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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies)

12 Months Ended

Dec. 31, 2012

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Premiums: Premiums for short duration contracts are recorded as written on the inception date of the policy. Premiums are earned primarily on a pro rata basis over the term of the related coverage. Sales of extended services contracts are reflected as premiums and earned on a pro rata basis over the term of the related coverage. The reserve for unearned premiums includes the portion of premiums written relating to the unexpired terms of coverage. Reinsurance premiums under a reinsurance contract are typically earned over the same period as the underlying policies, or risks, covered by the contracts. As a result, the earning pattern of a reinsurance contract may extend up to 24 months, reflecting the inception dates of the underlying policies throughout a year.

Reinsurance premiums ceded are recognized as a reduction in revenues over the period the reinsurance coverage is provided in proportion to the risks to which the premiums relate.

Premiums for long duration insurance products and life contingent annuities are recognized as revenues when due. Estimates for premiums due but not yet collected are accrued.

Policy fees: Policy fees represent fees recognized from universal life and investment-type products consisting of policy charges for the cost of insurance, policy administration charges, amortization of unearned revenue reserves and surrender charges.

Net investment income: For a discussion of our policies on net investment income, see Note 7 herein.

Net realized capital gains (losses): For a discussion of our policies on net realized capital gains (losses), see Note 7 herein.

Other income: Other income includes unrealized gains and losses on derivatives, including unrealized market valuation gains and losses associated with the Global Capital Markets (GCM) super senior credit default swap (CDS) portfolio, as well as income from the Direct Investment book (DIB).

Other income from the operations of the DIB and our Other Operations category consists of the following:

•: Change in fair value relating to financial assets and liabilities for which the fair value option has been elected.
•: Interest income and related expenses, including amortization of premiums and accretion of discounts on bonds with changes in the timing and the amount of expected principal and interest cash flows reflected in the yield, as applicable.
•: Dividend income from common and preferred stock and distributions from other investments.
•: Changes in the fair value of trading securities and spot commodities sold but not yet purchased, futures, hybrid financial instruments, securities purchased under agreements to resell, and securities sold under agreements to repurchase for which the fair value option was elected.
•: Realized capital gains and losses from the sales of available for sale securities and investments in private equity funds and hedge funds and other investments.
•: Income earned on real estate based investments and related losses from property level impairments and financing costs.

•: Exchange gains and losses resulting from foreign currency transactions.
•: Reductions to the cost basis of securities available for sale for other-than-temporary impairments.
•: Earnings from private equity funds and hedge fund investments accounted for under the equity method.
•: Gains and losses recognized in earnings on derivatives for the effective portion and their related hedged items.

Interest credited to policyholder account balances: Represents interest on account-value-based policyholder deposits consisting of amounts credited on non-equity-indexed account values, accretion to the host contract for equity indexed products, and net amortization of sales inducements.

Amortization of deferred acquisition costs: For a discussion of our accounting policies on amortization of deferred policy acquisition costs, see Note 10 herein.

Policyholder benefits and claims incurred

Policyholder benefits and claims incurred: Incurred claims and claims adjustment expense for short duration insurance contracts consist of the estimated ultimate cost of settling claims incurred within the reporting period, including incurred but not reported claims, plus changes in estimates of current and prior period losses resulting from the continuous review process, which are charged to income as incurred. Benefits for long duration insurance contracts consist of benefits paid and changes in future policy benefits liabilities. Benefits for universal life and investment-type products primarily consist of benefit payments made in excess of policy account balances except for certain contracts for which the fair value option was elected, for which benefits represent the entire change in fair value (including derivative gains and losses on related economic hedges).

Held-for-sale and discontinued operations

(b) Held-for-sale and discontinued operations: For a discussion of our accounting policies on reporting a business as held for sale or as discontinued operations, see Note 4 herein.

Investments

(c) Investments:

Fixed maturity and equity securities: For a discussion of our accounting policies on classification, measurement and other-than-temporary impairment of fixed maturity and equity securities, see Note 7 herein.

