AIG 2011 Annual Report Download - page 79

These decreases were partially offset by:
• fair value gains on the AIA ordinary shares in 2011 compared to losses in 2010; and
• an increase in income from fixed maturity securities, excluding the effect of the AIA deconsolidation, due to
higher average invested asset balances as a result of the cash redeployment in 2011.
2010 and 2009 Comparison
Net investment income increased in 2010 compared to 2009 primarily due to significantly higher income from
private equity funds and hedge fund investments due to an improved market environment compared to 2009, and
increased valuation gains associated with the Maiden Lane Interests.
These increases were partially offset by a decline in policyholder trading gains compared to 2009. Policyholder
trading gains are offset by a change in Policyholder benefits and claims incurred and generally reflect the trends in
equity markets, principally in Asia.
Net Realized Capital Gains (Losses)
The following table summarizes the components of consolidated Net realized capital gains (losses):
Years Ended December 31, Percentage Change
(in millions) 2011 2010 2009 2011 vs. 2010 2010 vs. 2009
Sales of fixed maturity securities $ 1,913 $ 1,846 $ 849 4% 117%
Sales of equity securities 164 725 303 (77) 139
Other-than-temporary impairments:
Severity (51) (73) (1,510) 30 95
Change in intent (12) (441) (958) 97 54
Foreign currency declines (32) (63) (112) 49 44
Issuer-specific credit events (1,165) (2,457) (3,979) 53 38
Adverse projected cash flows (20) (5) (137) (300) 96
Provision for loan losses 48 (304) (614) NM 50
Change in the fair value of MetLife securities prior to the
sale (191) 315 - NM NM
Foreign exchange transactions (116) 178 (616) NM NM
Derivative instruments 297 138 1,724 115 (92)
Other (314) (34) (160) NM 79
Net realized capital gains (losses) $ 521 $ (175) $ (5,210) NM 97
2011 and 2010 Comparison
AIG recognized net realized capital gains in 2011 compared to net realized capital losses in 2010 due to the
following:
• lower other-than-temporary impairment charges from issuer-specific credit events and changes in intent; and
• improvement in the provision for loan losses due to an increase in collateral values as a result of improved
operating performance and improved market conditions.
These gains were partially offset by the following:
• lower gains on sales of equity securities in 2011 compared to 2010 due to higher sales in 2010 resulting from
the continuing insurance companies’ portfolio repositioning;
• fair value losses in 2011 compared to gains in 2010 on the MetLife securities prior to their sale in March
2011;
• foreign exchange transaction losses incurred in 2011 compared to gains in 2010, primarily from the
weakening of the U.S. dollar against the Swiss Franc and Japanese Yen, partially offset by the strengthening
of the U.S. dollar against the Euro and the British Pound; and
• the deconsolidation of AIA.
AIG 2011 Form 10-K 65