Bring on tomorrow - AIG.com

ITEM 7 / RESULTS OF OPERATIONS.....................................................................................................................................................................................Retained Interests..............................................................................................................................................................................................Change in Fair Value of AIA Securities Prior to Their SaleWe sold our remaining 33 percent interest in AIA ordinary shares for proceeds of $14.5 billion and a net gain of$2.1 billion through three sale transactions on March 7, September 11 and December 20, 2012.We recognized a $1.3 billion gain in 2011, representing a 12 percent increase in the value of AIG’s then 33 percentinterest in AIA, which is recorded in Other invested assets and accounted for under the fair value option. In 2010, werecognized a $638 million loss on our interest in AIA during the approximate two-month holding period following theinitial public offering in late October 2010.Change in Fair Value of ML III Prior to LiquidationThe gains attributable to AIG’s interest in ML III for 2012 were based in part on the completion of the final auction ofML III assets by the FRBNY, in the third quarter of 2012.The loss attributable to AIG’s interest in ML III for 2011 was due to significant spread widening and reduced interestrates.The gain on ML III for 2010 was attributable to the shortening of its weighted average life. Additionally, fair value for2010 was positively affected by a decrease in projected credit losses in the underlying collateral securities.Change in the Fair Value of the MetLife Securities Prior to Their SaleWe recognized a loss in 2011, representing the decline in the securities’ value, due to market conditions, fromDecember 31, 2010 through the date of their sale in the first quarter of 2011.Corporate & Other..............................................................................................................................................................................................Corporate & Other reported lower operating losses in 2012 compared to 2011 primarily due to the effects of thefollowing:• reduction in expense of $211 million in 2012 resulting from settlements of the liability for the Department of theTreasury’s underwriting fees for the sale of AIG Common Stock at amounts lower than had been estimated at thetime the accrual was established, and AIG purchased a significant amount of shares for which no payment to theunderwriters was required; and• a decline in interest expense as a result of the repayment of the FRBNY Credit Facility and the exchange ofoutstanding junior subordinated debentures for senior unsecured notes in 2011.Real estate and other non-core businesses declined due to lower gains on real estate dispositions and higher equitylosses on real estate investments in 2012 compared to 2011.Corporate & Other reported lower operating losses in 2011 compared to 2010. This was primarily due to:• a decline in interest expense as a result of the repayment of the FRBNY Credit Facility; and• improvement in real estate and other non-core businesses due to significantly lower levels of real estateinvestment impairment charges in 2011 compared to 2010.Divested Businesses..............................................................................................................................................................................................Divested businesses include the operating results of divested businesses that did not qualify for discontinuedoperations accounting through the date of their sale. The Divested businesses results for 2010 primarily representthe historical results of AIA, which was deconsolidated in November 2010 in conjunction with its initial public offering...................................................................................................................................................................................................................................AIG 2012 Form 10-K 115