Mortgage and other loans receivable – net: For discussion of our policies on classification, measurement and the allowance for credit losses on mortgages and other loans receivable, see Note 8 herein.

Other invested assets: For a discussion of our accounting policies on classification, measurement and other-than-temporary impairment of other invested assets, see Note 7 herein.

Short-term investments: Short-term investments consist of interest-bearing cash equivalents, time deposits, securities purchased under agreements to resell, and investments, such as commercial paper, with original maturities within one year from the date of purchase.

For a discussion of our accounting policies on securities purchased under agreements to resell, see Note 7 herein.

Cash

(d) Cash: Cash represents cash on hand and non-interest bearing demand deposits.

Premiums and other receivables - net

(e) Premiums and other receivables – net: Premiums and other receivables includes premium balances receivable, amounts due from agents and brokers and insureds, trade receivables for the DIB and GCM and other receivables. Trade receivables for GCM include cash collateral posted to derivative counterparties that are not eligible to be netted against derivative liabilities. The allowance for doubtful accounts on premiums and other receivables was $619 million and $484 million at December 31, 2012 and 2011, respectively.

Reinsurance assets

(f) Reinsurance assets – net: For a discussion about our accounting policies on reinsurance assets – net, see Note 9 herein.

Deferred policy acquisition costs (DAC):

(g) Deferred policy acquisition costs (DAC): For discussion of our accounting policies on deferred policy acquisition costs, see Note 10 herein

Derivative assets and Derivative liabilities, at fair value

(h) Derivative assets and derivative liabilities, at fair value: For discussion of our accounting policies on derivative assets and derivative liabilities, at fair value, see Note 12 herein.

Other assets

(i) Other assets: Other assets consists of sales inducement assets, prepaid expenses, deposits, other deferred charges, real estate, other fixed assets, capitalized software costs, goodwill, intangible assets other than goodwill, and restricted cash.

We offer sales inducements, which include enhanced crediting rates or bonus payments to contract holders (bonus interest) on certain annuity and investment contract products. Sales inducements provided to the contractholder are recognized as part of the liability for policyholders' contract deposits in the Consolidated Balance Sheet. Such amounts are deferred and amortized over the life of the contract using the same methodology and assumptions used to amortize DAC (see Note 10 herein). To qualify for such accounting treatment, the bonus interest must be explicitly identified in the contract at inception. We must also demonstrate that such amounts are incremental to amounts we credit on similar contracts without bonus interest, and are higher than the contract's expected ongoing crediting rates for periods after the bonus period. The deferred bonus interest and other deferred sales inducement assets totaled $517 million and $803 million at December 31, 2012 and 2011, respectively. The amortization expense associated with these assets is reported within Interest Credited to Policyholder Account Balances in the Consolidated Statement of Operations. Such amortization expense totaled $162 million, $239 million and $146 million for the years ended December 31, 2012, 2011 and 2010, respectively.

The cost of buildings and furniture and equipment is depreciated principally on a straight-line basis over their estimated useful lives (maximum of 40 years for buildings and 10 years for furniture and equipment). Expenditures for maintenance and repairs are charged to income as incurred; expenditures for improvements are capitalized and depreciated. We periodically assess the carrying value of our real estate for purposes of determining any asset impairment. Capitalized software costs, which represent costs directly related to obtaining, developing or upgrading internal use software, are capitalized and amortized using the straight-line method over a period generally not exceeding five years. Real estate, fixed assets and other long-lived assets are assessed for impairment when impairment indicators exist.

Goodwill

(j) Goodwill: Goodwill represents the future economic benefits arising from assets acquired in a business combination that are not individually identified and separately recognized. Goodwill is tested for impairment annually, or more frequently if circumstances indicate an impairment may have occurred. All of our goodwill was associated with and allocated to the AIG Property Casualty Commercial and Consumer segments at December 31, 2012.

