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ITEM 7 / RESULTS OF OPERATIONS.....................................................................................................................................................................................to middle market consumers. AIG Direct, our direct-to-consumer platform, has proven highly effective for thedistribution of term life and A&H products. The decline in institutional sales during 2011 reflected several largevariable universal life sales during 2010.Retirement Services Net FlowsThe following table presents the account value rollforward for Retirement Services:Years Ended December 31,(in millions) 2012 2011 2010Group retirement productsBalance, beginning of year $ 69,925 $ 68,365 $ 63,419Deposits – annuities 5,083 5,652 4,937Deposits – mutual funds 1,945 1,660 1,372Total deposits 7,028 7,312 6,309Surrenders and other withdrawals (6,325) (5,853) (6,647)Death benefits (401) (371) (317)Net inflows (outflows) 302 1,088 (655)Change in fair value of underlying investments, interest credited, net of fees 6,087457 5,601Effect of unrealized gains (losses) (shadow loss) 17815 –Balance, end of year $ 76,492 $ 69,925 $ 68,365Individual fixed annuitiesBalance, beginning of year $ 52,276 $ 48,489 $ 47,202Deposits 1,495 6,606 4,410Surrenders and other withdrawals (3,465) (3,456) (3,520)Death benefits (1,632) (1,570) (1,479)Net inflows (outflows) (3,602) 1,580 (589)Change in fair value of underlying investments, interest credited, net of fees 1,719 1,828 1,876Other 479– –Effect of unrealized gains (losses) (shadow loss) (141) 379 –Balance, end of year $ 50,731 $ 52,276 $ 48,489Individual variable annuitiesBalance, beginning of year $ 24,896 $ 25,581 $ 24,637Deposits 4,561 3,212 2,072Surrenders and other withdrawals (2,727) (2,982) (2,725)Death benefits (447) (452) (437)Net inflows (outflows) 1,387 (222) (1,090)Change in fair value of underlying investments, interest credited, net of fees 2,830 (463) 2,034Balance, end of year $ 29,113 $ 24,896 $ 25,581Retail mutual fundsBalance, beginning of year $ 6,221 $ 5,975 $ 5,879Deposits 2,723 1,925 1,101Redemptions (1,705) (1,447) (1,252)Net inflows (outflows) 1,018478 (151)Change in fair value of underlying investments, interest credited, net of fees (69) (232) 247Balance, end of year $ 7,170 $ 6,221 $ 5,975Total Retirement ServicesBalance, beginning of year $ 153,318 $ 148,410 $ 141,137Deposits 15,807 19,055 13,892Surrenders, redemptions and other withdrawals (14,222) (13,738) (14,144)Death benefits (2,480) (2,393) (2,233)Net inflows (outflows) (895) 2,924 (2,485)Change in fair value of underlying investments, interest credited, net of fees 10,567 1,590 9,758Other 479– –Effect of unrealized gains (losses) (shadow loss) 37394 –Balance, end of year, excluding runoff 163,506 153,318 148,410Individual annuities runoff 4,151 4,299 4,430GIC runoff 6,099 6,706 8,486Balance, end of year $ 173,756 $ 164,323 $ 161,326General and separate account reserves and mutual fundsGeneral account reserve $ 102,814 $ 102,580 $ 97,515Separate account reserve 51,970 46,006 48,804Total general and separate account reserves 154,784 148,586 146,319Group retirement mutual funds 11,802 9,516 9,032Retail mutual funds 7,170 6,221 5,975Total reserves and mutual funds $ 173,756 $ 164,323 $ 161,326..................................................................................................................................................................................................................................AIG 2012 Form 10-K 107