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ITEM 7 / RESULTS OF OPERATIONS.....................................................................................................................................................................................The following table presents AIG Property Casualty accident year catastrophe losses, by major event andsevere losses:Years Ended2012 2011 2010December 31,# of Commercial Consumer # of Commercial Consumer # of Commercial Consumer(in millions) Events Insurance Insurance Total Events Insurance Insurance Total Events Insurance Insurance TotalEvent: (a)Storm Sandy (b) 1 $ 1,691 $ 322 $ 2,013 – $ – $ – $ – – $ – $ – $ –U.S. Windstorms 8 326 13 339 4 383 14 397 8 291 51 342U.S. Drought 1 108 – 108 – – – – – – – –Hurricane Isaac 1 56 22 78 – – – – – – – –Hurricane Irene – – – – 1 296 73 369 – – – –Thailand Flood – – – – 1 366 2 368 – – – –Tohoku Catastrophe (c) – – – – 1 667 524 1,191 – – – –New Zealand earthquakes – – – – 2 344 7 351 – – – –Chile earthquake – – – – – – – – 1 289 2 291Southeast U.S. flood – – – – – – – – 1 171 4 175All other events 3 62 25 87 13 525 95 620 9 249 9 258Claims and claimexpenses 2,243 382 2,6252,581 715 3,296 1,000 66 1,066Reinstatementpremiums 27 – 2711 – 11 10 – 10Total catastrophe-relatedcharges 14 $ 2,270 $ 382 $ 2,652 22 $ 2,592 $ 715 $ 3,307 19 $ 1,010 $ 66 $ 1,076Total severe losses and lossadjustment expense 23 $ 293 $ 33 $ 326 21 $ 296 $ – $ 296 12 $ 135 $ 12 $ 147(a) Events shown in the above table are catastrophic insured events having a net impact in excess of $10 million each. Severe losses are defined asnon-catastrophe individual first party losses greater than $10 million, net of related reinsurance.(b) On October 29, 2012 Storm Sandy, one of the largest Atlantic hurricanes on record, came ashore in the U.S. When the storm made landfall, it wascategorized as an extratropical cyclone, not a hurricane. Storm Sandy is expected to be the second-costliest Atlantic hurricane in history, only surpassed byHurricane Katrina in 2005. Storm Sandy caused widespread flooding and wind damage across the mid-Atlantic states.(c) On March 11, 2011, a major earthquake occurred near the northeast coast of Honshu, Japan, triggering a tsunami in the Pacific Ocean. This disaster isreferred to as the Tohoku Catastrophe.AIG Property Casualty Investing and Other Results..............................................................................................................................................................................................The following table presents AIG Property Casualty’s investing and other results:Years Ended December 31,Percentage Change(in millions) 2012 2011 2010 2012 vs. 2011 2011 vs. 2010Net investment incomeCommercial Insurance $ 2,809 $ 3,213 $ 3,309 (13)% (3)%Consumer Insurance 451 354 301 27 18Other 1,560 781 782 100 –Total net investment income 4,820 4,348 4,392 11 (1)Net realized capital gains (losses) (2) 607 (38) NM NMLegal settlement 17 – – NM NMBargain purchase gain – – 332 NM NMOther income (expense) – net * 2 (5) 669 NM NMInvesting and other results $ 4,837 $ 4,950 $ 5,355 (2)% (8)%* Includes gain on divested properties of $669 million in 2010We manage and account for our invested assets on a legal entity basis in conformity with regulatory requirements.Within a legal entity, invested assets are available to pay claims and expenses of both Commercial Insurance andConsumer Insurance operating segments as well as the Other category. Invested assets are not segregated orotherwise separately identified for the Commercial Insurance and Consumer Insurance operating segments.Investment income is allocated to the Commercial Insurance and Consumer Insurance operating segments based onan internal investment income allocation model. The model estimates investable funds based primarily on lossreserves, unearned premium and a capital allocation for each segment. The investment income allocation iscalculated based on the estimated investable funds and risk-free yields (plus an illiquidity premium) consistent withthe approximate duration of the liabilities. The actual yields in excess of the allocated amounts and the investment..................................................................................................................................................................................................................................86 AIG 2012 Form 10-K