Ladies and gentlemen, thank you for standing by. Welcome to the AIG Fourth Quarter 2010 financial results conference call. At this time, all participants are in a listen-only mode. Later, we will conduct a question and answer session. Instructions will be given at that time. Should you require assistance on today's call or would like to ask a question, please press star then zero. As a reminder, this conference is being recorded. I would now like to turn our conference over to our host, Ms. Elizabeth Werner. Please go ahead.
Thank you, operator. Good morning. Thank you everyone for joining us this morning. On the call today is our President and CEO, Robert Benmosche, who will take us through the first part of our presentation, followed by David Herzog, our CFO, who will take you through the detailed deck, which is available on our website. Bob and David are joined on this call by a number of folks on our management team. After we complete the presentation, we'll be happy to take your questions. If you're listening via phone and haven't already downloaded the presentation, it is available on our website, www.aig.com. Before we get started, I'd like to remind you that today's presentation may concern forward-looking statements which are based on management's current expectations and are subject to uncertainty and changes in circumstances.
Actual results may differ materially from these statements due to a variety of factors, including the precautionary statements referenced in our discussion today and those included in our SEC filings, including, without limitation, the Risk Factors section of our 2010 Form 10-K. AIG is not under any obligation and expressly disclaims any obligation to update or alter any projection or other statement, whether written or oral, that may be made from time to time, whether as a result of new information, future events, or otherwise. Today's presentation may contain non-GAAP financial measures. The reconciliation of such measures to the comparable GAAP figures are included therein or in the Fourth Quarter 2010 financial supplement available in the investor information section of our website. With that said and out of the way, let me turn it over to Bob. Bob?
Yeah. Thank you, Liz. Thank you all for joining us this morning. We're really delighted to have the opportunity to share with you today our financial results, some perspective on how we performed, and where AIG stands today as a global financial institution. As we conclude the presentation, we'll be happy to take any of your questions. As you all know, for more than 2 years, AIG has been focused on repaying the U.S. taxpayer for support they extended to the company during the financial crisis. 6 weeks ago, we were able to completely repay the Federal Reserve 2 years, and I need to stress, 2 years ahead of schedule. A huge milestone, one we achieved because of two things, the dedication of employees and the remarkable partnership of the Fed and the U.S. Treasury.
I would like to start this call by saying thank you to all of these people and to the American people. We thank you for all that you have done. We are on a path that we believe will allow the U.S. government to recoup its entire investment in AIG. As we look forward, as we now look at slide five, for those of you who have the slides, David will walk you through our fourth quarter results in more detail. In simple terms, our fourth quarter net income attributable to AIG of $11.2 billion reflects $17.6 billion of divestitures, particularly the gains of AIA IPO and the sale of Alico, and the $4.2 billion of reserve strengthening at Chartis. Excuse me. My nose. David will discuss our new non-GAAP financial measures and reserve strengthening later in the presentation as well.
I would like to say a few things about Chartis up front. The reserve strengthening was a result of our in-depth review of reserves. We are committed to holding the right level of reserves based on a highly detailed, thorough process. We continue to hold more statutory surplus than any P&C commercial insurance competitor in the U.S. market. Further, our reserves review updated our estimated losses for all years, including the more recent accident years of 2006 through 2009. Years to which approximately 50% of the reserve strengthening, excluding asbestos, applied. Net premiums written remains healthy at Chartis, and we continue to hold the line on pricing. As we have said numerous times in the last two years, we have adjusted our business mix to reduce risk and to yield more sustainable earnings.
In particular, over the past several years, Chartis has deliberately and strategically shifted its mix of business away from lines like workers' compensation and excess casualty and toward higher margin, less capital-intensive segments, such as consumer and specialty commercial businesses. Let's move to slide six, for those of you who have the slides. So much has been accomplished to position AIG for the future. You already heard me say that we sold Alico to MetLife and IPO'd AIA. Since 2008, AIG has announced sales of 33 businesses and raised more than $57 billion in cash and securities. As a result of our success in raising cash, we completed our recapitalization and completely repaid the Federal Reserve Bank of New York.
Government investment in AIG today consists of the U.S. Treasury owning 92% common equity stake in AIG, which it expects to sell off over time, depending upon market conditions. As a result, as we sit here today, AIG is a much simpler capital structure and a stronger balance sheet. Since the crisis began in 2008, AIG reduced net debt by more than $107 billion. We stabilized our credit ratings and accessed the capital markets. During the fourth quarter, AIG raised more than $5.5 billion of new non-government funding, including $2 billion in senior debt in our first bond sale since the summer of 2008. We also established a $500 million contingent liquidity facility and established bank credit facilities. Let me talk a little bit about our success in de-risking the company. The progress we have has been steady and significant.