The impairment assessment involves first assessing qualitative factors to determine whether events or circumstances exist that lead to a determination that it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If, after assessing the totality of the events or circumstances, we determine it is more likely than not that the fair value of a reporting unit is less than its carrying amount, the impairment assessment involves a two-step process in which a quantitative assessment for potential impairment is performed. If potential impairment is present, the amount of impairment is measured (if any) and recorded. Impairment is tested at the reporting unit level.

If we determine it is more likely than not that the fair value of a reporting unit is less than its carrying amount, we estimate the fair value of each reporting unit and compare the estimated fair value with the carrying amount of the reporting unit, including allocated goodwill. The estimate of a reporting unit's fair value may be based on one or a combination of approaches including market-based earnings multiples of the unit's peer companies, discounted expected future cash flows, external appraisals or, in the case of reporting units being considered for sale, third-party indications of fair value, if available. We consider one or more of these estimates when determining the fair value of a reporting unit to be used in the impairment test.

If the estimated fair value of a reporting unit exceeds its carrying value, goodwill is not impaired. If the carrying value of a reporting unit exceeds its estimated fair value, goodwill associated with that reporting unit potentially is impaired. The amount of impairment, if any, is measured as the excess of the carrying value of the goodwill over the implied fair value of the goodwill. The implied fair value of the goodwill is measured as the excess of the fair value of the reporting unit over the amounts that would be assigned to the reporting unit's assets and liabilities in a hypothetical business combination. An impairment charge is recognized in earnings to the extent of the excess. AIG Property Casualty manages its assets on an aggregate basis and does not allocate its assets, other than goodwill, between its operating segments. Therefore, the carrying value of the reporting units was determined by allocating the carrying value of AIG Property Casualty to those units based upon an internal capital allocation model.

In connection with the announcement of the ILFC sale, discussed in Note 4, and management's determination that the reporting unit met the held-for-sale criteria, management tested the remaining goodwill of the reporting unit for impairment. Based on the results of the goodwill impairment test, we determined that all of the goodwill allocated to the reporting unit should be impaired and, accordingly, recognized a goodwill impairment charge in the fourth quarter of 2012.

At December 31, 2012, we performed our annual goodwill impairment test. Based on the results of the goodwill impairment test, we concluded that the remaining goodwill was not impaired.

The following table presents the changes in goodwill by reportable segment:

(in millions)	AIG Property Casualty			Aircraft Leasing			Other			Total



Balance at December 31, 2010:
Goodwill – gross	$	2,529		$	–		$	2,281		$	4,810
Accumulated impairments		(1,196	)		–			(2,281	)		(3,477	)

Net goodwill		1,333			–			–			1,333

Increase (decrease) due to:
Acquisition		3			15			8			26
Other^(a)		14			–			–			14

Balance at December 31, 2011:
Goodwill – gross	$	2,546		$	15		$	2,289		$	4,850
Accumulated impairments		(1,196	)		–			(2,281	)		(3,477	)

Net goodwill	$	1,350		$	15		$	8		$	1,373

Increase (decrease) due to:
Acquisition		119			–			–			119
Other^(a)		–			–			–			–
Goodwill impairment included in discontinued operations		–			(15	)		(8	)		(23	)

Balance at December 31, 2012:
Goodwill – gross	$	2,665		$	–		$	2,281		$	4,946
Accumulated impairments		(1,196	)		–			(2,281	)		(3,477	)

Net goodwill	$	1,469		$	–		$	–		$	1,469

(a) Includes foreign exchange translation and purchase price adjustments.

Testing Goodwill for Impairment

In September 2011, the FASB issued an accounting standard that amends the approach to testing goodwill for impairment. The standard simplifies how entities test goodwill for impairment by permitting an entity to first assess qualitative factors to determine whether it is more likely than not the fair value of a reporting unit is less than its carrying amount as a basis for determining whether it is necessary to perform the quantitative, two-step goodwill impairment test. The standard became effective for annual and interim goodwill impairment tests performed for fiscal years beginning after December 15, 2011. The adoption of the standard did not have any effect on our consolidated financial condition, results of operations or cash flows.

