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ITEM 7 / RESULTS OF OPERATIONS.....................................................................................................................................................................................Discounting of ReservesThe following table presents the components of AIG Property Casualty’s loss reserve discount includedabove:December 31,(in millions) 2012 2011U.S. workers’ compensation:Tabular $ 801 $ 777Non-tabular 2,394 2,318Asbestos 51 88Total $ 3,246 $ 3,183See Note 13 to the Consolidated Financial Statements for additional information on discounting of loss reserves.The following table presents the net reserve discount benefit (charge):Years Ended December 31,(in millions) 2012 2011 2010Change in loss reserve discount – current accident year $ 348 $ 342 $ 381Change in loss reserve discount – prior year development 87 (22) 527Accretion of reserve discount (372) (354) (346)Net reserve discount benefit (charge) $ 63 $ (34) $ 562The benefit from the change in discount in the year ended December 31, 2012 includes a $100 million increase inthe reserve discount due to the commutation of an internal reinsurance treaty, under which a U.S. subsidiarypreviously ceded workers’ compensation claims to a non-U.S. subsidiary. AIG discounts its loss reserves related toworkers’ compensation business written by its U.S. domiciled subsidiaries as permitted by the domiciliary statutoryregulatory authorities. As a result of the commutation, the reserves for these claims are now recorded in a U.S.insurance subsidiary and accordingly are being discounted commencing in the three-month period ended June 30,2012. The commutation was implemented as part of AIG Property Casualty’s efforts to simplify its internalreinsurance arrangements.Annual Reserving ConclusionAIG net loss reserves represent our best estimate of our liability for net losses and loss expenses as ofDecember 31, 2012. While AIG regularly reviews the adequacy of established loss reserves, there can be noassurance that AIG’s ultimate loss reserves will not develop adversely and materially exceed AIG’s loss reserves asof December 31, 2012. In our opinion, such adverse development and resulting increase in reserves are not likely tohave a material adverse effect on AIG’s consolidated financial condition, although such events could have a materialadverse effect on AIG’s consolidated results of operations for an individual reporting period...................................................................................................................................................................................................................................90 AIG 2012 Form 10-K