AIG 2013 Annual Report Download - page 127

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AIG LIFE AND RETIREMENT PRE-TAX OPERATING INCOME
(in millions)
Retail
Institutional
2013 2012 2011
$5,095
$4,160
$3,277
$1,433
$1,718
$2,442
$3,157
$1,938
$1,844
Pre-tax operating income increased in 2013 compared to 2012, reflecting higher fee income from variable annuities
driven by growth in assets under management, continued active spread management in interest rate sensitive
product lines and higher net investment income. Net investment income increased in 2013 compared to 2012, due to
higher income from alternative investments, partially offset by ML II fair value gains recognized in 2012 and
reinvestment of investment proceeds at lower rates. Pre-tax operating income in 2013 included a net increase of
$153 million from adjustments to update certain gross profit assumptions used to amortize DAC and related items in
our investment-oriented product lines.
The increase in pre-tax operating income in 2013 compared to the prior year also reflected additional expenses
recorded in 2012, which were related to the resolution of multi-state regulatory examinations of death claims
practices and additional reserves for long-term care products in the Retail operating segment, and a comprehensive
review of reserves for the GIC portfolio in the Institutional operating segment.
Pre-tax operating income for our Retail operating segment increased in 2013 compared to 2012, due in part to higher
fee income in the Retirement Income Solutions product line, which reflected growth in variable annuity assets under
management driven by strong sales and positive equity market performance. Base spreads (defined as net
investment income excluding alternative investments and yield-enhancement activities, less interest credited)
improved in 2013 compared to 2012, as a result of active spread management in our interest-sensitive product lines.
The impact of life insurance mortality on pre-tax operating income improved in 2013 compared to 2012. Pre-tax
operating income for the Retail operating segment in 2013 included $198 million of net favorable adjustments to
update estimated gross profit assumptions for annuity spreads, surrender rates and life insurance mortality. See
Critical Accounting Estimates — Estimated Gross Profits for Investment-Oriented Products (AIG Life and Retirement)
for additional discussion of estimated gross profit assumptions.
The increases in Other income and in Other acquisition and insurance expenses in 2013 compared to 2012 included
additional activity in our Brokerage Services product line principally due to the acquisition of Woodbury Financial in
November 2012.
2013 and 2012 Comparison
AIG Life and Retirement Results
Retail Results
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AIG 2013 Form 10-K 109
ITEM 7 / RESULTS OF OPERATIONS / AIG LIFE AND RETIREMENT
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