Separate accounts

(k) Separate accounts: Separate accounts represent funds for which investment income and investment gains and losses accrue directly to the policyholders who bear the investment risk. Each account has specific investment objectives and the assets are carried at fair value. The assets of each account are legally segregated and are not subject to claims that arise from any of our other businesses. The liabilities for these accounts are equal to the account assets.

Liability for unpaid claims and claims adjustment expense

(l) Liability for unpaid claims and claims adjustment expense: For discussion of our accounting policies on liability for unpaid claims and claims adjustment expense, see Note 13 herein.

Future policy benefits for life and accident and health insurance contracts and Policyholder contract deposits

(m) Future policy benefits for life and accident and health insurance contracts and policyholder contract deposits: For discussion of our accounting policies on future policy benefits and life and accident and health insurance contracts and policyholder contract deposits, see Note 13 herein. See Note 6 herein for additional fair value information.

Other policyholder funds

(n) Other policyholder funds: Other policyholder funds are reported at cost and include any policyholder funds on deposit that encompass premium deposits and similar items.

Income taxes

(o) Income taxes: For a discussion of our accounting policies on income taxes, see Note 24 herein.

Other liabilities

(p) Other liabilities: Other liabilities consist of other funds on deposit, other payables, securities sold under agreements to repurchase and securities and spot commodities sold but not yet purchased. We have entered into certain insurance and reinsurance contracts, primarily in our AIG Property Casualty segment, that do not contain sufficient insurance risk to be accounted for as insurance or reinsurance. Accordingly, the premiums received on such contracts, after deduction for certain related expenses, are recorded as deposits within Other liabilities in the Consolidated Balance Sheet. Net proceeds of these deposits are invested and generate Net investment income. As amounts are paid, consistent with the underlying contracts, the deposit liability is reduced. Also included in Other liabilities are trade payables for the DIB and GCM, which include option premiums received and payables to counterparties that relate to unrealized gains and losses on futures, forwards, and options and balances due to clearing brokers and exchanges. Trade payables for GCM also include cash collateral received from derivative counterparties that is not contractually nettable against derivative assets.

Securities and spot commodities sold but not yet purchased represent sales of securities and spot commodities not owned at the time of sale. The obligations arising from such transactions are recorded on a trade-date basis and carried at fair value. Fair values of securities sold but not yet purchased are based on current market prices. Fair values of spot commodities sold but not yet purchased are based on current market prices of reference spot futures contracts traded on exchanges.

For further discussion of secured financing arrangements, see Note 7 herein.

Long-term debt

(q) Long-term debt: For a discussion of our accounting policies on long-term debt, see Note 15 herein.

Contingent liabilities

(r) Contingent liabilities: For a discussion of our accounting policies on contingent liabilities, see Note 16 herein.

Foreign currency

(s) Foreign currency: Financial statement accounts expressed in foreign currencies are translated into U.S. dollars. Functional currency assets and liabilities are translated into U.S. dollars generally using rates of exchange prevailing at the balance sheet date of each respective subsidiary and the related translation adjustments are recorded as a separate component of Accumulated other comprehensive income (loss), net of any related taxes, in Total AIG shareholders' equity. Functional currencies are generally the currencies of the local operating environment. Financial statement accounts expressed in currencies other than the functional currency of a consolidated entity are translated into that entity's functional currency. Income statement accounts expressed in functional currencies are translated using average exchange rates during the period. The adjustments resulting from translation of financial statements of foreign entities operating in highly inflationary economies are recorded in income. Exchange gains and losses resulting from foreign currency transactions are recorded in income.

Noncontrolling interests

(t) Noncontrolling interests: For discussion of our accounting policies on noncontrolling interests, see Note 18 herein.

Earnings (loss) per share

(u) Earnings (loss) per share: For a discussion of our accounting policies on earnings (loss) per share, see Note 19 herein

Future Application of Accounting Standards

Future Application of Accounting Standards

Testing Indefinite-Lived Intangible Assets for Impairment

In July 2012, the Financial Accounting Standards Board (FASB) issued an accounting standard that allows a company the option to first assess qualitatively whether it is more likely than not that an indefinite-lived intangible asset is impaired. A company is not required to calculate the fair value of an indefinite-lived intangible asset and perform the quantitative impairment test unless the company determines it is more likely than not the asset is impaired.

