Consolidated Balance Sheet (USD $) In Millions, unless otherwise specified	12 Months Ended
	Dec. 31, 2010	Dec. 31, 2009
Fixed maturity securities:
Bonds available for sale, at fair value (amortized cost: 2010 - $220,669; 2009 - $364,491)	$ 228,302	$ 365,551
Bond trading securities, at fair value	26,182	31,243
Equity securities:
Common and preferred stock available for sale, at fair value (cost: 2010 - $2,571; 2009 - $6,464)	4,581	9,522
Common and preferred stock trading, at fair value	6,652	8,318
Mortgage and other loans receivable, net of allowance (portion measured at fair value: 2010 - $143; 2009 - $119)	19,367	27,461
Finance receivables, net of allowance	870	20,327
Flight equipment primarily under operating leases, net of accumulated depreciation	38,510	44,091
Other invested assets (portion measured at fair value: 2010 - $21,356; 2009 - $18,888)	42,210	45,235
Securities purchased under agreements to resell, at fair value	1,553	2,154
Short-term investments (portion measured at fair value: 2010 - $22,307; 2009 - $23,975)	42,185	47,263
Total investments	410,412	601,165
Cash	1,558	4,400
Accrued investment income	2,960	5,152
Premiums and other receivables, net of allowance	15,713	16,549
Reinsurance assets, net of allowance	25,810	22,425
Current and deferred income taxes		4,108
Deferred policy acquisition costs	14,668	40,814
Real estate and other fixed assets, net of accumulated depreciation	2,845	4,142
Unrealized gain on swaps, options and forward transactions, at fair value	5,917	9,130
Goodwill	1,333	6,195
Other assets, including restricted cash of $30,232 in 2010 and $2,907 in 2009 and prepaid commitment asset of $3,628 in 2010 and $7,099 in 2009 (portion measured at fair value: 2010 - $14; 2009 - $288)	40,342	18,976
Separate account assets, at fair value	54,432	58,150
Assets held for sale	107,453	56,379
Total assets	683,443	847,585
Liabilities:
Liability for unpaid claims and claims adjustment expense	91,151	85,386
Unearned premiums	23,803	21,363
Future policy benefits for life and accident and health insurance contracts	31,268	116,001
Policyholder contract deposits (portion measured at fair value: 2010 - $445; 2009 - $5,214)	121,373	220,128
Other policyholder funds	6,758	13,252
Commissions, expenses and taxes payable	2,820	4,950
Insurance balances payable	2,829	4,393
Funds held by companies under reinsurance treaties	610	774
Current and deferred income taxes	2,369
Securities sold under agreements to repurchase (portion measured at fair value: 2010 - $2,119; 2009 - $3,221)	2,119	3,505
Securities and spot commodities sold but not yet purchased, at fair value	485	1,030
Unrealized loss on swaps, options and forward transactions, at fair value	5,735	5,403
Trust deposits and deposits due to banks and other depositors (portion measured at fair value: 2010 - $15; 2009 - $15)	892	1,641
Other liabilities	19,353	22,503
Federal Reserve Bank of New York Commercial Paper Funding Facility (portion measured at fair value: 2009 - $2,742)		4,739
Federal Reserve Bank of New York credit facility (see Notes 1 and 26)	20,985	23,435
Other long-term debt (portion measured at fair value: 2010 - $12,143; 2009 - $13,195)	85,476	113,298
Separate account liabilities	54,432	58,150
Liabilities held for sale	97,312	48,599
Total liabilities	569,770	748,550
Commitments, contingencies and guarantees (see Note 16)
Redeemable noncontrolling interests in partially owned consolidated subsidiaries (including $12 and $211 associated with businesses held for sale in 2010 and 2009, respectively)	434	959
AIG shareholders' equity (see Notes 1 and 26):
Common stock, $2.50 par value; 5,000,000,000 shares authorized; shares issued: 2010 - 147,124,067; 2009 - 141,732,263	368	354
Treasury stock, at cost; 2010 - 6,660,908; 2009 - 6,661,356 shares of common stock	(873)	(874)
Additional paid-in capital	9,683	6,358
Accumulated deficit	(3,466)	(11,491)
Accumulated other comprehensive income	7,624	5,693
Total AIG shareholders' equity	85,319	69,824
Noncontrolling interests (see Notes 1 and 26):
Noncontrolling nonvoting, callable, junior and senior preferred interests held by Federal Reserve Bank of New York	26,358	24,540
Other (including $204 and $2,234 associated with businesses held for sale in 2010 and 2009, respectively)	1,562	3,712
Total noncontrolling interests	27,920	28,252
Total equity	113,239	98,076
Total liabilities and equity	683,443	847,585
Series E
AIG shareholders' equity (see Notes 1 and 26):
Preferred stock	41,605	41,605
Series F
AIG shareholders' equity (see Notes 1 and 26):
Preferred stock	7,378	5,179
Series C
AIG shareholders' equity (see Notes 1 and 26):
Preferred stock	$ 23,000	$ 23,000

Consolidated Statement of Income (Loss) (USD $) In Millions, except Share data, unless otherwise specified	12 Months Ended
	Dec. 31, 2010	Dec. 31, 2009	Dec. 31, 2008
Revenues:
Premiums and other considerations	$ 48,029	$ 51,239	$ 63,137
Net investment income	20,930	18,987	10,453
Net realized capital losses:
Total other-than-temporary impairments on available for sale securities	(1,712)	(6,096)	(41,409)
Portion of other-than-temporary impairments on available for sale fixed maturity securities recognized in Accumulated other comprehensive income	(812)	316
Net other-than-temporary impairments on available for sale securities recognized in net income (loss)	(2,524)	(5,780)	(41,409)
Other realized capital gains (losses)	2,245	570	(5,385)
Total net realized capital losses	(279)	(5,210)	(46,794)
Unrealized market valuation gains (losses) on Capital Markets super senior credit default swap portfolio	598	1,418	(28,602)
Other income	8,023	8,918	(5,034)
Total revenues	77,301	75,352	(6,840)
Benefits, claims and expenses:
Policyholder benefits and claims incurred	45,874	50,015	51,036
Policy acquisition and other insurance expenses	15,820	15,864	20,833
Interest expense	7,859	14,238	15,713
Restructuring expenses and related asset impairment and other expenses	574	1,149	771
Net (gain) loss on sale of properties and divested businesses	(17,767)	1,271
Other expenses	7,005	7,122	7,836
Total benefits, claims and expenses	59,365	89,659	96,189
Income (loss) from continuing operations before income tax expense (benefit)	17,936	(14,307)	(103,029)
Income tax expense (benefit):
Current	644	2,802	1,049
Deferred	5,215	(4,291)	(10,732)
Total income tax expense (benefit)	5,859	(1,489)	(9,683)
Income (loss) from continuing operations	12,077	(12,818)	(93,346)
Income (loss) from discontinued operations, net of income tax expense (benefit) (See Note 4)	(2,064)	505	(7,041)
Net income (loss)	10,013	(12,313)	(100,387)
Less: Net income (loss) from continuing operations attributable to noncontrolling interests:
Noncontrolling nonvoting, callable, junior and senior preferred interests held by Federal Reserve Bank of New York	1,818	140
Other	355	(1,576)	(984)
Total net income (loss) from continuing operations attributable to noncontrolling interests	2,173	(1,436)	(984)
Net income (loss) from discontinued operations attributable to noncontrolling interests	54	72	(114)
Total net income (loss) attributable to noncontrolling interests	2,227	(1,364)	(1,098)
Net income (loss) attributable to AIG	7,786	(10,949)	(99,289)
Net income (loss) attributable to AIG common shareholders	$ 1,583	$ (12,244)	$ (99,689)
Basic:
Income (loss) from continuing operations (in dollars per share)	$ 14.75	$ (93.69)	$ (704.26)
Income (loss) from discontinued operations (in dollars per share)	$ (3.15)	$ 3.21	$ (52.59)
Diluted:
Income (loss) from continuing operations (in dollars per share)	$ 14.75	$ (93.69)	$ (704.26)
Income (loss) from discontinued operations (in dollars per share)	$ (3.15)	$ 3.21	$ (52.59)
Weighted average shares outstanding:
Basic (in shares)	136,585,844	135,324,896	131,714,245
Diluted (in shares)	136,649,280	135,324,896	131,714,245

Consolidated Statement of Comprehensive Income (Loss) (USD $) In Millions, unless otherwise specified	12 Months Ended
	Dec. 31, 2010	Dec. 31, 2009	Dec. 31, 2008
Net income (loss)	$ 10,013	$ (12,313)	$ (100,387)
Other comprehensive income (loss):
Cumulative effect of change in accounting principle			(162)
Income tax benefit (expense) on above change in accounting principle			57
Unrealized appreciation (depreciation) of fixed maturity investments on which other-than-temporary credit impairments were taken	2,522	2,048
Income tax benefit (expense) on above changes	(1,293)	(724)
Unrealized appreciation (depreciation) of all other investments - net of reclassification adjustments	3,640	27,891	(13,966)
Income tax benefit (expense) on above changes	(1,529)	(9,802)	4,948
Foreign currency translation adjustments	(1,873)	2,932	(1,398)
Income tax benefit (expense) on above changes	621	(1,005)	356
Net derivative gains (losses) arising from cash flow hedging activities - net of reclassification adjustments	111	95	(156)
Income tax benefit (expense) on above changes	(17)	(32)	52
Change in retirement plan liabilities adjustment	299	370	(1,325)
Income tax benefit (expense) on above changes	(24)	(16)	352
Other comprehensive income (loss)	2,457	21,757	(11,242)
Comprehensive income (loss)	12,470	9,444	(111,629)
Comprehensive income (loss) attributable to noncontrolling interests	590	(1,116)	(1,369)
Comprehensive income (loss) attributable to noncontrolling nonvoting, callable, junior and senior preferred interests held by Federal Reserve Bank of New York	1,818	140
Comprehensive income (loss) attributable to AIG	$ 10,062	$ 10,420	$ (110,260)

Consolidated Statement of Equity (USD $)
In Millions, unless otherwise specified

Total

Total AIG Share-holders' Equity

Preferred Stock

Common Stock

Treasury Stock

Additional Paid-in Capital

Payments Advanced to Purchase Shares

Retained Earnings/ (Accumulated Deficit)

Accumulated Other Comprehensive Income (Loss)

Noncontrolling Interests

Balance at Dec. 31, 2007

$ 104,273

$ 95,801

$ 344

$ (6,685)

$ 9,382

$ (912)

$ 89,029

$ 4,643

$ 8,472

Increase (Decrease) in Stockholders' Equity

Consideration received for Series C preferred stock not yet issued

23,000

Series C issuance in 2009 and Series D issuance in 2008

40,000

Common stock issued

7,343

7,319

Common stock issued under stock plans

146

(120)

Shares purchased

(1,912)

1,912

Present value of future contract adjustment payments related to issuance of equity units

(431)

Payments advanced

(1,000)

Cumulative effect of change in accounting principle, net of tax

(1,003)

Net income (loss) attributable to AIG or other noncontrolling interests

^[1]

(99,863)

(99,289)

(574)

Dividends

(1,105)

Other comprehensive income (loss)

(11,242)

(10,971)

(271)

Net decrease due to deconsolidation

(648)

Contributions from noncontrolling interests

1,651

Distributions to noncontrolling interests

(738)

Other

542

339

338

203

Balance at Dec. 31, 2008

60,805

52,710

40,000

368

(8,450)

39,488

(12,368)

(6,328)

8,095

Increase (Decrease) in Stockholders' Equity

Series C issuance in 2009 and Series D issuance in 2008

23,000

(23,000)

Series D exchange for Series E

1,605

(1,605)

Series F drawdowns

5,344

Series F commitment fee

(165)

Common stock issued under stock plans

176

(177)

Retirement of treasury stock

(15)

7,400

(7,385)

Cumulative effect of change in accounting principle, net of tax

2,478

11,826

(9,348)

Net income (loss) attributable to AIG or other noncontrolling interests

^[1]

(12,733)

(10,949)

(1,784)

Net income (loss) attributable to noncontrolling nonvoting, callable, junior and senior preferred interests held by the Federal Reserve Bank of New York

140

Other comprehensive income (loss)

21,757

21,369

388

Net decrease due to deconsolidation

(3,502)

(97)

(3,405)

Contributions from noncontrolling interests

677

Distributions to noncontrolling interests

(368)

Issuance of noncontrolling, nonvoting, callable, junior and senior preferred interests to the Federal Reserve Bank of New York

24,400

Deferred taxes

(818)

Other

(48)

109

Balance at Dec. 31, 2009

98,076

69,824

69,784

354

(874)

6,358

(11,491)

5,693

28,252

Increase (Decrease) in Stockholders' Equity

Series F drawdowns

2,199

Common stock issued under stock plans

(18)

(20)

Equity unit exchange

3,657

3,645

Cumulative effect of change in accounting principle, net of tax

(106)

239

(345)

Net income (loss) attributable to AIG or other noncontrolling interests

^[1]

8,122

7,786

336

Net income (loss) attributable to noncontrolling nonvoting, callable, junior and senior preferred interests held by the Federal Reserve Bank of New York

1,818

Other comprehensive income (loss)

^[2]

2,452

2,276

176

Net decrease due to deconsolidation

(2,740)

Contributions from noncontrolling interests

253

Distributions to noncontrolling interests

(175)

Deferred taxes

(332)

Other

Balance at Dec. 31, 2010

$ 113,239

$ 85,319

$ 71,983

$ 368

$ (873)

$ 9,683

$ (3,466)

$ 7,624

$ 27,920

[1]	Excludes gains (losses) of $73 million, $280 million, and $(524) million in 2010, 2009, and 2008, respectively, attributable to redeemable noncontrolling interests and net income attributable to noncontrolling nonvoting, callable, junior and senior preferred interests held by the Federal Reserve Bank of New York of $1.8 billion and $140 million in 2010 and 2009, respectively.
[2]	Excludes $5 million attributable to redeemable noncontrolling interests.

Consolidated Statement of Cash Flows (USD $)
In Millions, unless otherwise specified

12 Months Ended

Dec. 31, 2010

Dec. 31, 2009

Dec. 31, 2008

Summary:

Net cash provided by (used in) operating activities

$ 16,910

$ 18,584

$ (122)

Net cash provided by (used in) investing activities

(10,225)

5,778

47,176

Net cash used in financing activities

(9,261)

(28,997)

(40,734)

Effect of exchange rate changes on cash

533

Change in cash

(2,537)

(4,102)

6,358

Cash at beginning of period

4,400

8,642

2,284

Reclassification of assets held for sale

(305)

(140)

Cash at end of period

1,558

4,400

8,642

Cash flows from operating activities:

Net income (loss)

10,013

(12,313)

(100,387)

(Income) loss from discontinued operations

2,064

(505)

7,041

Noncash revenues, expenses, gains and losses included in income (loss):

Net (gains) losses on sales of securities available for sale and other assets

(2,842)

(1,305)

5,020

Net (gains) losses on sales of divested businesses

(17,767)

1,271

Unrealized (gains) losses in earnings - net

(1,361)

(4,249)

3,435

Equity in (income) loss from equity method investments, net of dividends or distributions

(1,268)

1,633

7,407

Depreciation and other amortization

11,320

12,074

12,875

Provision for mortgage, other loans and finance receivables

429

1,011

368

Impairments of assets

5,372

9,260

46,158

Amortization of costs and accrued interest and fees related to FRBNY Credit Facility

4,223

10,175

11,163

Changes in operating assets and liabilities:

General and life insurance reserves

8,705

5,991

8,098

Premiums and other receivables and payables - net

595

2,282

(5,885)

Reinsurance assets and funds held under reinsurance treaties

(3,510)

(246)

(718)

Capitalization of deferred policy acquisition costs

(9,321)

(8,938)

(11,030)

Other policyholder funds

572

689

400

Current and deferred income taxes - net

4,856

(2,397)

(9,815)

Trading securities

354

993

2,816

Securities sold under agreements to repurchase, net of securities purchased under agreements to resell

(281)

(18)

13,951

Securities and spot commodities sold but not yet purchased

(545)

(1,663)

(2,027)

Other, net

(1,905)

(1,462)

(959)

Total adjustments

(2,374)

25,101

81,257

Net cash provided by (used in) operating activities - continuing operations

9,703

12,283

(12,089)

Net cash provided by operating activities - discontinued operations

7,207

6,301

11,967

Net cash provided by (used in) operating activities

16,910

18,584

(122)

Cash flows from investing activities:

Sales of available for sale investments

56,213

39,969

91,741

Maturities of fixed maturity securities available for sale and hybrid investments

14,657

15,778

14,744

Sales of trading securities

6,313

12,493

22,418

Sales or distributions of other invested assets (including flight equipment)

10,495

10,745

16,354

Sales of divested businesses, net

21,760

5,278

Principal payments received on mortgage and other loans receivable

4,276

4,282

4,357

Principal payments received on and sales of finance receivables held for investment

1,134

4,913

5,786

Funding to establish Maiden Lane III LLC

(5,000)

Purchases of available for sale investments

(79,263)

(58,859)

(94,981)

Purchases of trading securities

(3,003)

(4,854)

(19,717)

Purchases of other invested assets (including flight equipment)

(7,850)

(10,270)

(21,569)

Mortgage and other loans receivable issued

(2,509)

(2,763)

(3,422)

Finance receivables held for investment - originations and purchases

(486)

(3,520)

(6,420)

Net additions to real estate, fixed assets, and other assets

(267)

(341)

(1,023)

Net change in restricted cash

(27,115)

(250)

(2,362)

Net change in short-term investments

(5,233)

(9,021)

(4,421)

Net change in derivative assets and liabilities other than Capital Markets

267

(127)

(1,289)

Other, net

(332)

2,953

48,205

^[1]

Net cash provided by (used in) investing activities - continuing operations

(10,943)

6,406

43,401

Net cash provided by (used in) investing activities - discontinued operations

718

(628)

3,775

Net cash provided by (used in) investing activities

(10,225)

5,778

47,176

Cash flows from financing activities:

Policyholder contract deposits

19,570

21,546

23,713

Policyholder contract withdrawals

(14,897)

(26,258)

(36,875)

Change in commercial paper and other short-term debt

225

(425)

(8,912)

Change in Federal Reserve Bank of New York Commercial Paper Funding Facility borrowings

(5,855)

(10,647)

15,061

Federal Reserve Bank of New York credit facility borrowings

19,900

32,526

96,650

Federal Reserve Bank of New York credit facility repayments

(23,178)

(26,426)

(59,850)

Issuance of other long-term debt

13,046

3,452

107,324

Repayments on other long-term debt

(15,976)

(19,451)

(134,219)

Proceeds from issuance of Series D preferred stock

40,000

Drawdown on the Department of the Treasury Commitment

2,199

5,344

Issuance of common stock

7,343

Payments advanced to purchase shares

(1,000)

Cash dividends paid to shareholders

(1,628)

Other, net

(579)

(671)

(72,800)

^[1]

Net cash used in financing activities - continuing operations

(5,545)

(21,010)

(25,193)

Net cash used in financing activities - discontinued operations

(3,716)

(7,987)

(15,541)

Net cash used in financing activities

(9,261)

(28,997)

(40,734)

Cash paid during the period for:

Interest

(5,166)

(5,777)

(7,437)

Taxes

(1,002)

(226)

(617)

Non-cash financing/investing activities:

Noncontrolling nonvoting callable, junior and senior preferred interests held by Federal Reserve Bank of New York

25,000

Consideration received for preferred stock not yet issued

23,000

Interest credited to policyholder contract deposits included in financing activities

9,294

12,615

2,566

Treasury stock acquired using payments advanced to purchase shares

1,912

Present value of future contract adjustment payments related to issuance of equity units

431

Long-term debt reduction due to deconsolidations

775

Exchange of equity units and extinguishment of junior subordinated debentures

3,657

Non-cash consideration received from sale of ALICO

9,041

Debt assumed on consolidation of variable interest entities

2,591

Debt assumed on acquisition

$ 164

$ 153

[1]	Includes $48.5 billion related to change in securities lending invested collateral in investing activities and $72.8 billion related to change in securities lending payable in financing activities.

Basis of Presentation and Recent Events

12 Months Ended

Dec. 31, 2010

Basis of Presentation and Recent Events

Basis of Presentation and Recent Events

1. Basis of Presentation and Recent Events

American International Group, Inc. (AIG) is a leading international insurance organization with operations in more than 130 countries. AIG companies serve commercial, institutional and individual customers through one of the most extensive worldwide property-casualty networks of any insurer. In addition, AIG companies are leading providers of life insurance and retirement services in the United States.

Since September 2008, AIG has been working to protect and enhance the value of its key businesses, execute an orderly asset disposition plan, and position itself for the future. AIG has entered into several important transactions and relationships with the Federal Reserve Bank of New York (FRBNY), the AIG Credit Facility Trust (together with its trustees, acting in their capacity as trustees, the Trust) and the United States Department of the Treasury (the Department of the Treasury) during this period. As a result of the series of integrated transactions to recapitalize AIG, on January 14, 2011, the Department of the Treasury became the holder of 92.2 percent of AIG's outstanding common stock. See Recent Events below for further information and Note 26 to the Consolidated Financial Statements herein for financial information regarding subsequent events.

The consolidated financial statements include the accounts of AIG, its controlled subsidiaries (through a greater than 50 percent ownership of voting rights of a voting interest entity), and variable interest entities (VIEs) in which AIG is the primary beneficiary. Entities that AIG does not consolidate but in which it holds 20 percent to 50 percent of the voting rights or otherwise has the ability to exercise significant influence are accounted for under the equity method unless AIG has elected the fair value option. On October 29, 2010, AIG completed an initial public offering of 8.08 billion ordinary shares of AIA Group Limited (AIA), upon the completion of which AIG owned approximately 33 percent of AIA's outstanding shares. AIG is accounting for its investment in AIA under the fair value option with gains and losses recorded in Net investment income.

Certain of AIG's foreign subsidiaries included in the consolidated financial statements report on different fiscal year bases, in most cases ending November 30. The effect on AIG's consolidated financial condition and results of operations of all material events occurring between the fiscal year end and December 31 for all periods presented has been recorded.

The accompanying consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (GAAP). All material intercompany accounts and transactions have been eliminated.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires the application of accounting policies that often involve a significant degree of judgment. AIG considers that its accounting policies that are most dependent on the application of estimates and assumptions are those relating to items considered by management in the determination of:

•

insurance liabilities, including general insurance unpaid claims and claims adjustment expenses and future policy benefits for life and accident and health contracts;

•

recoverability of assets, including deferred policy acquisition costs (DAC) and flight equipment;

•

estimated gross profits for investment-oriented products;

•

impairment charges, including other-than-temporary impairments;

•

liabilities for legal contingencies;

•

estimates with respect to income taxes, including recoverability of deferred tax assets;

•

fair value measurements of certain financial assets and liabilities, including credit default swaps (CDS) and AIG's economic interest in Maiden Lane II LLC (ML II) and equity interest in Maiden Lane III LLC (ML III) (together, the Maiden Lane Interests); and

•

classification of entities as held for sale or as discontinued operations.

These accounting estimates require the use of assumptions about matters, some of which are highly uncertain at the time of estimation. To the extent actual experience differs from the assumptions used, AIG's consolidated financial condition, results of operations and cash flows could be materially affected.

Revisions and Reclassifications

Certain reclassifications have been made to prior periods to conform to the current presentation. See Notes 3, 4 and 24 herein for revisions and reclassifications to prior period amounts attributable to discontinued operations.

Out of Period Adjustments

For the year ended December 31, 2010, AIG recorded out of period adjustments relating to prior years that decreased Income from continuing operations before income taxes and increased Loss from discontinued operations before income taxes by $233 million and $92 million, respectively, and decreased Net income attributable to AIG by $216 million. The out of period adjustments primarily related to the effect of recording impairments on certain consolidated investments held in Institutional Asset Management, which affected the calculation of income taxes, impairments on certain partnership investments held by SunAmerica Financial Group (SunAmerica), certain tax adjustments, and a foreign currency adjustment.

Had all adjustments been recorded in their appropriate periods, the Net loss attributable to AIG for the year ended December 31, 2009 would have increased by $542 million, from $10.9 billion to $11.5 billion.

While these adjustments were noteworthy for the periods, after evaluating the quantitative and qualitative aspects of these corrections, AIG concluded that its prior period financial statements were not materially misstated and, therefore, no restatement was required. See Note 24 herein for the effects on the unaudited quarterly information for 2010 and 2009.

Recent Events

AIG has been working to protect and enhance the value of its key businesses, execute an orderly asset disposition plan and position itself for the future. AIG continually reassesses this plan to maximize value while maintaining flexibility in managing its liquidity and capital.

AIG recently completed the Recapitalization (described below) and reached multiple milestones in connection with executing its asset disposition plan and raising capital. As a result of the completion of the Recapitalization and other transactions (including sales of businesses, specific asset dispositions and capital raised), as well as AIG's consideration of its financial flexibility (all discussed below) AIG has concluded that it has sufficient liquidity to satisfy its future liquidity requirements, including reasonably foreseeable contingencies or events.

Recapitalization

On January 14, 2011 (the Closing), AIG completed a series of integrated transactions to recapitalize AIG (the Recapitalization) with the Department of the Treasury, the FRBNY and the Trust, including the repayment of all amounts owed under the Credit Agreement, dated as of September 22, 2008 (as amended, the FRBNY Credit Facility).

Repayment and Termination of the FRBNY Credit Facility

At the Closing, AIG repaid to the FRBNY approximately $21 billion in cash, representing complete repayment of all amounts owing under the FRBNY Credit Facility, and the FRBNY Credit Facility was terminated. The funds for the repayment came from the net cash proceeds from AIG's sale of 67 percent of the ordinary shares of AIA Group, Limited (AIA) in its initial public offering and from AIG's sale of American Life Insurance Company (ALICO). These funds were loaned to AIG, in the form of secured limited recourse debt (the SPV Intercompany Loans), from the special purpose vehicles that held the proceeds of the AIA IPO and the ALICO sale (the SPVs, and such loans, the SPV Intercompany Loans). The SPV Intercompany Loans are secured by pledges and any proceeds received from the sale by AIG and certain of its subsidiaries of, among other collateral, all or part of their equity interests in Nan Shan Life Insurance Company, Ltd. (Nan Shan) and International Lease Finance Corporation (ILFC and, together with Nan Shan, the Designated Entities), as well as the remaining AIA ordinary shares held by the AIA SPV and certain of the MetLife, Inc. (MetLife) securities received from the sale of ALICO held by the ALICO SPV. Until their sale on February 1, 2011, AIG Star Life Insurance Company Ltd. (AIG Star) and AIG Edison Life Insurance Company (AIG Edison) were also Designated Entities. See Note 26 herein.

Repurchase and Exchange of SPV Preferred Interests

At the Closing, AIG drew down approximately $20.3 billion (the Series F Closing Drawdown Amount) under the Department of the Treasury's commitment (the Department of the Treasury Commitment (Series F)) pursuant to the Securities Purchase Agreement, dated as of April 17, 2009 (the Series F SPA), between AIG and the Department of the Treasury relating to AIG's Series F Fixed Rate Non-Cumulative Perpetual Preferred Stock, par value $5.00 per share (the Series F Preferred Stock). The Series F Closing Drawdown Amount was the full amount remaining under the Department of the Treasury Commitment (Series F), less $2 billion that AIG designated to be available after the closing for general corporate purposes under a commitment relating to AIG's Series G Cumulative Mandatory Convertible Preferred Stock, par value $5.00 per share (the Series G Preferred Stock), described below (the Series G Drawdown Right). The right of AIG to draw on the Department of the Treasury Commitment (Series F) (other than the Series G Drawdown Right) was terminated.

AIG used the Series F Closing Drawdown Amount to repurchase all of the FRBNY's SPV Preferred Interests. AIG transferred the SPV Preferred Interests to the Department of the Treasury as part of the consideration for the exchange of the Series F Preferred Stock, described below.

The Department of the Treasury, so long as it holds SPV Preferred Interests, has the right, subject to existing contractual restrictions, to require AIG to dispose of the remaining AIA common shares held by the AIA SPV and certain of the MetLife securities received from the sale of ALICO held by the ALICO SPV. The consent of the Department of the Treasury, so long as it holds SPV Preferred Interests, will also be required for AIG to take specified significant actions with respect to the Designated Entities, including initial public offerings, sales, significant acquisitions or dispositions and incurrence of specified levels of indebtedness. If any SPV Preferred Interests are outstanding on May 1, 2013, the Department of the Treasury will have the right to compel the sale of all or a portion of one or more of the Designated Entities on terms that it will determine.

As a result of these transactions, the SPV Preferred Interests are no longer considered permanent equity on AIG's balance sheet, and will be classified as redeemable noncontrolling interests in partially owned consolidated subsidiaries at the Closing.

Issuance of AIG's Series G Preferred Stock

At the Closing, AIG and the Department of the Treasury amended and restated the Series F SPA to provide for the issuance of 20,000 shares of Series G Preferred Stock by AIG to the Department of the Treasury. The Series G Preferred Stock initially has a liquidation preference of zero, which will increase by the amount of any funds drawn down by AIG under the Series G Drawdown Right from the Closing until March 31, 2012 (or the earlier termination of the Series G Drawdown Right).

Dividends on the Series G Preferred Stock are payable on a cumulative basis at a rate per annum of 5 percent, compounded quarterly, of the aggregate liquidation preference of the Series G Preferred Stock and may be paid, at AIG's option, in cash or in increases in the liquidation preference.

The available funding under the Series G Drawdown Right that may be used for general corporate purposes will be reduced by the amount of net proceeds of future AIG equity offerings, and net proceeds from an equity offering in excess of the available funding under the Series G Drawdown Right will be required to be used to pay down any liquidation preference of the Series G Preferred Stock. The Series G Preferred Stock will be redeemable at any time in cash at AIG's option, at a redemption price equal to the liquidation preference plus accrued and unpaid dividends.

If the Series G Preferred Stock has an outstanding aggregate liquidation preference on March 31, 2012, it will be converted into a number of shares of AIG common stock, par value $2.50 per share (AIG Common Stock), equal to the aggregate liquidation preference plus accrued and unpaid dividends divided by the lesser of $29.29 or 80 percent of the average volume weighted average price over 30 consecutive trading days commencing January 20, 2011.

