AIG 2008 Annual Report Download - page 70

• net realized capital losses of $2.3 billion ($1.6 billion after tax) related to declines in fair values of RMBS for
the month of October prior to the sale of these securities to ML II;
• net realized capital losses of $1.7 billion ($1.2 billion after tax) primarily related to foreign exchange
transactions and derivatives activity;
• unrealized market valuation losses on AIGFP’s super senior credit default swap portfolio totaling $6.9
billion ($4.5 billion after tax); a credit valuation loss of $7.8 billion ($5.1 billion after tax) representing the
effect of changes in credit spreads on the valuation of AIGFP’s assets and liabilities; and losses primarily
from winding down of AIGFP’s businesses and portfolios of $1.5 billion ($1.0 billion after tax);
• losses on hedges not qualifying for hedge accounting treatment under FAS 133 of $3.3 billion ($2.2 billion
after tax) largely due to the significant decline in U.S. interest rates, resulting in a decrease in the fair value of
the derivatives, which primarily economically hedge AIG’s debt. To a lesser extent, the strengthening of the
U.S. dollar, mainly against the British Pound and Euro decreased the fair value of the foreign currency
derivatives economically hedging AIG’s non-U.S. dollar denominated debt and foreign exchange
transactions;
• interest expense associated with the Fed Facility of $10.6 billion ($6.9 billion after tax), including
accelerated amortization of the prepaid commitment fee of $6.6 billion ($4.3 billion after tax);
• goodwill impairment charges of $3.6 billion, principally related to the General Insurance and Domestic Life
Insurance and Domestic Retirement Services businesses; and
• the inability to obtain a tax benefit for a significant amount of the losses incurred during the quarter as
reflected in the addition to the valuation allowance of $17.6 billion, and other discrete items of $3.4 billion.
AIG’s consolidated statements of income (loss) for the years ended December 31, 2008, 2007 and 2006
were as follows:
2008 2007 2006 2008 vs. 2007 2007 vs. 2006
Years Ended December 31, Percentage Increase/(Decrease)
(In millions, except per share data)
Revenues:
Premiums and other considerations .... $ 83,505 $ 79,302 $ 74,213 5% 7%
Net investment income ............. 12,222 28,619 26,070 (57) 10
Net realized capital gains (losses) ..... (55,484) (3,592) 106 — —
Unrealized market valuation losses on
AIGFP super senior credit default
swap portfolio .................. (28,602) (11,472) — — —
Other income (loss) ................ (537) 17,207 12,998 — 32
Total revenues .................... 11,104 110,064 113,387 (90) (3)
Benefits, claims and expenses:
Policyholder benefits and claims
incurred....................... 63,299 66,115 60,287 (4) 10
Policy acquisition and other insurance
expenses ...................... 27,565 20,396 19,413 35 5
Interest expense................... 17,007 4,751 3,657 258 30
Restructuring expenses and related asset
impairment and other expenses...... 758 ——— —
Other expenses ................... 11,236 9,859 8,343 14 18
Total benefits, claims and expenses ... 119,865 101,121 91,700 19 10
Income (loss) before income tax expense
(benefit), minority interest and
cumulative effect of change in
accounting principles .............. (108,761) 8,943 21,687 — (59)
Income tax expense (benefit):
64 AIG 2008 Form 10-K
American International Group, Inc., and Subsidiaries