AIG 2010 Annual Report Download - page 92

American International Group, Inc., and Subsidiaries
The effective tax rate on the pre-tax loss from continuing operations for the year ended December 31, 2008,
differs from the statutory rate primarily due to the change in investment in subsidiaries and partnerships of
$490 million, effect of foreign operations of $2.5 billion, nondeductible goodwill impairment of $1.3 billion, reserve
for uncertain tax positions of $1.0 billion, and an increase in the valuation allowance of $20.1 billion.
See Critical Accounting Estimates — Valuation Allowance on Deferred Tax Assets and Note 22 to the
Consolidated Financial Statements for additional information.
Discontinued Operations
Income (loss) from Discontinued Operations is comprised of the following:
Years Ended December 31,
(in millions) 2010 2009 2008
Foreign life insurance businesses(a) $(1,237) $ 2,581 $(4,941)
AGF (145) (904) (434)
Net gain (loss) on sale 1,588 (2,758) -
Consolidation adjustments (356) 54 (302)
Interest allocation(b) (75) (89) (55)
Loss from discontinued operations $ (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)
(a) Represents results of ALICO, AIG Star, AIG Edison and Nan Shan.
(b) Represents interest expense, including periodic amortization of the prepaid commitment fee asset, on the estimated net proceeds from the sale of
ALICO that were contractually required to be applied to the FRBNY Credit Facility. See Note 4 to the Consolidated Financial Statements.
Significant items affecting the comparison of results from discontinued operations included the following:
• impairments of goodwill in 2010 of $4.6 billion related to ALICO, AIG Star and AIG Edison. See Note 2(k)
of Notes to the Consolidated Financial Statements — Goodwill for further discussion;
• a pre-tax gain of $4.1 billion on the sale of ALICO in 2010;
• a pre-tax loss of approximately $1.7 billion on the sale of AGF in 2010;
• a pre-tax loss of $2.8 billion recognized in 2009 related to the sale of Nan Shan, as well as an additional loss
on sale of $874 million recognized in 2010; and
• tax effects of the above transactions, notably the impact of non-deductible goodwill impairments and the
change in investment in subsidiaries, which was principally related to changes in the estimated U.S. tax
liability with respect to the planned sales.
See Notes 4 and 22 to the Consolidated Financial Statements for further discussion of discontinued operations.
Segment Results
AIG believes it should present and discuss its financial information in a manner most meaningful to its financial
statement users. Underwriting profit (loss) is utilized to report results for Chartis operations. Operating income
(loss), which is before net realized capital gains (losses) and related DAC and SIA amortization and goodwill
impairment charges, is utilized to report results for SunAmerica operations. Results from discontinued operations
and net gains (losses) on sales of divested businesses are excluded from these measures. AIG believes that these
measures allow for a better assessment and enhanced understanding of the operating performance of each
business by highlighting the results from ongoing operations and the underlying profitability of its businesses.
When such measures are disclosed, reconciliations to GAAP pre-tax income are provided.
76 AIG 2010 Form 10-K