Exchange of AIG's Series C, E and F Preferred Stock for AIG Common Stock and Series G Preferred Stock

At the closing of the Recapitalization:

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the shares of AIG's Series C Perpetual, Convertible, Participating Preferred Stock, par value $5.00 per share (the Series C Preferred Stock), held by the Trust were exchanged for 562,868,096 shares of AIG Common Stock which were subsequently transferred by the Trust to the Department of the Treasury;

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the shares of AIG's Series E Fixed Rate Non-Cumulative Perpetual Preferred Stock, par value $5.00 per share (the Series E Preferred Stock), held by the Department of the Treasury were exchanged for 924,546,133 shares of AIG Common Stock; and

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the shares of the Series F Preferred Stock held by the Department of the Treasury were exchanged for (a) the SPV Preferred Interests, (b) 20,000 shares of the Series G Preferred Stock and (c) 167,623,733 shares of AIG Common Stock. As a result of the Recapitalization, the Department of the Treasury holds 1,655,037,962 shares of newly issued AIG Common Stock, representing ownership of approximately 92.2 percent of the outstanding AIG Common Stock.

The issuance of AIG Common Stock in connection with the exchange for the Series C Preferred Stock, the Series E Preferred Stock and the Series F Preferred Stock will, in future periods, significantly affect the determination of net income attributable to common shareholders and the weighted average shares outstanding, both of which are used to compute earnings per share.

AIG entered into a registration rights agreement with the Department of the Treasury that granted the Department of the Treasury registration rights with respect to the shares of AIG Common Stock issued at the Closing, including:

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the right to participate in any registered offering of AIG Common Stock by AIG after the Closing;

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the right to demand no more than twice in any 12-month period that AIG effect a registered market offering of its shares after the earlier of August 15, 2011 and the date of AIG's completion of a primary equity offering;

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the right to engage in at-the-market offerings; and

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subject to certain exceptions, the right to approve the terms, conditions and pricing of any registered offering in which it participates until its ownership falls below 33 percent of AIG's voting securities.

AIG has the right to:

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raise up to $3 billion (and up to an additional $4 billion with the consent of the Department of the Treasury) by January 14, 2012 in a registered primary offering; and

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if the AIG Board of Directors determines, after consultations with the Department of the Treasury, that due to events affecting AIG's insurance subsidiaries, AIG Parent's reasonably projected aggregate liquidity (cash, cash equivalents and commitments of credit, but not the Series G Drawdown Right) will fall below $8 billion within 12 months of the date of such determination, raise the greater of $2 billion and the amount of the projected deficit;

Until the Department of the Treasury's ownership of AIG's voting securities falls below 33 percent, the Department of the Treasury will, subject to certain exceptions, have complete control over the terms, conditions and pricing of any offering in which it participates, including any primary offering by AIG. As a result, if AIG seeks to conduct an offering of its equity securities (other than an offering described in the preceding paragraph) the Department of the Treasury may decide to participate in the offering, and to prevent AIG from selling any equity securities.

Issuance to AIG's Common Shareholders of Warrants to Purchase AIG Common Stock

As part of the Recapitalization, on January 19, 2011, AIG issued to the holders of record of AIG Common Stock on January 13, 2011, by means of a dividend, ten-year warrants to purchase a total of up to 75 million shares of AIG Common Stock at an exercise price of $45.00 per share. None of the Trust, the Department of the Treasury and the FRBNY received these warrants.

Sales of Businesses and Specific Asset Dispositions

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On February 1, 2011, AIG completed the sale of its Japan-based life insurance subsidiaries, AIG Star Life Insurance Co., Ltd. (AIG Star) and AIG Edison Life Insurance Company (AIG Edison), to Prudential Financial, Inc., for $4.8 billion, consisting of $4.2 billion in cash and $0.6 billion in the assumption of third-party debt. See also Note 26 herein.

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On January 12, 2011, AIG entered into an agreement to sell its 97.57 percent interest in Nan Shan Life Insurance Company, Ltd. (Nan Shan) for $2.16 billion in cash. See also Note 26 herein.

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On November 30, 2010, AIG completed the sale of 80 percent of American General Finance Inc. (AGF) and retained a 20 percent economic (16 percent voting) interest in the AGF business.

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On November 1, 2010, AIG completed the sale of ALICO to MetLife for approximately $16.2 billion ($7.2 billion in cash and the remainder in securities of MetLife).

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On October 29, 2010, AIG sold, in an initial public offering, 8.08 billion shares (or approximately 67 percent) of AIA for $20.51 billion.

See Note 4 to the Consolidated Financial Statements for additional information on these transactions.

Capital Raised

On November 30, 2010, AIG issued $2.0 billion in senior debt and on December 8, AIG established a $500 million contingent liquidity facility.

On December 23, 2010, AIG entered into 364-day and three-year bank credit facilities totaling $3 billion and Chartis entered into a one-year $1.3 billion letter of credit facility.

During 2010, ILFC significantly increased its liquidity position through a combination of new secured and unsecured debt issuances of approximately $9.8 billion and an extension of the maturity date of $2.16 billion of its $2.5 billion revolving credit facility from October 2011 to October 2012. Approximately $4.0 billion of the $9.8 billion in debt issued in 2010 was used to repay loans and accrued interest due to AIG. AIG used the $4.0 billion received from ILFC to reduce the principal amount outstanding under the FRBNY Credit Facility. In addition, during 2010, ILFC agreed to sell 66 aircraft to third parties, of which 60 aircraft, with an aggregate net book value of approximately $2.6 billion, met the criteria to be classified as held for sale. Fifty-seven of the 66 aircraft were sold, of which 51 had been classified as held for sale. These sales generated approximately $2.1 billion in gross proceeds during 2010. At December 31, 2010, nine aircraft were recorded in Assets held for sale on the Consolidated Balance Sheet. The sales of the remaining individual aircraft are expected to be consummated during the first quarter of 2011.

Financial Flexibility Assessment

In assessing AIG's current financial flexibility and developing operating plans for the future, management has made significant judgments and estimates with respect to the potential financial and liquidity effects of AIG's risks and uncertainties, including but not limited to:

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the potential for declines in bond and equity markets;

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the potential effect on AIG if the capital levels of its regulated and unregulated subsidiaries prove inadequate to support current business plans;

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AIG's continued ability to generate cash flow from operations;

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the potential adverse effects on AIG's businesses that could result if there are further downgrades by rating agencies; and

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the potential for regulatory limitations on AIG's business in one or more countries.

While AIG remains subject to potential financial and liquidity risks and uncertainties, AIG believes the impact of these risks and uncertainties has decreased significantly compared to 2009.

AIG believes that it has sufficient liquidity to satisfy future liquidity requirements and meet its obligations, including reasonably foreseeable contingencies and events.

- Definition

Description containing the entire organization, consolidation and basis of presentation of financial statements disclosure. May be provided in more than one note to the financial statements, as long as users are provided with an understanding of (1) the significant judgments and assumptions made by an enterprise in determining whether it must consolidate a VIE and/or disclose information about its involvement with a VIE, (2) the nature of restrictions on a consolidated VIE's assets reported by an enterprise in its statement of financial position, including the carrying amounts of such assets, (3) the nature of, and changes in, the risks associated with an enterprise's involvement with the VIE, and (4) how an enterprise's involvement with the VIE affects the enterprise's financial position, financial performance, and cash flows. Describes procedure if disclosures are provided in more than one note to the financial statements.

+ References+ Details

Summary of Significant Accounting Policies

12 Months Ended

Dec. 31, 2010

Summary of Significant Accounting Policies

Summary of Significant Accounting Policies

2. Summary of Significant Accounting Policies

(a) Revenue recognition and expenses:

Premiums and other considerations: Premiums for short duration contracts and considerations received from retailers in connection with sales of extended service contracts are earned primarily on a pro rata basis over the term of the related coverage. The reserve for unearned premiums includes the portion of premiums written and other considerations relating to the unexpired terms of coverage.

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. Consideration for universal life and investment-type products consists of policy charges for the cost of insurance, administration and surrenders during the period. Policy charges collected with respect to future services are deferred and recognized in a manner similar to DAC related to such products.

Net investment income: Net investment income represents income primarily from the following sources in AIG's insurance operations and AIG Parent:

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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.

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Dividend income and distributions from common and preferred stock and other investments when receivable.

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Realized and unrealized gains and losses from investments in trading securities accounted for at fair value.

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Earnings from hedge funds and limited partnership investments accounted for under the equity method.

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The difference between the carrying amount of a life settlement contract and the life insurance proceeds of the underlying life insurance policy recorded in income upon the death of the insured.

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Change in fair value of AIG's interests in ML II, ML III, AIA and MetLife.

Net realized capital gains (losses): Net realized capital gains and losses are determined by specific identification. The net realized capital gains and losses are generated primarily from the following sources:

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Sales of fixed maturity securities and equity securities (except trading securities accounted for at fair value), real estate, investments in joint ventures and limited partnerships and other types of investments.

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Reductions to the cost basis of fixed maturity securities and equity securities (except trading securities accounted for at fair value) and other invested assets for other-than-temporary impairments.

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Changes in fair value of derivatives except for (1) those instruments at Capital Markets, (2) those instruments that qualify for hedge accounting treatment when the change in the fair value of the hedged item is not reported in net realized capital gains (losses), and (3) those instruments that are designated as economic hedges of financial instruments for which the fair value option has been elected.

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Exchange gains and losses resulting from foreign currency transactions.

Unrealized market valuation gains (losses) on Capital Markets' super senior credit default swap portfolio: Includes the market valuation gains and losses associated with Capital Markets' super senior credit default swap (CDS) portfolio.

Other income: Other income includes income from flight equipment and Asset Management operations.

Income from flight equipment under operating leases is recognized over the life of the lease as rentals become receivable under the provisions of the lease or, in the case of leases with varying payments, under the straight-line method over the noncancelable term of the lease. In certain cases, leases provide for additional payments contingent on usage. Rental income is recognized at the time such usage occurs, less a provision for estimated future contractual aircraft maintenance reimbursements. Gains and losses on flight equipment are recognized as other income when flight equipment is sold and the risk of ownership of the equipment is passed to the new owner.

Income from Institutional Asset Management is generally recognized as revenues as services are performed with expenses generally recognized consistent with related revenues.

Other Income from the operations of Direct Investment business and AIG's Other category consists of the following:

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Change in fair value relating to financial assets and liabilities for which the fair value option has been elected.

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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.

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Dividend income and distributions from common and preferred stock and other investments when receivable.

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Changes in the fair value of derivatives. In certain instances, no initial gain or loss was recognized. Prior to January 1, 2008, the initial gain or loss was recognized in income over the life of the transaction or when observable market data became available. Any remaining unamortized balances at January 1, 2008 were recognized in beginning retained earnings when the fair value option was elected.

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Changes in the fair value of trading securities and spot commodities sold but not yet purchased, futures and hybrid financial instruments.

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Realized capital gains and losses from the sales of available for sale securities and investments in private equities, joint ventures, limited partnerships and other investments.

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Income earned on real estate based investments and related losses from property level impairments and financing costs.

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Exchange gains and losses resulting from foreign currency transactions.

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Reductions to the cost basis of securities available for sale for other-than-temporary impairments.

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Earnings from hedge funds and limited partnership investments accounted for under the equity method.

Policyholder benefits and claims incurred: Incurred claims and claims adjustment expenses 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 the changes in estimates of current and prior period losses resulting from the continuous review process. 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 interest credited to policy account balances and 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).

Restructuring expenses and related asset impairment and other expenses: Restructuring expenses include employee severance and related costs, costs to terminate contractual arrangements, consulting and other professional fees and other costs related to restructuring and divesture activities. Asset impairment includes charges associated with writing down long-lived assets to fair value when their carrying values are not recoverable from undiscounted cash flows. Other expenses include other costs associated with divesting of businesses and costs of employee retention awards.

Net (gain) loss on sale of divested businesses and properties: Includes gains or losses from the sales of businesses that do not qualify as discontinued operations and sales of previously occupied properties.

(b) Income taxes: Deferred tax assets and liabilities are recorded for the effects of temporary differences between the tax basis of an asset or liability and its reported amount in the consolidated financial statements. AIG assesses its ability to realize deferred tax assets considering all available evidence, including the earnings history, the timing, character and amount of future earnings potential, the reversal of taxable temporary differences and the tax planning strategies available to the legal entities when recognizing deferred tax assets. See Note 22 herein for a further discussion of income taxes.

(c) Held-for-sale and discontinued operations: AIG reports a business as held for sale when management has approved or received approval to sell the business and is committed to a formal plan, the business is available for immediate sale, the business is being actively marketed, the sale is anticipated to occur during the ensuing year and certain other specified criteria are met. A business classified as held for sale is recorded at the lower of its carrying amount or estimated fair value less cost to sell. If the carrying amount of the business exceeds its estimated fair value, a loss is recognized. Depreciation is not recorded on assets of a business classified as held for sale. Assets and liabilities related to a business classified as held for sale are segregated in the Consolidated Balance Sheet and major classes are separately disclosed in the notes to the Consolidated Financial Statements commencing in the period in which the business is classified as held for sale.

AIG reports the results of operations of a business as discontinued operations if the business is classified as held for sale, the operations and cash flows of the business have been or will be eliminated from the ongoing operations of AIG as a result of a disposal transaction and AIG will not have any significant continuing involvement in the operations of the business after the disposal transaction. The results of discontinued operations are reported in Discontinued Operations in the Consolidated Statement of Income (Loss) for current and prior periods commencing in the period in which the business is either disposed of or is classified as held for sale, including any gain or loss recognized on closing or adjustment of the carrying amount to fair value less cost to sell.

(d) Investments:

Fixed maturities and equity securities: Bonds held to maturity are carried at amortized cost when AIG has the ability and positive intent to hold these securities until maturity. None of the fixed maturity securities met the criteria for held to maturity classification at December 31, 2010 and 2009. When AIG does not have the positive intent to hold bonds until maturity, these securities are classified as available for sale or as trading and are carried at fair value.

Premiums and discounts arising from the purchase of bonds classified as held to maturity or available for sale are treated as yield adjustments over their estimated lives, until maturity, or call date, if applicable.

Common and preferred stocks are carried at fair value.

For AIG's Financial Services subsidiaries, those securities for which the fair value option was not elected, are held to meet long-term investment objectives and are accounted for as available for sale, carried at fair values and recorded on a trade-date basis.

For AIG Parent and its insurance subsidiaries, unrealized gains and losses on investments in trading securities are reported in Net investment income. Unrealized gains and losses from available for sale investments in equity and fixed maturity securities are reported as a separate component of Accumulated other comprehensive income (loss), net of deferred acquisition costs and deferred income taxes, in consolidated shareholders' equity. Investments in fixed maturities and equity securities are recorded on a trade-date basis.

Trading securities include the investment portfolio of Direct Investment business and the Maiden Lane Interests, all of which are carried at fair value.

Trading securities for Direct Investment business are held to meet short-term investment objectives and to economically hedge other securities. Trading securities are recorded on a trade-date basis and carried at fair value. Realized and unrealized gains and losses are reflected in Other income.

For discussion of AIG's other-than-temporary impairment policy, see Note 7 herein.

Mortgage and other loans receivable — net: Mortgage and other loans receivable includes mortgage loans on real estate, policy loans and collateral, commercial loans and guaranteed loans. Mortgage loans on real estate and collateral, commercial loans and guaranteed loans are carried at unpaid principal balances less credit allowances and plus or minus adjustments for the accretion or amortization of discount or premium. Interest income on such loans is accrued as earned.

Impairment of mortgage and other loans receivable is based on certain risk factors, including past due status. For commercial mortgages in particular, risk factors evaluated in monitoring credit quality also include debt service coverage ratio, loan-to-value or the ratio of the loan balance to the estimated value of the property, property occupancy, profile of the borrower and major property tenants, economic trends in the market where the property is located, and condition of the property. Mortgage and other loans receivable are considered impaired when collection of all amounts due under contractual terms is not probable. This impairment is generally measured based on the present value of expected future cash flows discounted at the loan's effective interest rate subject to the fair value of underlying collateral. Interest income on such impaired loans is recognized as cash is received.

Mortgage and other loans receivable also include policy loans which are carried at unpaid principal amount. There is no allowance for policy loans because these loans serve to reduce the death benefit paid when the death claim is made and the balances are effectively collateralized by the cash surrender value of the policy.

Finance receivables — net: Finance receivables, which are reported net of unearned finance charges, are held for both investment purposes and for sale. Finance receivables held for investment purposes are carried at amortized cost, which includes accrued finance charges on interest bearing finance receivables, unamortized deferred origination costs, and unamortized net premiums and discounts on purchased finance receivables. The allowance for finance receivable losses is established through the provision for finance receivable losses charged to Other expenses and is maintained at a level considered adequate to absorb probable credit losses in the portfolio. The portfolio is periodically evaluated on a pooled basis and factors such as economic conditions, portfolio composition, and loss and delinquency experience are considered in the evaluation of the allowance.

Direct costs of originating finance receivables, net of nonrefundable points and fees, are deferred and included in the carrying amount of the related receivables. The amount deferred is amortized to income as an adjustment to finance charge revenues using the interest method.

Finance receivables originated and intended for sale in the secondary market are carried at the lower of cost or fair value, as determined by aggregate outstanding commitments from investors, current investor yield requirements or negotiations with prospective purchasers, if any.

Flight equipment primarily under operating leases — net: Flight equipment is stated at cost (adjusted for any impairment charges), net of accumulated depreciation. Major additions, modifications and interest are capitalized. Normal maintenance and repairs, airframe and engine overhauls and compliance with return conditions of flight equipment on lease are provided by and paid for by the lessee. Under the provisions of most leases for certain airframe and engine overhauls, the lessee is reimbursed for certain costs incurred up to but not exceeding contingent rentals paid to ILFC by the lessee. ILFC provides a charge to income for such reimbursements based on the expected reimbursements during the life of the lease. For passenger aircraft, depreciation is generally computed on the straight-line basis to a residual value of approximately 15 percent of the cost of the asset over its estimated useful life of 25 years. For freighter aircraft, depreciation is computed on the straight-line basis to a zero residual value over its useful life of 35 years.

Aircraft in the fleet are evaluated for impairment whenever events or changes in circumstances indicate the carrying amount of an asset may not be recoverable. Recoverability of assets is measured by comparing the carrying amount of an asset to future undiscounted net cash flows expected to be generated by the asset. These evaluations for impairment are significantly affected by estimates of future net cash flows and other factors that involve uncertainty. There are a number of factors and circumstances that can influence (and increase) the potential for recognizing an impairment loss. A firm commitment to sell aircraft would result in aircraft being reclassified from held for use to held for sale for financial reporting purposes and would require an impairment assessment based on the aircraft's fair value. An increase in the likelihood of a sale transaction being completed could result in a similar impairment assessment if the probability of an aircraft sale becomes high enough to reduce the probability weighted expected undiscounted future cash flows to be realized from the aircraft to an amount that is less than its carrying value.

When assets are retired or disposed of, the cost and associated accumulated depreciation are removed from the related accounts and the difference, net of proceeds, is recorded as a gain or loss in Other income.

Accumulated depreciation on flight equipment was $12.9 billion and $13.9 billion at December 31, 2010 and 2009, respectively.

Other invested assets: Other invested assets consist primarily of investments by AIG's insurance operations in hedge funds, private equity funds, other investment partnerships and direct private equity investments. AIG's remaining 33 percent interest in AIA is also included in Other invested assets.

Hedge funds, private equity funds and other investment partnerships in which AIG's insurance operations hold in the aggregate less than a five percent interest are reported at fair value. The change in fair value is recognized as a component of Accumulated other comprehensive income (loss). With respect to hedge funds, private equity funds and other investment partnerships in which AIG holds in the aggregate a five percent or greater interest or less than a five percent interest but in which AIG has more than a minor influence over the operations of the investee, AIG's carrying value is its share of the net asset value of the funds or the partnerships. The changes in such net asset values, accounted for under the equity method, are recorded in Net investment income.

In applying the equity method of accounting, AIG consistently uses the most recently available financial information provided by the general partner or manager of each of these investments, which is one to three months prior to the end of AIG's reporting period. The financial statements of these investees are generally audited on an annual basis.

Other invested assets include direct private equity investments entered into for strategic purposes and not solely for capital appreciation or for income generation. These investments are accounted for under the equity method. AIG is accounting for its investment in 33 percent of AIA's outstanding ordinary shares under the fair value option with gains and losses recorded in Net investment income. See Note 7(c) herein for further information.

Also included in Other invested assets are real estate held for investment, aircraft asset investments held by non-Financial Services subsidiaries and investments in life settlement contracts. See Note 7(c) herein for further information.

Securities purchased (sold) under agreements to resell (repurchase), at contract value: Securities purchased under agreements to resell and Securities sold under agreements to repurchase (other than those entered into by the Direct Investment business) generally are accounted for as collateralized borrowing or lending transactions and are recorded at their contracted resale or repurchase amounts plus accrued interest. AIG carries such agreements at fair value based on market observable interest rates and credit spreads. AIG's policy is to take possession of or obtain a security interest in securities purchased under agreements to resell.

When AIG does not obtain cash collateral sufficient to fund substantially all of the cost of purchasing identical replacement securities during the term of the contract (generally less than 90 percent of the security value), AIG accounts for the transaction as a sale of the security and reports the obligation to repurchase the security as a derivative contract. Where securities are carried in the available for sale category, AIG records a gain or loss in income. Where changes in fair value of securities are recognized through income, no additional gain or loss is recognized. The fair value of securities transferred under repurchase agreements accounted for as sales was $2.7 billion and $2.3 billion at December 31, 2010 and December 31, 2009, respectively, and the related cash collateral obtained was $2.1 billion and $1.5 billion at December 31, 2010 and December 31, 2009, respectively.

AIG minimizes the risk that counterparties to transactions might be unable to fulfill their contractual obligations by monitoring customer credit exposure and collateral value and generally requiring additional collateral to be deposited with AIG when necessary.

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

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

(f) Premiums and other receivables: Premiums and other receivables includes premium balances receivable, amounts due from agents and brokers and insureds, trade receivables for Direct Investment business and Capital Markets and other receivables. Trade receivables for Capital Markets include receivables from derivative counterparties. The allowance for doubtful accounts on premiums and other receivables was $515 million and $537 million at December 31, 2010 and 2009, respectively.

(g) Reinsurance assets — net: Reinsurance assets include the balances due from reinsurance and insurance companies under the terms of AIG's reinsurance agreements for paid and unpaid losses and loss expenses, ceded unearned premiums and ceded future policy benefits for life and accident and health insurance contracts and benefits paid and unpaid. Amounts related to paid and unpaid losses and benefits and loss expenses with respect to these reinsurance agreements are substantially collateralized. The allowance for doubtful accounts on reinsurance assets was $493 million and $440 million at December 31, 2010 and 2009, respectively.

(h) Deferred policy acquisition costs: Policy acquisition costs represent those costs, including commissions, premium taxes and other underwriting expenses that vary with and are primarily related to the acquisition of new business.

Short-duration insurance contracts: Policy acquisition costs are deferred and amortized over the period in which the related premiums written are earned. DAC is grouped consistent with the manner in which the insurance contracts are acquired, serviced and measured for profitability and is reviewed for recoverability based on the profitability of the underlying insurance contracts. Investment income is not anticipated in assessing the recoverability of DAC.

Long-duration insurance contracts: Policy acquisition costs for participating life, traditional life and accident and health insurance products are generally deferred and amortized, with interest, over the premium paying period. Policy acquisition costs and policy issuance costs related to universal life, and investment-type products (investment-oriented products) are deferred and amortized, with interest, in relation to the incidence of estimated gross profits to be realized over the estimated lives of the contracts. Estimated gross profits are composed of net interest income, net realized investment gains and losses, fees, surrender charges, expenses, and mortality and morbidity gains and losses. If estimated gross profits change significantly, DAC is recalculated using the new assumptions. Any resulting adjustment is included in income as an adjustment to DAC. DAC is grouped consistent with the manner in which the insurance contracts are acquired, serviced and measured for profitability and is reviewed for recoverability based on the current and projected future profitability of the underlying insurance contracts.

The DAC for investment-oriented products is also adjusted with respect to estimated gross profits as a result of changes in the net unrealized gains or losses on fixed maturity and equity securities available for sale. Because fixed maturity and equity securities available for sale are carried at aggregate fair value, an adjustment is made to DAC equal to the change in amortization that would have been recorded if such securities had been sold at their stated aggregate fair value and the proceeds reinvested at current yields. The change in this adjustment, net of tax, is included with the change in net unrealized gains/losses on fixed maturity and equity securities available for sale that is credited or charged directly to Accumulated other comprehensive income (loss).

Value of Business Acquired (VOBA) is determined at the time of acquisition and is reported in the Consolidated Balance Sheet with DAC. This value is based on the present value of future pre-tax profits discounted at yields applicable at the time of purchase. For participating life, traditional life and accident and health insurance products, VOBA is amortized over the life of the business similar to that for DAC based on the assumptions at purchase. For universal life, and investment-oriented products, VOBA is amortized in relation to the estimated gross profits to date for each period.

For contracts accounted for at fair value, policy acquisition costs are expensed as incurred and not deferred or amortized.

(i) Real estate and other fixed assets — net: The cost of buildings and furniture and equipment is depreciated principally on the straight-line basis over their estimated useful lives (maximum of 40 years for buildings and ten years for furniture and equipment). Expenditures for maintenance and repairs are charged to income as incurred; expenditures for betterments are capitalized and depreciated. AIG periodically assesses the carrying value of its real estate for purposes of determining any asset impairment.

Also included in Real estate and other fixed assets are capitalized software costs, which represent costs directly related to obtaining, developing or upgrading internal use software. Such costs 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.

Accumulated depreciation on real estate and other fixed assets was $3.6 billion and $5.4 billion at December 31, 2010 and 2009, respectively.

(j) Unrealized gain and Unrealized loss on swaps, options and forward transactions: Interest rate, currency, equity and commodity swaps, credit contracts (including Capital Markets' super senior credit default swap portfolio), swaptions, options and forward transactions are accounted for as derivatives recorded on a trade-date basis, and carried at fair value. Unrealized gains and losses are reflected in income, when appropriate. In certain instances, a contract's transaction price is the best indication of initial fair value. Aggregate asset or liability positions are netted on the Consolidated Balance Sheet only to the extent permitted by qualifying master netting arrangements in place with each respective counterparty. Cash collateral posted by AIG with counterparties in conjunction with these transactions is reported as a reduction of the corresponding net derivative liability, while cash collateral received by AIG in conjunction with these transactions is reported as a reduction of the corresponding net derivative asset.

(k) Goodwill: Goodwill is the excess of the cost of an acquired business over the fair value of the identifiable net assets of the acquired business. Goodwill is tested for impairment annually, or more frequently if circumstances indicate an impairment may have occurred. During 2010, AIG performed goodwill impairment tests at March 31, June 30, September 30, in connection with the announced sales of ALICO, AIG Star and AIG Edison and again at December 31, 2010.

The impairment assessment involves a two-step process in which an initial assessment for potential impairment is performed and, if potential impairment is present, the amount of impairment is measured (if any) and recorded. Impairment is tested at the reporting unit level.

Management initially assesses the potential for impairment by estimating the fair value of each of AIG's reporting units and comparing the estimated fair values with the carrying amounts of those reporting units, 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 earning 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. Management considers 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 goodwill over the estimated fair value of the goodwill. The estimated 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.

In connection with the announced sale of ALICO on March 7, 2010 and management's decision that ALICO met the held-for-sale criteria on March 31, 2010, total goodwill of $4.6 billion associated with the Foreign Life Insurance & Retirement Services — Japan operating segment was allocated between ALICO and the AIG Star and AIG Edison reporting unit (Reporting Unit) based on their relative fair values as of March 31, 2010. This resulted in $3.3 billion and $1.3 billion of goodwill being allocated to ALICO and the AIG Star and AIG Edison Reporting Unit, respectively for the purpose of assessing goodwill impairment. Management initially tested goodwill for impairment in both reporting units and determined the fair values of ALICO and AIG Star and AIG Edison exceeded book value at March 31, 2010, by 1 percent and 51 percent, respectively, and, therefore, the goodwill of these reporting units was considered not impaired at that time. The fair value of ALICO used to test goodwill for impairment at March 31, 2010 was determined by AIG by considering, among other information, a third-party valuation at March 31, 2010 of the announced proceeds from the sale of ALICO to MetLife.

At June 30, 2010, AIG estimated the fair value of ALICO and determined it to be less than its carrying value. Accordingly, AIG performed the second step of the goodwill impairment analysis and estimated the implied fair value of the goodwill allocated to ALICO by measuring the excess of the estimated fair value of ALICO over the amounts that would be assigned to ALICO's assets and liabilities in a hypothetical business combination. Based on the results of the goodwill impairment test, AIG determined that all of the goodwill allocated to ALICO should be impaired and, accordingly, recognized a goodwill impairment charge of $3.3 billion in the second quarter of 2010. The fair value of ALICO used to test goodwill for impairment at June 30, 2010 was determined by updating the fair value of ALICO determined at March 31, 2010 discussed above.

In connection with the announced sale of AIG Star and AIG Edison on September 30, 2010 and management's determination that the Reporting Unit met the held-for-sale criteria, management tested the $1.3 billion of goodwill of the Reporting Unit for impairment. AIG estimated the fair value of the Reporting Unit based on the consideration to be received pursuant to the agreement with Prudential Financial Inc. and determined the fair value to be less than its carrying value. Accordingly, AIG performed the second step of the goodwill impairment analysis and estimated the implied fair value of the goodwill allocated to the Reporting Unit by measuring the excess of the estimated 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. Based on the results of the goodwill impairment test, AIG determined that all of the goodwill allocated to the Reporting Unit should be impaired and, accordingly, recognized a goodwill impairment charge of $1.3 billion in the third quarter of 2010.

At December 31, 2010, AIG performed its annual goodwill impairment test. Based on the results of the goodwill impairment test, AIG concluded that the remaining goodwill was not impaired.