We've brought the notional amount of the legacy AIG FP derivative portfolio down by 62%, from $940.7 billion at the end of 2009 to $352.8 billion at the end of 2010. Perhaps more important, the liquidity risk of the FP portfolio is down some 97% from September of 2008. The team there has done an outstanding job, and we are committed to managing the remaining FP book on terms and on a timeline that is beneficial to our stakeholders. Let's move to slide seven. Let's talk about the state of our business and our operations. Our key objectives are to position our franchises for sustainable growth, which means striking the right balance between growth, profit, and risk. Led by Peter Hancock, we have done a lot of work to enhance enterprise risk management. We hired Sid Sankaran as our Chief Risk Officer, who is doing a terrific job.
We escalate major decisions involving risks we take to the group risk committee, which Peter chairs. I am also a member, as are all of our business heads and senior functional heads. As we continue to bring aboard world-class enterprise risk management professionals to support our efforts and develop sound comprehensive tools to value risk and enhance value while supporting business growth. As I have said many times, our business performance shows a clear pattern. Our insurance businesses are well-positioned. Client retention rates are strong. Surrender rates have improved to normal levels and in some cases, even better. Sales and distribution relationships are gaining momentum and employee turnover is well within the norm. AIG consists predominantly of two core businesses, Chartis, one of the world's largest, most extensive property and casualty franchises, and SunAmerica Financial Group, one of the U.S.'s broadest life and retirement services franchises.
These franchises are complemented by investments in other businesses that diversify our risk profile and will contribute to our success, such as our aircraft leasing business, ILFC, and United Guaranty Corporation, our mortgage guarantee insurance business. Each of these franchises is well-capitalized and benefits from the simplified and greatly de-levered balance sheet of the post-structured AIG. At Chartis, customer loyalty is high, and retention rates are up in the businesses where we want to grow, particularly our consumer and specialty segments. The Chartis team has brought to market more new products and services while continuing to expand and enhance its existing offerings. The business has a powerful global platform and we are growing. Just recently, we launched the tender offer for the remaining outstanding shares of Fuji Fire and Marine, which will further strengthen our position as the largest foreign-owned insurance group in Japan.
SunAmerica Financial Group includes American General, a leading life insurer, and SunAmerica, VALIC, and Western National, all leading providers of retirement products in the U.S. At SunAmerica, we are focused on innovative products. We greatly enhance distribution, which is key to the retirement services side of the business. We are thankful to the many distribution partners that stayed with us and have returned to us. As many of you know, there is an enormous and underserved need in the U.S. life and retirement services market, and we believe SunAmerica is well-positioned for the upcoming retirement boom. A few words on ILFC and UGC. Over the past two years, these companies have taken significant actions to improve their balance sheets. ILFC returned to the capital markets last year, stabilized its funding portfolio, and has strong cash flows.
Beginning in March, ILFC raised more than $14 billion through a variety of funding sources and other liquidity initiatives, enabling it to pay off loans from AIG and indirectly, the U.S. government. UGC, which was profitable in 2010, saw lower first lien delinquencies and improved both its underwriting and claims operations to an extent that we believe it will benefit shareholders going forward. I commend the teams at all of our businesses for their unwavering focus on conducting business during the global recession and with all the noise surrounding AIG. I truly believe that AIG's greatest asset is our people. Our people believe in AIG. No matter the environment, they focus on servicing their customers and preserving the value and power of great franchises. Recently, we completed an employee survey in which 92% of the employees participated, an extraordinary percentage.
They give the highest scores to teamwork and high standards for ethics and compliance, which was incredibly heartening. The resilience, integrity, and commitment of our employees are at the heart of why I am proud to be a part of AIG today. As we move to slide eight, we can see that as we build our recent accomplishments, we face new and exciting challenges. We are squarely focused on making AIG the world's most valuable insurance company. We will pursue that goal by leveraging our unmatched global presence, franchise leadership, and loyalty that comes from confidence that our customers have in AIG. Focusing on profitable growth, growing our core insurance operations, in particular. Focusing on enhanced risk management framework and effectively deploying our capital to the best opportunities. Our efforts are intrinsic to our delivering profitable, sustainable growth.
We are committed to building on the extraordinary efforts of the last two years, as we continue to take the right steps to earn enduring the confidence of our stakeholders. David, I'd like to turn it over to you.
Thanks, Bob, good morning, everyone. Let's turn to slide number 10. As Bob highlighted, we reported fourth quarter net income attributable to AIG of $11.2 billion. Here's a quick rundown of the results for the quarter. For Chartis, a $4 billion loss and a $1.1 billion loss for the year. These results are heavily affected by the prior year loss reserve strengthening on long-tail lines of business of $4.2 billion in the quarter, and catastrophe losses of roughly $1.1 billion for the year. At SunAmerica, we posted income of $1 billion for the quarter and generated $4 billion for the year. For ILFC, a loss of just over $600 million for the quarter and a loss of nearly $700 million for the year.
These results reflect the impairment charges of about $740 million for the quarter, $1.6 billion for the year, stemming from more active fleet and balance sheet management, in large part for the quarter due to recent announcements by one aircraft manufacturer with respect to forthcoming new aircraft with more fuel-efficient engines. At UGC, as Bob pointed out, we posted $154 million profit for the quarter and almost $330 million of profit for the year, reflecting continued improvement in market conditions, lower levels of newly reported delinquencies in first lien products, a decline in claims and claims adjustment expense, all resulting in favorable prior year loss development. Let's turn to slide 11. This page shows a reconciliation of our after-tax operating income to GAAP net income attributable to AIG.