The standard is effective for annual and interim impairment tests performed for fiscal years beginning after September 15, 2012. While early adoption was permitted, we adopted the standard on its required effective date of January 1, 2013. We do not expect adoption of the standard to have a material effect on our consolidated financial condition, results of operations or cash flows.

Disclosures about Offsetting Assets and Liabilities

In February 2013 the FASB issued guidance that clarifies the scope of transactions subject to disclosures about offsetting assets and liabilities. The guidance applies to derivatives, repurchase agreements and reverse purchase agreements, and securities borrowing and securities lending transactions that are offset either in accordance with specific criteria contained in FASB Accounting Standards Codification or subject to a master netting arrangement or similar agreement.

The standard is effective for fiscal years and interim periods beginning on or after January 1, 2013, and will be applied retrospectively to all comparative periods presented. We do not expect adoption of the standard to have a material effect on our consolidated financial condition, results of operations or cash flows.

Presentation of Comprehensive Income

In February 2013 the FASB issued guidance on the presentation requirements for items reclassified out of accumulated other comprehensive income. We will be required to disclose the effect of significant items reclassified out of accumulated other comprehensive income on the respective line items of net income or provide a cross-reference to other disclosures currently required under U.S. GAAP for relevant items.

The standard is effective for annual and interim reporting periods beginning after December 15, 2012. We do not expect adoption of the standard to have a material effect on our consolidated financial condition, results of operations or cash flows.

Reconsideration of Effective Control for Repurchase Agreements

Reconsideration of Effective Control for Repurchase Agreements

In April 2011, the FASB issued an accounting standard that amends the criteria used to determine effective control for repurchase agreements and other similar arrangements such as securities lending transactions. The standard modifies the criteria for determining when these transactions would be accounted for as secured borrowings (i.e., financings) instead of sales of the securities.

The standard removes from the assessment of effective control the requirement that the transferor have the ability to repurchase or redeem the financial assets on substantially the agreed terms, even in the event of default by the transferee. The removal of this requirement makes the level of collateral received by the transferor in a repurchase agreement or similar arrangement irrelevant in determining whether the transaction should be accounted for as a sale. As a consequence, more repurchase agreements, securities lending transactions and similar arrangements will be accounted for as secured borrowings.

The guidance in the standard was required to be applied prospectively to transactions or modifications of existing transactions that occur on or after January 1, 2012. There are no repurchase agreements that continue to be accounted for as sales as of December 31, 2012.

Common Fair Value Measurements and Disclosure Requirements in GAAP and IFRS

Common Fair Value Measurements and Disclosure Requirements in GAAP and IFRS

In May 2011, the FASB issued an accounting standard that amended certain aspects of the fair value measurement guidance in GAAP, primarily to achieve the FASB's objective of a converged definition of fair value and substantially converged measurement and disclosure guidance with International Financial Reporting Standards (IFRS). The measurement and disclosure requirements under GAAP and IFRS are now generally consistent, with certain exceptions including the accounting for day one gains and losses, measuring the fair value of alternative investments using net asset value and certain disclosure requirements.

The standard's fair value measurement and disclosure guidance applies to all companies that measure assets, liabilities, or instruments classified in shareholders' equity at fair value or provide fair value disclosures for items not recorded at fair value. The guidance clarifies existing guidance on the application of fair value measurements, changes certain principles or requirements for measuring fair value, and requires significant additional disclosures for Level 3 valuation inputs. The new disclosure requirements were applied prospectively. The standard became effective beginning on January 1, 2012. The standard did not have any effect on our consolidated financial condition, results of operations or cash flows. See Note 6 for additional information related to fair value measurements.