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

(in millions)			Chartis			SunAmerica Financial Group			Financial Services			Other			Total



Balance at December 31, 2008:
	Goodwill – gross		$	2,405		$	1,301		$	791		$	6,540		$	11,037
	Accumulated impairments			(1,196	)		(1,220	)		(791	)		(878	)		(4,085	)

	Net goodwill			1,209			81			-			5,662			6,952

	Increase (decrease) due to:
		Goodwill impairments		-			(81	)		-			(612	)		(693	)
		Sales of business units		-			-			-			(83	)		(83	)
		Consolidation/Deconsolidation^(a)		-			-			-			(477	)		(477	)
		Other^(b)		75			-			-			13			88
		Activity of discontinued operations		-			-			-			424			424
		Reclassified to Assets of businesses held for sale		-			-			-			(16	)		(16	)

Balance at December 31, 2009:
	Goodwill – gross		$	2,480		$	1,301		$	791		$	6,401		$	10,973
	Accumulated impairments			(1,196	)		(1,301	)		(791	)		(1,490	)		(4,778	)

	Net goodwill		$	1,284		$	-		$	-		$	4,911		$	6,195

	Increase (decrease) due to:
		Acquisition		33			-			-			-			33
		Sales of business units		-			-			-			(69	)		(69	)
		Other^(b)		16			-			-			(86	)		(70	)
		Goodwill impairment included in discontinued operations		-			-			-			(4,625	)		(4,625	)
		Dispositions^(c)		-			-			-			(131	)		(131	)

Balance at December 31, 2010:
	Goodwill – gross		$	2,529		$	1,301		$	791		$	1,490		$	6,111
	Accumulated impairments			(1,196	)		(1,301	)		(791	)		(1,490	)		(4,778	)

	Net goodwill		$	1,333		$	-		$	-		$	-		$	1,333

(a): Represents increase/decrease in AIG's ownership of consolidated investments.
(b): Includes foreign exchange translation and purchase price adjustments (PPA).
(c): Reflects the deconsolidation of AIA.

(l) Other assets: Other assets consists of a prepaid commitment fee asset related to the FRBNY Credit Agreement, prepaid expenses, including deferred advertising costs, sales inducement assets, deposits, other deferred charges, restricted cash, including net cash proceeds from the AIA initial public offering and ALICO sale held in escrow pending the January 14, 2011 closing of the Recapitalization transactions and intangible assets other than goodwill. The prepaid commitment fee asset related to the FRBNY Credit Agreement was amortized as interest expense ratably over the five-year term of the agreement, accelerated for actual pay-downs that reduce the total credit available. The remaining unamortized prepaid commitment fee asset of $3.6 billion at December 31, 2010 will be derecognized by AIG through earnings upon the closing of the Recapitalization on January 14, 2011. See Note 26 herein for additional information on the Recapitalization.

Certain direct response advertising costs are deferred and amortized over the expected future benefit period. When AIG can demonstrate that its customers have responded specifically to direct-response advertising, the primary purpose of which is to elicit sales to customers, and when it can be shown such advertising results in probable future economic benefits, the advertising costs are capitalized. Deferred advertising costs are amortized on a cost-pool-by-cost-pool basis over the expected future economic benefit period and are reviewed regularly for recoverability. Deferred advertising costs totaled $200 million and $207 million at December 31, 2010 and 2009, respectively. The amount of expense amortized into income was $40 million, $173 million and $483 million, for the years ended 2010, 2009 and 2008, respectively.

AIG offers 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. To qualify for such accounting treatment, the bonus interest must be explicitly identified in the contract at inception, and AIG must demonstrate that such amounts are incremental to amounts AIG credits 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 $856 million and $1.3 billion at December 31, 2010 and 2009, respectively. The amortization expense associated with these assets is reported within Policyholder benefits and claims incurred in the Consolidated Statement of Income (Loss). Such amortization expense totaled $194 million, $215 million and $2 million for the years ended December 31, 2010, 2009 and 2008, respectively.

All commodities are recorded at the lower of cost or fair value. The exposure to market risk may be reduced through the use of forwards, futures and option contracts. Lower of cost or fair value reductions in commodity positions and unrealized gains and losses in related derivatives are reflected in Other income.

See Note 12 herein for a discussion of derivatives.

(m) 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 out of any other business of AIG. The liabilities for these accounts are equal to the account assets.

(n) Liability for unpaid claims and claims adjustment expense: Claims and claims adjustment expenses are charged to income as incurred. The liability for unpaid claims and claims adjustment expense represents the accumulation of estimates for unpaid reported losses and includes provisions for losses incurred but not reported. The methods of determining such estimates and establishing resulting reserves, including amounts relating to allowances for estimated unrecoverable reinsurance, are reviewed and updated. If the estimate of reserves is determined to be inadequate or redundant, the increase or decrease is reflected in income. AIG discounts its loss reserves relating to workers' compensation business written by its U.S. domiciled subsidiaries as permitted by the domiciliary statutory regulatory authorities.

(o) Future policy benefits for life and accident and health contracts and Policyholder contract deposits: The liability for future policy benefits and policyholder contract deposits are established using assumptions described in Note 13 herein. Future policy benefits for life and accident and health insurance contracts include provisions for future dividends to participating policyholders, accrued in accordance with all applicable regulatory or contractual provisions. Also included in Future policy benefits are liabilities for annuities issued in structured settlement arrangements whereby a claimant has agreed to settle a general insurance claim in exchange for fixed payments over a fixed determinable period of time with a life contingency feature. Structured settlement liabilities are presented on a discounted basis as the settled claims are fixed and determinable. Policyholder contract deposits include AIG's liability for (a) certain guarantee benefits accounted for as embedded derivatives at fair value, (b) annuities issued in a structured settlement arrangement with no life contingency and (c) certain contracts that AIG has elected to account for at fair value beginning in 2008.

See Note 6 herein for additional fair value disclosures.

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

(q) Securities and spot commodities sold but not yet purchased, at fair value: 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. Also included are obligations under gold leases, which are accounted for as a debt host with an embedded gold derivative which are accounted for under the fair value option.

(r) Other liabilities: Other liabilities consist of other funds on deposit, and other payables. AIG has entered into certain insurance and reinsurance contracts, primarily in its Chartis 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 Direct Investment business and Capital Markets 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.

(s) FRBNY Credit Facility: In 2008, AIG obtained funding under the FRBNY Credit Facility . Amounts borrowed under the FRBNY Credit Facility are carried at the principal amount borrowed and also include accrued compounding interest and fees.

(t) Long-Term Debt: AIG's funding consists, in part, of medium and long-term debt. Long-term debt is carried at the principal amount borrowed, net of unamortized discounts or premiums. See Note 15 herein for additional information. Long-term debt also includes liabilities connected to trust preferred stock principally related to outstanding securities issued by SunAmerica Financial Group, Inc. (SAFG, Inc.), a wholly owned subsidiary of AIG, (formerly AIG Life Holdings, Inc.). Cash distributions on such preferred stock are accounted for as interest expense.

(u) Contingent Liabilities: Amounts are accrued for the resolution of claims that have either been asserted or are deemed probable of assertion if, in the opinion of management, it is both probable that a liability has been incurred and the amount of the liability can be reasonably estimated. In many cases, it is not possible to determine whether a liability has been incurred or to estimate the ultimate or minimum amount of that liability until years after the contingency arises, in which case, no accrual is made until that time.

(v) 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 consolidated 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.

(w) Noncontrolling Interests: Noncontrolling nonvoting, callable, junior and senior preferred interests held by the FRBNY: Represents preferred interests in two wholly-owned SPVs formed to hold all the common stock of AIA and ALICO. The preferred interests were measured at fair value on their issuance date. AIG transferred the preferred interests in the SPVs to the FRBNY in consideration for a $25 billion reduction of the FRBNY Credit Facility. The preferred interests have a liquidation preference of $25 billion and have a preferred return of five percent per year compounded quarterly through September 22, 2013 and nine percent thereafter. The preferred return is reflected in Income (loss) from continuing operations attributable to noncontrolling nonvoting, callable, junior and senior preferred interests held by the FRBNY in the Consolidated Statement of Income (Loss). The difference between the preferred interests' fair value and the initial liquidation preference will be amortized and included in Income (loss) from continuing operations attributable to noncontrolling nonvoting, callable, junior and senior preferred interests held by the FRBNY. These noncontrolling interests, other than the senior preferred interests in the ALICO SPV, which were redeemed in full, were transferred to the Department of the Treasury as part of the January 14, 2011 Recapitalization transactions.

Other Noncontrolling interests: Includes the equity interest of outside shareholders in AIG's consolidated subsidiaries and includes the preferred shareholders' equity in outstanding preferred stock of ILFC, a wholly owned subsidiary of AIG. Cash distributions on such preferred stock or interest are accounted for as interest expense. This preferred stock consists of 1,000 shares of market auction preferred stock (MAPS) in two series (Series A and B) of 500 shares each. Each of the MAPS shares has a liquidation value of $100,000 per share and is not convertible. The dividend rate, other than the initial rate, for each dividend period for each series is reset approximately every seven weeks (49 days) on the basis of orders placed in an auction, provided such auctions are able to occur. At the present time, there is no ability to conduct such auctions, therefore, the MAPS certificate of determination dictates that a maximum applicable rate, as defined in the certificate of determination, be paid on the MAPS. At December 31, 2010, the dividend rate for each of the Series A and Series B MAPS was 0.53 percent and 0.61 percent respectively.

(x) Earnings (Loss) per Share: Basic earnings or loss per share and diluted loss per share are based on the weighted average number of common shares outstanding, adjusted to reflect all stock dividends and stock splits. Diluted earnings per share is based on those shares used in basic earnings per share plus shares that would have been outstanding assuming issuance of common shares for all dilutive potential common shares outstanding, adjusted to reflect all stock dividends and stock splits.

See Note 17 herein for additional earnings (loss) per share disclosures.

(y) Recent Accounting Standards:

Future Application of Accounting Standards

Consolidation of Investments in Separate Accounts

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 in situations in which 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. The new standard is effective for interim and annual periods beginning on January 1, 2011 for AIG. Earlier application is permitted. AIG expects to adopt this new standard on January 1, 2011. AIG does not expect the adoption of this new standard to have a material effect on its consolidated financial condition, results of operations or cash flows.

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 new standard clarifies how to determine whether the costs incurred in connection with the acquisition of new or renewal insurance contracts qualify as deferred acquisition costs. The new standard is effective for interim and annual periods beginning on January 1, 2012 with early adoption permitted. Prospective or retrospective application is permitted. AIG has not determined whether it will adopt this new standard prospectively or retrospectively. The accounting standard update will result in a decrease of the amount of capitalized costs in connection with the acquisition or renewal of insurance contracts. AIG is currently assessing the effect of adoption of this new standard on its consolidated financial condition, results of operations and cash flows.

Accounting Standards Adopted During 2010

Accounting for Transfers of Financial Assets

In June 2009, the Financial Accounting Standards Board (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.

The new standard was effective for interim and annual periods beginning on January 1, 2010 for AIG. Earlier application was prohibited. The adoption of this standard increased both assets and liabilities by approximately $1.3 billion as a result of consolidating two previously unconsolidated QSPEs. The adoption of this new standard did not have a material effect on AIG's consolidated financial condition, results of operations or cash flows.

Consolidation of Variable Interest Entities

In June 2009, the FASB issued an accounting standard that amends the guidance addressing consolidation of certain variable interest entities with an approach focused on identifying which enterprise has the power to direct the activities of a variable interest entity that most significantly affect the entity's economic performance and has (1) the obligation to absorb losses of the entity or (2) the right to receive benefits from the entity. The new standard also requires enhanced financial reporting by enterprises involved with variable interest entities.

The following table summarizes the two methods applied by AIG and the amount and classification in the Consolidated Balance Sheet of the assets and liabilities consolidated as a result of the adoption of the new standard on January 1, 2010:

		Transition Methods


(in millions)		Fair Value Option		Carrying Value		Total

Assets:
	Bond trading securities, at fair value	$	1,239	$	1,262	$	2,501
	Mortgage and other loans receivable		-		1,980		1,980
	Other invested assets		-		480		480
	Other asset accounts		194		150		344
	Assets held for sale		4,630		-		4,630

Total Assets		$	6,063	$	3,872	$	9,935

Liabilities:
	FRBNY commercial paper funding facility	$	1,088	$	-	$	1,088
	Other long-term debt		-		1,533		1,533
	Other liability accounts		1		31		32
	Liabilities held for sale		4,525		-		4,525

Total Liabilities		$	5,614	$	1,564	$	7,178

The cumulative effect adjustment of electing the fair value option was not material to AIG's accumulated deficit.

The following table summarizes the excess of amounts previously recorded upon the consolidation of previously unconsolidated VIEs, as a result of the adoption of the new standard on January 1, 2010:

(in billions)



Assets		$	8.2

Liabilities			7.1
Redeemable noncontrolling interest			1.1
Equity:
	Accumulated deficit		0.2
	Accumulated other comprehensive income		(0.3	)
	Other noncontrolling interests		0.1

Total liabilities and equity		$	8.2

In February 2010, the FASB also issued an update to the aforementioned accounting standard that defers the revised consolidation rules for variable interest entities with attributes of, or similar to, an investment company or money market fund. The primary effect of this deferral for AIG is that AIG will continue to apply the consolidation rules in effect before the amended guidance discussed above for its interests in eligible entities, such as certain mutual funds.

Accounting for Embedded Credit Derivatives

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 new 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. AIG adopted the new standard on July 1, 2010 and recorded a reclassification of $256 million of synthetic securities from Bonds available for sale to Bond trading securities and also reclassified a gain of $68 million from Accumulated other comprehensive income to Accumulated deficit as of July 1, 2010. Upon adoption, AIG accounts for its investments in synthetic securities otherwise requiring bifurcation at fair value, with changes in fair value recognized in earnings. The adoption of this new standard did not have a material effect on AIG's consolidated financial condition, results of operations or cash flows.

Disclosure about the Credit Quality of Financing Receivables

In July 2010, the FASB issued guidance to enhance disclosures about the credit quality of financing receivables that are not measured at fair value. This guidance requires a greater level of disaggregated information about the credit quality of financing receivables and the related allowance for credit losses. In addition, this guidance requires disclosure of credit quality indicators, past due information, and modifications of financing receivables. The disclosures as of the end of a reporting period became effective for interim and annual reporting periods ended on or after December 15, 2010 and are included herein. The disclosures about activity that occurs during a reporting period became effective for interim and annual reporting periods beginning on or after December 15, 2010. In January 2011, the FASB issued an accounting standard update that temporarily defers the effective date for disclosures on modifications of financing receivables by creditors.

Accounting Standards Adopted During 2009

Business Combinations

In December 2007, the FASB issued an accounting standard that changed the accounting for business combinations in a number of ways, including broadening the transactions or events that are considered business combinations; requiring an acquirer to recognize 100 percent of the fair value of certain assets acquired, liabilities assumed and noncontrolling (i.e., minority) interests; and recognizing contingent consideration arrangements at their acquisition-date fair values with subsequent changes in fair value generally reflected in earnings, among other changes.

AIG adopted the new business combination standard for business combinations for which the acquisition date is on or after January 1, 2009. The adoption of the new standard did not have a material effect on AIG's consolidated financial position, results of operations or cash flows at and for the year ended December 31, 2009, but will affect the future accounting for business combinations, if any, as well as goodwill impairment assessments. See Note 5 herein for further discussion.

Noncontrolling Interests in Consolidated Financial Statements

In December 2007, the FASB issued an accounting standard that requires noncontrolling (i.e., minority) interests in partially owned consolidated subsidiaries to be classified in the Consolidated Balance Sheet as a separate component of equity, or in the mezzanine section of the Consolidated Balance Sheet (between liabilities and equity) if such interests do not qualify for "permanent equity" classification. The new standard also specifies the accounting treatment for subsequent acquisitions and sales of noncontrolling interests and how noncontrolling interests should be presented in the Consolidated Statement of Income (Loss). The noncontrolling interests' share of subsidiary income (loss) should be reported as a part of consolidated Net income (loss) with disclosure of the attribution of consolidated Net income (loss) to the controlling and noncontrolling interests on the face of the Consolidated Statement of Income (Loss).

AIG adopted the new standard on January 1, 2009 and applied it prospectively, except for presentation and disclosure requirements. The Consolidated Statement of Income (Loss) for the year ended December 31, 2008 has been retrospectively recast to include net income (loss) attributable to both the controlling and noncontrolling interests.

Noncontrolling interests also includes junior and senior non-voting, callable preferred interests issued in connection with the $25 billion reduction in the outstanding balance and maximum borrowing commitment under the FRBNY Credit Facility. See Note 17 herein for further discussion.

Disclosures about Derivative Instruments and Hedging Activities

In March 2008, the FASB issued an accounting standard that requires enhanced disclosures about (a) how and why AIG uses derivative instruments, (b) how derivative instruments and related hedged items are accounted for and (c) how derivative instruments and related hedged items affect AIG's consolidated financial condition, results of operations, and cash flows. AIG adopted the new standard on January 1, 2009. See Note 12 herein for related disclosures.

Accounting for Transfers of Financial Assets and Repurchase Financing Transactions

In February 2008, the FASB issued an accounting standard that requires an initial transfer of a financial asset and a repurchase financing that was entered into contemporaneously with or in contemplation of the initial transfer to be evaluated as a linked transaction unless certain criteria are met. AIG adopted the new standard for new transactions entered into from that date forward. The adoption of the new standard did not have a material effect on AIG's consolidated financial condition, results of operations or cash flows.

Determining Whether an Instrument (or Embedded Feature) is Indexed to an Entity's Own Stock

In June 2008, the FASB issued an accounting standard that addresses how to determine whether a financial instrument (or embedded feature) is indexed to an entity's own stock and therefore may not be accounted for as a derivative instrument. AIG adopted the new standard on January 1, 2009, which resulted in a $15 million cumulative effect adjustment to opening Accumulated deficit and a $91 million reduction in Additional paid-in capital.

Interim Disclosures about Fair Value of Financial Instruments

In April 2009, the FASB issued an accounting standard that requires companies to disclose in interim financial statements information about the fair value of financial instruments (including methods and significant assumptions used). The standard also requires the disclosures of summarized financial information for interim reporting periods. AIG adopted the new standard on April 1, 2009.

Recognition and Presentation of Other-Than-Temporary Impairments

In April 2009, the FASB issued an accounting standard that requires a company to recognize the credit component of an other-than-temporary impairment of a fixed maturity security in earnings and the non-credit component in accumulated other comprehensive income when the company does not intend to sell the security or it is more likely than not that the company will not be required to sell the security prior to recovery. The standard also changed the threshold for determining when an other-than-temporary impairment has occurred on a fixed maturity security with respect to intent and ability to hold until recovery. The standard does not change the recognition of other-than-temporary impairment for equity securities. The standard requires additional disclosures in interim and annual reporting periods for fixed maturity and equity securities. See Note 7 herein for the expanded disclosures.

AIG adopted the new standard on April 1, 2009 and recorded an after-tax cumulative effect adjustment to increase AIG shareholders' equity by $2.5 billion as of April 1, 2009, consisting of a decrease in Accumulated deficit of $11.8 billion and an increase to Accumulated other comprehensive loss of $9.3 billion, net of tax. The net increase in AIG's shareholders' equity was due to a reversal of a portion of the deferred tax asset valuation allowance for certain previous non-credit impairment charges directly attributable to the change in accounting principle (see Note 22 herein). The cumulative effect adjustment resulted in an increase of approximately $16 billion in the amortized cost of fixed maturity securities, which has the effect of significantly reducing the accretion of investment income over the remaining life of the underlying securities, beginning in the second quarter of 2009. The effect of the reduced investment income will be offset, in part, by a decrease in the amortization of deferred policy acquisition costs (DAC) and sales inducements assets (SIA).

The new standard is expected to reduce the level of other-than-temporary impairment charges recorded in earnings for fixed maturity securities due to the following required changes in AIG's accounting policy for other-than-temporary impairments (see Note 7 herein for a more detailed discussion of the changes in policy):

•

Impairment charges for non-credit (e.g., severity) losses are no longer recognized;

•

The amortized cost basis of credit impaired securities will be written down through a charge to earnings to the present value of expected cash flows, rather than to fair value; and

•

For fixed maturity securities that are not deemed to be credit-impaired, AIG is no longer required to assert that it has the intent and ability to hold such securities to recovery to avoid an other-than-temporary impairment charge. Instead, an impairment charge through earnings is required only in situations where AIG has the intent to sell the fixed maturity security or it is more likely than not that AIG will be required to sell the security prior to recovery.

The following table presents the components of the change in AIG shareholders' equity at April 1, 2009 due to the adoption of the new accounting standard for other-than-temporary impairments:

(in billions)		Accumulated Deficit			Accumulated Other Comprehensive Loss			AIG Shareholders' Equity



Increase (decrease) to:
	Net effect of the increase in amortized cost of available for sale fixed maturity securities	$	16.1		$	(16.1	)	$	—
	Net effect of related DAC, SIA and other insurance balances		(1.8	)		1.8			—
	Net effect on deferred income tax assets		(2.5	)		5.0			2.5

Net increase in AIG shareholders' equity		$	11.8		$	(9.3	)	$	2.5

Determining Fair Value When the Volume and Level of Activity for the Asset or Liability Have Significantly Decreased and Identifying Transactions That Are Not Orderly

In April 2009 the FASB issued an accounting standard that provides guidance for estimating the fair value of assets and liabilities when the volume and level of activity for an asset or liability have significantly decreased and for identifying circumstances that indicate a transaction is not orderly. The new standard also requires extensive additional fair value disclosures. The adoption of the new standard on April 1, 2009, did not have a material effect on AIG's consolidated financial condition, results of operations or cash flows.

Employers' Disclosures about Postretirement Benefit Plan Assets

In December 2008, the FASB issued an accounting standard that requires more detailed disclosures about an employer's plan assets, including the employer's investment strategies, major categories of plan assets, concentrations of risk within plan assets, and valuation techniques used to measure the fair values of plan assets. The new standard was effective for fiscal years ending after December 15, 2009. The adoption of the new standard had no effect on AIG's consolidated financial condition, results of operations or cash flows. See Note 20 herein for disclosures.

Measuring Liabilities at Fair Value

In August 2009, the FASB issued an accounting standard to clarify how the fair value measurement principles should be applied to measuring liabilities carried at fair value. The new standard explains how to prioritize market inputs in measuring liabilities at fair value and what adjustments to market inputs are appropriate for debt obligations that are restricted from being transferred to another obligor. The new standard was effective beginning October 1, 2009 for AIG. The adoption of the new standard did not have a material effect on AIG's consolidated financial condition, results of operations or cash flows.

Investments in Certain Entities that Calculate Net Asset Value per Share (or Its Equivalent)

In September 2009, the FASB issued an accounting standard that permits, as a practical expedient, a company to measure the fair value of an investment that is within the scope of the update on the basis of the net asset value per share of the investment (or its equivalent) if that value is calculated in accordance with fair value as defined by the FASB. The standard also requires enhanced disclosures. The new standard applies to investment companies that do not have readily determinable fair values such as certain hedge funds and private equity funds. The new standard was effective for interim and annual periods ending after December 15, 2009. The adoption of the new standard did not have a material effect on AIG's consolidated financial condition, results of operations or cash flows. See Note 6 herein for disclosure.

Accounting and Reporting for Decreases in Ownership of a Subsidiary

In January 2010, the FASB issued an accounting standard that clarifies that the partial sale and deconsolidation provisions of the accounting standards addressing consolidation should be applied to (1) a business that is not in the legal form of a subsidiary, (2) transactions with equity method investees and joint ventures, (3) exchanges of groups of assets that constitute businesses for noncontrolling interests in other entities and (4) the deconsolidation of a subsidiary that does not qualify as a business if the substance of the transaction is not addressed directly by other guidance, and that the accounting standards addressing consolidation do not apply to the sales of in-substance real estate. The adoption of the new standard did not have a material effect on AIG's consolidated financial condition, results of operations or cash flows.

Accounting Standards Adopted During 2008

Fair Value Measurements and Fair Value Option

In September 2006, the FASB issued an accounting standard that defined fair value, established a framework for measuring fair value and expands disclosure requirements regarding fair value measurements but did not change existing guidance about whether an asset or liability is carried at fair value. The standard nullifies the guidance that precluded the recognition of a trading profit at the inception of a derivative contract unless the fair value of such contract was obtained from a quoted market price or other valuation technique incorporating observable market data. The standard also clarifies that an issuer's credit standing should be considered when measuring liabilities at fair value. The fair value measurement and related disclosure guidance in the standard do not apply to fair value measurements associated with AIG's share-based employee compensation awards.

AIG adopted the standard on January 1, 2008, its required effective date. The standard was applied prospectively, except for certain stand-alone derivatives and hybrid instruments, which were applied as a cumulative effect of change in accounting principle to retained earnings at January 1, 2008. The cumulative effect, net of taxes, of adopting the standard on AIG's Consolidated Balance Sheet was an increase in retained earnings of $4 million.

The most significant effect of adopting the standard on AIG's consolidated results of operations for 2008 related to changes in fair value methodologies with respect to both liabilities already carried at fair value, primarily hybrid notes and derivatives, and newly elected liabilities measured at fair value. Specifically, the incorporation of AIG's own credit spreads and the incorporation of explicit risk margins (embedded policy derivatives at transition only) resulted in a increase in pre-tax loss of $1.8 billion ($1.2 billion after tax) for 2008. The effects of the changes in AIG's own credit spreads on pre-tax income for Direct Investment business and Capital Markets was an increase of $1.4 billion for 2008. The effect of the changes in counterparty credit spreads for assets measured at fair value at Direct Investment business and Capital Markets was a decrease in pre-tax income of $10.7 billion for 2008.

See Note 6 herein for additional disclosures.

In February 2007, the FASB issued an accounting standard that permits entities to choose to measure at fair value many financial instruments and certain other items that are not required to be measured at fair value. Subsequent changes in fair value for designated items are required to be reported in income. The standard also establishes presentation and disclosure requirements for similar types of assets and liabilities measured at fair value. The standard permits the fair value option election on an instrument-by-instrument basis for eligible items existing at the adoption date and at initial recognition of an asset or liability, or upon most events that give rise to a new basis of accounting for that instrument.

AIG adopted the standard on January 1, 2008, its required effective date. The adoption of the standard with respect to elections made for its domestic and foreign life insurance businesses resulted in an after-tax decrease to 2008 opening retained earnings of $559 million. The adoption of this standard with respect to elections made by Direct Investment business and Capital Markets resulted in an after-tax decrease to 2008 opening retained earnings of $448 million. Included in this amount are net unrealized gains of $105 million that were reclassified to retained earnings from accumulated other comprehensive income (loss) related to available for sale securities recorded in the consolidated balance sheet at January 1, 2008 for which the fair value option was elected.

See Note 6 herein for additional fair value disclosures.

The following table summarizes the after-tax increase (decrease) from adopting the accounting standards on Fair Value Measurements and Fair Value Option on the opening shareholders' equity accounts:

At January 1, 2008 (in millions)	Accumulated Other Comprehensive Income/(Loss)			Retained Earnings			Cumulative Effect of Accounting Changes



Fair Value Measurements	$	-		$	4		$	4
Fair Value Option		(105	)		(1,007	)		(1,112	)

Cumulative effect of change in accounting principles	$	(105	)	$	(1,003	)	$	(1,108	)

Offsetting of Amounts Related to Certain Contracts

In April 2007, the FASB issued an accounting standard that permitted companies to offset cash collateral receivables or payables against derivative instruments under certain circumstances. AIG adopted the provisions of the standard effective January 1, 2008, which required retrospective application to all prior periods presented. At December 31, 2008, the amounts of cash collateral received and posted that were offset against net derivative positions totaled $7.1 billion and $19.2 billion, respectively. The cash collateral received and paid related to Capital Markets derivative instruments was previously recorded in Other liabilities and Premiums and other receivables. Cash collateral received related to AIG and its subsidiaries (other than Capital Markets) derivative instruments was previously recorded in Other liabilities.

Disclosures about Credit Derivatives and Certain Guarantees

In September 2008, the FASB issued an accounting standard that requires additional disclosures by sellers of credit derivatives, including derivatives embedded in a hybrid instrument. The standard also requires an additional disclosure about the current status of the payment/performance risk of a guarantee. The additional disclosures are included in Note 12 herein.

Fair Value of Financial Assets in Inactive Markets

In October 2008, the FASB issued an accounting standard that provides guidance clarifying certain aspects with respect to the fair value measurements of a security when the market for that security is inactive. AIG adopted this guidance in the third quarter of 2008. The effects of adopting this standard on AIG's consolidated financial condition, results of operations and cash flows were not material.

Disclosures about Transfers of Financial Assets and Variable Interest Entities

In December 2008, the FASB issued an accounting standard that amends and expands the disclosure requirements regarding transfers of financial assets and a company's involvement with variable interest entities. The standard was effective for interim and annual periods ending after December 15, 2008. Adoption of the standard did not affect AIG's financial condition, results of operations or cash flow, as only additional disclosures were required. The additional disclosures are included in Note 11 herein.

Amendment to Impairment Guidance

In January 2009, the FASB issued an accounting standard that amends the impairment guidance on recognition of interest income and impairment on purchased beneficial interests and beneficial interests that continue to be held by a transferor in securitized financial assets to achieve more consistent determination of whether an other-than-temporary impairment has occurred. The standard also retains and emphasizes the objective of an other-than-temporary impairment assessment and the related disclosure requirements related to the accounting for certain investments in fixed maturity and equity securities and other related guidance. AIG adopted this guidance in the fourth quarter of 2008. The effects of adopting the standard on AIG's consolidated financial condition, results of operations and cash flows were not material.

Segment Information

12 Months Ended

Dec. 31, 2010

Segment Information

Segment Information

3. Segment Information

AIG reports the results of its operations through three reportable segments: Chartis, SunAmerica and Financial Services. AIG evaluates performance based on pre-tax income (loss), excluding results from discontinued operations and net (gains) losses on sales of divested businesses, because AIG believes that this provides more meaningful information on how its operations are performing.

