6 billion of the deferred tax asset valuation allowance for the U.S.
consolidated income tax group. The fourth quarter effect was $17.7 billion, which included valuation
allowance increases during the first nine months of 2011. See Critical Accounting Estimates —
Recoverability of Deferred Tax Asset herein and Note 22 of the Consolidated Financial Statements for
additional information;
• Chartis prior year adverse loss reserve development declined by $4.6 billion to $211 million;
• Interest expense declined $4.1 billion, primarily due to the termination of the FRBNY Credit Facility; and
• Improving equity markets contributed to a $1.3 billion increase in the market valuation of AIG’s holding of
AIA ordinary shares.
Offsetting these favorable developments were record catastrophe losses for Chartis and the effects of several
macroeconomic drivers, including declining equity markets, widening credit spreads, and declining interest rates,
including:
• Total catastrophe losses of $3.3 billion for Chartis in 2011 compared to $1.1 billion in 2010;
• Aircraft Leasing losses of $1.7 billion due to impairment charges, fair value adjustments and lease-related
charges on aircraft;
• The widening of credit spreads, reduced interest rates, and changes in the timing of estimated future cash
flows drove declines of $604 million in the recorded fair value of the Maiden Lane Interests;
• AIG recognized a $3.3 billion loss on extinguishment of debt related to the termination of the FRBNY
Credit Facility, which was partially offset by a $484 million gain on extinguishment of debt associated with
the exchange of junior subordinated debt; and
• Components of operating results decreased due to the deconsolidation of AIA in the fourth quarter of 2010.
62 AIG 2011 Form 10-K
CONSOLIDATED RESULTS