HELD-FOR-SALE CLASSIFICATION AND DISCONTINUED OPERATIONS

6 Months Ended

Jun. 30, 2013

HELD-FOR-SALE CLASSIFICATION AND DISCONTINUED OPERATIONS

HELD-FOR-SALE CLASSIFICATION AND DISCONTINUED OPERATIONS

4. HELD-FOR-SALE CLASSIFICATION AND DISCONTINUED OPERATIONS

International Lease Finance Corporation Sale

On December 9, 2012, American International Group, Inc. (AIG Parent), AIG Capital Corporation (Seller), a wholly-owned direct subsidiary of AIG Parent and the sole shareholder of International Lease Finance Corporation (ILFC), and Jumbo Acquisition Limited (Purchaser) entered into a definitive agreement (the Share Purchase Agreement) for the sale of 80.1 percent of the common stock of ILFC for approximately $4.2 billion in cash (the ILFC Transaction). The Share Purchase Agreement permits the Purchaser to elect to purchase an additional 9.9 percent of the common stock of ILFC for $522.5 million (the Option). On June 15, 2013, AIG, Seller and Purchaser entered into an amendment (the Amendment) to the Share Purchase Agreement, as amended by Amendment No. 1, dated May 10, 2013. The Amendment extended to July 31, 2013, the date on which any of AIG Parent, Seller or Purchaser may terminate the Share Purchase Agreement, as amended, if the closing of the ILFC Transaction has not yet occurred. Under the Amendment, AIG Parent and Seller may pursue (but not enter into definitive documentation for, or consummate) other offers for ILFC and may continue to pursue (but not engage in widespread solicitation of orders for, or request effectiveness of) the alternative of a public offering.

On July 15, 2013, the Purchaser delivered notice that it intended to exercise the Option, raising the size of the total purchase to 90 percent of the common stock of ILFC.

As of August 5, 2013, the closing of the ILFC Transaction has not occurred. AIG continues to consider ILFC as a non-core business and is continuing to pursue other options including a sale or initial public offering. We determined ILFC met the criteria for held for sale and discontinued operations accounting at June 30, 2013 and December 31, 2012.

The following table summarizes the components of assets and liabilities, all of which consist of ILFC, held-for-sale:

(in millions)	June 30, 2013			December 31, 2012
Assets:
Equity securities	$	2		$	1
Mortgage and other loans receivable, net		118			117
Flight equipment primarily under operating leases, net of accumulated depreciation		34,948			34,468
Short-term investments		1,521			1,861
Cash		73			63
Premiums and other receivables, net of allowance		334			308
Other assets		2,062			1,864
Assets of businesses held for sale		39,058			38,682
Less: Loss accrual		(7,890	)		(6,717	)
Total assets held for sale	$	31,168		$	31,965
Liabilities:
Other liabilities	$	3,222		$	3,043
Long-term debt		23,274			24,323
Total liabilities held for sale	$	26,496		$	27,366

The following table summarizes income from discontinued operations:

	Three Months Ended June 30,						Six Months Ended June 30,
(in millions)	2013			2012			2013			2012
Revenues:
Aircraft leasing revenue	$	1,115		$	1,123		$	2,193		$	2,279
Net realized capital gains (losses)		–			(2	)		(1	)		(1	)
Other income		(4	)		(4	)		(7	)		(9	)
Total revenues		1,111			1,117			2,185			2,269
Benefits, claims and expenses, excluding Aircraft leasing expenses		383			389			771			798
Aircraft leasing expenses		90			646			180			1,271
Income from discontinued operations		638			82			1,234			200
Gain (loss) on sale		(591	)		(8	)		(1,027	)		12
Income from discontinued operations, before income tax expense		47			74			207			212
Income tax (benefit) expense		14			(105	)		81			(31	)
Income from discontinued operations, net of income tax	$	33		$	179		$	126		$	243

We recorded a $4.4 billion after-tax loss on the sale of ILFC for the year ended December 31, 2012. In the three- and six-month periods ended June 30, 2013, we recorded an additional $619 million and $1.2 billion pre-tax loss, respectively, on the sale of ILFC, largely offsetting ILFC operating results for such periods. ILFC operating results did not include depreciation and amortization expense as a result of its classification as held for sale, as depreciation and amortization expense is not recorded on the assets of a business after the business is classified as held-for-sale.

ALICO

In connection with the sale of American Life Insurance Company (ALICO) to MetLife, Inc. (MetLife), we recognized pre-tax gains of $28 million and $145 million, in the three- and six-month periods ended June 30, 2013, respectively, primarily attributable to refunds of taxes, interest and penalties after a successful appeal to the Japanese tax authorities related to the deduction of unrealized foreign exchange losses on certain bond securities held by ALICO prior to its sale to MetLife in 2010.