In order to align financial reporting with changes made during 2010 to the manner in which AIG's chief operating decision makers review the businesses to make decisions about resources to be allocated and to assess performance, the following changes were made to AIG's segment information.

•

As a result of the IPO of AIA on October 29, 2010, the results of AIA for the eleven-month period of AIG's ownership are now presented in AIG's Other operations category as part of Divested businesses. Divested businesses include the historical results of divested entities that did not meet the criteria for discontinued operations accounting as well as certain non-core businesses currently in run-off. As a result, AIG no longer has a Foreign Life Insurance & Retirement Services reportable segment.

•

As a result of AIG's sale of ALICO and AGF, discussed in Note 1 herein, these businesses are presented in discontinued operations and are no longer reported as part of the Foreign Life Insurance & Retirement Services and Financial Services segments, respectively. AIG's remaining foreign life and consumer finance businesses are now reported in AIG's Other operations category as part of Divested businesses.

•

As a result of AIG's entering into an agreement to sell AIG Star and AIG Edison, AIG Star and AIG Edison are presented in discontinued operations and are no longer reported as part of the Foreign Life Insurance & Retirement Services segment.

•

During 2010, AIG's Asset Management Group undertook the management responsibilities for non-derivative assets and liabilities of the Capital Markets businesses of the Financial Services segment. The assets are being managed by the Asset Management Group in concert with the Matched Investment Program (MIP) to service the associated liabilities. Accordingly, gains and losses related to these assets and liabilities, primarily consisting of credit valuation adjustment gains and losses are reported in AIG's Other operations category as part of Asset Management — Direct Investment business.

•

Intercompany interest related to loans from AIG Funding, Inc. (AIG Funding) to AIGFP is no longer being allocated to Capital Markets from Other operations.

The remaining Capital Markets derivatives business continues to be reported in the Financial Services segment as part of Capital Markets results.

Prior periods have been revised to conform to the current period presentation for the above changes.

The reportable segments and their respective operations are as follows:

Chartis: AIG's General Insurance subsidiaries, branded as Chartis, are multi-line companies writing substantially all lines of property and casualty insurance in the U.S. and internationally. Revenues in Chartis represent general insurance Premiums and other considerations, Net investment income and Net realized capital gains (losses). AIG's principal general insurance operations are as follows:

Chartis U.S. writes substantially all classes of business insurance in the U.S. and Canada accepting such business mainly from insurance brokers.

Chartis International writes both commercial and consumer lines of insurance through a network of branches and foreign based insurance subsidiaries. It also writes a small amount of life insurance (primarily traditional life products), particularly in the newly acquired Japanese business, Fuji Fire & Marine Insurance Company Limited (Fuji). Chartis International uses various marketing methods and multiple distribution channels to write both commercial and consumer lines insurance with certain refinements for local laws, customs and needs. Chartis International is established around four regional centers, Asia Pacific, Emerging Markets, Europe and the Far East.

Each of the Chartis operating segments is comprised of groupings of major products and services as follows: Chartis U.S. is comprised of commercial and personal lines insurance products and services sold in the U.S. and Canada; and Chartis International is comprised of general insurance products and services sold overseas.

SunAmerica: SunAmerica offers a comprehensive suite of products and services to individuals and groups including term life, universal life, accident and health, fixed and variable deferred annuities, fixed payout annuities, mutual funds and financial planning. SunAmerica offers its products and services through a diverse, multi-channel distribution network that includes banks, national, regional and independent broker-dealers, affiliated financial advisors, independent marketing organizations, independent and career insurance agents, structured settlement brokers, benefit consultants and direct-to-consumer platforms.

The SunAmerica segment is presented as two operating segments — Domestic Life Insurance, which focuses on mortality and morbidity based protection products, and Domestic Retirement Services, which focuses on investment, retirement savings and income solutions.

Financial Services: AIG's Financial Services subsidiaries engage in diversified activities including commercial aircraft leasing and the remaining Capital Markets' portfolios, which are conducted through ILFC and AIGFP, respectively. Following the classification of AGF as discontinued operations in the third quarter of 2010 (see Note 4 to the Consolidated Financial Statements), AIG's remaining consumer finance businesses are now reported in AIG's Other operations category as part of Divested businesses.

The remaining capital markets derivatives business continues to be reported in the Financial Services segment as part of Capital Markets results.

Prior periods have been revised to conform to the current period presentation for the above changes.

Other Operations: AIG's Other operations includes results from Parent & Other operations, after allocations to AIG's business segments, Mortgage Guaranty operations, Asset Management operations, and results from those divested businesses not included in Discontinued operations.

AIG's Parent & Other operations consist primarily of interest expense, intercompany interest income that is eliminated in consolidation, restructuring costs, expenses of corporate staff not attributable to specific reportable segments, expenses related to efforts to improve internal controls and the financial and operating platforms, corporate initiatives, certain compensation plan expenses, corporate-level net realized capital gains and losses, certain litigation-related charges and net gains and losses on sale of divested businesses and properties that did not qualify for discontinued operations accounting treatment. In addition, fair value gains or losses on AIG's remaining interest in AIA and in the MetLife securities received as consideration from the sale of ALICO are included in Other operations.

Divested businesses include results of certain businesses that have been divested but do not meet the criteria for discontinued operations accounting (including AIA prior to its being deconsolidated as a result of its initial public offering), as well as certain non-core businesses currently in run-off.

Year-end identifiable assets presented in the following tables include assets of businesses held for sale at December 31, 2010 and 2009.

The following table presents AIG's operations by reportable segment:

		Reportable Segments


		Reportable Segments															Consolidation and Eliminations
(in millions)		Chartis			SunAmerica			Financial Services			Other			Total			Consolidation and Eliminations			Consolidated

2010
	Total revenues	$	37,196		$	14,747		$	5,657		$	20,425		$	78,025		$	(724	)	$	77,301
	Other-than-temporary impairment charges^(a)		577			1,958			10			494			3,039			-			3,039
	Net (gain) loss on sale of properties and divested businesses		(669	)		-			-			(17,098	)		(17,767	)		-			(17,767	)
	Interest expense^(b)		1			-			1,813			6,452			8,266			(406	)		7,860
	Depreciation and amortization		7,256			899			2,065			1,100			11,320			-			11,320
	Pre-tax income (loss) from continuing operations		(116	)		2,712			(636	)		15,710			17,670			266			17,936
	Capital expenditures		213			57			266			620			1,156			-			1,156
	Year-end identifiable assets		172,708			260,947			77,531			276,759			787,945			(104,502	)		683,443

2009
	Total revenues	$	35,023		$	11,366		$	6,730		$	24,342		$	77,461		$	(2,109	)	$	75,352
	Other-than-temporary impairment charges^(a)		903			3,821			-			1,972			6,696			-			6,696
	Net (gain) loss on sale of properties and divested businesses		-			-			-			1,271			1,271			-			1,271
	Interest expense^(b)		-			-			1,765			13,168			14,933			(698	)		14,235
	Depreciation and amortization		7,005			1,140			2,074			1,855			12,074			-			12,074
	Pre-tax income (loss) from continuing operations		164			(1,179	)		2,006			(14,454	)		(13,463	)		(844	)		(14,307	)
	Capital expenditures		191			52			2,588			874			3,705			-			3,705
	Year-end identifiable assets		154,733			245,607			86,965			450,260			937,565			(89,980	)		847,585

2008
	Total revenues	$	33,793		$	(19,634	)	$	(25,426	)	$	6,670		$	(4,597	)	$	(2,243	)	$	(6,840	)
	Other-than-temporary impairment charges^(a)		4,051			30,464			-			7,352			41,867			-			41,867
	Interest expense^(b)		-			-			1,798			14,368			16,166			(462	)		15,704
	Depreciation and amortization		7,933			361			1,946			2,635			12,875			-			12,875
	Pre-tax loss from continuing operations		(2,488	)		(34,948	)		(29,786	)		(34,492	)		(101,714	)		(1,315	)		(103,029	)
	Capital expenditures		179			100			3,416			2,446			6,141			-			6,141
	Year-end identifiable assets		144,520			240,279			105,772			497,785			988,356			(127,938	)		860,418

(a): Included in Total revenues presented above.
(b): Interest expense for Other operations in 2010, 2009 and 2008 includes amortization of prepaid commitment asset of $3.5 billion, $8.4 billion and $9.3 billion, respectively.

The following table presents Chartis operations by operating segment:

(in millions)		Chartis U.S.			Chartis International			Total Operating Segments			Consolidation and Eliminations			Total Chartis



2010
	Total revenues	$	21,485		$	15,711		$	37,196		$	-		$	37,196
	Net (gain) loss on sale of properties and divested businesses		-			(669	)		(669	)		-			(669	)
	Claims and claims adjustment expenses incurred		18,514			9,353			27,867			-			27,867
	Underwriting expenses		4,671			5,443			10,114			-			10,114
	Depreciation and amortization		3,856			3,400			7,256			-			7,256
	Pre-tax income (loss) from continuing operations		(1,700	)		1,584			(116	)		-			(116	)
	Capital expenditures		87			126			213			-			213
	Year-end identifiable assets		112,810			59,862			172,672			36			172,708

2009
	Total revenues	$	21,889		$	13,134		$	35,023		$	-		$	35,023
	Claims and claims adjustment expenses incurred		17,943			7,419			25,362			-			25,362
	Underwriting expenses		4,401			5,096			9,497			-			9,497
	Depreciation and amortization		3,759			3,246			7,005			-			7,005
	Pre-tax income (loss) from continuing operations		(455	)		619			164			-			164
	Capital expenditures		103			88			191			-			191
	Year-end identifiable assets		109,142			45,232			154,374			359			154,733

2008
	Total revenues	$	21,099		$	12,694		$	33,793		$	-		$	33,793
	Claims and claims adjustment expenses incurred		18,255			7,269			25,524			-			25,524
	Underwriting expenses		5,887			4,870			10,757			-			10,757
	Depreciation and amortization		4,558			3,375			7,933			-			7,933
	Pre-tax income (loss) from continuing operations		(3,043	)		555			(2,488	)		-			(2,488	)
	Capital expenditures		62			117			179			-			179
	Year-end identifiable assets		105,738			39,037			144,775			(255	)		144,520

The following table presents SunAmerica operations by operating segment:

(in millions)		Domestic Life Insurance			Domestic Retirement Services			Total Operating Segment			Consolidation and Eliminations			SunAmerica Financial Group



2010
Total revenues:
	Insurance-oriented products	$	5,992		$	-		$	5,992		$	-		$	5,992
	Retirement savings products		2,335			6,150			8,485			-			8,485
	Asset management revenues		7			263			270			-			270

	Total revenues		8,334			6,413			14,747			-			14,747

Depreciation and amortization			629			270			899			-			899
Pre-tax income (loss) from continuing operations			1,394			1,318			2,712			-			2,712
Capital expenditures			28			29			57			-			57
Year-end identifiable assets			105,580			175,755			281,335			(20,388	)		260,947

2009
Total revenues:
	Insurance-oriented products	$	5,349		$	-		$	5,349		$	-		$	5,349
	Retirement savings products		1,993			3,611			5,604			-			5,604
	Asset management revenues		17			396			413			-			413

	Total revenues		7,359			4,007			11,366			-			11,366

Depreciation and amortization			534			606			1,140			-			1,140
Pre-tax income (loss) from continuing operations			619			(1,798	)		(1,179	)		-			(1,179	)
Capital expenditures			17			35			52			-			52
Year-end identifiable assets			100,600			165,436			266,036			(20,429	)		245,607

2008
Total revenues:
	Insurance-oriented products	$	(3,743	)	$	-		$	(3,743	)	$	-		$	(3,743	)
	Retirement savings products		2,222			(15,520	)		(13,298	)		-			(13,298	)
	Asset management revenues		38			(2,631	)		(2,593	)		-			(2,593	)

	Total revenues		(1,483	)		(18,151	)		(19,634	)		-			(19,634	)

Depreciation and amortization			279			82			361			-			361
Pre-tax loss from continuing operations			(10,230	)		(24,718	)		(34,948	)		-			(34,948	)
Capital expenditures			32			68			100			-			100
Year-end identifiable assets			99,881			159,558			259,439			(19,160	)		240,279

The following table presents AIG's Financial Services operations by operating segment:

(in millions)		Aircraft Leasing			Capital Markets			Other			Total Operating Segments			Consolidation and Eliminations			Total Financial Services



2010
	Total revenues	$	4,718		$	527		$	442		$	5,687		$	(30	)	$	5,657
	Interest expense		1,397			-			446			1,843			(30	)		1,813
	Depreciation and amortization		2,035			4			26			2,065			-			2,065
	Pre-tax income (loss) from continuing operations		(729	)		209			(116	)		(636	)		-			(636	)
	Capital expenditures		266			-			-			266			-			266
	Year-end identifiable assets		43,158			29,747			(18,117	)		54,788			22,743			77,531

2009
	Total revenues	$	4,992		$	1,166		$	690		$	6,848		$	(118	)	$	6,730
	Interest expense		1,222			-			573			1,795			(30	)		1,765
	Depreciation and amortization		2,022			13			39			2,074			-			2,074
	Pre-tax income (loss) from continuing operations		1,385			684			(63	)		2,006			-			2,006
	Capital expenditures		2,587			-			1			2,588			-			2,588
	Year-end identifiable assets		45,992			33,963			(15,420	)		64,535			22,430			86,965

2008
	Total revenues	$	4,810		$	(30,559	)	$	323		$	(25,426	)	$	-		$	(25,426	)
	Interest expense		1,557			-			276			1,833			(35	)		1,798
	Depreciation and amortization		1,893			20			33			1,946			-			1,946
	Pre-tax income (loss) from continuing operations		1,116			(30,697	)		(205	)		(29,786	)		-			(29,786	)
	Capital expenditures		3,231			5			180			3,416			-			3,416
	Year-end identifiable assets		47,426			47,468			(2,354	)		92,540			13,232			105,772

The following table presents components of AIG's Other operations:

								Asset Management Operations


(in millions)		Parent & Other			Mortgage Guaranty			Direct Investment Business			Institutional Asset Management			Divested Businesses			Change in ML III		Consolidation and Eliminations			Total Other Operations

2010
	Total revenues	$	1,934		$	1,168		$	1,179		$	386		$	14,210		$	1,792	$	(244	)	$	20,425
	Net (gain) loss on sale of properties and divested businesses		(16,466	)		-			(632	)		-			-			-		-			(17,098	)
	Interest expense		6,075			-			545			35			41			-		(244	)		6,452
	Depreciation and amortization		192			77			(208	)		22			1,017			-		-			1,100
	Pre-tax income (loss) from continuing operations		9,843			373			1,254			(151	)		2,599			1,792		-			15,710
	Capital expenditures		161			10			336			5			108			-		-			620
	Year-end identifiable assets		122,071			6,073			33,857			1,515			109,621			6,311		(2,689	)		276,759

2009
	Total revenues	$	1,141		$	1,183		$	429		$	913		$	19,254		$	1,820	$	(398	)	$	24,342
	Net (gain) loss on sale of properties and divested businesses		1,271			-			-			-			-			-		-			1,271
	Interest expense		12,502			-			618			103			226			-		(281	)		13,168
	Depreciation and amortization		310			94			10			102			1,339			-		-			1,855
	Pre-tax income (loss) from continuing operations		(15,001	)		(1,688	)		(322	)		(1,303	)		2,040			1,820		-			(14,454	)
	Capital expenditures		249			5			373			1			246			-		-			874
	Year-end identifiable assets		66,995			7,816			38,841			5,262			334,821			4,519		(7,994	)		450,260

2008
	Total revenues	$	(856	)	$	1,215		$	(12,704	)	$	2,342		$	16,721		$	-	$	(48	)	$	6,670
	Interest expense		13,323			-			679			33			333			-		-			14,368
	Depreciation and amortization		201			77			76			102			2,179			-		-			2,635
	Pre-tax income (loss) from continuing operations		(16,307	)		(2,488	)		(13,548	)		(255	)		(1,894	)		-		-			(34,492	)
	Capital expenditures		303			10			1,354			27			752			-		-			2,446
	Year-end identifiable assets		117,765			6,561			48,801			6,241			325,429			-		(7,012	)		497,785

The following table presents AIG's operations and long-lived assets by major geographic area:

		Geographic Area


(in millions)		United States			Asia		Other Foreign		Consolidated

2010
	Total revenues^(a)	$	40,772		$	20,407	$	16,122	$	77,301
	Real estate and other fixed assets, net of accumulated depreciation		1,896			557		392		2,845
	Flight equipment primarily under operating leases, net of accumulated depreciation^(b)		38,510			-		-		38,510

2009
	Total revenues^(a)	$	34,896		$	23,178	$	17,278	$	75,352
	Real estate and other fixed assets, net of accumulated depreciation		2,328			1,189		625		4,142
	Flight equipment primarily under operating leases, net of accumulated depreciation^(b)		44,091			-		-		44,091

2008
	Total revenues^(a)	$	(37,198	)	$	15,207	$	15,151	$	(6,840	)
	Real estate and other fixed assets, net of accumulated depreciation		3,220			1,552		794		5,566
	Flight equipment primarily under operating leases, net of accumulated depreciation^(b)		43,395			-		-		43,395

(a): Revenues are generally reported according to the geographic location of the reporting unit.
(b): ILFC derives more than 94 percent of its revenue from foreign-operated airlines.

Divested Businesses, Discontinued Operations and Held-for-Sale Classification

12 Months Ended

Dec. 31, 2010

Divested Businesses, Discontinued Operations and Held-for-Sale Classification

Divested Businesses, Discontinued Operations and Held-for-Sale Classification

4. Divested Businesses, Discontinued Operations and Held-for-Sale Classification

Divested Businesses

AIA Initial Public Offering

During the second quarter of 2010, AIG and Prudential plc terminated the AIA purchase agreement they had entered in March 2010 and in accordance with the terms of the purchase agreement, Prudential plc paid AIG a termination fee of $228 million, which is included in Net loss (gain) on sale of divested businesses and properties in the Consolidated Statement of Income (Loss).

On October 29, 2010, AIG completed an initial public offering of 8.08 billion ordinary shares of AIA for aggregate gross proceeds of approximately $20.51 billion. Upon completion of the initial public offering, AIG owned 33 percent of AIA's outstanding shares. Accordingly, AIG deconsolidated AIA and recorded a pre-tax gain of $16.3 billion in 2010. Under the terms of an agreement with the underwriters, AIG is precluded from selling or hedging any of its remaining shares of AIA until October 18, 2011 and more than half of its remaining shares of AIA until April 18, 2012. Based on AIG's continuing involvement as a result of its 33 percent ownership and board representation, AIA is not being presented as a discontinued operation in the Consolidated Financial Statements at December 31, 2010. AIG is accounting for its investment in AIA under the fair value option with gains and losses recorded in Net investment income. At December 31, 2010, the fair value of AIG's retained interest in AIA was approximately $11.1 billion and is included in Other invested assets.

Under the Master Transaction Agreement, dated as of December 8, 2010 (the Master Transaction Agreement), among AIG, the SPVs, the FRBNY, the Department of the Treasury and the Trust, net cash proceeds from the AIA public offering were held in escrow pending the Closing of the Recapitalization. Upon the Closing, these cash proceeds were loaned by AIA SPV to AIG and used to repay amounts owing under the FRBNY Credit Facility as described in Note 1.

Discontinued Operations

The results of operations for the following sales are presented as discontinued operations in AIG's Consolidated Statement of Income (Loss) for all periods presented.

ALICO Sale

On March 7, 2010, AIG and ALICO Holdings LLC (the ALICO SPV), a special purpose vehicle formed by AIG, entered into a definitive agreement with MetLife for the sale of ALICO by the ALICO SPV to MetLife, and the sale of Delaware American Life Insurance Company by AIG to MetLife, for consideration then valued at approximately $15.5 billion, consisting of $6.8 billion in cash and the remainder in equity securities of MetLife, subject to closing adjustments. The ALICO sale closed on November 1, 2010. AIG does not have any continuing significant involvement with or significant continuing cash flows from ALICO. The fair value of the consideration at closing was approximately $16.2 billion. At December 31, 2010, a total of $6.5 billion is included in preferred and common stock trading, and is recorded at fair value with unrealized gains and losses recorded in Net investment income and for certain derivative components, in Net realized capital gains (losses).

On the closing date, as consideration for the ALICO sale, the ALICO SPV received net cash consideration of $7.2 billion (which included an upward price adjustment of approximately $400 million pursuant to the terms of the ALICO stock purchase agreement), 78,239,712 shares of MetLife common stock, 6,857,000 shares of newly issued MetLife participating preferred stock convertible into 68,570,000 shares of MetLife common stock upon the approval of MetLife shareholders and 40,000,000 equity units of MetLife with an aggregate stated value of $3.2 billion. AIG intends to monetize these MetLife securities over time, subject to market conditions, following the lapse of agreed-upon minimum holding periods. AIG recorded a pre-tax gain of $4.1 billion on the transaction in 2010.

Under the Master Transaction Agreement, net cash proceeds from the ALICO sale were held in escrow pending the Closing of the Recapitalization. Upon the Closing of the Recapitalization, these cash proceeds were loaned by the ALICO SPV to AIG and were used to repay amounts owing under the FRBNY Credit Facility and, together with other funds, to repurchase all of the FRBNY's SPV Preferred Interests.

Prior to conversion into MetLife common stock, the MetLife participating preferred stock will be entitled to dividends equivalent, on an as-converted basis, to those that may be declared from time to time on MetLife common stock.

Each of the equity units of MetLife has an initial stated amount of $75 and consists of an ownership interest in three series of senior debt securities of MetLife and three stock purchase contracts with a weighted average life of approximately three years. The stock purchase contracts obligate the holder of an equity unit to purchase, and obligate MetLife to sell, a number of shares of MetLife common stock that will be determined based on the market price of MetLife common stock at the scheduled settlement dates under the stock purchase contracts (a minimum of 67,764,000 shares and a maximum of 84,696,000 shares in the aggregate for all equity units, subject to anti-dilution adjustments). The equity units provide for the remarketing of the senior debt securities to fund the purchase price of the MetLife common stock. They also entitle the holder to receive interest payments on the senior debt securities and deferrable contract payments at a combined rate equal to five percent of their stated amount. The equity units have been placed in escrow as collateral to secure payments, if any, in respect of indemnity obligations owed by the ALICO SPV to MetLife under the ALICO stock purchase agreement and other transaction agreements. The escrow collateral will be released to the ALICO SPV over a 30-month period, to the extent not used to make indemnity payments or to secure pending indemnity claims submitted by MetLife.

AGF Sale

On August 10, 2010, AIG entered into a definitive agreement to sell an 80 percent economic interest (84 percent voting interest) in American General Finance, Inc. (AGF) for $125 million. The AGF sale closed on November 30, 2010. AIG's voting ownership interest in AGF was reduced to approximately 16 percent, and AIG does not otherwise have significant continuing involvement with or significant continuing cash flows from AGF. AIG is carrying its retained investment in AGF of approximately $30 million as a cost method investment in Other invested assets. As a result of this transaction, AIG recorded a pre-tax loss of $1.7 billion in 2010.

The components of the $1.7 billion charge consisted of the difference between (i) the sum of the fair value of the agreed consideration and AIG's retained 20 percent economic interest and (ii) the net book value of the assets. Prior to the agreed sale, AGF's business and underlying assets were subject to periodic impairment assessments under a held-for-use model and did not meet the criteria for held-for-sale accounting. The large majority of AGF's assets were consumer finance and mortgage loans held for investment and thus were not carried at fair value.

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. AIG has no continuing significant involvement with or significant continuing cash flows from AIG Star and AIG Edison. In connection with the sale, AIG recorded a goodwill impairment charge of $1.3 billion in 2010.

Nan Shan Sale Agreement

On January 12, 2011, AIG entered into an agreement to sell its 97.57 percent interest in Nan Shan for $2.16 billion to a Taiwan-based consortium. While AIG believes the consortium meets certain basic criteria established by the Financial Supervisory Commission of Taiwan, the transaction is still subject to regulatory approvals and customary closing conditions. The sale of Nan Shan is expected to be consummated in 2011. AIG continues to classify Nan Shan as a discontinued operation for all periods presented since AIG will not retain any interest or continuing involvement within Nan Shan and Nan Shan is not expected to generate significant continuing cash flows.

The transaction meets the criteria for held for sale accounting and discontinued operations classification.

See Note 16 for a discussion of guarantees and indemnifications associated with sales of businesses.

ALICO, Nan Shan, AIG Star and AIG Edison previously were components of the Foreign Life Insurance & Retirement Services reportable segment and AGF previously was a component of the Financial Services reportable segment.

Certain other sales completed during 2010 and 2009 were not classified as discontinued operations because AIG continued to generate significant direct revenue-producing or cost-generating cash flows from the businesses or because associated assets, liabilities and results of operations were not material, individually or in the aggregate, to AIG's consolidated financial position or results of operations.

The following table summarizes income (loss) from discontinued operations:

Years Ended December 31, (in millions)		2010			2009			2008



Revenues:
	Premiums and other considerations	$	18,296		$	18,325		$	20,636
	Net investment income		6,924			7,851			2,758
	Net realized capital gains (losses)		289			(920	)		(8,690	)
	Other income		1,607			2,285			2,975

Total revenues			27,116			27,541			17,679

Benefits, claims and expenses^*			28,854			25,810			23,356
Interest expense allocation			75			89			55

Income (loss) from discontinued operations			(1,813	)		1,642			(5,732	)

Income (loss) on sales			1,588			(2,758	)		-

Loss from discontinued operations, before income tax expense (benefit)			(225	)		(1,116	)		(5,732	)

Income tax expense (benefit)			1,839			(1,621	)		1,309

Income (loss) from discontinued operations, net of tax		$	(2,064	)	$	505		$	(7,041	)

*: In 2010, includes goodwill impairment charges of $3.3 billion related to the sale of ALICO and $1.3 billion related to the sale of AIG Star and AIG Edison. See Note 2(k) – Goodwill for further discussion.

Interest Expense Allocation

Interest expense allocated to discontinued operations gives effect to the provisions of the Recapitalization discussed in Note 1 for all periods presented. For this reason, an interest allocation to discontinued operations related to a portion of the ALICO and all the AGF proceeds was required.

The interest expense allocated to discontinued operations was based on the anticipated net proceeds that would be applied toward the repayment of the FRBNY Credit Facility from the sales of ALICO and AGF multiplied by the daily interest rate on the FRBNY Credit Facility for each respective period. The periodic amortization of the prepaid commitment fee allocated to discontinued operations was determined based on the ratio of funds committed to repay the FRBNY Credit Facility to the total amount of credit available under the FRBNY Credit Facility.

Prior to the Recapitalization, the terms of the FRBNY Credit Facility contractually required net proceeds from dispositions, after taxes and transaction expenses, to the extent such proceeds did not represent capital of AIG's insurance subsidiaries required for regulatory or ratings purposes, to be applied toward the repayment of the FRBNY Credit Facility as mandatory prepayments unless otherwise agreed with the FRBNY. Mandatory prepayments reduced the amount available to be borrowed under the FRBNY Credit Facility by the amount of the prepayment. In conjunction with anticipated prepayments, AIG allocated interest expense, including periodic amortization of the prepaid commitment fee asset, to Income (loss) from discontinued operations. As a result of the revised terms for repayment of the FRBNY Credit Facility, interest expense that was previously allocated to discontinued operations in connection with the sales of AIG Star, AIG Edison and Nan Shan was reclassified to continuing operations for all periods presented.

Held-for-Sale Classification

The aggregate held-for-sale assets and liabilities are presented separately as single line items in the asset and liability sections of the Consolidated Balance Sheet at December 31, 2009 for Nan Shan and December 31, 2010 for Nan Shan, AIG Star and AIG Edison.

During 2010, AIG sold its investment advisory and third-party asset management business for $277 million cash at closing plus contingent consideration to be received over time. Prior to the closing of this transaction this business was a component of the Asset Management operations included within Other operations. This transaction met the criteria for held-for-sale accounting, and the assets and liabilities of the business were included as single line items in the asset and liability sections of the Consolidated Balance Sheet at December 31, 2009. This transaction does not meet the criteria for discontinued operations accounting because of significant direct continuing cash flows between AIG and the business sold.

During 2009, AIG entered into an agreement to combine its consumer finance business in Poland, conducted through AIG Bank Polska S.A., into the Polish consumer finance business of Santander Consumer Finance S.A. (SCB). The transaction closed on June 8, 2010. In exchange, AIG received an equity interest in SCB. Prior to the closing of the transaction, AIG Bank Polska S.A. was a component of the Financial Services reporting segment. This transaction met the criteria for held-for-sale accounting and, as a result, the assets and liabilities of this business were included as single line items in the asset and liability sections of the Consolidated Balance Sheet at December 31, 2009. This transaction does not meet the criteria for discontinued operations accounting because of the equity method interest in SCB that AIG received in this transaction.

The following table summarizes assets and liabilities held for sale:

December 31, (in millions)		2010		2009



Assets:
	Fixed maturity securities	$	77,905	$	34,495
	Deferred policy acquisition costs		7,095		3,322
	Mortgage and other loans receivable, net		5,584		3,997
	Equity securities		4,488		2,947
	Other invested assets		4,167		4,256
	Short-term investments		3,670		3,501
	Separate account assets		3,745		3,467
	Other assets		544		394

Assets of businesses held for sale			107,198		56,379

Flight equipment^*			255		-

Total assets held for sale		$	107,453	$	56,379

Liabilities:
	Future policy benefits for life and accident and health insurance contracts	$	61,767	$	38,023
	Policyholder contract deposits		26,847		3,133
	Separate account liabilities		3,745		3,467
	Other long-term debt		525		-
	Other liabilities		4,428		3,976

Total liabilities held for sale		$	97,312	$	48,599

*: Represents nine aircraft that remain to be sold under agreements for sale by ILFC as of December 31, 2010.

Fair Value Measurements

12 Months Ended

Dec. 31, 2010

Fair Value Measurements

Fair Value Measurements

6. Fair Value Measurements

Fair Value Measurements on a Recurring Basis

AIG carries certain of its financial instruments at fair value. AIG defines the fair value of a financial instrument as the amount that would be received from the sale of an asset or paid to transfer a liability in an orderly transaction between willing, able and knowledgeable market participants at the measurement date.

