AIG 2010 Annual Report Download - page 258

American International Group, Inc., and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The following table summarizes income (loss) from discontinued operations:
Years Ended December 31,
(in millions) 2010 2009 2008
Revenues:
Premiums and other considerations $18,296 $18,325 $20,636
Net investment income 6,924 7,851 2,758
Net realized capital gains (losses) 289 (920) (8,690)
Other income 1,607 2,285 2,975
Total revenues 27,116 27,541 17,679
Benefits, claims and expenses*28,854 25,810 23,356
Interest expense allocation 75 89 55
Income (loss) from discontinued operations (1,813) 1,642 (5,732)
Income (loss) on sales 1,588 (2,758) -
Loss from discontinued operations, before income tax expense (benefit) (225) (1,116) (5,732)
Income tax expense (benefit) 1,839 (1,621) 1,309
Income (loss) from discontinued operations, net of tax $(2,064) $ 505 $(7,041)
* In 2010, includes goodwill impairment charges of $3.3 billion related to the sale of ALICO and $1.3 billion related to the sale of AIG Star and
AIG Edison. See Note 2(k) – Goodwill for further discussion.
Interest Expense Allocation
Interest expense allocated to discontinued operations gives effect to the provisions of the Recapitalization
discussed in Note 1 for all periods presented. For this reason, an interest allocation to discontinued operations
related to a portion of the ALICO and all the AGF proceeds was required.
The interest expense allocated to discontinued operations was based on the anticipated net proceeds that would
be applied toward the repayment of the FRBNY Credit Facility from the sales of ALICO and AGF multiplied by
the daily interest rate on the FRBNY Credit Facility for each respective period. The periodic amortization of the
prepaid commitment fee allocated to discontinued operations was determined based on the ratio of funds
committed to repay the FRBNY Credit Facility to the total amount of credit available under the FRBNY Credit
Facility.
Prior to the Recapitalization, the terms of the FRBNY Credit Facility contractually required net proceeds from
dispositions, after taxes and transaction expenses, to the extent such proceeds did not represent capital of AIG’s
insurance subsidiaries required for regulatory or ratings purposes, to be applied toward the repayment of the
FRBNY Credit Facility as mandatory prepayments unless otherwise agreed with the FRBNY. Mandatory
prepayments reduced the amount available to be borrowed under the FRBNY Credit Facility by the amount of
the prepayment. In conjunction with anticipated prepayments, AIG allocated interest expense, including periodic
amortization of the prepaid commitment fee asset, to Income (loss) from discontinued operations. As a result of
the revised terms for repayment of the FRBNY Credit Facility, interest expense that was previously allocated to
discontinued operations in connection with the sales of AIG Star, AIG Edison and Nan Shan was reclassified to
continuing operations for all periods presented.
Held-for-Sale Classification
The aggregate held-for-sale assets and liabilities are presented separately as single line items in the asset and
liability sections of the Consolidated Balance Sheet at December 31, 2009 for Nan Shan and December 31, 2010
for Nan Shan, AIG Star and AIG Edison.
242 AIG 2010 Form 10-K