AIG 2013 Annual Report Download - page 94

offset by an increase in pre-tax income from GCM and Mortgage Guaranty. The pre-tax income in 2012 included fair
value gains from our previously held interests in AIA ordinary shares and ML III.
Mortgage Guaranty’s pre-tax operating income increased in 2013 compared to 2012 due to higher net premiums
earned in the first-lien business, a decline in newly reported delinquencies and improving cure rates.
The net loss on divested businesses in 2012 includes a loss associated with the announced sale of ILFC.
Pre-tax Income Comparison for 2012 and 2011
AIG Property Casualty — Pre-tax income decreased slightly in 2012 compared to 2011 due to higher acquisition
costs as a result of the change in business mix from Commercial Insurance to Consumer Insurance and higher
general operating expenses and lower net realized capital gains. Partially offsetting the decrease were lower
underwriting losses due to the impact of lower catastrophe losses, underwriting improvements related to rate
increases and enhanced risk selection, higher net investment income due to asset diversification by reducing the
concentration in tax-exempt municipal instruments and increasing investments in private placement debt and
structured securities.
AIG Life and Retirement — Pre-tax income increased in 2012 compared to 2011, principally due to efforts to
actively manage net investment spreads. Results benefited from higher net investment income, lower interest
credited, lower reserves for death claims and the impact of more favorable separate account performance on DAC
amortization and policyholder benefit reserves. These items were partially offset by significant proceeds from a legal
settlement in 2011, higher mortality costs and an increase in GIC reserves.
Other Operations — Other Operations recorded a decline in pre-tax loss in 2012 compared to 2011 due to fair
value and realized gains in our interest in AIA ordinary shares, and in our interest in ML III, partially offset by an
increase in estimated litigation liability, and a loss on extinguishment of debt of $3.3 billion in 2011 in connection with
the termination of the FRBNY Credit Facility.
Mortgage Guaranty recorded a pre-tax operating income in 2012 compared to a pre-tax operating loss in 2011 due to
a decrease in claims and claims adjustment expense.
The net loss on divested businesses in 2012 includes a loss associated with the announced sale of ILFC.
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AIG 2013 Form 10-K76
ITEM 7 / RESULTS OF OPERATIONS
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