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ITEM 7 / RESULTS OF OPERATIONS.....................................................................................................................................................................................Change in Benefit Reserves and DAC, VOBA and SIA Related to Net Realized Capital Gains (Losses)In conjunction with a program to utilize capital loss tax carryforwards, we sold approximately $19.5 billion ofinvestments in 2012. These and other sales with subsequent reinvestment at lower yields triggered loss recognitionon certain long-term payout annuity contracts in the amount of $1.2 billion, which effectively transferred shadow lossrecognition from unrealized (AOCI) to actual loss recognition (benefit expense) and, to a much lesser extent,transferred shadow DAC (AOCI) to DAC amortization expense in 2012. Assumptions related to investment yields,mortality experience and expenses will be reviewed periodically and updated as appropriate, which may result inadditional loss recognition reserves. In addition, due to the reinvestment of the assets at lower yields, earningsrelated to this payout annuity block of business are expected to decline beginning in 2013.PremiumsPremiums represent amounts received on traditional life insurance policies, group benefit policies and deposits onlife-contingent payout annuities. Premiums, deposits and other considerations is a non-GAAP measure that includeslife insurance premiums and deposits on annuity contracts and mutual funds.The following table presents a reconciliation of premiums, deposits and other considerations to premiums:Years Ended December 31,(in millions) 2012 2011 2010Premiums, deposits and other considerations $ 20,994 $ 24,392 $ 19,505Deposits (17,934) (21,338) (16,405)Other (632) (541) (580)Premiums $ 2,428 $ 2,513 $ 2,520Sales and DepositsThe following tables summarize AIG Life and Retirement premiums, deposits and other considerations byproduct * :Years Ended December 31,Percentage Change(in millions) 2012 2011 2010 2012 vs. 2011 2011 vs. 2010Premiums, deposits and other considerationsIndividual fixed annuity deposits $ 1,495 $ 6,606 $ 4,410 (77)% 50%Group retirement product deposits 7,028 7,312 6,309 (4) 16Life insurance 5,129 5,267 5,529 (3) (5)Individual variable annuity deposits 4,561 3,212 2,072 42 55Retail mutual funds 2,723 1,925 1,101 41 75Individual annuities runoff 58 70 84 (17) (17)Total premiums, deposits and otherconsiderations $ 20,994 $ 24,392 $ 19,505 (14)% 25%Life Insurance SalesRetail – Independent $ 138 $ 144 $ 123 (4)% 17%Retail – Affiliated (Career and AIG Direct) 110 109 98 1 11Total Retail 248 253 221 (2) 14Institutional – Independent 26 25 32 4 (22)Total life insurance sales $ 274 $ 278 $ 253 (1)% 10%* Life insurance sales include periodic premiums from new business expected to be collected over a one-year period and 10 percent of singlepremiums and unscheduled deposits from new and existing policyholders. Annuity sales represent deposits from new and existing customers...................................................................................................................................................................................................................................AIG 2012 Form 10-K 105
ITEM 7 / RESULTS OF OPERATIONS.....................................................................................................................................................................................TOTAL PREMIUMS, DEPOSITS AND OTHER CONSIDERATIONS BY PRODUCT LINE(in millions)6%13% 8%13%11%RETAIL MUTUAL FUNDS22%INDIVIDUAL VARIABLE ANNUITY22%28%DEPOSITS24%30%32%34%27%23%7%2012 2011 2010LIFE INSURANCEGROUP RETIREMENT PRODUCTDEPOSITSINDIVIDUAL FIXED ANNUITYDEPOSITS15FEB201317173483Total premiums, deposits and other considerations decreased in 2012 as substantial decreases in individual fixedannuities were only partially offset by significant increases in individual variable annuities and retail mutual funds.2012 and 2011 ComparisonIndividual fixed annuity deposits declined due to the low interest rate environment as consumers are reluctant topurchase these products at the relatively low crediting rates currently offered. Group retirement product deposits(which include deposits into mutual funds and fixed options within variable annuities sold in group retirementmarkets) decreased modestly due to slightly lower levels of individual rollover deposits and periodic deposits in 2012,partially offset by higher mutual fund deposits. The low interest rate environment has affected group retirementdeposits, resulting in lower levels of deposits into fixed options. Individual variable annuity deposits increased due toinnovative product enhancements and expanded distribution as well as a more favorable competitive environment.Premiums from life insurance products increased in 2012, but were more than offset by declines in deferred annuitiessold through life insurance distribution channels. Retail mutual fund sales growth was principally driven bySunAmerica Asset Management Corp.’s Focused Dividend Strategy product offering which continues to be a toplong-term performer within its respective peer group.AIG Life and Retirement’s total life sales decreased 1 percent during 2012 compared to 2011. Overall retail universallife sales decreased 1 percent with sales of indexed products growing while sales of universal life products sensitiveto low interest rates declined. Retail term insurance sales increased 1 percent in 2012 compared to 2011 becausewe continued our disciplined focus related to new business pricing and underwriting. Institutional life sales increased4 percent in 2012 compared to 2011 from growth in single premium private placement universal life deposits.2011 and 2010 ComparisonGroup retirement deposits increased primarily due to higher levels of individual rollover deposits in 2011. Individualfixed annuity deposits increased as certain bank distributors negotiated a lower commission in exchange for a higherrate offered to policyholders which made our individual fixed annuity products more attractive. However, fixed annuitydeposits declined in the latter part of 2011 from the first six months of 2011 due to significant declines in interestrates. Variable annuity sales increased due to reinstatements of relationships at a number of key broker-dealers, andincreased wholesaler productivity. Deposits from life insurance products increased in 2011, but were more than offsetby declines in deferred annuities sold through life insurance distribution channels and a large private placementvariable annuity sale in 2010. Retail mutual fund annual sales growth was driven by SunAmerica Asset ManagementCorp.’s Specialty Series product offerings (Alternative Strategies and Global Trends) and the Focused DividendStrategy Portfolio.AIG Life and Retirement grew new sales of mortality-based life insurance products during 2011 by strengthening thecore retail independent distribution channel and continuing to focus on career agent and direct-to-consumerdistribution. Retail life sales increased 17 percent during 2011 as we continued to re-engage independent distributionchannels. Affiliated distribution channels grew 11 percent in 2011 as a result of an enhanced product suite appealing..................................................................................................................................................................................................................................106 AIG 2012 Form 10-K
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American International Group, Inc.2
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KEY FACTS & FIGURES52,000+ $65.7 bi
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■We said we would return to profi
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Financial HighlightsYears Ended Dec
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~63,000AIG EMPLOYEES AROUND THE WOR
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$115.1 millionAVERAGE CLAIMS PAID E
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$10,000MAXIMUM DONATION MADE BY AIG
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American International Group, Inc.F
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AMERICAN INTERNATIONAL GROUP, INC.A
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ITEM 1 / BUSINESS / AIG............
