Discontinued Operations and Held-for-Sale Classification

6 Months Ended

Jun. 30, 2011

Discontinued Operations and Held-for-Sale Classification

Discontinued Operations and Held-for-Sale Classification

4. Discontinued Operations and Held-for-Sale Classification

Discontinued Operations

AIG Star and AIG Edison Sale

    On September 30, 2010, AIG entered into a definitive agreement with Prudential Financial, Inc. for the sale of its Japan-based insurance subsidiaries, AIG Star and AIG Edison, for total consideration of $4.8 billion, including the assumption of certain outstanding debt totaling $0.6 billion owed by AIG Star and AIG Edison. The transaction closed on February 1, 2011 and AIG recognized a pre-tax gain of $2.0 billion on the sale which is reflected in Income (loss) from discontinued operations in the Consolidated Statement of Operations. AIG has no continuing significant involvement with or significant continuing cash flows from AIG Star and AIG Edison. In connection with the sale, AIG recorded a goodwill impairment charge of $1.3 billion in the third quarter of 2010.

Nan Shan Sale Agreement

    On January 12, 2011, AIG entered into an agreement to sell its 97.57 percent interest in Nan Shan for $2.16 billion in cash to a Taiwan-based consortium. All regulatory approvals for the sale have been received. The transaction met the criteria for held for sale accounting and discontinued operations classification, because AIG has no significant continuing involvement with or significant continuing cash flows from Nan Shan. The sale is expected to close during the third quarter of 2011.

    Nan Shan, AIG Star and AIG Edison previously were components of the Foreign Life Insurance & Retirement Services reportable segment. Results from discontinued operations for the six months ended June 30, 2011 and 2010 include the results of Nan Shan and results of AIG Star and AIG Edison through the date of disposition. Results from discontinued operations for the six months ended June 30, 2010 also include the results of ALICO and American General Finance, Inc. (AGF), which were sold during 2010. See Note 4 to the Consolidated Financial Statements in AIG's 2010 Annual Report on Form 10-K for discussion of these sales and Note 11 herein for a discussion of guarantees and indemnifications associated with sales of businesses.

The following table summarizes income (loss) from discontinued operations:

		Three Months Ended June 30,						Six Months Ended June 30,
(in millions)		2011			2010			2011		2010
Revenues:
	Premiums	$	1,548		$	4,892		$	4,097	$	9,922
	Net investment income		497			1,762			1,209		3,654
	Net realized capital gains (losses)		595			(276	)		964		(427	)
	Other income		-			468			5		1,018
Total revenues			2,640			6,846			6,275		14,167
Benefits, claims and expenses			2,028			9,659			5,122		16,292
Interest expense allocation			-			19			2		38
Income (loss) from discontinued operations			612			(2,832	)		1,151		(2,163	)
Gain (loss) on sales			(692	)		(294	)		902		(401	)
Income (loss) from discontinued operations, before tax expense (benefit)			(80	)		(3,126	)		2,053		(2,564	)
Income tax expense (benefit)			(43	)		(515	)		437		(296	)
Income (loss) from discontinued operations, net of income tax		$	(37	)	$	(2,611	)	$	1,616	$	(2,268	)

Held-for-Sale Classification

    The aggregate held-for-sale assets and liabilities are presented separately as single line items in the asset and liability sections of the Consolidated Balance Sheet at June 30, 2011 for Nan Shan and December 31, 2010 for Nan Shan, AIG Star and AIG Edison.

The following table summarizes assets and liabilities held for sale:

(in millions)		June 30, 2011		December 31, 2010
Assets:
	Fixed maturity securities	$	45,302	$	77,905
	Equity securities		2,654		4,488
	Mortgage and other loans receivable, net		4,265		5,584
	Other invested assets		2,484		4,167
	Short-term investments		692		3,670
	Deferred policy acquisition costs and Other assets		2,114		7,639
	Separate account assets		4,077		3,745
Assets of businesses held for sale			61,588		107,198
Flight equipment*			5		255
Total assets held for sale		$	61,593	$	107,453
Liabilities:
	Future policy benefits for life and accident and health insurance contracts	$	48,930	$	61,767
	Policyholder contract deposits		1,322		26,847
	Other liabilities		2,821		4,428
	Other long-term debt		-		525
	Separate account liabilities		4,077		3,745
Total liabilities held for sale		$	57,150	$	97,312

*

Represents one and nine aircraft that remain to be sold under agreements for sale by ILFC as of June 30, 2011 and December 31, 2010, respectively.