The degree of judgment used in measuring the fair value of financial instruments generally correlates with the level of observable valuation inputs. AIG maximizes the use of observable inputs and minimizes the use of unobservable inputs when measuring fair value. Financial instruments with quoted prices in active markets generally have more pricing observability and less judgment is used in measuring fair value. Conversely, financial instruments for which no quoted prices are available have less observability and are measured at fair value using valuation models or other pricing techniques that require more judgment. Pricing observability is affected by a number of factors, including the type of financial instrument, whether the financial instrument is new to the market and not yet established, the characteristics specific to the transaction, liquidity and general market conditions.

Fair Value Hierarchy

Assets and liabilities recorded at fair value in the Consolidated Balance Sheet are measured and classified in a hierarchy for disclosure purposes consisting of three "levels" based on the observability of inputs available in the marketplace used to measure the fair values as discussed below:

•

Level 1:  Fair value measurements that are quoted prices (unadjusted) in active markets that AIG has the ability to access for identical assets or liabilities. Market price data generally is obtained from exchange or dealer markets. AIG does not adjust the quoted price for such instruments. Assets and liabilities measured at fair value on a recurring basis and classified as Level 1 include certain government and agency securities, actively traded listed common stocks and futures and options contracts, most separate account assets and most mutual funds.

•

Level 2:  Fair value measurements based on inputs other than quoted prices included in Level 1, that are observable for the asset or liability, either directly or indirectly. Level 2 inputs include quoted prices for similar assets and liabilities in active markets, and inputs other than quoted prices that are observable for the asset or liability, such as interest rates and yield curves that are observable at commonly quoted intervals. Assets and liabilities measured at fair value on a recurring basis and classified as Level 2 generally include certain government and agency securities, most investment-grade and high-yield corporate bonds, certain residential mortgage-backed securities (RMBS), commercial mortgage-backed securities (CMBS) and collateralized loan obligations/asset backed securities (CLO/ABS), certain listed equities, state, municipal and provincial obligations, hybrid securities, securities purchased (sold) under agreements to resell (repurchase), mutual fund and hedge fund investments, certain interest rate, currency and commodity derivative contracts, guaranteed investment agreements (GIAs) for the Direct Investment business, other long-term debt and physical commodities.

•

Level 3:  Fair value measurements based on valuation techniques that use significant inputs that are unobservable. Both observable and unobservable inputs may be used to determine the fair values of positions classified in Level 3. These measurements include circumstances in which there is little, if any, market activity for the asset or liability. Therefore, AIG must make certain assumptions as to the inputs a hypothetical market participant would use to value that asset or liability. In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, the level in the fair value hierarchy within which the fair value measurement in its entirety falls is determined based on the lowest level input that is significant to the fair value measurement in its entirety. AIG's assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment. In making the assessment, AIG considers factors specific to the asset or liability. Assets and liabilities measured at fair value on a recurring basis and classified as Level 3 include certain RMBS, CMBS and collateralized debt obligations/asset backed securities (CDO/ABS), corporate debt, certain municipal and sovereign debt, certain derivative contracts (including Capital Markets' super senior credit default swap portfolio), policyholder contract deposits carried at fair value, private equity and real estate fund investments, and direct private equity investments. AIG's non-financial instrument assets that are measured at fair value on a non-recurring basis generally are classified as Level 3.

The following is a description of the valuation methodologies used for instruments carried at fair value. These methodologies are applied to assets and liabilities across the levels noted above, and it is the observability of the inputs used that determines the appropriate level in the fair value hierarchy for the respective asset or liability.

Valuation Methodologies

Incorporation of Credit Risk in Fair Value Measurements

•

AIG's Own Credit Risk. Fair value measurements for certain Direct Investment business' debt, GIAs, structured note liabilities and freestanding derivatives, as well as Capital Markets derivatives, incorporate AIG's own credit risk by determining the explicit cost for each counterparty to protect against its net credit exposure to AIG at the balance sheet date by reference to observable AIG credit default swap or cash bond spreads. A derivative counterparty's net credit exposure to AIG is determined based on master netting agreements, when applicable, which take into consideration all derivative positions with AIG, as well as cash collateral posted by AIG with the counterparty at the balance sheet date.

- Fair value measurements for embedded policy derivatives and policyholder contract deposits take into consideration that policyholder liabilities are senior in priority to general creditors of AIG and therefore are much less sensitive to changes in AIG credit default swap or cash issuance spreads.
•

Counterparty Credit Risk. Fair value measurements for freestanding derivatives incorporate counterparty credit by determining the explicit cost for AIG to protect against its net credit exposure to each counterparty at the balance sheet date by reference to observable counterparty credit default swap spreads, when available. When not available, other directly or indirectly observable credit spreads will be used to derive the best estimates of the counterparty spreads. AIG's net credit exposure to a counterparty is determined based on master netting agreements, which take into consideration all derivative positions with the counterparty, as well as cash collateral posted by the counterparty at the balance sheet date.

A CDS is a derivative contract that allows the transfer of third party credit risk from one party to the other. The buyer of the CDS pays an upfront and/or periodic premium to the seller. The seller's payment obligation is triggered by the occurrence of a credit event under a specified reference security and is determined by the loss on that specified reference security. The present value of the amount of the periodic and/or upfront premium therefore represents a market-based expectation of the likelihood that the specified reference party will fail to perform on the reference obligation, a key market observable indicator of non-performance risk (the CDS spread).

Fair values for fixed maturity securities based on observable market prices for identical or similar instruments implicitly incorporate counterparty credit risk. Fair values for fixed maturity securities based on internal models incorporate counterparty credit risk by using discount rates that take into consideration cash issuance spreads for similar instruments or other observable information.

The cost of credit protection is determined under a discounted present value approach considering the market levels for single name CDS spreads for each specific counterparty, the mid market value of the net exposure (reflecting the amount of protection required) and the weighted average life of the net exposure. CDS spreads are provided to AIG by an independent third party. AIG utilizes an interest rate based on the benchmark London Interbank Offered Rate (LIBOR) curve to derive its discount rates.

While this approach does not explicitly consider all potential future behavior of the derivative transactions or potential future changes in valuation inputs, AIG believes this approach provides a reasonable estimate of the fair value of the assets and liabilities, including consideration of the impact of non-performance risk.

Fixed Maturity Securities — Trading and Available for Sale

Whenever available, AIG obtains quoted prices in active markets for identical assets at the balance sheet date to measure fixed maturity securities at fair value in its trading and available for sale portfolios. Market price data is generally obtained from dealer markets.

Management is responsible for the determination of the value of the investments carried at fair value and the supporting methodologies and assumptions. AIG employs independent third-party valuation service providers to gather, analyze, and interpret market information and derive fair values based upon relevant methodologies and assumptions for individual instruments. When AIG's valuation service providers are unable to obtain sufficient market observable information upon which to estimate the fair value for a particular security, fair value is determined either by requesting brokers who are knowledgeable about these securities to provide a quote, which is generally non-binding, or by employing widely accepted internal valuation models.

Valuation service providers typically obtain data about market transactions and other key valuation model inputs from multiple sources and, through the use of widely accepted valuation models, provide a single fair value measurement for individual securities for which a fair value has been requested under the terms of service agreements. The inputs used by the valuation service providers include, but are not limited to, market prices from recently completed transactions and transactions of comparable securities, benchmark yields, interest rate yield curves, credit spreads, currency rates, quoted prices for similar securities and other market- observable information, as applicable. The valuation models take into account, among other things, market observable information as of the measurement date as well as the specific attributes of the security being valued, including its term, interest rate, credit rating, industry sector, and when applicable, collateral quality and other security or issuer-specific information. When market transactions or other market observable data is limited, the extent to which judgment is applied in determining fair value is greatly increased.

AIG has processes designed to ensure that the values received or internally estimated are accurately recorded, that the data inputs and the valuation techniques utilized are appropriate and consistently applied and that the assumptions are reasonable and consistent with the objective of determining fair value. AIG assesses the reasonableness of individual security values received from valuation service providers through various analytical techniques. In addition, AIG may validate the reasonableness of fair values by comparing information obtained from AIG's valuation service providers to other third-party valuation sources for selected securities. AIG also validates prices for selected securities obtained from brokers through reviews by members of management who have relevant expertise and who are independent of those charged with executing investing transactions.

The methodology above is relevant for all fixed maturity securities; following are discussions of certain procedures unique to specific classes of securities.

Fixed Maturity Securities issued by Government Entities

For most debt securities issued by government entities, AIG obtains fair value information from independent third-party valuation service providers, as quoted prices in active markets are generally only available for limited debt securities issued by government entities. The fair values received from these valuation service providers may be based on a market approach using matrix pricing, which considers a security's relationship to other securities for which a quoted price in an active market may be available, or alternatively based on an income approach, which uses valuation techniques to convert future cash flows to a single present value amount.

Fixed Maturity Securities issued by Corporate Entities

For most debt securities issued by corporate entities, AIG obtains fair value information from third-party valuation service providers. For certain corporate debt securities, AIG obtains fair value information from brokers. For those corporate debt instruments (for example, private placements) that are not traded in active markets or that are subject to transfer restrictions, valuations are adjusted to reflect illiquidity and/or non-transferability, and such adjustments generally are based on available market evidence. In the absence of such evidence, management's best estimate is used.

RMBS, CMBS, CDOs and other ABS

Third-party valuation service providers also provide fair value information for the majority of AIG investments in RMBS, CMBS, CDOs and other ABS. Where pricing is not available from valuation service providers, AIG obtains fair value information from brokers. Broker prices may be based on an income approach, which converts expected future cash flows to a single present value amount, with specific consideration of inputs relevant to structured securities, including ratings, collateral types, geographic concentrations, underlying loan vintages, loan delinquencies, and weighted average coupons and maturities. Broker prices may also be based on a market approach that considers recent transactions involving identical or similar securities. When the volume or level of market activity for an investment in RMBS, CMBS, CDOs or other ABS is limited, certain inputs used to determine fair value may not be observable in the market.

Maiden Lane II and Maiden Lane III

At their inception, ML II and ML III were valued and recorded at the transaction prices of $1 billion and $5 billion, respectively. Subsequently, the Maiden Lane Interests are valued using a discounted cash flow methodology that uses the estimated future cash flows of the Maiden Lane assets. AIG applies model-determined market discount rates to its interests. These discount rates are calibrated to the changes in the estimated asset values for the underlying assets commensurate with AIG's interests in the capital structure of the respective entities. Estimated cash flows and discount rates used in the valuations are validated, to the extent possible, using market observable information for securities with similar asset pools, structure and terms.

The fair value methodology used assumes that the underlying collateral in the Maiden Lane Interests will continue to be held and generate cash flows into the foreseeable future and does not assume a current liquidation of the assets underlying the Maiden Lane Interests. Other methodologies employed or assumptions made in determining fair value for these investments could result in amounts that differ significantly from the amounts reported.

Adjustments to the fair value of AIG's interest in ML II are recorded on the Consolidated Statement of Income (Loss) in Net investment income for SunAmerica's domestic life insurance companies. Adjustments to the fair value of AIG's interest in ML III are recorded on the Consolidated Statement of Income (Loss) in Net investment income and, beginning in the second quarter of 2009, were included in Other operations results, reflecting the contribution to an AIG subsidiary. Prior to the second quarter of 2009, such amounts had been included in Other Parent company results. AIG's Maiden Lane Interests are included in Bond trading securities, at fair value, on the Consolidated Balance Sheet.

As of December 31, 2010, AIG expected to receive cash flows (undiscounted) in excess of AIG's initial investment, and any accrued interest, in the Maiden Lane Interests over the remaining life of the investments after repayment of the first priority obligations owed to the FRBNY. AIG's cash flow methodology considers the capital structure of the collateral securities and their expected credit losses from the underlying asset pools. The fair values of the Maiden Lane Interests are most affected by changes in the discount rates and changes in the underlying estimated future collateral cash flow assumptions used in the valuation model.

The LIBOR interest rate curve changes are determined based on observable prices, interpolated or extrapolated to derive a LIBOR for a specific maturity term as necessary. The spreads over LIBOR for the Maiden Lane Interests (including collateral-specific credit and liquidity spreads) can change as a result of changes in market expectations about the future performance of these investments as well as changes in the risk premium that market participants would demand at the time of the transactions.

Changes in estimated future cash flows would primarily be the result of changes in expectations for defaults, recoveries and prepayments on underlying loans.

Changes in the discount rate or the estimated future cash flows used in the valuation would alter AIG's estimate of the fair value of the Maiden Lane Interests as shown in the table below.

		Fair Value Change


Year Ended December 31, 2010 (in millions)		Fair Value Change
Year Ended December 31, 2010 (in millions)		Maiden Lane II			Maiden Lane III

Discount Rates:
	200 basis point increase	$	(142	)	$	(722	)
	200 basis point decrease		164			836
	400 basis point increase		(266	)		(1,349	)
	400 basis point decrease		354			1,810

Estimated Future Cash Flows:
	10% increase		303			845
	10% decrease		(315	)		(858	)
	20% increase		599			1,674
	20% decrease		(649	)		(1,735	)

AIG believes that the ranges of discount rates used in these analyses are reasonable on the basis of implied spread volatilities of similar collateral securities and implied volatilities of LIBOR interest rates. The ranges of estimated future cash flows were determined on the basis of variability in estimated future cash flows implied by cumulative loss estimates for similar instruments. Because of these factors, the fair values of the Maiden Lane Interests are likely to vary, perhaps materially, from the amount estimated.

Equity Securities Traded in Active Markets — Trading, Available for Sale and Other Invested Assets

Whenever available, AIG obtains quoted prices in active markets for identical assets at the balance sheet date to measure at fair value marketable equity securities in its trading and available for sale portfolios or in Other invested assets. Market price data is generally obtained from exchange or dealer markets.

Direct Private Equity Investments — Other Invested Assets

AIG initially estimates the fair value of direct private equity investments by reference to the transaction price. This valuation is adjusted for changes in inputs and assumptions that are corroborated by evidence such as transactions in similar instruments, completed or pending third-party transactions in the underlying investment or comparable entities, subsequent rounds of financing, recapitalizations and other transactions across the capital structure, offerings in the equity capital markets and/or changes in financial ratios or cash flows. For equity securities that are subject to transfer restrictions, valuations are adjusted to reflect illiquidity and/or non-transferability and such adjustments generally are based on available market evidence. In the absence of such evidence, management's best estimate is used.

Hedge Funds, Private Equity Funds and Other Investment Partnerships — Other Invested Assets

AIG initially estimates the fair value of investments in certain hedge funds, private equity funds and other investment partnerships by reference to the transaction price. Subsequently, AIG generally obtains the fair value of these investments from net asset value information provided by the general partner or manager of the investments, the financial statements of which are generally audited annually. AIG considers observable market data and performs diligence procedures in validating the appropriateness of using the net asset value as a fair value measurement.

Separate Account Assets

Separate account assets are composed primarily of registered and unregistered open-end mutual funds that generally trade daily and are measured at fair value in the manner discussed above for equity securities traded in active markets.

Other Assets and Liabilities Measured at Fair Value

Securities Purchased (Sold) under Agreements to Resell (Repurchase) — AIG estimates the fair value of receivables (payables) arising from securities purchased (sold) under agreements to resell (repurchase) using dealer quotations, discounted cash flow analyses and/or internal valuation models. This methodology considers such factors as the coupon rate, yield curves, prepayment rates and other relevant factors.

Short-term Investments — For short-term investments that are measured at fair value, AIG obtains fair value information from independent third-party valuation service providers. The determination of fair value for these instruments is consistent with the process for fixed maturity securities, as discussed above.

Loans Receivable — AIG estimates the fair value of mortgage and other loans receivable by using dealer quotations, discounted cash flow analyses and/or internal valuation models. The determination of fair value considers inputs such as interest rate, maturity, the borrower's creditworthiness, collateral, subordination, guarantees, past-due status, yield curves, credit curves, prepayment rates, market pricing for comparable loans and other relevant factors.

Freestanding Derivatives

Derivative assets and liabilities can be exchange-traded or traded over-the-counter (OTC). AIG generally values exchange-traded derivatives such as futures and options using quoted prices in active markets for identical derivatives at the balance sheet date.

OTC derivatives are valued using market transactions and other market evidence whenever possible, including market-based inputs to models, model calibration to market clearing transactions, broker or dealer quotations or alternative pricing sources with reasonable levels of price transparency. When models are used, the selection of a particular model to value an OTC derivative depends on the contractual terms of, and specific risks inherent in the instrument, as well as the availability of pricing information in the market. AIG generally uses similar models to value similar instruments. Valuation models require a variety of inputs, including contractual terms, market prices and rates, yield curves, credit curves, measures of volatility, prepayment rates and correlations of such inputs. For OTC derivatives that trade in liquid markets, such as generic forwards, swaps and options, model inputs can generally be corroborated by observable market data by correlation or other means, and model selection does not involve significant management judgment.

Certain OTC derivatives trade in less liquid markets with limited pricing information, and the determination of fair value for these derivatives is inherently more difficult. When AIG does not have corroborating market evidence to support significant model inputs and cannot verify the model to market transactions, the transaction price may provide the best estimate of fair value. Accordingly, when a pricing model is used to value such an instrument, the model is adjusted so the model value at inception equals the transaction price. AIG will update valuation inputs in these models only when corroborated by evidence such as similar market transactions, third party pricing services and/or broker or dealer quotations, or other empirical market data. When appropriate, valuations are adjusted for various factors such as liquidity, bid/offer spreads and credit considerations. Such adjustments are generally based on available market evidence. In the absence of such evidence, management's best estimate is used.

Embedded Policy Derivatives

The fair value of embedded policy derivatives contained in certain variable annuity and equity-indexed annuity and life contracts is measured based on actuarial and capital market assumptions related to projected cash flows over the expected lives of the contracts. These cash flow estimates primarily include benefits and related fees assessed, when applicable, and incorporate expectations about policyholder behavior. Estimates of future policyholder behavior are subjective and based primarily on AIG's historical experience. With respect to embedded policy derivatives in AIG's variable annuity contracts, because of the dynamic and complex nature of the expected cash flows, risk neutral valuations are used. Estimating the underlying cash flows for these products involves many estimates and judgments, including those regarding expected market rates of return, market volatility, correlations of market index returns to funds, fund performance, discount rates and policyholder behavior. With respect to embedded policy derivatives in AIG's equity-indexed annuity and life contracts, option pricing models are used to estimate fair value, taking into account assumptions for future equity index growth rates, volatility of the equity index, future interest rates, and determinations on adjusting the participation rate and the cap on equity indexed credited rates in light of market conditions and policyholder behavior assumptions. These methodologies incorporate an explicit risk margin to take into consideration market participant estimates of projected cash flows and policyholder behavior.

AIG also incorporates its own risk of non-performance in the valuation of the embedded policy derivatives associated with variable annuity and equity-indexed annuity and life contracts. Historically, the expected cash flows were discounted using the interest rate swap curve (swap curve), which is commonly viewed as being consistent with the credit spreads for highly-rated financial institutions (S&P AA-rated or above). A swap curve shows the fixed-rate leg of a plain vanilla swap against the floating LIBOR leg of a related tenor. The swap curve was adjusted, as necessary, for anomalies between the swap curve and the treasury yield curve. During the fourth quarter of 2010, AIG revised the non-performance risk adjustment to reflect a market participant's view of SunAmerica's claims paying ability. As a result, in 2010 AIG incorporated an additional spread to the swap curve used to value embedded policy derivatives, thereby reducing the fair value of the embedded derivative liabilities by $336 million, which is partially offset by $173 million of DAC amortization.

AIGFP's Super Senior Credit Default Swap Portfolio

AIGFP values AIGFP's CDS transactions written on the super senior risk layers of designated pools of debt securities or loans using internal valuation models, third-party price estimates and market indices. The principal market was determined to be the market in which super senior credit default swaps of this type and size would be transacted, or have been transacted, with the greatest volume or level of activity. AIG has determined that the principal market participants, therefore, would consist of other large financial institutions who participate in sophisticated over-the-counter derivatives markets. The specific valuation methodologies vary based on the nature of the referenced obligations and availability of market prices.

The valuation of the super senior credit derivatives is challenging given the limitation on the availability of market observable information due to the lack of trading and price transparency in certain structured finance markets. These market conditions have increased the reliance on management estimates and judgments in arriving at an estimate of fair value for financial reporting purposes. Further, disparities in the valuation methodologies employed by market participants and the varying judgments reached by such participants when assessing volatile markets have increased the likelihood that the various parties to these instruments may arrive at significantly different estimates as to their fair values.

AIG's valuation methodologies for the super senior credit default swap portfolio have evolved over time in response to market conditions and the availability of market observable information. AIG has sought to calibrate the methodologies to available market information and to review the assumptions of the methodologies on a regular basis.

Regulatory capital portfolio: In the case of credit default swaps written to facilitate regulatory capital relief, AIG estimates the fair value of these derivatives by considering observable market transactions. The transactions with the most observability are the early terminations of these transactions by counterparties. AIG continues to reassess the expected maturity of the portfolio. AIGFP has not been required to make any payments as part of terminations initiated by counterparties. The regulatory benefit of these transactions for AIGFP's financial institution counterparties is generally derived from Basel I. In December 2010, the Basel Committee on Banking Supervision finalized Basel III, which, when fully implemented, may reduce or eliminate the regulatory benefits to certain counterparties and thus my impact the period of time that such counterparties are expected to hold the positions. In assessing the fair value of the regulatory capital CDS transactions, AIG also considers other market data, to the extent relevant and available. For further discussion, see Note 12 herein.

Multi-sector CDO portfolios: AIG uses a modified version of the Binomial Expansion Technique (BET) model to value AIGFP's credit default swap portfolio written on super senior tranches of multi-sector collateralized debt obligations (CDOs) of ABS, including maturity-shortening puts that allow the holders of the securities issued by certain CDOs to treat the securities as short-term 2a-7 eligible investments under the Investment Company Act of 1940 (2a-7 Puts). The BET model was developed in 1996 by a major rating agency to generate expected loss estimates for CDO tranches and derive a credit rating for those tranches, and remains widely used.

AIG has adapted the BET model to estimate the price of the super senior risk layer or tranche of the CDO. AIG modified the BET model to imply default probabilities from market prices for the underlying securities and not from rating agency assumptions. To generate the estimate, the model uses the price estimates for the securities comprising the portfolio of a CDO as an input and converts those estimates to credit spreads over current LIBOR-based interest rates. These credit spreads are used to determine implied probabilities of default and expected losses on the underlying securities. This data is then aggregated and used to estimate the expected cash flows of the super senior tranche of the CDO.

Prices for the individual securities held by a CDO are obtained in most cases from the CDO collateral managers, to the extent available. CDO collateral managers provided market prices for 58.0 percent of the underlying securities used in the valuation at December 31, 2010. When a price for an individual security is not provided by a CDO collateral manager, AIG derives the price through a pricing matrix using prices from CDO collateral managers for similar securities. Matrix pricing is a mathematical technique used principally to value debt securities without relying exclusively on quoted prices for the specific securities, but rather by relying on the relationship of the security to other benchmark quoted securities. Substantially all of the CDO collateral managers who provided prices used dealer prices for all or part of the underlying securities, in some cases supplemented by third-party pricing services.

The BET model also uses diversity scores, weighted average lives, recovery rates and discount rates. AIG employs a Monte Carlo simulation to assist in quantifying the effect on the valuation of the CDO of the unique aspects of the CDO's structure such as triggers that divert cash flows to the most senior part of the capital structure. The Monte Carlo simulation is used to determine whether an underlying security defaults in a given simulation scenario and, if it does, the security's implied random default time and expected loss. This information is used to project cash flow streams and to determine the expected losses of the portfolio.

In addition to calculating an estimate of the fair value of the super senior CDO security referenced in the credit default swaps using its internal model, AIG also considers the price estimates for the super senior CDO securities provided by third parties, including counterparties to these transactions, to validate the results of the model and to determine the best available estimate of fair value. In determining the fair value of the super senior CDO security referenced in the credit default swaps, AIG uses a consistent process that considers all available pricing data points and eliminates the use of outlying data points. When pricing data points are within a reasonable range an averaging technique is applied.

Corporate debt/Collateralized loan obligation (CLO) portfolios: In the case of credit default swaps written on portfolios of investment-grade corporate debt, AIG uses a mathematical model that produces results that are closely aligned with prices received from third parties. This methodology is widely used by other market participants and uses the current market credit spreads of the names in the portfolios along with the base correlations implied by the current market prices of comparable tranches of the relevant market traded credit indices as inputs. One transaction, representing two percent of the total notional amount of the corporate arbitrage transactions, is valued using third party quotes given its unique attributes.

AIG estimates the fair value of its obligations resulting from credit default swaps written on CLOs to be equivalent to the par value less the current market value of the referenced obligation. Accordingly, the value is determined by obtaining third-party quotes on the underlying super senior tranches referenced under the credit default swap contract.

Policyholder Contract Deposits

Policyholder contract deposits accounted for at fair value are measured using an earnings approach by taking into consideration the following factors:

•

Current policyholder account values and related surrender charges;

•

The present value of estimated future cash inflows (policy fees) and outflows (benefits and maintenance expenses) associated with the product using risk neutral valuations, incorporating expectations about policyholder behavior, market returns and other factors; and

•

A risk margin that market participants would require for a market return and the uncertainty inherent in the model inputs.

The change in fair value of these policyholder contract deposits is recorded as Policyholder benefits and claims incurred in the Consolidated Statement of Income (Loss).

Securities and Spot Commodities Sold But Not Yet Purchased

Fair values for 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.

Other Long-Term Debt

When fair value accounting has been elected, the fair value of non-structured liabilities is generally determined by using market prices from exchange or dealer markets, when available, or discounting expected cash flows using the appropriate discount rate for the applicable maturity. Such instruments are generally classified in Level 2 of the fair value hierarchy as substantially all inputs are readily observable. AIG determines the fair value of structured liabilities and hybrid financial instruments (where performance is linked to structured interest rates, inflation or currency risks) using the appropriate derivative valuation methodology (described above) given the nature of the embedded risk profile. Such instruments are classified in Level 2 or Level 3 depending on the observability of significant inputs to the model. In addition, adjustments are made to the valuations of both non-structured and structured liabilities to reflect AIG's own credit-worthiness based on observable credit spreads of AIG.

Assets and Liabilities Measured at Fair Value on a Recurring Basis

The following table presents information about assets and liabilities measured at fair value on a recurring basis and indicates the level of the fair value measurement based on the levels of the inputs used:

At December 31, 2010 (in millions)			Level 1		Level 2		Level 3		Counterparty Netting^(a)			Cash Collateral^(b)			Total



Assets:
	Bonds available for sale:
		U.S. government and government sponsored entities	$	142	$	7,208	$	-	$	-		$	-		$	7,350
		Obligations of states, municipalities and Political subdivisions		4		46,007		609		-			-			46,620
		Non-U.S. governments		719		14,620		5		-			-			15,344
		Corporate debt		8		124,088		2,262		-			-			126,358
		RMBS		-		13,441		6,367		-			-			19,808
		CMBS		-		2,807		3,604		-			-			6,411
		CDO/ABS		-		2,170		4,241		-			-			6,411

Total bonds available for sale				873		210,341		17,088		-			-			228,302

	Bond trading securities:
		U.S. government and government sponsored entities		339		6,563		-		-			-			6,902
		Obligations of states, municipalities and Political subdivisions		-		316		-		-			-			316
		Non-U.S. governments		-		125		-		-			-			125
		Corporate debt		-		912		-		-			-			912
		RMBS		-		1,837		91		-			-			1,928
		CMBS		-		1,572		506		-			-			2,078
		CDO/ABS		-		4,490		9,431		-			-			13,921

Total bond trading securities				339		15,815		10,028		-			-			26,182

	Equity securities available for sale:
		Common stock		3,577		61		61		-			-			3,699
		Preferred stock		-		423		64		-			-			487
		Mutual funds		316		79		-		-			-			395

Total equity securities available for sale				3,893		563		125		-			-			4,581

	Equity securities trading:
		Common stock		6,545		106		1		-			-			6,652

Total equity securities trading				6,545		106		1		-			-			6,652

	Mortgage and other loans receivable			-		143		-		-			-			143
	Other invested assets^(c)			12,281		1,661		7,414		-			-			21,356
	Unrealized gain on swaps, options and forward transactions:
		Interest rate contracts		1		13,146		1,057		-			-			14,204
		Foreign exchange contracts		14		172		16		-			-			202
		Equity contracts		61		233		65		-			-			359
		Commodity contracts		-		69		23		-			-			92
		Credit contracts		-		2		377		-			-			379
		Other contracts		8		923		144		-			-			1,075
		Counterparty netting and cash collateral		-		-		-		(6,298	)		(4,096	)		(10,394	)

Total unrealized gain on swaps, options and forward transactions				84		14,545		1,682		(6,298	)		(4,096	)		5,917

	Securities purchased under agreements to resell			-		1,553		-		-			-			1,553
	Short-term investments			5,401		16,906		-		-			-			22,307
	Separate account assets			51,607		2,825		-		-			-			54,432
	Other assets			-		14		-		-			-			14

Total			$	81,023	$	264,472	$	36,338	$	(6,298	)	$	(4,096	)	$	371,439

At December 31, 2010 (in millions)			Level 1		Level 2		Level 3		Counterparty Netting^(a)			Cash Collateral^(b)			Total



Liabilities:
	Policyholder contract deposits		$	-	$	-	$	445	$	-		$	-		$	445
	Securities sold under agreements to repurchase			-		2,119		-		-			-			2,119
	Securities and spot commodities sold but not yet purchased			391		94		-		-			-			485
	Unrealized loss on swaps, options and forward transactions:
		Interest rate contracts		-		9,387		325		-			-			9,712
		Foreign exchange contracts		14		324		-		-			-			338
		Equity contracts		-		286		43		-			-			329
		Commodity contracts		-		68		-		-			-			68
		Credit contracts^(d)		-		5		4,175		-			-			4,180
		Other contracts		-		52		256		-			-			308
		Counterparty netting and cash collateral		-		-		-		(6,298	)		(2,902	)		(9,200	)

Total unrealized loss on swaps, options and forward transactions				14		10,122		4,799		(6,298	)		(2,902	)		5,735

	Trust deposits and deposits due to banks and other depositors			-		15		-		-			-			15
	Other long-term debt			-		11,161		982		-			-			12,143

Total			$	405	$	23,511	$	6,226	$	(6,298	)	$	(2,902	)	$	20,942

At December 31, 2009 (in millions)			Level 1		Level 2		Level 3		Counterparty Netting^(a)			Cash Collateral^(b)			Total



Assets:
	Bonds available for sale:
		U.S. government and government sponsored entities	$	146	$	5,077	$	-	$	-		$	-		$	5,223
		Obligations of states, municipalities and Political subdivisions		219		53,270		613		-			-			54,102
		Non-U.S. governments		312		64,519		753		-			-			65,584
		Corporate debt		10		187,337		4,791		-			-			192,138
		RMBS		-		21,670		6,654		-			-			28,324
		CMBS		-		8,350		4,939		-			-			13,289
		CDO/ABS		-		2,167		4,724		-			-			6,891

Total bonds available for sale				687		342,390		22,474		-			-			365,551

	Bond trading securities:
		U.S. government and government sponsored entities		394		6,317		16		-			-			6,727
		Obligations of states, municipalities and Political subdivisions		-		371		-		-			-			371
		Non-U.S. governments		2		1,363		56		-			-			1,421
		Corporate debt		-		5,205		121		-			-			5,326
		RMBS		-		3,671		4		-			-			3,675
		CMBS		-		2,152		325		-			-			2,477
		CDO/ABS		-		4,381		6,865		-			-			11,246

Total bond trading securities				396		23,460		7,387		-			-			31,243

	Equity securities available for sale:
		Common stock		7,254		9		35		-			-			7,298
		Preferred stock		-		760		54		-			-			814
		Mutual funds		1,348		56		6		-			-			1,410

Total equity securities available for sale				8,602		825		95		-			-			9,522

	Equity securities trading:
		Common stock		1,254		104		1		-			-			1,359
		Mutual funds		6,460		492		7		-			-			6,959

Total equity securities trading				7,714		596		8		-			-			8,318

	Mortgage and other loans receivable			-		119		-		-			-			119
	Other invested assets^(c)			3,322		8,656		6,910		-			-			18,888
	Unrealized gain on swaps, options and forward transactions			123		32,617		1,761		(19,054	)		(6,317	)		9,130
	Securities purchased under agreements to resell			-		2,154		-		-			-			2,154
	Short-term investments			1,898		22,077		-		-			-			23,975
	Separate account assets			56,165		1,984		1		-			-			58,150
	Other assets			-		18		270		-			-			288

Total			$	78,907	$	434,896	$	38,906	$	(19,054	)	$	(6,317	)	$	527,338

Liabilities:
	Policyholder contract deposits		$	-	$	-	$	5,214	$	-		$	-		$	5,214
	Securities sold under agreements to repurchase			-		3,221		-		-			-			3,221
	Securities and spot commodities sold but not yet purchased			159		871		-		-			-			1,030
	Unrealized loss on swaps, options and forward transactions^(d)			8		24,789		7,826		(19,054	)		(8,166	)		5,403
	Trust deposits and deposits due to banks and other depositors			-		15		-		-			-			15
	Federal Reserve Bank of New York Commercial Paper Funding
		Facility		-		2,742		-		-			-			2,742
	Other long-term debt			-		12,314		881		-			-			13,195

Total			$	167	$	43,952	$	13,921	$	(19,054	)	$	(8,166	)	$	30,820

(a): Represents netting of derivative exposures covered by a qualifying master netting agreement.

