AIG 2013 Annual Report Download - page 91

• increases in fair value of AIG’s interest in AIA ordinary shares of $2.1 billion and $1.3 billion in 2012 and 2011,
respectively. The increase in fair value in 2012 included a gain on sale of AIA ordinary shares of approximately
$0.8 billion;
• an increase in fair value of AIG’s interest in ML III of $2.9 billion in 2012, compared to a decrease in fair value of
$646 million in 2011;
• an increase in estimated litigation liability of approximately $783 million for 2012 based on developments in several
actions;
• litigation settlement income of $210 million in 2012 from settlements with three financial institutions who
participated in the creation, offering and sale of RMBS from which AIG and its subsidiaries suffered losses either
directly on their own account or in connection with their participation in AIG’s securities lending program; and
• a $3.3 billion net loss in 2011, primarily consisting of the accelerated amortization of the remaining prepaid
commitment fee asset resulting from the termination of the credit facility provided by the FRBNY (the FRBNY
Credit Facility) in 2011. This was partially offset by a $484 million gain on extinguishment of debt due to the
exchange of subordinated debt.
For the year ended December 31, 2011, the effective tax rate on loss from continuing operations was not meaningful,
due to the significant effect of releasing approximately $18.4 billion of the deferred tax asset valuation allowance.
Other factors that contributed to the difference from the statutory rate included tax benefits of $454 million associated
with tax exempt interest income, $386 million associated with the effect of foreign operations, and $224 million
related to our investment in subsidiaries and partnerships.
The following table presents a reconciliation of net income attributable to AIG to after-tax operating income
(loss) attributable to AIG:
Net income attributable to AIG $ 3,438 $ 20,622
Income from discontinued operations (1) (2,448)
Loss from divested businesses, including Aircraft Leasing 4,039 663
Uncertain tax positions and other tax adjustments 543 –
Legal reserves (settlements) related to legacy crisis matters 353 13
Deferred income tax valuation allowance releases (1,911) (18,307)
Amortization of FRBNY prepaid commitment fee asset – 2,358
Changes in fair value of AIG Life and Retirement fixed maturity securities
designated to hedge living benefit liabilities, net of interest expense (24) –
Changes in benefit reserves and DAC, VOBA and SIA related to net realized
capital gains 781 202
AIG Property Casualty other (income) expense – net – –
Loss on extinguishment of debt 21 (480)
Net realized capital gains (586) (453)
Non-qualifying derivative hedging gains, excluding net realized capital gains (18) (84)
After-tax operating income attributable to AIG $ 6,635 $ 2,086
After-tax operating income attributable to AIG increased in 2013 compared to 2012 primarily due to increases in
income from insurance operations, discussed above, lower income tax expense and noncontrolling interests, partially
offset by fair value gains on AIG’s previously held interests in AIA ordinary shares, ML II, and ML III.
After-tax operating income attributable to AIG increased in 2012 compared to 2011 primarily due to increases in
income from insurance operations and in the fair value gains on AIG’s interests in AIA ordinary shares and AIG’s
interest in ML III, discussed above. This was partially offset by an increase in income tax expense in 2012 compared
to an income tax benefit in 2011.
For the year ended December 31, 2013, the effective tax rate on pre-tax operating income was 28.9 percent. The
significant factors that contributed to the difference from the statutory rate included tax benefits resulting from tax
exempt interest income and other permanent tax items, and the impact of discrete tax benefits.
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AIG 2013 Form 10-K 73
ITEM 7 / RESULTS OF OPERATIONS
Years Ended December 31,
(in millions) 2013 2012 2011
$ 9,085
(84)
117
791
(460)
(3,237)
–
105
1,132
47
423
(1,157)
–
$ 6,762
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