AIG 2010 Annual Report Download - page 61

American International Group, Inc., and Subsidiaries
• On November 1, 2010, AIG completed the sale of ALICO to MetLife, Inc. (MetLife) for approximately
$16.2 billion ($7.2 billion in cash and the remainder in securities of MetLife).
• On October 29, 2010, AIG sold, in an initial public offering, 8.08 billion shares (or 67 percent) of AIA for
$20.51 billion.
AIG Parent had $14.5 billion of actual and contingent liquidity at February 16, 2011. As a result of the
foregoing and additional non-core asset sales and internal liquidity repositioning transactions, AIG has concluded
that it has sufficient liquidity to satisfy its future liquidity requirements, including reasonably foreseeable
contingencies or events.
See Capital Resources and Liquidity herein and Note 4 to the Consolidated Financial Statements for additional
information on these transactions.
2010 Financial Overview
AIG’s income from continuing operations before income taxes amounted to $17.9 billion in 2010 compared to a
loss of $14.3 billion in 2009. The improvement of $32.2 billion compared to 2009 reflects significant divestiture
activity discussed further below as well as the following additional items:
• a gain of $17.8 billion on sales of divested businesses in 2010, which includes a gain of $16.3 billion from the
completion of the initial public offering and listing of AIA ordinary shares on the Stock Exchange of Hong
Kong on October 29, 2010, as well as a gain of $1.3 billion recognized in 2010 related to the sale of AIG’s
headquarters building in Tokyo in 2009 which gain had been deferred until the expiration of certain lease
provisions. In 2009, AIG incurred losses of $1.3 billion from sales of divested businesses;
• a decline in interest expense on the FRBNY Credit Facility, primarily due to lower amortization of the
prepaid commitment asset, including accelerated amortization. Total amortization declined from $8.3 billion
in 2009 to $3.4 billion in 2010;
• a reduction in net realized capital losses of $4.9 billion as discussed in Consolidated Results — Net Realized
Capital Gains (Losses);
• an improvement of $2.7 billion in asset management pre-tax earnings, reflecting a portion of the gain
recorded on the Tokyo headquarters sale discussed above, decreases in impairment charges on proprietary
real estate and private equity investments and the effect of goodwill impairment charges recorded in 2009;
• an increase of $1.9 billion in net investment income, primarily driven by higher valuation gains associated
with AIG’s interests in Maiden Lane II LLC (ML II) and Maiden Lane III LLC (ML III) (together, the
Maiden Lane Interests) as well as increased income from partnership investment; and
• an improvement in underwriting results of $2.0 billion for Mortgage Guaranty operations primarily due to
lower claims and claims adjustment expenses, commutations and favorable prior year reserve development
arising from increased cures, rescissions and claim denials.
These improvements were partially offset by the following:
• an increased underwriting loss for Chartis reflecting a net reserve strengthening charge of $4.2 billion in the
fourth quarter of 2010 primarily related to its asbestos, excess casualty, and workers’ compensation lines; and
• a decline of $2.6 billion in Financial Services pre-tax income, reflecting a reduction in unrealized market
valuation gains on the super senior credit default swap portfolio in Capital Markets of $820 million, as well
as an increase in ILFC impairment charges of $1.6 billion.
Additionally, AIG recorded a net loss from discontinued operations of $2.1 billion in 2010, compared to net
income from discontinued operations of $505 million in 2009. The net loss in 2010 reflected goodwill impairment
charges of $4.6 billion related to the sales of ALICO and AIG Star and AIG Edison. See Note 2(k) to the
Consolidated Financial Statements and Consolidated Results — Discontinued Operations for further discussion.
AIG 2010 Form 10-K 45