(b): Represents cash collateral posted and received. Securities collateral posted for derivative transactions that is reflected in Fixed maturity securities in the Consolidated Balance Sheet, and collateral received, not reflected in the Consolidated Balance Sheet, were $1.4 billion and $109 million, respectively, at December 31, 2010 and $1.6 billion and $289 million, respectively, at December 31, 2009.
(c): Approximately 5 percent and 6 percent of the fair value of the total assets recorded as Level 3 relates to various private equity, real estate, hedge fund and fund-of-funds investments that are consolidated by AIG at both December 31, 2010 and 2009, respectively. AIG's ownership in these funds represented 68.6 percent, or $1.3 billion, of Level 3 assets at December 31, 2010 and 71.1 percent, or $1.6 billion, of Level 3 assets at December 31, 2009. For December 31, 2010, includes AIG's remaining 33 percent interest in AIA classified as Level 1.
(d): Included in Level 3 is the fair value derivative liability of $3.7 billion and $4.8 billion at December 31, 2010 and 2009, respectively, on the Capital Markets' super senior credit default swap portfolio.

Transfers of Level 1 and Level 2 Assets and Liabilities

AIG's policy is to record transfers of assets and liabilities between Level 1 and Level 2 at their fair values as of the end of each reporting period, consistent with the date of the determination of fair value. Assets are transferred out of Level 1 when they are no longer transacted with sufficient frequency and volume in an active market. During the year ended December 31, 2010, AIG transferred certain assets from Level 1 to Level 2, including approximately $477 million of investments in U.S. government and government sponsored entities. Conversely, assets are transferred from Level 2 to Level 1 when transaction volume and frequency are indicative of an active market. AIG had no significant transfers from Level 2 to Level 1 during the twelve months ended December 31, 2010.

Changes in Level 3 recurring fair value measurements

The following tables present changes during 2010 and 2009 in Level 3 assets and liabilities measured at fair value on a recurring basis, and the realized and unrealized gains (losses) recorded in the Consolidated Statement of Income (Loss), during 2010 and 2009 related to the Level 3 assets and liabilities that remained on the Consolidated Balance Sheet at December 31, 2010 and 2009:

December 31, 2010 (in millions)			Balance Beginning of year^(a)			Net Realized and Unrealized Gains (Losses) Included in Income^(b)			Accumulated Other Comprehensive Income		Purchases, Sales, Issuances and Settlements-Net^(c)			Net Transfers			Activity of Discontinued Operations			Reclassified to Assets of Businesses Held for Sale^(d)			Balance End of year			Changes in Unrealized Gains (Losses) on Instruments Held at End of year



Assets:
	Bonds available for sale:
		Obligations of states, municipalities and political subdivisions	$	613		$	(59	)	$	5	$	(121	)	$	171		$	7		$	(7	)	$	609		$	-
		Non-U.S. governments		753			-			3		29			(39	)		(19	)		(722	)		5			-
		Corporate debt		4,791			(44	)		122		(322	)		(1,813	)		(181	)		(291	)		2,262			-
		RMBS		6,654			(700	)		1,847		(2,497	)		1,106			134			(177	)		6,367			-
		CMBS		4,939			(801	)		2,055		(668	)		146			783			(2,850	)		3,604			-
		CDO/ABS		4,724			110			605		(667	)		(19	)		(152	)		(360	)		4,241			-

Total bonds available for sale				22,474			(1,494	)		4,637		(4,246	)		(448	)		572			(4,407	)		17,088			-

	Bond trading securities:
		U.S. government and government sponsored entities		16			-			-		-			-			(16	)		-			-			-
		Non-U.S. governments		56			-			-		(32	)		(11	)		(6	)		(7	)		-			-
		Corporate debt		121			(3	)		-		(7	)		-			(1	)		(110	)		-			(6	)
		RMBS		4			(24	)		-		(7	)		118			69			(69	)		91			(19	)
		CMBS		325			50			-		19			210			(14	)		(84	)		506			146
		CDO/ABS		6,865			2,876			-		(144	)		4			29			(199	)		9,431			1,407

Total bond trading securities				7,387			2,899			-		(171	)		321			61			(469	)		10,028			1,528

	Equity securities available for sale:
		Common stock		35			(2	)		38		4			(5	)		-			(9	)		61			-
		Preferred stock		54			(5	)		6		8			1			-			-			64			-
		Mutual funds		6			-			3		11			(2	)		-			(18	)		-			-

Total equity securities available for sale				95			(7	)		47		23			(6	)		-			(27	)		125			-

	Equity securities trading:
		Common stock		1			-			-		-			-			-			-			1			-
		Mutual funds		7			-			-		1			-			(2	)		(6	)		-			-

Total equity securities trading				8			-			-		1			-			(2	)		(6	)		1			-

	Other invested assets			6,910			355			149		(1,075	)		1,474			346			(745	)		7,414			(516	)
	Other assets			270			-			-		(270	)		-			-			-			-			-
	Separate account assets			1			-			-		-			-			-			(1	)		-			-

Total			$	37,145		$	1,753		$	4,833	$	(5,738	)	$	1,341		$	977		$	(5,655	)	$	34,656		$	1,012

Liabilities:
	Policyholder contract deposits		$	(5,214	)	$	175		$	-	$	(544	)	$	-		$	(137	)	$	5,275		$	(445	)	$	(609	)
	Unrealized loss on swaps, options and forward transactions, net:
		Interest rate contracts		(1,469	)		(20	)		-		1,230			991			-			-			732			(61	)
		Foreign exchange contracts		29			7			-		(2	)		-			1			(19	)		16			9
		Equity contracts		74			(27	)		-		(44	)		20			-			(1	)		22			(4	)
		Commodity contracts		22			3			-		(2	)		-			-			-			23			3
		Credit contracts		(4,545	)		880			-		(131	)		(2	)		-			-			(3,798	)		993
		Other contracts		(176	)		(61	)		-		69			49			(3	)		10			(112	)		(86	)

Total unrealized loss on swaps, options and forward transactions, net				(6,065	)		782			-		1,120			1,058			(2	)		(10	)		(3,117	)		854

	Other long-term debt			(881	)		(237	)		-		743			(607	)		-			-			(982	)		(275	)

Total			$	(12,160	)	$	720		$	-	$	1,319		$	451		$	(139	)	$	5,265		$	(4,544	)	$	(30	)

December 31, 2009 (in millions)			Balance Beginning of year^(a)			Net Realized and Unrealized Gains (Losses) Included in Income^(b)			Accumulated Other Comprehensive Income			Purchases, Sales, Issuances and Settlements-Net^(c)			Net Transfers			Activity of Discontinued Operations			Reclassified to Assets of Businesses Held for Sale^(d)			Balance End of year			Changes in Unrealized Gains (Losses) on Instruments Held at End of year



Assets:
	Bonds available for sale:
		U.S. government and government sponsored entities	$	2		$	-		$	(2	)	$	-		$	-		$	-		$	-		$	-		$	-
		Obligations of states, municipalities and political subdivisions		861			(12	)		(55	)		97			(278	)		-			-			613			-
		Non-U.S. governments		601			2			(1	)		(3	)		(66	)		220			-			753			-
		Corporate debt		6,103			(27	)		1,097			(1,202	)		(996	)		(178	)		(6	)		4,791			-
		RMBS		6,156			(1,134	)		1,503			(494	)		622			1			-			6,654			-
		CMBS		1,663			(302	)		519			(328	)		1,563			1,824			-			4,939			-
		CDO/ABS		3,440			(650	)		1,752			(448	)		620			43			(33	)		4,724			-

Total bonds available for sale				18,826			(2,123	)		4,813			(2,378	)		1,465			1,910			(39	)		22,474			-

	Bond trading securities:
		U.S. government and government sponsored entities		17			-			-			-			-			(1	)		-			16			-
		Non-U.S. governments		-			-			-			1			49			6			-			56			-
		Corporate debt		261			12			(5	)		(65	)		6			(24	)		(64	)		121			37
		RMBS		8			(3	)		-			(1	)		-			-			-			4			15
		CMBS		45			(98	)		-			58			222			98			-			325			(66	)
		CDO/ABS		6,656			850			-			(641	)		-			-			-			6,865			1,844

Total bond trading securities				6,987			761			(5	)		(648	)		277			79			(64	)		7,387			1,830

	Equity securities available for sale:
		Common stock		55			(24	)		7			5			(8	)		-			-			35			-
		Preferred stock		54			(11	)		6			1			4			-			-			54			-
		Mutual funds		2			-			4			-			-			-			-			6			-

Total equity securities available for sale				111			(35	)		17			6			(4	)		-			-			95			-

	Equity securities trading:
		Common stock		1			-			-			-			-			-			-			1			-
		Mutual funds		2			-			-			-			-			5			-			7			-

Total equity securities trading				3			-			-			-			-			5			-			8			-

	Other invested assets			11,168			(2,051	)		(1,497	)		790			119			(43	)		(1,576	)		6,910			(1,737	)
	Short-term investments			-			-			-			38			(38	)		-			-			-			-
	Other assets			325			(23	)		-			(32	)		-			-			-			270			(23	)
	Separate account assets			830			-			(1	)		-			-			95			(923	)		1			-

Total			$	38,250		$	(3,471	)	$	3,327		$	(2,224	)	$	1,819		$	2,046		$	(2,602	)	$	37,145		$	70

Liabilities:
	Policyholder contract deposits		$	(5,458	)	$	955		$	1		$	(457	)	$	-		$	(255	)	$	-		$	(5,214	)	$	(523	)
	Securities sold under agreements to repurchase			(85	)		4			-			81			-			-			-			-			-
	Unrealized loss on swaps, options and forward transactions, net			(10,570	)		1,618			(4	)		3,460			(583	)		14			-			(6,065	)		5,223
	Other long-term debt			(1,147	)		(3	)		-			186			83			-			-			(881	)		82

Total			$	(17,260	)	$	2,574		$	(3	)	$	3,270		$	(500	)	$	(241	)	$	-		$	(12,160	)	$	4,782

(a): Total Level 3 derivative exposures have been netted on these tables for presentation purposes only.

(b): Net realized and unrealized gains and losses related to Level 3 items shown above are reported in the Consolidated Statement of Income (Loss) primarily as follows:

Major Category of Assets/Liabilities		Consolidated Statement of Income (Loss) Line Items


Bonds available for sale		• Net realized capital losses

Bond trading securities		• Net investment income
		• Other income

Other invested assets		• Net realized capital losses
		• Other income

Policyholder contract deposits		• Policyholder benefits and claims incurred
		• Net realized capital losses

Unrealized loss on swaps, options and forward transactions, net		• Unrealized market valuation gains (losses) on Capital Markets super senior credit default swap portfolio
		• Net realized capital losses
		• Other income

(c): Included within purchases, sales, issuances and settlements — net is approximately $210 million transferred from bonds available for sale to bond trading securities for the 12 months ended December 31, 2010.
(d): Reflects the deconsolidation of AIA and sales of ALICO and AGF in 2010.

Both observable and unobservable inputs may be used to determine the fair values of positions classified in Level 3 in the tables above. As a result, the unrealized gains (losses) on instruments held at December 31, 2010 and 2009 may include changes in fair value that were attributable to both observable (e.g., changes in market interest rates) and unobservable inputs (e.g., changes in unobservable long-dated volatilities).

Transfers of Level 3 Assets and Liabilities

AIG's policy is to transfer assets and liabilities into Level 3 when a significant input cannot be corroborated with market observable data. This may include circumstances in which market activity has dramatically decreased and transparency to underlying inputs cannot be observed, current prices are not available and substantial price variances in quotations among market participants exist.

In certain cases, the inputs used to measure the fair value may fall into different levels of the fair value hierarchy. In such cases, the level in the fair value hierarchy within which the fair value measurement in its entirety falls is determined based on the lowest level input that is significant to the fair value measurement. AIG's assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment. In making the assessment, AIG considers factors specific to the asset or liability.

Transfers in 2010 are comprised of gross transfers into Level 3 assets and liabilities of $7.8 billion and gross transfers out of Level 3 assets and liabilities of $6.9 billion. AIG's policy is to record transfers of assets and liabilities into or out of Level 3 at their fair values as of the end of each reporting period, consistent with the date of the determination of fair value. As a result, the Net realized and unrealized gains (losses) included in income or other comprehensive income and as shown in the table above excludes $86 million of net losses related to assets and liabilities transferred into Level 3 during 2010, and includes $172 million of net gains related to assets and liabilities transferred out of Level 3 during 2010.

The following table provides the components of the transfers of Level 3 assets and liabilities on a gross basis:

December 31, 2010 (in millions)			Gross Transfers in			Gross Transfers (out)			Net transfers In (out)



Assets:
	Obligations of states, municipalities and political subdivisions		$	358		$	(187	)	$	171
	Non U.S. governments			9			(59	)		(50	)
	Corporate debt			1,389			(3,202	)		(1,813	)
	RMBS			1,486			(262	)		1,224
	CMBS			728			(372	)		356
	CDO/ABS			735			(750	)		(15	)
	Equity securities			13			(19	)		(6	)
	Other invested assets			2,284			(810	)		1,474

Total assets			$	7,002		$	(5,661	)	$	1,341

Liabilities:
Unrealized loss on swaps, options, and forward transactions
		Interest rate contracts	$	(11	)	$	1,002		$	991
		Foreign exchange contracts		(1	)		1			-
		Equity contracts		(86	)		106			20
		Credit contracts		(2	)		-			(2	)
		Other contracts		-			49			49

	Total unrealized loss on swaps, options and forward transactions			(100	)		1,158			1,058
	Other long-term debt			(705	)		98			(607	)

Total liabilities			$	(805	)	$	1,256		$	451

Transfers of Level 3 Assets

During the year ended December 31, 2010, AIG transferred into Level 3 approximately $7.0 billion of assets consisting of certain ABS, CMBS and RMBS, as well as private placement corporate debt, certain municipal bonds related to affordable housing partnerships and investment partnerships. The transfers into Level 3 related to investments in certain ABS, RMBS and CMBS were due to a decrease in market transparency, downward credit migration and an overall increase in price disparity for certain individual security types. Transfers into Level 3 for private placement corporate debt and certain ABS were primarily the result of AIG overriding matrix pricing information downward to better reflect the additional risk premium associated with those securities that AIG believes was not captured in the matrix. Certain municipal bonds were transferred into Level 3 based on limited market activity for the particular issuances and related limitations on observable inputs for their valuation. Investment partnerships transferred into Level 3 primarily consisted of certain hedge funds with limited market activity due to fund-imposed redemption restrictions.

Assets are transferred out of Level 3 when circumstances change such that significant inputs can be corroborated with market observable data. This may be due to a significant increase in market activity for the asset, a specific event, one or more significant input(s) becoming observable or when a long-term interest rate significant to a valuation becomes short-term and thus observable. During the year ended December 31, 2010, AIG transferred approximately $5.7 billion of assets out of Level 3. These transfers out of Level 3 are primarily related to investments in private placement corporate debt, investments in certain ABS, RMBS, CMBS and CDOs and certain investment partnerships. Transfers out of Level 3 for private placement corporate debt and for ABS were primarily the result of AIG using observable pricing information or a third party pricing quote that appropriately reflects the fair value of those securities, without the need for adjustment based on AIG's own assumptions regarding the characteristics of a specific security or the current liquidity in the market. Transfers out of Level 3 for RMBS investments were primarily due to increased usage of pricing from valuation service providers that were reflective of market activity, where previously an internally adjusted price had been used. Similarly, transfers out of Level 3 for CMBS and CDO investments backed by corporate credits were primarily the result of AIG using observable pricing information or a third party pricing quote that appropriately reflects the fair value of those securities, without the need for adjustment based on AIG's own assumptions regarding the characteristics of a specific security or the current liquidity in the market. Transfers out of Level 3 for both the CMBS and CDO investments were primarily due to increased observations of market transactions and price information for those securities. Certain investment partnerships were transferred out of Level 3 primarily due to the availability of information related to the underlying assets of these funds.

Transfers of Level 3 Liabilities

During the year ended December 31, 2010, AIG transferred into Level 3 $805 million of liabilities, primarily related to term notes and hybrid term notes, as well as certain derivatives. Term notes and hybrid term notes were transferred into Level 3 primarily due to an unobservable credit linked component constituting a significant amount of the valuations. As AIG provides net presentation of carrying values for its derivative positions in the table above, transfers out of Level 3 derivatives, which totaled approximately $1.2 billion primarily relate to certain derivative assets transferred into Level 3 because of the lack of observable inputs on certain interest rate swaps. Other transfers out of Level 3 liabilities were due to movement in market variables.

AIG uses various hedging techniques to manage risks associated with certain positions, including those classified within Level 3. Such techniques may include the purchase or sale of financial instruments that are classified within Level 1 and/or Level 2. As a result, the realized and unrealized gains (losses) for assets and liabilities classified within Level 3 presented in the table above do not reflect the related realized or unrealized gains (losses) on hedging instruments that are classified within Level 1 and/or Level 2.

Investments in certain entities carried at fair value using net asset value per share

The following table includes information related to AIG's investments in certain other invested assets, including private equity funds, hedge funds and other alternative investments that calculate net asset value per share (or its equivalent). For these investments, which are measured at fair value on a recurring or non-recurring basis, AIG uses the net asset value per share as a practical expedient for fair value.

			*December 31, 2010^(a)***					December 31, 2009


(in millions)		Investment Category Includes	Fair Value Using Net Asset Value			Unfunded Commitments		Fair Value Using Net Asset Value			Unfunded Commitments

Investment Category
Private equity funds:
	Leveraged buyout	Debt and/or equity investments made as part of a transaction in which assets of mature companies are acquired from the current shareholders, typically with the use of financial leverage.	$	3,137		$	1,151	$	3,166		$	1,553
	Non-U.S.	Investments that focus primarily on Asian and European based buyouts, expansion capital, special situations, turnarounds, venture capital, mezzanine and distressed opportunities strategies.		172			67		543			103
	Venture capital	Early-stage, high-potential, growth companies expected to generate a return through an eventual realization event, such as an initial public offering or sale of the company.		325			42		427			48
	Fund of funds	Funds that invest in other funds, which invest in various diversified strategies		-			-		334			-
	Distressed	Securities of companies that are already in default, under bankruptcy protection, or troubled.		258			67		238			91
	Other	Real estate, energy, multi-strategy, mezzanine, and industry-focused strategies.		373			147		336			182

Total private equity funds				4,265			1,474		5,044			1,977

Hedge funds:
	Event-driven	Securities of companies undergoing material structural changes, including mergers, acquisitions and other reorganizations.		1,310			2		1,426			-
	Long-short	Securities that the manager believes are undervalued, with corresponding short positions to hedge market risk.		1,038			-		955			-
	Relative value	Funds that seek to benefit from market inefficiencies and value discrepancies between related investments.		230			-		286			-
	Distressed	Securities of companies that are already in default, under bankruptcy protection or troubled.		369			20		272			-
	Other	Non-U.S. companies, futures and commodities, macro and multi-strategy and industry-focused strategies.		708			-		785			-

Total hedge funds				3,655			22		3,724			-

Total			$	7,920	^(b)	$	1,496	$	8,768	^(b)	$	1,977

(a): Because of the sale of the investment advisory business in 2010, certain partnerships and hedge funds are no longer carried at fair value and are not included in this table.
(b): Includes investments of entities classified as held for sale of $415 million and $1.1 billion at December 31, 2010 and December 31, 2009, respectively.

At December 31, 2010, private equity fund investments included above are not redeemable during the lives of the funds and have expected remaining lives that extend in some cases more than 10 years. At that date, 35 percent of the total above had expected remaining lives of less than three years, 41 percent between 3 and 7 years and 24 percent between 7 and 10 years. Expected lives are based upon legal maturity, which can be extended at the fund manager's discretion, typically in one-year increments.

At December 31, 2010, hedge fund investments included above are redeemable monthly (19 percent), quarterly (50 percent), semi-annually (4 percent) and annually (27 percent), with redemption notices ranging from 1 day to 180 days. More than 85 percent require redemption notices of less than 90 days. Investments representing approximately 66 percent of the value of the hedge fund investments cannot be redeemed, either in whole or in part, because the investments include various restrictions. The majority of these restrictions were put in place in 2008 and do not have stated end dates. The remaining restrictions, which have pre-defined end dates, are generally expected to be lifted by the end of 2012. The partial restrictions relate to certain hedge funds that hold at least one investment that the fund manager deems to be illiquid. In order to treat investors fairly and to accommodate subsequent subscription and redemption requests, the fund manager isolates these illiquid assets from the rest of the fund until the assets become liquid.

Fair Value Measurements on a Non-Recurring Basis

AIG also measures the fair value of certain assets on a non-recurring basis, generally quarterly, annually or when events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable. These assets include cost and equity-method investments, life settlement contracts, flight equipment primarily under operating leases, collateral securing foreclosed loans and real estate and other fixed assets, goodwill and other intangible assets. AIG uses a variety of techniques to measure the fair value of these assets when appropriate, as described below:

•

Cost and Equity-Method Investments:  When AIG determines that the carrying value of these assets may not be recoverable, AIG records the assets at fair value with the loss recognized in earnings. In such cases, AIG measures the fair value of these assets using the techniques discussed in Valuation Methodologies, above, for Other invested assets.

•

Life Settlement Contracts:  AIG measures the fair value of individual life settlement contracts (which are included in other invested assets) whenever the carrying value plus the undiscounted future costs that are expected to be incurred to keep the life settlement contract in force exceed the expected proceeds from the contract. In those situations, the fair value is determined on a discounted cash flow basis, incorporating current life expectancy assumptions. The discount rate incorporates current information about market interest rates, the credit exposure to the insurance company that issued the life settlement contract and AIG's estimate of the risk margin an investor in the contracts would require.

•

Flight Equipment Primarily Under Operating Leases:  When AIG determines that the carrying value of its commercial aircraft may not be recoverable, AIG records the aircraft at fair value with the loss recognized in earnings. AIG measures the fair value of its commercial aircraft using an earnings approach based on the present value of all cash flows from existing and projected lease payments (based on historical experience and current expectations regarding market participants), including net contingent rentals for the period extending to the end of the aircraft's economic life in its highest and best use configuration, plus its disposition value.

•

Collateral Securing Foreclosed Loans and Real Estate and Other Fixed Assets:  When AIG takes collateral in connection with foreclosed loans, AIG generally bases its estimate of fair value on the price that would be received in a current transaction to sell the asset by itself, by reference to observable transactions for similar assets.

•

Goodwill:  AIG tests goodwill for impairment annually or more frequently whenever events or changes in circumstances indicate the carrying amount of goodwill may not be recoverable. When AIG determines that goodwill may be impaired, AIG uses techniques including market-based earning multiples of peer companies, discounted expected future cash flows, appraisals, or, in the case of reporting units being considered for sale, third-party indications of fair value of the reporting unit, if available, to determine the amount of any impairment.

•

Long-Lived Assets:  AIG tests its long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of a long-lived asset may not be recoverable. AIG measures the fair value of long-lived assets based on an in-use premise that considers the same factors used to estimate the fair value of its real estate and other fixed assets under an in-use premise.

•

Finance Receivables:

•

Originated as held for sale — AIG determines the fair value of finance receivables originated as held for sale by reference to available market indicators such as current investor yield requirements, outstanding forward sale commitments and negotiations with prospective purchasers, if any.

•

Originated as held for investment — AIG determines the fair value of finance receivables originated as held for investment based on negotiations with prospective purchasers, if any, or by using projected cash flows discounted at the weighted average interest rates offered in the marketplace for similar finance receivables. Cash flows are projected based on contractual payment terms, adjusted for delinquencies and estimates of prepayments and credit-related losses.

•

Businesses Held for Sale:  When AIG determines that a business qualifies as held for sale and AIG's carrying amount is greater than the expected sale price less cost to sell, AIG records an impairment loss for the difference.

See Notes 2(d), (f), (g) and (h) herein for additional information about how AIG tests various asset classes for impairment.

The following table presents assets (excluding discontinued operations) measured at fair value on a non-recurring basis on which impairment charges were recorded, and the related impairment charges:

		Assets at Fair Value								Impairment Charges


		Non-Recurring Basis								December 31,
(in millions)		Level 1		Level 2		Level 3		Total		2010		2009		2008

At December 31, 2010
	Goodwill	$	-	$	-	$	-	$	-	$	-	$	693	$	3,744
	Investment real estate		-		-		1,588		1,588		604		1,198		242
	Other investments		-		4		2,388		2,392		323		908		237
	Aircraft		-		-		4,224		4,224		1,614		51		-
	Other assets		-		-		2		2		5		225		34

Total		$	-	$	4	$	8,202	$	8,206	$	2,546	$	3,075	$	4,257

At December 31, 2009
	Investment real estate	$	-	$	-	$	3,148	$	3,148
	Other investments		99		-		1,005		1,104
	Aircraft		-		-		62		62
	Other assets		-		85		54		139

Total		$	99	$	85	$	4,269	$	4,453

Impairment charges shown above for the 12 months ended December 31, 2010 exclude a $4.6 billion of goodwill impairment charges associated with the sales of ALICO and AIG Star and AIG Edison, all of which are reported in discontinued operations.

During 2009, AIG recognized goodwill impairment charges primarily in the Institutional Asset Management business. These impairment charges related to a significant decline in certain consolidated warehoused investments as well as the consideration of recent transaction activity. AIG also recognized impairment charges related to certain investment real estate, proprietary real estate, private equity investments and other long-lived assets.

AIG recognized goodwill impairment charges of $3.7 billion in 2008, which were primarily related to Chartis, SunAmerica, Consumer Finance and the Capital Markets businesses. The remaining impairment charges related to certain investment real estate and other long-lived assets that were included in other income. The fair value disclosed in the table above is unadjusted for transaction costs. The amounts recorded on the Consolidated Balance Sheet are net of transaction costs.

Fair Value Option

Under the fair value option, AIG may elect to measure at fair value financial assets and financial liabilities that are not otherwise required to be carried at fair value. Subsequent changes in fair value for designated items are reported in earnings.

