Discontinued Operations and Held-for-Sale Classification

9 Months Ended

Sep. 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 that is reflected in Income (loss) from discontinued operations in the Consolidated Statement of Operations. In connection with the sale, AIG recorded a goodwill impairment charge of $1.3 billion in the third quarter of 2010.

Nan Shan Sale

    On January 12, 2011, AIG entered into an agreement to sell its 97.57 percent interest in Nan Shan to a Taiwan-based consortium. The transaction was consummated on August 18, 2011 for net proceeds of $2.15 billion in cash. AIG recorded a pre-tax gain of $69 million and a pre-tax loss of $976 million on the sale for the three and nine months ended September 30, 2011, respectively, which are reflected in Income (loss) from discontinued operations in the Consolidated Statement of Operations. The net proceeds from the transaction were used to pay down a portion of the liquidation preference of the Department of the Treasury's AIA SPV Preferred Interests.

    Results from discontinued operations for the three and nine months ended September 30, 2011 and 2010 primarily include the results of Nan Shan and results of AIG Star and AIG Edison through the dates of disposition, and settlements pursuant to indemnification provisions from prior dispositions. AIG has no continuing significant involvement with or significant continuing cash flows from these businesses. Results from discontinued operations for the nine months ended September 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 September 30,						Nine Months Ended September 30,
(in millions)		2011			2010			2011		2010
Revenues:
	Premiums	$	915		$	4,651		$	5,012	$	14,573
	Net investment income		423			1,517			1,632		5,171
	Net realized capital gains (losses)		(120	)		364			844		(63	)
	Other income		-			228			5		1,246
Total revenues			1,218			6,760			7,493		20,927
Benefits, claims and expenses			1,239			6,803			6,361		23,095
Interest expense allocation			-			369			2		407
Income (loss) from discontinued operations			(21	)		(412	)		1,130		(2,575	)
Gain (loss) on sales			43			(1,970	)		945		(2,371	)
Income (loss) from discontinued operations, before tax expense (benefit)			22			(2,382	)		2,075		(4,946	)
Income tax expense (benefit)			243			(549	)		680		(845	)
Income (loss) from discontinued operations, net of income tax		$	(221	)	$	(1,833	)	$	1,395	$	(4,101	)

Held-for-Sale Classification

    In the third quarter of 2011, AIG sold its remaining assets and liabilities that had been classified as held-for-sale. At December 31, 2010, held-for-sale assets and liabilities consisted of Nan Shan, AIG Star, and AIG Edison, and aircraft that remained to be sold under agreements for sale by ILFC.

The following table summarizes the components of assets and liabilities held for sale on the Consolidated Balance Sheet as of December 31, 2010:

(in millions)		December 31, 2010
Assets:
	Fixed maturity securities	$	77,905
	Equity securities		4,488
	Mortgage and other loans receivable, net		5,584
	Other invested assets		4,167
	Short-term investments		3,670
	Deferred policy acquisition costs and Other assets		7,639
	Separate account assets		3,745
Assets of businesses held for sale			107,198
Flight equipment*			255
Total assets held for sale		$	107,453
Liabilities:
	Future policy benefits for life and accident and health insurance contracts	$	61,767
	Policyholder contract deposits		26,847
	Other liabilities		4,428
	Other long-term debt		525
	Separate account liabilities		3,745
Total liabilities held for sale		$	97,312

*

Represents nine aircraft that were under agreements for sale by ILFC at December 31, 2010.