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ITEM 1 / BUSINESS / AIG............
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ITEM 1 / BUSINESS / AIG PROPERTY CA
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ITEM 1 / BUSINESS / AIG PROPERTY CA
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ITEM 1 / BUSINESS / AIG LIFE AND RE
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ITEM 1 / BUSINESS / OTHER OPERATION
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ITEM 1 / BUSINESS / OTHER OPERATION
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ITEM 1 / BUSINESS..................
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ITEM 1 / BUSINESS..................
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ITEM 1 / BUSINESS..................
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ITEM 1 / BUSINESS..................
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ITEM 1 / BUSINESS..................
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ITEM 1A / RISK FACTORS.............
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ITEM 1B / UNRESOLVED STAFF COMMENTS
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ITEM 5 / MARKET FOR REGISTRANT’S
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ITEM 6 / SELECTED FINANCIAL DATA...
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ITEM 6 / SELECTED FINANCIAL DATA...
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ITEM 7 / MANAGEMENT’S DISCUSSION
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ITEM 7 / ENTERPRISE RISK MANAGEMENT
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ITEM 7 / CRITICAL ACCOUNTING ESTIMA
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ITEM 7 / GLOSSARY..................
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ITEM 7 / GLOSSARY..................
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ITEM 7A / QUANTITATIVE AND QUALITAT
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ITEM 8 / INDEX TO FINANCIAL STATEME
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AMERICAN INTERNATIONAL GROUP, INC.C
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ITEM 8 / NOTE 1. BASIS OF PRESENTAT
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ITEM 8 / NOTE 2. SUMMARY OF SIGNIFI
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ITEM 8 / NOTE 3. SEGMENT INFORMATIO
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ITEM 8 / NOTE 3. SEGMENT INFORMATIO
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ITEM 8 / NOTE 4. DIVESTED BUSINESSE
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ITEM 8 / NOTE 4. DIVESTED BUSINESSE
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ITEM 8 / NOTE 5. BUSINESS COMBINATI
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ITEM 8 / NOTE 6. FAIR VALUE MEASURE
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ITEM 8 / NOTE 7. INVESTMENTS.......
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ITEM 8 / NOTE 8. LENDING ACTIVITIES
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ITEM 8 / NOTE 9. REINSURANCE.......
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ITEM 8 / NOTE 10. DEFERRED POLICY A
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ITEM 8 / NOTE 10. DEFERRED POLICY A
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ITEM 8 / NOTE 11. VARIABLE INTEREST
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ITEM 8 / NOTE 11. VARIABLE INTEREST
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ITEM 8 / NOTE 12. DERIVATIVES AND H
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ITEM 8 / NOTE 13. LIABILITY FOR UNP
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ITEM 8 / NOTE 14. VARIABLE LIFE AND
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ITEM 8 / NOTE 15. DEBT OUTSTANDING.
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ITEM 8 / NOTE 15. DEBT OUTSTANDING.
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ITEM 8 / NOTE 16. CONTINGENCIES, CO
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ITEM 8 / NOTE 17. TOTAL EQUITY.....
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ITEM 8 / NOTE 18. NONCONTROLLING IN
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ITEM 8 / NOTE 19. EARNINGS (LOSS) P
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ITEM 8 / NOTE 20. STATUTORY FINANCI
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ITEM 8 / NOTE 21. SHARE-BASED COMPE
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ITEM 8 / NOTE 21. SHARE-BASED COMPE
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ITEM 8 / NOTE 22. EMPLOYEE BENEFITS
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ITEM 8 / NOTE 24. INCOME TAXES.....
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ITEM 8 / NOTE 26. QUARTERLY FINANCI
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ITEM 8 / NOTE 27. INFORMATION PROVI
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PART II............................
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PART IV............................
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SignatureTitle/s/ ARTHUR C. MARTINE
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ExhibitNumber Description Location(
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Condensed Financial Information of
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Condensed Financial Information of
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Notes to Condensed Financial Inform
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Supplementary Insurance Information
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Valuation and Qualifying AccountsFo
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Subsidiaries of RegistrantExhibit 2
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Percentageof VotingSecuritiesJurisd
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Percentageof VotingSecuritiesJurisd
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CONSENT OF INDEPENDENT REGISTERED P
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CERTIFICATIONSI, Robert H. Benmosch
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CERTIFICATIONExhibit 32In connectio
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SECURITIES REGISTERED PURSUANT TO S
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American International Group, Inc.1
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