The following table presents the gains or losses recorded related to the eligible instruments for which AIG elected the fair value option:

		Gain (Loss)


Years Ended December 31, (in millions)		Gain (Loss)
Years Ended December 31, (in millions)		2010			2009			2008

Assets:
	Mortgage and other loans receivable	$	53		$	(6	)	$	(82	)
	Trading securities		2,060			2,513			(8,663	)
	Trading – Maiden Lane II		513			(25	)		(211	)
	Trading – Maiden Lane III		1,792			419			(900	)
	Securities purchased under agreements to resell		1			(8	)		400
	Retained interest in AIA^(a)		(638	)		-			-
	Other invested assets		(43	)		(32	)		(39	)
	Short-term investments		3			-			68
	Other assets		-			-			1

Liabilities:
	Policyholder contract deposits^(b)		(320	)		(1,121	)		1,304
	Securities sold under agreements to repurchase		14			(73	)		(125	)
	Securities and spot commodities sold but not yet purchased		(21	)		(148	)		(176	)
	Debt		(1,285	)		2,447			(4,041	)
	Other liabilities		(1	)		(173	)		1,408

Total gain (loss)^(c)		$	2,128		$	3,793		$	(11,056	)

(a): Represents change in fair value measured from the closing sale price on the October 29, 2010 initial date of trading.
(b): AIG elected to apply the fair value option to a certain investment-linked life insurance product sold principally in Asia, classified within policyholder contract deposits in the Consolidated Balance Sheet. AIG elected the fair value option for these liabilities to more closely align its accounting with the economics of its transactions. The election more effectively aligns changes in the fair value of assets with a commensurate change in the fair value of policyholders' liabilities.
(c): Excludes businesses held for sale in the Consolidated Balance Sheet. Also excluded from the table above were gains of $4.9 billion and $3.8 billion and losses of $32.4 billion for the years ended December 31, 2010, 2009 and 2008, respectively, that were primarily due to changes in the fair value of derivatives, trading securities and certain other invested assets for which the fair value option was not elected. Included in these amounts were unrealized market valuation gains of $598 million, gains of $1.4 billion and losses of $28.6 billion for 2010, 2009 and 2008, respectively, related to Capital Markets' super senior credit default swap portfolio.

Interest income and expense and dividend income on assets and liabilities elected under the fair value option are recognized and classified in the Consolidated Statement of Income (Loss) depending on the nature of the instrument and related market conventions. For Direct Investment business-related activity, interest, dividend income and interest expense are included in Other income. Otherwise, interest and dividend income are included in Net investment income in the Consolidated Statement of Income (Loss). Gains and losses on AIG's Maiden Lane Interests are recorded in Net investment income. See Note 2(a) herein for additional information about AIG's policies for recognition, measurement, and disclosure of interest and dividend income and interest expense.

During 2010, 2009 and 2008, AIG recognized losses of $467 million and $2 million and gains of $84 million, respectively, attributable to the observable effect of changes in credit spreads on AIG's own liabilities for which the fair value option was elected. AIG calculates the effect of these credit spread changes using discounted cash flow techniques that incorporate current market interest rates, AIG's observable credit spreads on these liabilities and other factors that mitigate the risk of nonperformance such as cash collateral posted.

The following table presents the difference between fair values and the aggregate contractual principal amounts of mortgage and other loans receivable and long-term borrowings for which the fair value option was elected:

		At December 31, 2010							At December 31, 2009


(in millions)		Fair Value		Outstanding Principal Amount		Difference			Fair Value		Outstanding Principal Amount		Difference

Assets:
	Mortgage and other loans receivable	$	143	$	203	$	(60	)	$	119	$	253	$	(134	)
Liabilities:
	Long-term debt	$	10,778	$	8,977	$	1,801		$	11,308	$	10,111	$	1,197

At December 31, 2010 and 2009 there were no significant mortgage or other loans receivable for which the fair value option was elected that were 90 days or more past due and in non-accrual status.

Fair Value Information about Financial Instruments Not Measured at Fair Value

Information regarding the estimation of fair value for financial instruments not carried at fair value (excluding insurance contracts and lease contracts) is discussed below:

•

Mortgage and other loans receivable:  Fair values of loans on real estate and collateral loans were estimated for disclosure purposes using discounted cash flow calculations based upon discount rates that AIG believes market participants would use in determining the price that they would pay for such assets. For certain loans, AIG's current incremental lending rates for similar type loans is used as the discount rate, as it is believed that this rate approximates the rates that market participants would use. The fair values of policy loans were not estimated as AIG believes it would have to expend excessive costs for the benefits derived.

•

Finance receivables:  Fair values of net finance receivables, less allowance for finance receivable losses, were estimated for disclosure purposes using projected cash flows, computed by category of finance receivable, discounted at the weighted average interest rates offered for similar finance receivables at the balance sheet date. Cash flows were projected based on contractual payment terms adjusted for delinquencies and estimates of losses. The fair value estimates do not reflect the underlying customer relationships or the related distribution systems.

•

Cash, short-term investments, trade receivables, trade payables, securities purchased (sold) under agreements to resell (repurchase) and commercial paper and other short-term debt:  The carrying values of these assets and liabilities approximate fair values because of the relatively short period of time between origination and expected realization.

•

Policyholder contract deposits associated with investment-type contracts:  Fair values for policyholder contract deposits associated with investment-type contracts not accounted for at fair value were estimated for disclosure purposes using discounted cash flow calculations based upon interest rates currently being offered for similar contracts with maturities consistent with those remaining for the contracts being valued. Where no similar contracts are being offered, the discount rate is the appropriate tenor swap rates (if available) or current risk-free interest rates consistent with the currency in which the cash flows are denominated.

•

Trust deposits and deposits due to banks and other depositors:  The fair values of certificates of deposit that mature in more than one year are estimated for disclosure purposes using discounted cash flow calculations based upon interest rates currently offered for deposits with similar maturities. For demand deposits and certificates of deposit that mature in less than one year, carrying values approximate fair value.

•

Long-term debt:  Fair values of these obligations were determined for disclosure purposes by reference to quoted market prices, where available and appropriate, or discounted cash flow calculations based upon AIG's current market-observable implicit-credit-spread rates for similar types of borrowings with maturities consistent with those remaining for the debt being valued.

The following table presents the carrying value and estimated fair value of AIG's financial instruments:

		December 31, 2010				December 31, 2009


(in millions)		Carrying Value		Fair Value		Carrying Value		Fair Value

Assets:
	Fixed maturities	$	254,484	$	254,484	$	396,794	$	396,794
	Equity securities		11,233		11,233		17,840		17,840
	Mortgage and other loans receivable		19,367		19,558		27,461		25,957
	Finance receivables, net of allowance		870		802		20,327		18,974
	Other invested assets^*		40,828		40,220		43,737		42,474
	Securities purchased under agreements to resell		1,553		1,553		2,154		2,154
	Short-term investments		42,185		42,185		47,263		47,263
	Cash		1,558		1,558		4,400		4,400
	Unrealized gain on swaps, options and forward transactions		5,917		5,917		9,130		9,130
Liabilities:
	Policyholder contract deposits associated with investment-type contracts		102,585		112,710		168,846		175,612
	Securities sold under agreements to repurchase		2,119		2,119		3,505		3,505
	Securities and spot commodities sold but not yet purchased		485		485		1,030		1,030
	Unrealized loss on swaps, options and forward transactions		5,735		5,735		5,403		5,403
	Trust deposits and deposits due to banks and other depositors		892		892		1,641		1,641
	Federal Reserve Bank of New York Commercial Paper Funding Facility		-		-		4,739		4,739
	Federal Reserve Bank of New York credit facility		20,985		21,009		23,435		23,390
	Other long-term debt		85,476		84,879		113,298		94,458

*: Excludes aircraft asset investments held by non-Financial Services subsidiaries.

- Definition

This item represents the complete disclosure regarding the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments, assets, and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the Company is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risk is are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

+ References+ Details

Investments

12 Months Ended

Dec. 31, 2010

Investments

Investments

7. Investments

(a) Securities Available for Sale

The following table presents the amortized cost or cost and fair value of AIG's available for sale securities:

(in millions)			Amortized Cost or Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value		Other-Than- Temporary Impairments in AOCI^(a)



December 31, 2010
Bonds available for sale:
	U.S. government and government sponsored entities		$	7,239	$	184	$	(73	)	$	7,350	$	-
	Obligations of states, municipalities and political subdivisions			45,297		1,725		(402	)		46,620		2
	Non-U.S. governments			14,780		639		(75	)		15,344		(28	)
	Corporate debt			118,729		8,827		(1,198	)		126,358		99
	Mortgage-backed, asset-backed and collateralized:
		RMBS		20,661		700		(1,553	)		19,808		(648	)
		CMBS		7,320		240		(1,149	)		6,411		(218	)
		CDO/ABS		6,643		402		(634	)		6,411		32

	Total mortgage-backed, asset-backed and collateralized			34,624		1,342		(3,336	)		32,630		(834	)

*Total bonds available for sale^(b)***				220,669		12,717		(5,084	)		228,302		(761	)
Equity securities available for sale:
	Common stock			1,820		1,931		(52	)		3,699		-
	Preferred stock			400		88		(1	)		487		-
	Mutual funds			351		46		(2	)		395		-

Total equity securities available for sale				2,571		2,065		(55	)		4,581		-

*Total^(c)***			$	223,240	$	14,782	$	(5,139	)	$	232,883	$	(761	)

December 31, 2009
Bonds available for sale:
	U.S. government and government sponsored entities		$	5,098	$	174	$	(49	)	$	5,223	$	-
	Obligations of states, municipalities and political subdivisions			52,324		2,163		(385	)		54,102		-
	Non-U.S. governments			63,080		3,153		(649	)		65,584		(1	)
	Corporate debt			185,188		10,826		(3,876	)		192,138		119
	Mortgage-backed, asset-backed and collateralized:
		RMBS		32,173		991		(4,840	)		28,324		(2,121	)
		CMBS		18,717		195		(5,623	)		13,289		(739	)
		CDO/ABS		7,911		284		(1,304	)		6,891		(63	)

Total mortgage-backed, asset-backed and collateralized				58,801		1,470		(11,767	)		48,504		(2,923	)

*Total bonds available for sale^(b)***				364,491		17,786		(16,726	)		365,551		(2,805	)
Equity securities available for sale:
	Common stock			4,460		2,913		(75	)		7,298		-
	Preferred stock			740		94		(20	)		814		-
	Mutual funds			1,264		182		(36	)		1,410		-

Total equity securities available for sale				6,464		3,189		(131	)		9,522		-

*Total^(c)***			$	370,955	$	20,975	$	(16,857	)	$	375,073	$	(2,805	)

(a): Represents the amount of other-than-temporary impairment losses recognized in Accumulated other comprehensive loss, which, starting on April 1, 2009, were not included in earnings. Amount includes unrealized gains and losses on impaired securities relating to changes in the value of such securities subsequent to the impairment measurement date.
(b): At December 31, 2010 and 2009, bonds available for sale held by AIG that were below investment grade or not rated totaled $18.6 billion and $24.5 billion, respectively.
(c): Excludes $80.5 billion and $36.1 billion of available for sale investments at fair value from businesses held for sale at December 31, 2010 and December 31, 2009, respectively. See Note 4 to the Consolidated Financial Statements herein.

Unrealized losses on Securities Available for Sale

The following table summarizes the fair value and gross unrealized losses on AIG's available for sale securities, aggregated by major investment category and length of time that individual securities have been in a continuous unrealized loss position:

		12 Months or Less				More than 12 Months				Total


(in millions)		Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses

December 31, 2010^*
Bonds available for sale:
	U.S. government and government sponsored entities	$	2,142	$	73	$	-	$	-	$	2,142	$	73
Obligations of states, municipalities and political subdivisions			9,300		296		646		106		9,946		402
	Non-U.S. governments		1,427		34		335		41		1,762		75
	Corporate debt		18,246		579		7,343		619		25,589		1,198
	RMBS		4,461		105		6,178		1,448		10,639		1,553
	CMBS		462		19		3,014		1,130		3,476		1,149
	CDO/ABS		996		48		2,603		586		3,599		634

Total bonds available for sale			37,034		1,154		20,119		3,930		57,153		5,084
Equity securities available for sale:
	Common stock		576		52		-		-		576		52
	Preferred stock		11		1		-		-		11		1
	Mutual funds		65		2		-		-		65		2

Total equity securities available for sale			652		55		-		-		652		55

Total		$	37,686	$	1,209	$	20,119	$	3,930	$	57,805	$	5,139

December 31, 2009^*
Bonds available for sale:
	U.S. government and government sponsored entities	$	1,414	$	35	$	105	$	14	$	1,519	$	49
Obligations of states, municipalities and political subdivisions			5,405		132		3,349		253		8,754		385
	Non-U.S. governments		7,842		239		3,286		410		11,128		649
	Corporate debt		24,696		1,386		22,139		2,490		46,835		3,876
	RMBS		7,135		3,051		6,352		1,789		13,487		4,840
	CMBS		5,013		3,927		4,528		1,696		9,541		5,623
	CDO/ABS		2,809		1,119		1,693		185		4,502		1,304

Total bonds available for sale			54,314		9,889		41,452		6,837		95,766		16,726
Equity securities available for sale:
	Common stock		933		75		-		-		933		75
	Preferred stock		172		20		-		-		172		20
	Mutual funds		333		36		-		-		333		36

Total equity securities available for sale			1,438		131		-		-		1,438		131

Total		$	55,752	$	10,020	$	41,452	$	6,837	$	97,204	$	16,857

*: Excludes fixed maturity and equity securities of businesses held for sale. See Note 4 herein.

At December 31, 2010, AIG held 6,595 and 234 of individual fixed maturity and equity securities, respectively, that were in an unrealized loss position, of which 2,747 individual securities were in a continuous unrealized loss position for longer than 12 months. AIG did not recognize in earnings the unrealized losses on these fixed maturity securities at December 31, 2010, because management neither intends to sell the securities nor does it believe that it is more likely than not that it will be required to sell these securities before recovery of their amortized cost basis. Furthermore, management expects to recover the entire amortized cost basis of these securities. In performing this evaluation, management considered the recovery periods for securities in previous periods of broad market declines. For fixed maturity securities with significant declines, management performed fundamental credit analysis on a security-by-security basis, which included consideration of credit enhancements, expected defaults on underlying collateral, review of relevant industry analyst reports and forecasts and other available market data.

Contractual Maturities of Securities Available for Sale

The following table presents the amortized cost and fair value of fixed maturity securities available for sale by contractual maturity:

	Total Fixed Maturity Available for Sale Securities				Fixed Maturity Securities in a Loss Position


December 31, 2010 (in millions)	Total Fixed Maturity Available for Sale Securities				Fixed Maturity Securities in a Loss Position
December 31, 2010 (in millions)	Amortized Cost		Fair Value		Amortized Cost		Fair Value

Due in one year or less	$	8,940	$	9,054	$	1,052	$	1,033
Due after one year through five years		52,394		54,803		11,236		10,997
Due after five years through ten years		57,375		60,455		10,644		10,157
Due after ten years		67,336		71,360		18,255		17,252
Mortgage-backed, asset-backed and collateralized		34,624		32,630		21,050		17,714

Total	$	220,669	$	228,302	$	62,237	$	57,153

Actual maturities may differ from contractual maturities because certain borrowers have the right to call or prepay certain obligations with or without call or prepayment penalties.

(b) Trading Securities

The following table presents the fair value of AIG's trading securities:

			December 31, 2010					December 31, 2009


(in millions)			Fair Value		Percent of Total			Fair Value		Percent of Total

Fixed Maturities:
	U.S. government and government sponsored entities		$	6,902		21	%	$	6,711		18	%
	Non-U.S. governments			125		1			1,421		4
	Corporate debt			912		3			5,315		13
	State, territories and political subdivisions			316		1			370		1
	Mortgage-backed, asset-backed and collateralized:
		RMBS		1,928		6			3,675		9
		CMBS		2,078		6			2,476		6
		CDO/ABS and other collateralized		6,331		19			5,997		15

Total mortgage-backed, asset-backed and collateralized				10,337		31			12,148		30
ML II				1,279		4			759		2
ML III				6,311		19			4,519		11

Total fixed maturities				26,182		80			31,243		79
Equity securities:
	MetLife			6,494		20			-		-
	All other			158		-			8,318		21

Total equity securities				6,652		20			8,318		21

Total			$	32,834		100	%	$	39,561		100	%

See Note 8 herein for information on Mortgage and other loans receivable and Finance receivables.

(c) Other Invested Assets

The following table summarizes Other invested assets:



At December 31, (in millions)			2010		2009

Category:
	Alternative funds^(a)	$	18,825	$	19,273
	Mutual funds		1,718		9,623
	Investment real estate^(b)		3,196		7,262
	Aircraft asset investments^(c)		1,381		1,498
	Life settlement contracts		3,834		3,399
	Consolidated managed partnerships and funds		638		816
	Direct private equity investments		383		443
	Retained interest in AIA		11,134		-
	All other investments		1,101		2,921

Other invested assets		$	42,210	$	45,235

(a): Includes hedge funds, private equity funds, affordable housing partnerships and other investment partnerships.
(b): Net of accumulated depreciation of $536 million and $1.04 billion in 2010 and 2009, respectively.
(c): Consist primarily of SunAmerica investments in aircraft equipment held in trusts.

Investments in Life Settlement Contracts

During 2010, 2009 and 2008, income recognized on life settlement contracts was $213 million, $106 million and $120 million, respectively, and are included in Net investment income in the Consolidated Statement of Income. AIG's life settlement contracts reported above are monitored for impairment on a contract-by-contract basis quarterly. Impairment charges on life settlement contracts are included in net realized capital gains (losses).

The following table presents further information regarding life settlement contracts:

		At December 31, 2010


(dollars in millions)		Number of Contracts		Carrying Value		Face Value (Death Benefits)

Remaining Life Expectancy of Insureds:
	0 - 1 year		13	$	7	$	16
	1 - 2 years		50		26		37
	2 - 3 years		114		89		164
	3 - 4 years		242		283		574
	4 - 5 years		257		245		647
	Thereafter		4,997		3,184		16,309

	Total		5,673	$	3,834	$	17,747

At December 31, 2010, the anticipated life insurance premiums required to keep the life settlement contracts in force, payable in the ensuing 12 months ending December 31, 2011 and the four succeeding years ending December 31, 2015 are $476 million, $489 million, $491 million, $485 million and $483 million, respectively.

Other Invested Assets — Available for Sale Investments

At December 31, 2010 and 2009, $6.5 billion and $6.1 billion of Other invested assets related to available for sale investments carried at fair value, with unrealized gains and losses recorded in Accumulated other comprehensive income (loss), net of deferred taxes, with almost all of the remaining investments being accounted for on the equity method of accounting. All of the investments are subject to other-than-temporary impairment evaluation (see Note 2(d) herein). The gross unrealized loss on the investments accounted for as available for sale at December 31, 2010 was $93 million, the majority of which represents investments that have been in a continuous unrealized loss position for less than 12 months.

Other Invested Assets — Equity Method Investments

At December 31, 2010, AIG's equity method investments included a 33 percent interest in AIA, which AIG is accounting for under the fair value option, certain investment partnerships in which AIG holds in the aggregate a five percent or greater interest or less than a five percent interest but in which AIG has more than a minor influence over the operations of the investee, and certain other strategic investments. Dividends received from AIG's other strategic investments were $11 million, $1 million and $20 million for the years ended December 31, 2010, 2009, and 2008, respectively. The undistributed earnings of other strategic investments in which AIG's ownership interest is less than 50 percent were $13 million, $12 million and $227 million at December 31, 2010, 2009, and 2008, respectively.

The following table presents the carrying value and ownership percentage of equity method investments:

	2010					2009


(in millions, except percentages)	Carrying Value		Ownership Percentage			Carrying Value		Ownership Percentage

AIA	$	11,134		33	%	$	-		-
All other equity method investments		9,187		Various			8,222		Various

Total	$	20,321				$	8,222

Summarized Financial Information of Equity Method Investees

The following is the aggregated summarized financial information of AIG's equity method investees:

Years Ended December 31, (in millions)		2010			2009			2008



Operating results:
	Total revenues	$	29,694		$	(15,082	)	$	19,181
	Total expenses		(17,250	)		(6,384	)		(8,701	)

Net income (loss)		$	12,444		$	(21,466	)	$	10,480

At December 31, (in millions)		2010			2009


Balance sheet:
	Total assets	$	213,936		$	101,291
	Total liabilities	$	(115,760	)	$	(32,136	)

Summarized financial information for these equity method investees may be presented on a lag, due to the unavailability of information for the investees at the respective balance sheet date, and is included for the periods in which AIG held an equity method ownership interest. Summarized financial information for entities that have been divested or are held-for-sale are not included in the table above.

(d) Net Investment Income

The following table presents the components of Net investment income:

Years Ended December 31, (in millions)	2010			2009			2008



Fixed maturities, including short-term investments	$	14,445		$	14,535		$	16,326
ML II		513			(25	)		(211	)
ML III		1,792			419			(900	)
Change in fair value of AIA securities^*		(638	)		-			-
Change in fair value of MetLife securities		665			-			-
Other equity securities		326			372			361
Interest on mortgage and other loans		1,268			1,347			1,278
Partnerships		1,602			4			(2,084	)
Mutual funds		(25	)		315			(799	)
Real estate		126			139			258
Other investments		465			120			521

Total investment income before policyholder income and trading gains		20,539			17,226			14,750
Policyholder investment income and trading gains (losses)		886			2,305			(3,504	)

Total investment income		21,425			19,531			11,246
Investment expenses		495			544			793

Net investment income	$	20,930		$	18,987		$	10,453

*: Represents change in fair value measured from the closing sale price on the October 29, 2010 initial date of trading.

(e) Net Realized Capital Gains and Losses

The following table presents the components of Net realized capital gains (losses) and the increase (decrease) in unrealized appreciation of AIG's available for sale investments:

Years Ended December 31, (in millions)		2010			2009			2008



Sales of fixed maturity securities		$	1,846		$	849		$	(4,906	)
Sales of equity securities			725			303			158
Sales of real estate and loans			153			(18	)		136
Other-than-temporary impairments:
	Severity		(73	)		(1,510	)		(23,213	)
	Change in intent		(441	)		(958	)		(10,806	)
	Foreign currency declines		(63	)		(112	)		(1,356	)
	Issuer-specific credit events		(2,457	)		(3,979	)		(4,874	)
	Adverse projected cash flows on structured securities		(5	)		(137	)		(1,618	)
Provision for loan losses			(304	)		(614	)		-
Foreign exchange transactions			178			(616	)		2,028
Derivative instruments			453			1,724			(3,313	)
Other			(291	)		(142	)		970

Net realized capital losses		$	(279	)	$	(5,210	)	$	(46,794	)

Increase (decrease) in unrealized appreciation of investments:
	Fixed maturities	$	8,651		$	23,027		$	(7,570	)
	Equity securities		470			1,276			(2,286	)
	Other investments		(590	)		(2,693	)		(200	)
	Activity of businesses held for sale		(2,369	)		8,329			(3,910	)

Increase (decrease) in unrealized appreciation		$	6,162		$	29,939		$	(13,966	)

Net unrealized gains (losses) included in the Consolidated Statement of Income from investment securities classified as trading securities in 2010, 2009 and 2008 were $3.5 billion, $3.7 billion and $(3.1) billion, respectively.

The following table presents the gross realized gains and gross realized losses from sales or redemptions of AIG's available for sale securities:

	Years Ended December 31,


	2010				2009				2008
(in millions)	Gross Realized Gains		Gross Realized Losses		Gross Realized Gains		Gross Realized Losses		Gross Realized Gains		Gross Realized Losses

Fixed maturities	$	2,138	$	292	$	1,497	$	648	$	6,367	$	11,273
Equity securities		811		86		516		213		1,028		870

Total	$	2,949	$	378	$	2,013	$	861	$	7,395	$	12,143

For the year ended December 31, 2010, the aggregate fair value of available for sale securities sold was $56.0 billion, which resulted in a net realized capital gain of $2.6 billion.

Evaluating Investments for Other-Than-Temporary Impairments

On April 1, 2009, AIG adopted prospectively a new accounting standard addressing the evaluation of fixed maturity securities for other-than-temporary impairments. These requirements have significantly altered AIG's policies and procedures for determining impairment charges recognized through earnings. The new standard requires a company to recognize the credit component (a credit impairment) of an other-than-temporary impairment of a fixed maturity security in earnings and the non-credit component in Accumulated other comprehensive income (loss) when the company does not intend to sell the security or it is more likely than not that the company will not be required to sell the security prior to recovery. The standard also changes the threshold for determining when an other-than-temporary impairment has occurred on a fixed maturity security with respect to intent and ability to hold the security until recovery and requires additional disclosures. A credit impairment, which is recognized in earnings when it occurs, is the difference between the amortized cost of the fixed maturity security and the estimated present value of cash flows expected to be collected (recovery value), as determined by management. The difference between fair value and amortized cost that is not related to a credit impairment is recognized as a separate component of Accumulated other comprehensive income (loss). AIG refers to both credit impairments and impairments recognized as a result of intent to sell as "impairment charges." The impairment model for equity securities was not affected by the standard.

Impairment Policy — Effective April 1, 2009 and Thereafter

Fixed Maturity Securities

If AIG intends to sell a fixed maturity security or it is more likely than not that AIG will be required to sell a fixed maturity security before recovery of its amortized cost basis and the fair value of the security is below amortized cost, an other-than-temporary impairment has occurred and the amortized cost is written down to current fair value, with a corresponding charge to earnings.

For all other fixed maturity securities for which a credit impairment has occurred, the amortized cost is written down to the estimated recovery value with a corresponding charge to earnings. Changes in fair value compared to recovery value, if any, is charged to unrealized appreciation (depreciation) of fixed maturity investments on which other-than-temporary credit impairments were taken (a component of Accumulated other comprehensive income (loss)).

When assessing AIG's intent to sell a fixed maturity security, or whether it is more likely than not that AIG will be required to sell a fixed maturity security before recovery of its amortized cost basis, management evaluates relevant facts and circumstances including, but not limited to, decisions to reposition AIG's investment portfolio, sales of securities to meet cash flow needs and sales of securities to take advantage of favorable pricing.

AIG considers severe price declines in its assessment of potential credit impairments. AIG may also modify its modeled outputs for certain securities when it determines that price declines are indicative of factors not comprehended by the cash flow models.

In periods subsequent to the recognition of an other-than-temporary impairment charge for available for sale fixed maturity securities that is not foreign exchange related, AIG generally prospectively accretes into earnings the difference between the new amortized cost and the expected undiscounted recovery value over the remaining expected holding period of the security.

Credit Impairments

The following table presents a rollforward of the credit impairments recognized in earnings for available for sale fixed maturity securities held by AIG^(a):

(in millions)			Twelve Months Ended December 31, 2010			Nine Months Ended December 31, 2009



	Balance, beginning of year		$	7,803		$	-
	Increases due to:
		Credit losses remaining in accumulated deficit related to the adoption of new other-than-temporary impairment standard		-			7,182
		Credit impairments on new securities subject to impairment losses		627			550
		Additional credit impairments on previously impaired securities		1,294			1,523
	Reductions due to:
		Credit impaired securities fully disposed for which there was no prior intent or requirement to sell		(1,039	)		(967	)
		Credit impaired securities for which there is a current intent or anticipated requirement to sell		(503	)		-
		Accretion on securities previously impaired due to credit^(b)		(332	)		(221	)
		Hybrid securities with embedded credit derivatives reclassified to Bonds trading securities		(748	)		-
	Foreign exchange translation adjustments			(18	)		18
	Activity of discontinued operations			251			(104	)
	Impairments on securities reclassified to Assets held for sale			(201	)		(176	)
	Dispositions^(c)			(406	)		-
	Other			58			(2	)

Balance, end of year			$	6,786		$	7,803

(a): Includes structured, corporate, municipal and sovereign fixed maturity securities.
(b): Represents accretion recognized due to changes in cash flows expected to be collected over the remaining expected term of the credit impaired securities as well as the accretion due to the passage of time.
(c): Reflects the deconsolidation of AIA and sale of ALICO and AGF in 2010.

In assessing whether a credit impairment has occurred for a structured fixed maturity security, AIG performs evaluations of expected future cash flows. Certain critical assumptions are made with respect to the performance of the securities.

When estimating future cash flows for a structured fixed maturity security (e.g., RMBS, CMBS, CDO, ABS) management considers historical performance of underlying assets and available market information as well as bond-specific structural considerations, such as credit enhancement and priority of payment structure of the security. In addition, the process of estimating future cash flows includes, but is not limited to, the following critical inputs, which vary by asset class:

•

Current delinquency rates;

•

Expected default rates and the timing of such defaults;

•

Loss severity and the timing of any such recovery;

•

Expected prepayment speeds; and

•

Ratings of securities underlying structured products.

For corporate, municipal and sovereign fixed maturity securities determined to be credit impaired, management considers the fair value as the recovery value when available information does not indicate that another value is more relevant or reliable. When management identifies information that supports a recovery value other than the fair value, the determination of a recovery value considers scenarios specific to the issuer and the security, and may be based upon estimates of outcomes of corporate restructurings, political and macro economic factors, stability and financial strength of the issuer, the value of any secondary sources of repayment and the disposition of assets.

Equity Securities

The impairment model for equity securities and other cost and equity method investments was not affected by the adoption of the accounting standard related to other-than-temporary impairments in the second quarter of 2009. AIG continues to evaluate its available for sale equity securities, equity method and cost method investments for impairment by considering such securities as candidates for other-than-temporary impairment if they meet any of the following criteria:

•

The security has traded at a significant (25 percent or more) discount to cost for an extended period of time (nine consecutive months or longer);

•

A discrete credit event has occurred resulting in (i) the issuer defaulting on a material outstanding obligation; (ii) the issuer seeking protection from creditors under the bankruptcy laws or any similar laws intended for court-supervised reorganization of insolvent enterprises; or (iii) the issuer proposing a voluntary reorganization pursuant to which creditors are asked to exchange their claims for cash or securities having a fair value substantially lower than the par value of their claims; or

•

AIG has concluded that it may not realize a full recovery on its investment, regardless of the occurrence of one of the foregoing events.

The determination that an equity security is other-than-temporarily impaired requires the judgment of management and consideration of the fundamental condition of the issuer, its near-term prospects and all the relevant facts and circumstances. The above criteria also consider circumstances of a rapid and severe market valuation decline in which AIG could not reasonably assert that the impairment period would be temporary (severity losses).

