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ITEM 7 / RESULTS OF OPERATIONS.....................................................................................................................................................................................AIG Life and Retirement Results..............................................................................................................................................................................................The following table presents AIG Life and Retirement results:Years Ended December 31,Percentage Change(in millions) 2012 2011 2010 2012 vs. 2011 2011 vs. 2010Life Insurance:Revenue:Premiums $ 2,428 $ 2,513 $ 2,520 (3)% –%Policy fees 1,465 1,478 1,576 (1) (6)Net investment income 4,101 3,925 4,313 4 (9)Other income 1 3 – (67) NMOperating expenses:Policyholder benefits and claims incurred 4,511 4,510 4,277 – 5Interest credited to policyholder account balances 822 851 843 (3) 1Amortization of deferred acquisition costs 467 389 596 20 (35)Other acquisition and insurance expenses 1,059 1,126 1,140 (6) (1)Operating income 1,136 1,043 1,553 9 (33)Net realized capital gains (losses) 1,471 363 (75) 305 NMLegal settlements 43 – – NM NMChange in benefit reserves and DAC, VOBA and SIA related to net realizedcapital gains (losses) (684) (19) (37) NM 49Pre-tax income $ 1,966 $ 1,387 $ 1,441 42% (4)%Retirement Services:Revenue:Policy fees $ 1,326 $ 1,227 $ 1,134 8% 8%Net investment income 6,617 5,957 6,455 11 (8)Other income 8 206 – (96) NMOperating expenses:Policyholder benefits and claims incurred 22 104 (1) (79) NMInterest credited to policyholder account balances 3,540 3,616 3,644 (2) (1)Amortization of deferred acquisition costs 345 477 375 (28) 27Other acquisition and insurance expenses 1,020 959 1,068 6 (10)Operating income 3,024 2,234 2,503 35 (11)Legal settlements 111 – – NM NMChanges in fair value of fixed maturity securities designated to hedge livingbenefit liabilities 37 – – NM NMNet realized capital losses (841) (357) (1,176) (136) 70Change in benefit reserves and DAC, VOBA and SIA related to net realizedcapital losses (517) (308) (67) (68) (360)Pre-tax income $ 1,814 $ 1,569 $ 1,260 16% 25%Total AIG Life and Retirement:Revenue:Premiums $ 2,428 $ 2,513 $ 2,520 (3)% –%Policy fees 2,791 2,705 2,710 3 –Net investment income 10,718 9,882 10,768 8 (8)Other income 9 209 – (96) NMOperating expenses:Policyholder benefits and claims incurred 4,533 4,614 4,276 (2) 8Interest credited to policyholder account balances 4,362 4,467 4,487 (2) –Amortization of deferred acquisition costs 812 866 971 (6) (11)Other acquisition and insurance expenses 2,079 2,085 2,208 – (6)Operating income 4,160 3,277 4,056 27 (19)Legal settlements 154 – – NM NMChanges in fair value of fixed maturity securities designated to hedge livingbenefit liabilities 37 – – NM NMNet realized capital gains (losses) 630 6 (1,251) NM NMChange in benefit reserves and DAC, VOBA and SIA related to net realizedcapital gains (losses) (1,201) (327) (104) (267) (214)Pre-tax income $ 3,780 $ 2,956 $ 2,701 28% 9%..................................................................................................................................................................................................................................100 AIG 2012 Form 10-K