Presentation of Comprehensive Income

Presentation of Comprehensive Income

In June 2011, the FASB issued an accounting standard that requires the presentation of comprehensive income either in a single continuous statement of comprehensive income or in two separate but consecutive statements. In the two-statement approach, the first statement should present total net income and its components, followed consecutively by a second statement that presents total other comprehensive income and its components. The standard became effective beginning January 1, 2012 with retrospective application required. The standard did not have any effect on our consolidated financial condition, results of operations or cash flows.

2012

New Accounting Pronouncements or Change in Accounting Principles

Accounting Standards Adopted

Accounting for Costs Associated with Acquiring or Renewing Insurance Contracts

In October 2010, the FASB issued an accounting standard update that amends the accounting for costs incurred by insurance companies that can be capitalized in connection with acquiring or renewing insurance contracts. The standard clarifies how to determine whether the costs incurred in connection with the acquisition of new or renewal insurance contracts qualify as DAC. We adopted the standard retrospectively on January 1, 2012.

Deferred policy acquisition costs represent those costs that are incremental and directly related to the successful acquisition of new or renewal insurance contracts. We defer incremental costs that result directly from, and are essential to, the acquisition or renewal of an insurance contract. Such costs generally include agent or broker commissions and bonuses, premium taxes, and medical and inspection fees that would not have been incurred if the insurance contract had not been acquired or renewed. Each cost is analyzed to assess whether it is fully deferrable. We partially defer costs, including certain commissions, when we do not believe the entire cost is directly related to the acquisition or renewal of insurance contracts.

We also defer a portion of employee total compensation and payroll-related fringe benefits directly related to time spent performing specific acquisition or renewal activities, including costs associated with the time spent on underwriting, policy issuance and processing, and sales force contract selling. The amounts deferred are those that resulted in successful policy acquisition or renewal for each distribution channel and/or cost center from which the cost originates.

Advertising costs related to the issuance of insurance contracts that meet the direct-advertising criteria are deferred and amortized as part of DAC.

The method we use to amortize DAC for either short- or long-duration insurance contracts did not change as a result of the adoption of the standard.

The adoption of the standard resulted in a reduction to beginning of period retained earnings for the earliest period presented and a decrease in the amount of capitalized costs in connection with the acquisition or renewal of insurance contracts. Accordingly, we revised our historical financial statements and accompanying notes to the consolidated financial statements for the changes in DAC and associated changes in acquisition expenses and income taxes for affected entities and segments, including divested entities presented in continuing and discontinued operations.

The following table presents amounts previously reported as of December 31, 2011, to reflect the effect of the change due to the retrospective adoption of the standard, and the adjusted amounts that are reflected in our Consolidated Balance Sheet.

December 31, 2011 (in millions)	As Previously Reported		Effect of Change			As Currently Reported



Balance Sheet:
Deferred income taxes	$	17,897	$	1,718		$	19,615
Deferred policy acquisition costs		14,026		(5,089	)		8,937
Other assets		11,705		(42	)		11,663

Total assets		556,467		(3,413	)		553,054

Retained earnings		14,332		(3,558	)		10,774
Accumulated other comprehensive income		6,336		145			6,481

Total AIG shareholders' equity		104,951		(3,413	)		101,538

The following tables present amounts previously reported for the years ended December 31, 2011 and 2010 to reflect the effect of the change due to the retrospective adoption of the standard, and the adjusted amounts that are reflected in our Consolidated Statement of Operations and Consolidated Statement of Cash Flows.

