AIG 2013 Annual Report Download - page 142

GCM reported pre-tax income and pre-tax operating income in 2012 compared to pre-tax loss and pre-tax operating
loss in 2011 primarily due to improvement in unrealized market valuations related to the super senior CDS portfolio,
a decrease in operating expenses and lower costs related to the wind-down of AIGFP’s businesses and portfolios.
Unrealized market valuation gains on the CDS portfolio of $617 million and $339 million were recognized in 2012 and
2011, respectively. The improvement resulted primarily from amortization and price movements within the CDS
portfolio. For 2012, the remaining portfolio of AIGFP continued to be wound down and was managed consistent with
AIG’s risk management objectives. The active wind-down of the AIGFP derivatives portfolio was completed by the
end of the second quarter of 2011.
The following table presents Direct Investment book results:
Pre-tax operating income $ 1,215 $ 604 19% 101%
Legal settlements 26 – 73 NM
Loss on extinguishment of debt – – NM NM
Net realized capital gains 391 18 (83) NM
Pre-tax income $ 1,632 $ 622 (5)% 162%
DIB pre-tax income decreased in 2013 compared to 2012 primarily due to a one-time realized capital gain of
$426 million recorded in 2012 on the sale of 35.7 million common units of The Blackstone Group L.P., partially offset
by improvements in pre-tax operating income. DIB pre-tax operating income increased in 2013 compared to 2012
primarily due to fair value appreciation on ABS CDOs that were acquired in the fourth quarter of 2012, partially offset
by a decline in net credit valuation adjustments on assets and liabilities for which the fair value option was elected.
Fair value appreciation on ABS CDOs was $954 million for 2013 driven primarily by improved collateral pricing due to
improvements in home price indices and amortization of the underlying collateral.
Net credit valuation adjustment gains of $444 million and $789 million were recognized for 2013 and 2012,
respectively. The decrease resulted primarily from a decline in the portfolio size due to sales and maturities as well
as lower gains on assets due to less significant tightening of counterparty credit spreads, partially offset by lower
losses on liabilities due to less significant tightening of AIG’s credit spreads in 2013 compared to 2012.
DIB pre-tax income increased in 2012 compared to 2011 primarily due to a capital gain on the sale of common units
of The Blackstone Group L.P. mentioned above and improvements in pre-tax operating income. DIB pre-tax
operating income increased in 2012 compared to 2011 primarily due to improvement in net credit valuation
adjustments on assets and liabilities for which the fair value option was elected. Net credit valuation adjustment gains
of $789 million and $380 million were recognized for 2012 and 2011, respectively. The improvement resulted
primarily from gains on assets due to the tightening of counterparty credit spreads, partially offset by losses on
liabilities due to the tightening of AIG’s credit spreads.
2012 and 2011 Comparison
Direct Investment Book Results
2013 and 2012 Comparison
2012 and 2011 Comparison
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AIG 2013 Form 10-K124
ITEM 7 / RESULTS OF OPERATIONS / OTHER OPERATIONS
Percentage Change
Years Ended December 31,
(in millions) 2013 2012 2011 2013 vs. 2012 2012 vs. 2011
$ 1,448
45
(15)
66
$ 1,544
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