After-tax operating income or loss is a new non-GAAP measure we are using in place of adjusted net income that we formerly used. As you can see, many of the adjustments relate to our restructuring and divestiture activities that are winding down and are not part of the ongoing operations of the company going forward. In addition to excluding realized capital gains and losses and derivatives not receiving hedge accounting treatment, we will now exclude the deferred acquisition cost effects of capital gains and losses, much like other market participants, and show the operating earnings as if there was no deferred tax asset valuation allowance. This makes our non-GAAP measure more comparable to others in the industry. Let's turn to slide 12. As a result of the recapitalization, which happened after the quarter closed, our pro forma book value per share at year-end is $46.80.
As you can see with the recapitalization, we have greatly simplified our capital structure and reduced financial leverage. We have a footnote 26 in our 10-K that shows a pro forma unaudited balance sheet showing the effects. Let's turn to slide 14, Chartis operating results. Chartis operating loss was $4 billion, as I earlier mentioned, before realized capital gains and losses and reflected the $4.2 billion reserve strengthening net of discount and loss-sensitive premium adjustments. The total reserve strengthening represents about 6.2% of AIG's total general insurance net liability for unpaid claims and claims adjustment expense of just over $68 billion reported at year-end. Major cats in the quarter were about $203 million, while there were none in last year's fourth quarter.
Partially offsetting the adverse reserve development and higher cats was net investment income of about $1.2 billion, up 40% from the fourth quarter of 2009, which included a large unusual item. Fourth quarter 2010 includes just over $300 million of partnership in mutual fund returns. Let's now turn to slide 15. As part of our annual in-depth reserve review, Chartis conducts hundreds of individual analyses for each class of business in its companies. Across AIG, this is a well-established process, and with the assistance of third-party actuaries, our own actuarial teams assess the potential implications of new data, loss emergence across accident years during the quarter, new and emerging AIG specific and industry loss trends, and where appropriate, we update and calibrate loss models using the best available current information. We updated our estimated net loss reserves for many accident years, including more recent accident years.
As Bob mentioned, excluding asbestos, approximately 50% of the reserve strengthening related to accident years 2006 through 2009. As you can see, there's a breakdown of the adverse development by major class of business on the slide. As you will note, 4 classes have contributed the majority of the adverse development over the last five years. With all remaining classes that make up nearly 93% of the net premiums written for 2010 contributing favorable development of just over $1 billion over the same five-year period. We have continued to de-emphasize the 4 long-tail classes of business, as you can see at the bottom right of the slide, where we show that these 4 classes made up almost 22% of the premiums in 2007 and represent less than 7% in 2010.
We are comfortable that our process resulted in our reasonable best estimates, which were further informed by third-party actuarial indications. Let's turn to slide 16. Chartis continues to deploy capital in higher margin segments and geographies and has made a significant change in geographic diversity with growth in the international markets. In the fourth quarter, worldwide net premiums increased 9.4%, but excluding the nearly $900 million of premiums relating to Fuji, which we now consolidate, worldwide premiums declined to actually 3.3% during the period. This is primarily due to challenging economic conditions, though some global regions are improving and a shift in business mix away from certain long-tail lines or cat-exposed lines that are less profitable, as Bob mentioned earlier. We have had some good experiences in specialty markets and with our consumer lines and niche products. We continue to shift our mix of business.
Pricing in 2010 was relatively stable, and we compared favorably to the major U.S. pricing indices. The international share of overall Chartis net premiums increased steadily from approximately 35% in 2007 to nearly 50% in 2010. For example, the recent Fuji acquisition was very much in line with our strategic goal of increasing both consumer and international business. Let's turn to slide 17. The fourth quarter 2010 combined ratio was just over 160 points, including 49 points from reserve strengthening. In addition to the reserves, Chartis had higher expenses. The expenses were up 150 points due to higher acquisition costs from deliberate strategic shift to increase our consumer lines. As we acquire more consumer business, we will experience higher expense ratios as acquisition costs associated with consumer business are higher. However, the overall combined ratio in this business tends to be lower. Let's turn to slide 18.
Investment income, as I mentioned earlier, increased just over 40%, primarily due to the large unusual item in 2004. We also had increased partnership income. We have reduced the Chartis municipal bond portfolio to approximately $36.3 billion net of the pre-funded municipal bonds. Current portfolio is high quality, with over 99% of the portfolio rated low single A or better, and the majority of the portfolio is in revenue bonds. As part of our Chartis strategic asset allocation going forward, we continue to purchase taxable instruments in line with liquidity, duration, quality constraints, and importantly, that also meet our current risk return and tax objectives. Let's turn to slide 20. SunAmerica. With 2010 operating income of $4 billion, SunAmerica is well-positioned