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ITEM 7 / LIQUIDITY AND CAPITAL RESOURCES.....................................................................................................................................................................................The following table presents a summary of AIG’s Consolidated Statement of Cash Flows:Years Ended December 31,(in millions) 2012 2011 2010Summary:Net cash provided by (used in) operating activities $ 3,676 $ (81) $ 16,597Net cash provided by (used in) investing activities 16,612 36,448 (9,912)Net cash used in financing activities (20,564) (36,926) (9,261)Effect of exchange rate changes on cash 16 29 39Decrease in cash (260) (530) (2,537)Cash at beginning of year 1,474 1,558 4,400Change in cash of businesses held for sale (63) 446 (305)Cash at end of year $ 1,151 $ 1,474 $ 1,558Operating Cash Flow Activities..............................................................................................................................................................................................Interest payments totaled $4.0 billion in 2012 compared to $9.0 billion in 2011. Cash paid for interest in 2011includes the payment of FRBNY Credit Facility accrued compounded interest totaling $6.4 billion. Excluding interestpayments, AIG generated positive operating cash flow of $7.7 billion and $8.9 billion in 2012 and 2011, respectively.Insurance companies generally receive most premiums in advance of the payment of claims or policy benefits. Theability of insurance companies to generate positive cash flow is affected by the frequency and severity of lossesunder their insurance policies, policy retention rates and operating expenses.Cash provided by AIG Property Casualty operating activities was $1.1 billion in 2012 compared to $1.9 billion in2011, primarily reflecting the decrease in net premiums written as a result of the continued execution of strategicinitiatives to improve business mix and the timing of the cash flows used to pay claims and claims adjustmentexpenses and the related reinsurance recoveries.Cash provided by operating activities by AIG Life and Retirement was $2.9 billion in 2012 compared to $2.4 billion in2011, primarily reflecting efforts to actively manage spread income.Cash provided by operating activities of discontinued operations of $2.9 billion in 2012 compared to $6.2 billion in2011, includes ILFC, and in 2011 and 2010, foreign life insurance subsidiaries that were divested in 2011, includingNan Shan, AIG Star and AIG Edison.Net cash provided by operating activities declined in 2011 compared to 2010, principally due to the following:• the cash payment by AIG Parent of $6.4 billion in accrued compounded interest and fees under the FRBNY CreditFacility. In prior periods, these payments were paid in-kind and did not affect operating cash flows;• cash provided by operating activities of foreign life subsidiaries declined by $10.4 billion due to the sale of thosesubsidiaries (AIA, ALICO, AIG Star, AIG Edison and Nan Shan). The subsidiaries generated operational cashinflows of $3.4 billion and $13.8 billion in 2011 and 2010, respectively; and• the effect of catastrophes and the cession of a large portion of AIG Property Casualty’s net asbestos liabilities inthe U.S. to NICO. Excluding the impact of the NICO cession and catastrophes, cash provided by AIG’s reportablesegments in 2011 is consistent with 2010, as increases in claims paid were offset by increases in premiumscollected at the insurance subsidiaries.Investing Cash Flow Activities..............................................................................................................................................................................................Net cash provided by investing activities for 2012 includes the following items:• payments received relating to the sale of the underlying assets held by ML II of approximately $1.6 billion;• payments of approximately $8.5 billion received in connection with the dispositions of ML III assets by the FRBNY;..................................................................................................................................................................................................................................AIG 2012 Form 10-K 123