AIG 2012 Annual Report Download - page 135

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Change in Retirement Plan Liabilities Adjustment
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The decrease in the amount of change in 2012 compared to the 2011 was primarily due to the overall decreases in
discount rates resulting in a loss of approximately $636 million and $677 million in 2012 and 2011, respectively.
Partially offsetting the 2012 loss was a gain from investment returns of $213 million. Adding to the loss in 2011 was
a loss from investment returns of $146 million.
See Note 22 to the Consolidated Financial Statements for further discussion.
Change Attributable to Divestitures and Deconsolidations
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The change attributable to divestitures and deconsolidations in 2011 primarily reflects the derecognition of all items in
Accumulated other comprehensive income (loss) at the time of sale for AIG Star, AIG Edison and Nan Shan.
Deferred Taxes on Other Comprehensive Income
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In 2012, the effective tax rate on pre-tax Other Comprehensive Income was 32.2 percent. The effective tax rate
differed from the statutory 35 percent rate primarily due to a decrease in the deferred tax asset valuation allowance
and the effect of foreign operations.
For the year ended December 31, 2011, the effective tax rate on pre-tax Other Comprehensive Loss was
9.1 percent. The effective tax rate differs from the statutory 35 percent rate primarily due to the effects of the Nan
Shan disposition.
2011 and 2010 Comparison
Change in Unrealized Appreciation of Investments
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As discussed above, the 2011 increase in unrealized appreciation of investments was due to the result of
appreciation in bonds available for sale due to lower rates, which more than offset widening spreads.
The $9.9 billion increase in 2010 primarily reflects an appreciation in bonds available for sale due to lower U.S.
Treasury rates and slightly narrowed spreads. The structured securities portfolio accounted for more than half of the
positive change in 2010, as RMBS and CMBS continued to recover from the distressed pricing levels of the financial
crisis. The increase in 2010 also includes an appreciation in available-for-sale equity securities.
The reclassification adjustments included in net income on unrealized appreciation of investments decreased by
$0.5 billion in 2011 compared to 2010 as a result of realized gains and losses recognized on sales of securities
classified as available for sale.
Change in Deferred Acquisition Costs Adjustment and Other
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DAC amortization was reduced in 2011 and 2010 primarily as a result of increases in the unrealized appreciation of
investments supporting interest-sensitive products. The declines also reflect the divestiture of multiple life insurance
operations, including the sales of Nan Shan, AIG Star and AIG Edison in 2011, the deconsolidation of AIA in 2010
and sale of ALICO in 2010.
Change in Foreign Currency Translation Adjustments
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The decline in foreign currency translation adjustments reflects the divestiture of multiple foreign operations, including
the sales of Nan Shan, AIG Star and AIG Edison in 2011, the deconsolidation of AIA in 2010 and the sale of ALICO
in 2010.
Change in Net Derivative Gains (Losses) Arising from Cash Flow Hedging Activities
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The decline in 2011 compared to 2010 primarily reflects the gradual wind-down of the cash flow hedge portfolio,
partially offset by a decline in the interest rate environment.
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AIG 2012 Form 10-K118
ITEM 7 / RESULTS OF OPERATIONS