HELD-FOR-SALE CLASSIFICATION AND DISCONTINUED OPERATIONS

9 Months Ended

Sep. 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, AIG Parent, AIG Capital Corporation (Seller), a wholly-owned direct subsidiary of AIG Parent and the sole shareholder of 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 Parent, 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 had 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 October 31, 2013, the closing of the ILFC Transaction has not occurred. As a result, no assurance can be given that the Share Purchase Agreement will not be terminated. We continue to consider ILFC as a non-core business and we are continuing to pursue other options including an alternative sale or an initial public offering. We determined ILFC met the criteria for held for sale and discontinued operations accounting at September 30, 2013 and December 31, 2012.

The following table summarizes the components of assets and liabilities held-for sale:

(in millions)	September 30, 2013			December 31, 2012
Assets:
Equity securities	$	2		$	1
Mortgage and other loans receivable, net		178			117
Flight equipment primarily under operating leases,  net of accumulated depreciation		35,256			34,468
Short-term investments		548			1,861
Cash		71			63
Premiums and other receivables, net of allowance		300			308
Other assets		2,238			1,864
Assets held for sale		38,593			38,682
Less: Loss accrual		(8,473	)		(6,717	)
Total assets held for sale	$	30,120		$	31,965
Liabilities:
Other liabilities	$	3,195		$	3,043
Long-term debt		22,253			24,323
Total liabilities held for sale	$	25,448		$	27,366

The following table summarizes income from discontinued operations:

	Three Months Ended September 30,						Nine Months Ended September 30,
(in millions)	2013			2012			2013			2012
Revenues:
Aircraft leasing revenue	$	1,120		$	1,147		$	3,313		$	3,426
Net realized capital gains		1			1			–			–
Other income (loss)		(3	)		(5	)		(10	)		(14	)
Total revenues		1,118			1,143			3,303			3,412
Benefits, claims and expenses, excluding Aircraft leasing expenses		341			386			1,112			1,184
Aircraft leasing expenses		196			720			376			1,991
Income from discontinued operations		581			37			1,815			237
Gain (loss) on sale		(609	)		–			(1,636	)		12
Income (loss) from discontinued operations, before income tax (benefit) expense		(28	)		37			179			249
Income tax (benefit) expense		14			–			95			(31	)
Income (loss) from discontinued operations, net of income tax	$	(42	)	$	37		$	84		$	280

We recorded a $6.7 billion pre-tax loss and a $4.4 billion after-tax loss on the sale of ILFC for the year ended December 31, 2012. In the three- and nine-month periods ended September 30, 2013, we recorded additional pre-tax losses of $582 million and $1.8 billion, respectively, on the sale, largely offsetting ILFC operating results for the periods. ILFC operating results did not include depreciation and amortization expense as a result of its classification as held for sale, because depreciation and amortization expense is not recorded on the assets of a business after the business is classified as held-for-sale.

Impairment in ILFC Separate-Company Financial Statements

ILFC recognized a $1.1 billion impairment charge related to flight equipment held for use in their separate-company financial statements for the three- and nine-month periods ended September 30, 2013. ILFC concluded that the net book value of certain four-engine widebody aircraft in their fleet is no longer supportable based upon the latest cash flow estimates because the estimated holding period is not likely to be as long as previously anticipated. Sustained high fuel prices, the introduction of more fuel-efficient aircraft, and the success of competing aircraft models have resulted in a shrinking operator base for these aircraft types. These factors along with the latest updates to airline fleet plans and recent efforts to remarket these aircraft resulted in the impairment charge. Approximately $1.0 billion of the $1.1 billion in the impairment charges recorded in the three months ended September 30, 2013, resulted from the four-engine widebody aircraft and in particular the Airbus A340-600s. This had no effect on AIG's consolidated financial condition, results of operations, or cash flows as a result of the loss on sale AIG recognized for the year ended December 31, 2012.

ALICO

In connection with the sale of American Life Insurance Company (ALICO) to MetLife, Inc. (MetLife), we recognized a pre-tax loss of $27 million and pre-tax gain of $118 million for the three- and nine-month periods ended September 30, 2013, respectively, primarily attributable to the refund of taxes, interest and penalties, together with other matters.