AIG 2012 Annual Report Download - page 87

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AIG 2011 and 2010 Comparison
Income from continuing operations before income taxes for 2011 and 2010 reflected the following:
• pre-tax income from insurance operations of $4.8 billion in 2011 which included the catastrophe losses described
above, compared to $2.6 billion in 2010, which included catastrophe losses of $1.1 billion;
• a $3.3 billion net loss on extinguishment of debt from the termination of the FRBNY Credit Facility on January 14,
2011. This was partially offset by a $484 million gain on extinguishment of debt in the fourth quarter of 2011 due to
the exchange of junior subordinated debt;
• $604 million in unfavorable fair value adjustments on AIG’s economic interest in ML II and equity interest in ML III
(together, the Maiden Lane Interests);
• our 2010 results included gains of $19.6 billion on sales of divested businesses. These included a $18.1 billion
gain from the initial public offering and listing of AIA ordinary shares on the Hong Kong Stock Exchange on
October 29, 2010, and a gain of $1.3 billion recognized in 2010 related to the sale of our headquarters building in
Tokyo in 2009, which gain had been deferred until the expiration of certain lease provisions; and
• we had income in 2010 from divested businesses prior to their sale totaling $2.4 billion, primarily representing AIA.
Partially offsetting these declines were:
• a decrease in interest expense of $4.1 billion primarily resulting from the January 2011 repayment of the FRBNY
Credit Facility;
• an increase in the fair value of AIA ordinary shares; and
• a reduction in realized capital losses in 2011 compared to 2010.
As discussed above, AIG released $18.4 billion of the deferred tax asset valuation allowance for the U.S.
consolidated income tax group in 2011.
For the year ended December 31, 2010, the effective tax rate on pre-tax income from continuing operations was
34.5 percent. This rate differs from the statutory rate primarily due to tax benefits of $1.3 billion associated with our
investment in subsidiaries and partnerships, principally the AIA SPV which is treated as a partnership for U.S. tax
purposes, and $587 million associated with tax exempt interest, partially offset by an increase in the deferred tax
asset valuation allowance attributable to continuing operations of $1.4 billion.
In 2011, AIG recorded income from discontinued operations net of taxes of $1.8 billion, which included a pre-tax gain
of $3.5 billion recorded in the first quarter of 2011 on the sale of AIG Star Life Insurance Co., Ltd. (AIG Star) and
AIG Edison Life Insurance Company (AIG Edison). This compared to a net loss of $969 million in 2010, which
included goodwill impairment charges of $4.6 billion associated with the sale of American Life Insurance Company
(ALICO), AIG Star and AIG Edison.
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AIG 2012 Form 10-K70
ITEM 7 / RESULTS OF OPERATIONS