AIG 2010 Annual Report Download - page 89

American International Group, Inc., and Subsidiaries
on Capital Markets super senior credit default swap portfolio, partially offset by reduced losses from AIGFP
from lower unwind costs; and
• a decline of $1.0 billion in credit valuation adjustments on Direct Investment business assets and liabilities
which are measured at fair value.
This decrease was partially offset by a bargain purchase gain recorded by Chartis International of $332 million
related to the Fuji acquisition.
2009 and 2008 Comparison
Other income increased in 2009 compared to 2008 due to:
• net credit valuation adjustment gains of $2.8 billion in 2009 compared to net credit valuation adjustment
losses of $9.5 billion in 2008 on Capital Markets and Direct Investment business assets and liabilities which
are measured at fair value, excluding gains and losses which are reflected in Unrealized gains (losses) on
Capital Markets’ super senior credit default swap portfolio; and
• an improvement of $5.5 billion reflecting the positive effect of hedging activities that did not qualify for
hedge accounting, which was driven by the weakening of the U.S. dollar against most major currencies
during 2009.
These increases were partially offset by:
• a $2.4 billion decline in Institutional Asset Management revenues due to impairments on proprietary real
estate and private equity investments and lower base management fees on lower base assets under
management in 2009; and
• a decline of $1.0 billion in income from consolidated managed partnerships and funds, which is partially
offset by Net income (loss) attributable to noncontrolling interests.
Policyholder Benefits and Claims Incurred
2010 and 2009 Comparison
Policyholder benefits and claims incurred decreased in 2010 primarily due to:
• a reduction of $2.2 billion as a result of the dispositions in 2009 noted above that did not meet the criteria
for discontinued operations accounting;
• a decrease in incurred policy losses and benefit expenses for AIA of $1.3 billion related to a decline in
policyholder trading gains which are discussed above in Net Investment Income; and
• a decrease in claims and claims adjustment expense of $2.4 billion for Mortgage Guaranty operations
primarily due to lower levels of newly reported delinquencies in the first-lien, second-lien and international
products, higher cure rates on existing first-lien and international delinquent loans and the recognition of
stop loss limits on certain second-lien policies.
Partially offsetting these declines were:
• the net $4.3 billion of reserve strengthening in 2010 compared to $2.8 billion in 2009;
• increased catastrophe losses for Chartis; and
• the effect of the consolidation of Fuji in 2010.
See Chartis results herein for further discussion.
AIG 2010 Form 10-K 73