Year Ended December 31, 2011 (dollars in millions, except per share data)	As Previously Reported^(a)			Effect of Change			As Currently Reported



Statement of Operations:
Total net realized capital gains	$	681		$	20		$	701

Total revenues		59,792			20			59,812

Interest credited to policyholder account balances		4,446			21			4,467
Amortization of deferred acquisition costs		8,019			(2,533	)		5,486
Other acquisition and other insurance expenses		6,091			2,367			8,458
Net (gain) loss on sale of properties and divested businesses		74			–			74

Total benefits, claims and expenses		59,840			(144	)		59,696

Income (loss) from continuing operations before income tax benefit		(48	)		164			116

Income tax benefit^(b)		(17,696	)		(1,728	)		(19,424	)

Income from continuing operations		17,648			1,892			19,540
Income from discontinued operations, net of income tax expense^(c)		858			932			1,790

Net income		18,506			2,824			21,330

Net income attributable to AIG		17,798			2,824			20,622

Net income attributable to AIG common shareholders		16,986			2,824			19,810

Income per share attributable to AIG common shareholders:
Basic and diluted
Income from continuing operations	$	8.98		$	1.05			10.03
Income from discontinued operations	$	0.46		$	0.52			0.98

(a) Includes $140 million in Total net realized capital gains attributable to the effect of the reclassification of certain derivative activity discussed in Note 1 herein. Also includes the effect of the reclassification of ILFC as discontinued operations.

(b) Includes an adjustment to the deferred tax valuation allowance of $1.8 billion in the fourth quarter of 2011.

Year Ended December 31, 2010 (dollars in millions, except per share data)	As Previously Reported^(a)			Effect of Change			As Currently Reported



Statement of Operations:
Total net realized capital losses	$	(727	)	$	11		$	(716	)

Total revenues		72,818			11			72,829

Interest credited to policyholder account balances		4,480			7			4,487
Amortization of deferred acquisition costs		9,134			(3,313	)		5,821
Other acquisition and other insurance expenses		6,775			3,388			10,163
Net (gain) loss on sale of properties and divested businesses^(b)		(17,767	)		(1,799	)		(19,566	)

Total benefits, claims and expenses		54,301			(1,719	)		52,582

Income from continuing operations before income tax expense		18,517			1,730			20,247

Income tax expense^(c)		6,116			877			6,993

Income from continuing operations		12,401			853			13,254
Income (loss) from discontinued operations, net of income tax expense^(d)		(2,388	)		1,419			(969	)

Net income		10,013			2,272			12,285

Net income attributable to AIG		7,786			2,272			10,058

Net income attributable to AIG common shareholders		1,583			463			2,046

Income (loss) per share attributable to AIG common shareholders:
Basic and diluted
Income from continuing operations	$	15.23		$	1.27		$	16.50
Loss from discontinued operations	$	3.63		$	2.11		$	1.52

(a) Includes $783 million in Total net realized capital gains attributable to the effect of the reclassification of certain derivative activity discussed in Note 1 herein. Also includes the effect of the reclassification of ILFC as discontinued operations.

(b) Represents the effect on the gain on sale of AIA ordinary shares, which were sold in the fourth quarter of 2010.

(d) Includes an adjustment to the after-tax gain on the sale of ALICO of $1.6 billion in the fourth quarter of 2010.

Adoption of the standard did not affect the previously reported totals for net cash flows provided by (used in) operating, investing, or financing activities, but did affect the following components of net cash flows provided by (used in) operating activities.

Year Ended December 31, 2011 (in millions)	As Previously Reported^(a)			Effect of Change			As Currently Reported



Cash flows from operating activities:
Net income	$	18,506		$	2,824		$	21,330
(Income) loss from discontinued operations		(858	)		(932	)		(1,790	)

Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Noncash revenues, expenses, gains and losses included in income (loss):
Unrealized gains in earnings – net		(937	)		(20	)		(957	)
Depreciation and other amortization		7,935			(2,511	)		5,424
Changes in operating assets and liabilities:
Capitalization of deferred policy acquisition costs		(7,796	)		2,367			(5,429	)
Current and deferred income taxes – net		(18,333	)		(1,728	)		(20,061	)
Total adjustments		(23,904	)		(1,892	)		(25,796	)

Year Ended December 31, 2010 (in millions)	As Previously Reported^(a)			Effect of Change			As Currently Reported



Cash flows from operating activities:
Net income	$	10,013		$	2,272		$	12,285
(Income) loss from discontinued operations		2,388			(1,419	)		969

Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Noncash revenues, expenses, gains and losses included in income (loss):
Net (gains) losses on sales of divested businesses		(17,767	)		(1,799	)		(19,566	)
Unrealized gains in earnings – net		(1,509	)		(20	)		(1,529	)
Depreciation and other amortization		8,488			(2,511	)		5,977
Changes in operating assets and liabilities:
Capitalization of deferred policy acquisition costs		(8,300	)		2,367			(5,933	)
Current and deferred income taxes – net		7,780			(1,728	)		6,052
Total adjustments	$	(5,201	)	$	(1,892	)	$	(7,093	)

(a) Includes the effect of the reclassification of ILFC as discontinued operations.

For short-duration insurance contracts, starting in 2012, we elected to include anticipated investment income in our determination of whether the deferred policy acquisition costs are recoverable. We believe the inclusion of anticipated investment income in the recoverability analysis is a preferable accounting policy because it includes in the recoverability analysis the fact that there is a timing difference between when premiums are collected and in turn invested and when losses and related expenses are paid. This is considered a change in accounting principle that required retrospective application to all periods presented. Because we historically have not recorded any premium deficiency on our short-duration insurance contracts even without the inclusion of anticipated investment income, there were no changes to the historical financial statements for the change in accounting principle.

2011

New Accounting Pronouncements or Change in Accounting Principles

Accounting Standards Adopted

Accounting Standards Adopted During 2011

In January 2010, the FASB issued an accounting standard that requires fair value disclosures about significant transfers between Level 1 and 2 measurement categories and separate presentation of purchases, sales, issuances, and settlements within the rollforward of Level 3 activity. Also, this fair value guidance clarifies the disclosure requirements about the level of disaggregation and valuation techniques and inputs. This guidance became effective for us beginning on January 1, 2010, except for the disclosures about purchases, sales, issuances, and settlements within the rollforward of Level 3 activity, which became effective for us beginning on January 1, 2011. See Note 6 for additional information related to fair value measurements.

In April 2010, the FASB issued an accounting standard that clarifies that an insurance company should not combine any investments held in separate account interests with its interest in the same investment held in its general account when assessing the investment for consolidation. Separate accounts represent funds for which investment income and investment gains and losses accrue directly to the policyholders who bear the investment risk. The standard also provides guidance on how an insurer should consolidate an investment fund when the insurer concludes that consolidation of an investment is required and the insurer's interest is through its general account in addition to any separate accounts.

In April 2011, the FASB issued an accounting standard that amends the guidance for a creditor's evaluation of whether a restructuring is a troubled debt restructuring and requires additional disclosures about a creditor's troubled debt restructuring activities. The standard clarifies the two criteria used to determine whether a modification or restructuring is a troubled debt restructuring: (i) whether the creditor has granted a concession and (ii) whether the debtor is experiencing financial difficulties.

The adoption of these standards did not have a material effect on our consolidated financial condition, results of operations or cash flows.

2010

New Accounting Pronouncements or Change in Accounting Principles

Accounting Standards Adopted

Accounting Standards Adopted During 2010

In June 2009, the FASB issued an accounting standard addressing transfers of financial assets that removes the concept of a qualifying special-purpose entity (QSPE) from the FASB Accounting Standards Codification and removes the exception that exempted transferors from applying the consolidation rules to QSPEs.

In March 2010, the FASB issued an accounting standard that amends the accounting for embedded credit derivative features in structured securities that redistribute credit risk in the form of subordination of one financial instrument to another. The standard clarifies how to determine whether embedded credit derivative features, including those in collateralized debt obligations (CDOs), credit-linked notes (CLNs), synthetic CDOs and CLNs and other synthetic securities (e.g., commercial and residential mortgage-backed securities issued by securitization entities that wrote credit derivatives), are considered to be embedded derivatives that should be analyzed for potential bifurcation and separate accounting or, alternatively, for fair value accounting in connection with the application of the fair value option to the entire hybrid instrument.

The adoption of these standards did not have a material effect on our consolidated financial condition, results of operations or cash flows.