Other Invested Assets

AIG's investments in funds and investment partnerships are evaluated for impairment consistent with the evaluation of equity securities for impairments as discussed above. Such evaluation considers market conditions, events and volatility that may impact the recoverability of the underlying investments within these funds and investment partnerships and is based on the nature of the underlying investments and specific inherent risks. Such risks may evolve based on the nature of the underlying investments.

AIG's investments in life settlement contracts are monitored for impairment based on the underlying life insurance policies, with cash flows reported periodically. An investment in a life settlement contract is considered impaired if the undiscounted cash flows resulting from the expected proceeds from the insurance policy are less than the carrying amount of the investment plus anticipated continuing costs. If an impairment loss is recognized, the investment is written down to fair value.

AIG's aircraft asset investments and investments in real estate are periodically evaluated for recoverability whenever changes in circumstances indicate the carrying amount of an asset may be impaired. When impairment indicators are present, AIG compares expected investment cash flows to carrying value. When the expected cash flows are less than the carrying value, the investments are written down to fair value with a corresponding charge to earnings.

Fixed Maturity Securities Impairment Policy — Prior to April 1, 2009

In all periods prior to April 1, 2009, AIG assessed its ability to hold any fixed maturity available for sale security in an unrealized loss position to its recovery at each balance sheet date. The decision to sell any such fixed maturity security classified as available for sale reflected the judgment of AIG's management that the security sold was unlikely to provide, on a relative value basis, as attractive a return in the future as alternative securities entailing comparable risks. With respect to distressed securities, the sale decision reflected management's judgment that the risk-adjusted ultimate recovery was less than the value achievable on sale.

In those periods, AIG evaluated its fixed maturity securities for other-than-temporary impairments with respect to valuation as well as credit.

After a fixed maturity security had been identified as other-than-temporarily impaired, the amount of such impairment was determined as the difference between fair value and amortized cost and the entire amount, whether attributable to credit or noncredit factors, was recorded as a charge to earnings.

(f) Insurance — Statutory Deposits

Total carrying values of cash and securities deposited by AIG's insurance subsidiaries under requirements of regulatory authorities were $12.0 billion and $14.6 billion at December 31, 2010 and 2009, respectively.

Variable Interest Entities

12 Months Ended

Dec. 31, 2010

Variable Interest Entities

Variable Interest Entities

11. Variable Interest Entities

A VIE is a legal entity that does not have sufficient equity at risk to finance its activities without additional subordinated financial support or is structured such that equity investors lack the ability to make significant decisions relating to the entity's operations through voting rights and do not substantively participate in the gains and losses of the entity. Consolidation of a VIE by its primary beneficiary is not based on majority voting interest, but is based on other criteria discussed below.

While AIG enters into various arrangements with VIEs in the normal course of business, AIG's involvement with VIEs is primarily via its insurance companies as a passive investor in debt securities (rated and unrated) and equity interests issued by VIEs. In all instances, AIG consolidates the VIE when it determines it is the primary beneficiary. This analysis includes a review of the VIE's capital structure, contractual relationships and terms, nature of the VIE's operations and purpose, nature of the VIE's interests issued and AIG's involvements with the entity. AIG also evaluates the design of the VIE and the related risks the entity was designed to expose the variable interest holders to in evaluating consolidation.

For VIEs with attributes consistent with that of an investment company or a money market fund, the primary beneficiary is the party or group of related parties that absorbs a majority of the expected losses of the VIE, receives the majority of the expected residual returns of the VIE, or both.

For all other variable interest entities, the primary beneficiary is the entity that has both (1) the power to direct the activities of the VIE that most significantly affect the entity's economic performance and (2) the obligation to absorb losses or the right to receive benefits that could be potentially significant to the VIE. While also considering these factors, the consolidation conclusion depends on the breadth of AIG's decision-making ability and its ability to influence activities that significantly affect the economic performance of the VIE.

Exposure to Loss

AIG's total off-balance sheet exposure associated with VIEs, primarily consisting of financial guarantees and commitments to real estate and investment funds, was $1.0 billion and $2.2 billion at December 31, 2010 and 2009, respectively.

The following table presents AIG's total assets, total liabilities and off-balance sheet exposure associated with its variable interests in consolidated VIEs:

										Off-Balance Sheet Exposure


At December 31, (in billions)		VIE Assets^(a)				VIE Liabilities				Off-Balance Sheet Exposure
At December 31, (in billions)		2010		2009		2010		2009		2010		2009

	AIA/ALICO SPVs^(b)	$	48.6	$	200.6	$	0.9	$	171.5	$	-	$	-
	Real estate and investment funds		3.8		4.6		1.2		2.9		0.1		0.6
	Commercial paper conduit		0.5		3.6		0.2		3.0		-		-
	CDOs		-		0.2		-		0.1		-		-
	Affordable housing partnerships		2.9		2.5		0.4		-		-		-
	Other		4.7		3.4		2.1		2.1		-		-
	VIEs of businesses held for sale		0.4		-		-		-		-		-

Total		$	60.9	$	214.9	$	4.8	$	179.6	$	0.1	$	0.6

(a): Each of the VIE's assets can be used only to settle specific obligations of that VIE.
(b): In 2010, AIG made revisions to the presentation to include the ALICO and AIA SPV. The prior period has been revised to conform to the current period presentation.

AIG calculates its maximum exposure to loss to be (i) the amount invested in the debt or equity of the VIE, (ii) the notional amount of VIE assets or liabilities where AIG has also provided credit protection to the VIE with the VIE as the referenced obligation and (iii) other commitments and guarantees to the VIE. Interest holders in VIEs sponsored by AIG generally have recourse only to the assets and cash flows of the VIEs and do not have recourse to AIG, except in limited circumstances when AIG has provided a guarantee to the VIE's interest holders.

The following table presents total assets of unconsolidated VIEs in which AIG holds a variable interest, as well as AIG's maximum exposure to loss associated with these VIEs:

				Maximum Exposure to Loss


(in billions)		Total VIE Assets		On-Balance Sheet		Off-Balance Sheet		Total

December 31, 2010
	Real estate and investment funds	$	18.5	$	2.5	$	0.3	$	2.8
	Affordable housing partnerships		0.6		0.6		-		0.6
	Maiden Lane Interests		40.1		7.6		-		7.6
	Other		1.6		0.1		0.5		0.6
	VIEs of businesses held for sale		2.0		0.4		0.1		0.5

Total		$	62.8	$	11.2	$	0.9	$	12.1

December 31, 2009
	Real estate and investment funds	$	23.3	$	3.6	$	1.6	$	5.2
	Affordable housing partnerships		1.3		1.3		-		1.3
	Maiden Lane Interests		38.7		5.3		-		5.3
	Other		7.6		1.7		-		1.7

Total		$	70.9	$	11.9	$	1.6	$	13.5

Balance Sheet Classification

AIG's interest in the assets and liabilities of consolidated and unconsolidated VIEs were classified on the Consolidated Balance Sheet as follows:

						Unconsolidated VIEs


At December 31, (in billions)		Consolidated VIEs				Unconsolidated VIEs
At December 31, (in billions)		2010		2009		2010		2009

Assets:
	Available for sale securities	$	3.3	$	132.2	$	-	$	0.3
	Trading securities		8.1		9.9		7.7		6.4
	Mortgage and other loans receivable		0.7		5.3		-		-
	Other invested assets		18.3		27.6		3.1		3.6
	Cash		0.1		4.3		-		-
	Other asset accounts		30.0		35.6		0.1		1.6
	Assets held for sale		0.4		-		0.3		-

Total		$	60.9	$	214.9	$	11.2	$	11.9

Liabilities:
	Future policy benefits for life and accident and health insurance contracts	$	-	$	67.6	$	-	$	-
	Policyholder contract deposits		-		77.3		-		-
	Other policyholder funds		-		8.9		-		-
	FRBNY commercial paper funding facility		-		2.7		-		-
	Other long-term debt		2.6		7.1		-		-
	Other liability accounts		2.2		16.0		-		-

Total		$	4.8	$	179.6	$	-	$	-

See Note 2(y) herein for the effect of consolidation under the amended accounting standard for the consolidation of variable interest entities.

AIA and ALICO SPVs

AIG is the primary beneficiary of the AIA and ALICO SPVs as it has the power to direct the activities of the SPVs that most significantly impact their economic performance and the obligation to absorb losses and the right to receive benefits that could potentially be significant to the SPVs. See Notes 2 and 17 herein for further discussion of the AIA and ALICO SPVs.

Real Estate and Investment Funds

AIG's Direct Investment business, through AIG Global Real Estate, is an investor in various real estate investments, some of which are VIEs. These investments are typically with unaffiliated third-party developers via a partnership or limited liability company structure. The VIE's activities consist of the development or redevelopment of commercial and residential real estate. AIG's involvement varies from being a passive equity investor or finance provider to actively managing the activities of the VIE.

AIG's insurance operations participate as passive investors in the equity issued primarily by third-party-managed hedge and private equity funds. AIG's insurance operations typically are not involved in the design or establishment of VIEs, nor do they actively participate in the management of VIEs.

Affordable Housing Partnerships

SunAmerica Affordable Housing Partners, Inc. (SAAHP) organizes and invests in limited partnerships that develop and operate affordable housing qualifying for federal tax credits, in addition to a few market rate properties across the United States. The general partners in the operating partnerships are almost exclusively unaffiliated third-party developers. AIG does not consolidate an operating partnership if the general partner is an unaffiliated person. Through approximately 1,200 partnerships, SAAHP has invested in developments with approximately 150,000 apartment units nationwide, and has syndicated over $7 billion in partnership equity since 1991 to other investors who will receive, among other benefits, tax credits under certain sections of the Internal Revenue Code. The pre-tax income of SAAHP is reported, along with other SunAmerica partnership income, as a component of the SunAmerica segment.

Maiden Lane Interests

In 2008, certain AIG wholly owned life insurance companies sold all of their undivided interests in a pool of $39.3 billion face amount of RMBS to ML II, whose sole member is the FRBNY. AIG has a significant variable economic interest in ML II, which is a VIE.

In 2008, AIG entered into the ML III Agreement with the FRBNY, ML III and The Bank of New York Mellon, which established arrangements, through ML III, to fund the purchase of multi-sector CDOs underlying or related to CDS written by AIG Financial Products Corp. Concurrently, AIG Financial Products Corp's counterparties to such CDS transactions agreed to terminate those CDS transactions relating to the multi-sector CDOs purchased from them. AIG has a significant variable interest in ML III, which is a VIE.

Other Asset Accounts

Aircraft Trusts

AIG has created two VIEs for the purpose of acquiring, owning, leasing, maintaining, operating and selling aircraft. AIG subsidiaries hold beneficial interests, including all the equity interests in these entities. These beneficial interests include passive investments by AIG's insurance operations in non-voting preferred equity interests and in the majority of the debt issued by these entities. AIG and its subsidiaries collectively maintain the power to direct the activities of the VIEs that most significantly impact the entities' economic performance, and bear the obligation to absorb economic losses or receive economic benefits that could potentially be significant to the VIEs. As result, AIG has determined that it is the primary beneficiary and fully consolidates these entities. The debt of these entities is not an obligation of, or guaranteed by, AIG or any of its subsidiaries. Under a servicing agreement, ILFC acts as servicer for the aircraft owned by these entities

Consumer Loans Vehicles

AIG sponsors one VIE that has issued a variable funding note backed by a consumer loan collateralized by individual life insurance assets. As of December 31, 2010, AIG's maximum exposure, representing the carrying value of the consumer loan, was $502 million. The total VIE assets and liabilities for this entity were $535 million and $338 million, respectively. AIG consolidates the assets and liabilities of this entity.

Commercial Paper Conduit

AIG Financial Products Corp., AIG Trading Group Inc. and their respective subsidiaries (collectively, AIGFP) are the primary beneficiary of Curzon Funding LLC, an asset-backed commercial paper conduit to third parties, the assets of which serve as collateral for the conduit's obligations.

RMBS, CMBS, Other ABS and CDOs

AIG, through its insurance company subsidiaries, is a passive investor in RMBS, CMBS, other ABS and CDOs primarily issued by domestic special-purpose entities. AIG generally does not sponsor or transfer assets to, or act as the servicer to these asset-backed structures, and was not involved in the design of these entities.

AIG, through its Direct Investment business, also invests in CDOs and similar structures, which can be cash-based or synthetic and are managed by third parties. The role of Direct Investment subsidiaries is generally limited to that of a passive investor; it does not manage such structures.

AIG's maximum exposure in these types of structures is limited to its investment in securities issued by these entities. Based on the nature of AIG's investments and its passive involvement in these types of structures, AIG has determined that it is not the primary beneficiary of these entities. The fair values of AIG's investments in these structures are reported in Notes 6 and 7 herein.

Financing Vehicles

ILFC has created wholly owned subsidiaries for the purpose of purchasing aircraft and obtaining financing secured by such aircraft. A portion of the secured debt has been guaranteed by the European Export Credit Agencies. These entities meet the definition of a VIE because they do not have sufficient equity to operate without ILFC's subordinated financial support in the form of intercompany notes which serve as equity even though they are legally debt instruments. ILFC fully consolidates the entities, controls all the activities of the entities and guarantees the activities of the entities. AIG has not included these entities in the above table as they are wholly owned and there are no other variable interests other than those of ILFC and the lenders. See Note 15 herein for further information.

Leasing Entities

ILFC has created wholly owned subsidiaries for the purpose of facilitating aircraft leases with airlines. The entities meet the definition of a VIE because they do not have sufficient equity to operate without ILFC's subordinated financial support in the form of intercompany notes which serve as equity. ILFC fully consolidates the entities, controls all the activities of the entities and fully guarantees the activities of the entities. AIG has not included these entities in the above table as they are wholly owned and there are no other variable interests in the entities other than those of ILFC.

Structured Investment Vehicle

The Direct Investment business sponsors Nightingale Finance Ltd, its only structured investment vehicle (SIV), which invests in variable rate, investment-grade debt securities, the majority of which are ABS. The Direct Investment business has no equity interest in the SIV; however, it maintains the power to direct the activities of the SIV that most significantly impact the entity's economic performance and bears the obligation to absorb economic losses that could potentially be significant to the SIV. The SIV meets the definition of a VIE and accordingly, the Direct Investment business, as primary beneficiary, consolidates the SIV.

- Definition

Disclosure of variable interest entities (VIE), including, but not limited to the nature, purpose, size, and activities of the VIE, the carrying amount and classification of consolidated assets that are collateral for the VIE's obligations, lack of recourse if creditors (or beneficial interest holders) of a consolidated VIE have no recourse to the general credit of the primary beneficiary. An enterprise that holds a significant variable interest in a VIE but is not the primary beneficiary may disclose the nature of its involvement with the VIE and when that involvement began, the nature, purpose, size, and activities of the VIE and the enterprise's maximum exposure to loss as a result of its involvement with the VIE.

+ References+ Details

Derivatives and Hedge Accounting

12 Months Ended

Dec. 31, 2010

Derivatives and Hedge Accounting

Derivatives and Hedge Accounting

12. Derivatives and Hedge Accounting

AIG uses derivatives and other financial instruments as part of its financial risk management programs and as part of its investment operations. AIGFP had also transacted in derivatives as a dealer and had acted as an intermediary between the relevant AIG subsidiary and the counterparty. In a number of situations, AIG has replaced AIGFP with AIG Markets for purposes of acting as an intermediary between the AIG subsidiary and the third-party counterparty as part of the wind-down of AIGFP's portfolios.

Derivatives are financial arrangements among two or more parties with returns linked to or "derived" from some underlying equity, debt, commodity, or other asset, liability, or foreign exchange rate or other index or the occurrence of a specified payment event. Derivative payments may be based on interest rates, exchange rates, prices of certain securities, commodities, or financial or commodity indices or other variables. Derivatives, with the exception of bifurcated embedded derivatives, are reflected on the Consolidated Balance Sheet in Unrealized gain on swaps, options and forward transactions, at fair value and Unrealized loss on swaps, options and forward contracts, at fair value. A bifurcated embedded derivative is recorded at fair value whereas the corresponding host contract is recorded on an amortized cost basis. A bifurcated embedded derivative is presented with the host contract on the Consolidated Balance Sheet.

The following table presents the notional amounts and fair values of AIG's derivative instruments:

		December 31, 2010								December 31, 2009


		Gross Derivative Assets				Gross Derivative Liabilities				Gross Derivative Assets				Gross Derivative Liabilities
(in millions)		Notional Amount^(a)		Fair Value^(b)		Notional Amount^(a)		Fair Value^(b)		Notional Amount^(a)		Fair Value^(b)		Notional Amount^(a)		Fair Value^(b)

Derivatives designated as hedging instruments:
	Interest rate contracts^(c)	$	1,471	$	156	$	626	$	56	$	10,612	$	2,129	$	3,884	$	375
Derivatives not designated as hedging instruments:
	Interest rate contracts^(c)		150,966		14,048		118,783		9,657		345,614		27,451		300,847		23,718
	Foreign exchange contracts		2,495		203		4,105		338		16,662		720		9,719		939
	Equity contracts		5,002		358		1,559		329		8,175		1,184		7,713		1,064
	Commodity contracts		944		92		768		67		759		883		381		373
	Credit contracts		2,046		379		62,715		4,180		3,706		1,210		190,275		5,815
	Other contracts		27,333		1,075		16,297		753		34,605		928		23,310		1,101

Total derivatives not designated as hedging instruments			188,786		16,155		204,227		15,324		409,521		32,376		532,245		33,010

Total derivatives		$	190,257	$	16,311	$	204,853	$	15,380	$	420,133	$	34,505	$	536,129	$	33,385

(a): Notional amount represents a standard of measurement of the volume of derivatives business of AIG. Notional amount is generally not a quantification of market risk or credit risk and is not recorded on the Consolidated Balance Sheet. Notional amounts generally represent those amounts used to calculate contractual cash flows to be exchanged and are not paid or received, except for certain contracts such as currency swaps and certain credit contracts. For credit contracts, notional amounts are net of all underlying subordination.
(b): Fair value amounts are shown before the effects of counterparty netting adjustments and offsetting cash collateral.
(c): Includes cross currency swaps.

The following table presents the fair values of derivative assets and liabilities on the Consolidated Balance Sheet:

		December 31, 2010										December 31, 2009


		Derivative Assets					Derivative Liabilities^(a)					Derivative Assets^(b)					Derivative Liabilities^(c)
(in millions)		Notional Amount		Fair Value			Notional Amount		Fair Value			Notional Amount		Fair Value			Notional Amount		Fair Value

Capital Markets derivatives		$	168,033	$	12,268		$	173,226	$	12,379		$	400,223	$	31,951		$	499,821	$	30,930
All other derivatives			22,224		4,043			31,627		3,001			19,910		2,554			36,308		2,455

	Total derivatives, gross	$	190,257		16,311		$	204,853		15,380		$	420,133		34,505		$	536,129		33,385

Counterparty netting^(d)					(6,298	)				(6,298	)				(19,054	)				(19,054	)
Cash collateral^(e)					(4,096	)				(2,902	)				(6,317	)				(8,166	)

	Total derivatives, net				5,917					6,180					9,134					6,165

Less: Bifurcated embedded derivatives^(f)					-					445					4					762

Total derivatives on balance sheet				$	5,917				$	5,735				$	9,130				$	5,403

(a): Included in all other derivatives are bifurcated embedded derivatives, which are recorded in Policyholder contract deposits Bonds available for sale, at fair value, and Common and preferred stock.
(b): Included in all other derivatives are bifurcated embedded derivatives, which are recorded in Bonds available for sale, at fair value, and Policyholder contract deposits.
(c): Included in all other derivatives are bifurcated embedded derivatives, which are recorded in Policyholder contract deposits and Common and preferred stock.
(d): Represents netting of derivative exposures covered by a qualifying master netting agreement.
(e): Represents cash collateral posted and received.

(f): Current period includes a change in valuation assumption relating to embedded policy derivatives.

Hedge Accounting

AIG designated certain derivatives entered into by AIGFP and AIG Markets with third parties as either fair value or cash flow hedges of certain debt issued by AIG Parent and ILFC. The fair value hedges included (i) interest rate swaps that were designated as hedges of the change in the fair value of fixed rate debt attributable to changes in the benchmark interest rate and (ii) foreign currency swaps designated as hedges of the change in fair value of foreign currency denominated debt attributable to changes in foreign exchange rates and in certain cases also the benchmark interest rate. With respect to the cash flow hedges, (i) interest rate swaps were designated as hedges of the changes in cash flows on floating rate debt attributable to changes in the benchmark interest rate, and (ii) foreign currency swaps were designated as hedges of changes in cash flows on foreign currency denominated debt attributable to changes in the benchmark interest rate and foreign exchange rates.

AIG assesses, both at the hedge's inception and on an ongoing basis, whether the derivatives used in hedging transactions are highly effective in offsetting changes in fair values or cash flows of hedged items. Regression analysis is employed to assess the effectiveness of these hedges both on a prospective and retrospective basis. AIG does not utilize the shortcut method to assess hedge effectiveness. For net investment hedges, a qualitative methodology is utilized to assess hedge effectiveness.

AIG uses debt instruments in net investment hedge relationships to mitigate the foreign exchange risk associated with AIG's non-U.S. dollar functional currency foreign subsidiaries. AIG assesses the hedge effectiveness and measures the amount of ineffectiveness for these hedge relationships based on changes in spot exchange rates. AIG records the change in the carrying amount of these investments in the foreign currency translation adjustment within Accumulated other comprehensive income (loss). Simultaneously, the effective portion of the hedge of this exposure is also recorded in foreign currency translation adjustment and the ineffective portion, if any, is recorded in earnings. If (i) the notional amount of the hedging debt instrument matches the designated portion of the net investment and (ii) the hedging debt instrument is denominated in the same currency as the functional currency of the hedged net investment, no ineffectiveness is recorded in earnings. For the years ended December 31, 2010 and 2009, AIG recognized gains (losses) of $28 million and $(81) million, respectively, included in Foreign currency translation adjustment in Accumulated other comprehensive loss related to the net investment hedge relationships.

The following table presents the effect of AIG's derivative instruments in fair value hedging relationships on the Consolidated Statement of Income (Loss):

Years Ended December 31, (in millions)		2010			2009



Interest rate contracts^(a)(b):
	Gain (loss) recognized in earnings on derivatives	$	196		$	(240	)
	Gain (loss) recognized in earnings on hedged items^(c)		(25	)		343
	Gain recognized in earnings for ineffective portion and amount excluded from effectiveness testing		27			87

(a): Gains and losses recognized in earnings on derivatives for the effective portion and hedged items are recorded in Other income. Gains and losses recognized in earnings on derivatives for the ineffective portion and amounts excluded from effectiveness testing are recorded in Net realized capital losses and Other income, respectively.
(b): Includes $27 million and $95 million for 2010 and 2009, respectively, related to the ineffective portion and $0 million and $(8) million for 2010 and 2009, respectively, for amounts excluded from effectiveness testing.
(c): Includes $144 million for 2010, representing the amortization of debt basis adjustment following the discontinuation of hedge accounting on certain positions.

The following table presents the effect of AIG's derivative instruments in cash flow hedging relationships on the Consolidated Statement of Income (Loss):

Years Ended December 31, (in millions)		2010			2009



Interest rate contracts^(a):
	Gain (loss) recognized in OCI on derivatives	$	(33	)	$	91
	Loss reclassified from Accumulated OCI into earnings^(b)		(84	)		(13	)
	Gain (loss) recognized in earnings on derivatives for ineffective portion		(6	)		9

(a): Gains and losses reclassified from Accumulated other comprehensive loss are recorded in Other income. Gains or losses recognized in earnings on derivatives for the ineffective portion are recorded in Net realized capital losses.
(b): The effective portion of the change in fair value of a derivative qualifying as a cash flow hedge is recorded in Accumulated other comprehensive income until earnings are affected by the variability of cash flows in the hedged item. At December 31, 2010, $55 million of the deferred net loss in Accumulated other comprehensive loss is expected to be recognized in earnings during the next 12 months.

Derivatives Not Designated as Hedging Instruments

The following table presents the effect of AIG's derivative instruments not designated as hedging instruments on the Consolidated Statement of Income (Loss):

		Gains (Losses) Recognized in Earnings


Years Ended December 31, (in millions)		Gains (Losses) Recognized in Earnings
Years Ended December 31, (in millions)		2010			2009

By Derivative Type:
	Interest rate contracts^(a)	$	254		$	726
	Foreign exchange contracts		(123	)		(578	)
	Equity contracts		4			(876	)
	Commodity contracts		1			(703	)
	Credit contracts		1,227			2,088
	Other contracts^(b)		968			1,739

Total		$	2,331		$	2,396

By Classification:
	Premiums and other considerations	$	75		$	74
	Net investment income		18			21
	Net realized capital gains		726			1,201
	Unrealized market valuation gains on Capital Markets super senior credit default swap portfolio		598			1,418
	Other income		914			(318	)

Total		$	2,331		$	2,396

(a): Includes cross currency swaps.
(b): Includes embedded derivative gains of $423 million and $1.7 billion, for the years ended December 31, 2010 and December 31, 2009, respectively.

Capital Markets Derivatives

AIGFP enters into derivative transactions to mitigate market risk in its exposures (interest rates, currencies, commodities, credit and equities) arising from its transactions. In most cases, AIGFP did not hedge its exposures related to the credit default swaps it had written. As a dealer, AIGFP structured and entered into derivative transactions to meet the needs of counterparties who may be seeking to hedge certain aspects of such counterparties' operations or obtain a desired financial exposure.

Capital Markets' derivative transactions involving interest rate swap transactions generally involve the exchange of fixed and floating rate interest payment obligations without the exchange of the underlying notional amounts. AIGFP typically became a principal in the exchange of interest payments between the parties and, therefore, is exposed to counterparty credit risk and may be exposed to loss, if counterparties default. Currency, commodity and equity swaps are similar to interest rate swaps but involve the exchange of specific currencies or cash flows based on the underlying commodity, equity securities or indices. Also, they may involve the exchange of notional amounts at the beginning and end of the transaction. Swaptions are options where the holder has the right but not the obligation to enter into a swap transaction or cancel an existing swap transaction.

AIGFP follows a policy of minimizing interest rate, currency, commodity, and equity risks associated with investment securities by entering into offsetting positions, on a security-by-security basis within its derivatives portfolio, thereby offsetting a significant portion of the unrealized appreciation and depreciation. In addition, to reduce its credit risk, AIGFP has entered into credit derivative transactions with respect to $369 million of securities to economically hedge its credit risk.

The timing and the amount of cash flows relating to Capital Markets' foreign exchange forwards and exchange traded futures and options contracts are determined by each of the respective contractual agreements.

Futures and forward contracts are contracts that obligate the holder to sell or purchase foreign currencies, commodities or financial indices in which the seller/purchaser agrees to make/take delivery at a specified future date of a specified instrument, at a specified price or yield. Options are contracts that allow the holder of the option to purchase or sell the underlying commodity, currency or index at a specified price and within, or at, a specified period of time. As a writer of options, AIGFP generally receives an option premium and then manages the risk of any unfavorable change in the value of the underlying commodity, currency or index by entering into offsetting transactions with third-party market participants. Risks arise as a result of movements in current market prices from contracted prices, and the potential inability of the counterparties to meet their obligations under the contracts.

Capital Markets Super Senior Credit Default Swaps

AIGFP entered into credit default swap transactions with the intention of earning revenue on credit exposure. In the majority of Capital Markets' credit default swap transactions, AIGFP sold credit protection on a designated portfolio of loans or debt securities. Generally, AIGFP provides such credit protection on a "second loss" basis, meaning that AIGFP would incur credit losses only after a shortfall of principal and/or interest, or other credit events, in respect of the protected loans and debt securities, exceeds a specified threshold amount or level of "first losses."

Typically, the credit risk associated with a designated portfolio of loans or debt securities has been tranched into different layers of risk, which are then analyzed and rated by the credit rating agencies. At origination, there is usually an equity layer covering the first credit losses in respect of the portfolio up to a specified percentage of the total portfolio, and then successive layers ranging generally from a BBB-rated layer to one or more AAA-rated layers. A significant majority of AIGFP transactions that were rated by rating agencies had risk layers or tranches rated AAA at origination and are immediately junior to the threshold level above which AIGFP's payment obligation would generally arise. In transactions that were not rated, AIGFP applied equivalent risk criteria for setting the threshold level for its payment obligations. Therefore, the risk layer assumed by AIGFP with respect to the designated portfolio of loans or debt securities in these transactions is often called the "super senior" risk layer, defined as a layer of credit risk senior to one or more risk layers rated AAA by the credit rating agencies, or, if the transaction is not rated, structured to be the equivalent thereto.

The following table presents the net notional amount, fair value of derivative (asset) liability and unrealized market valuation gain (loss) of the Capital Markets super senior credit default swap portfolio, including credit default swaps written on mezzanine tranches of certain regulatory capital relief transactions, by asset class:

		Net Notional Amount December 31,				Fair Value of Derivative (Asset) Liability at December 31,						Unrealized Market Valuation Gain (Loss) Year Ended December 31,


(in millions)		2010^(a)		2009^(a)		2010^(b)(c)			2009^(b)(c)			2010^(c)			2009^(c)

Regulatory Capital:
	Corporate loans	$	5,193	$	55,010	$	-		$	-		$	-		$	-
	Prime residential mortgages		31,613		93,276		(190	)		(137	)		53			137
	Other		1,263		1,760		17			21			4			35

	Total		38,069		150,046		(173	)		(116	)		57			172

Arbitrage:
	Multi-sector CDOs^(d)		6,689		7,926		3,484			4,418			663			(669	)
	Corporate debt/CLOs^(e)		12,269		22,076		171			309			(67	)		1,863

	Total		18,958		30,002		3,655			4,727			596			1,194

Mezzanine tranches^(f)			2,823		3,478		198			143			(55	)		52

Total		$	59,850	$	183,526	$	3,680		$	4,754		$	598		$	1,418

(a): Net notional amounts presented are net of all structural subordination below the covered tranches.
(b): Fair value amounts are shown before the effects of counterparty netting adjustments and offsetting cash collateral.
(c): Includes credit valuation adjustment gains (losses) of ($133) million and $52 million in the years ended December 31, 2010 and 2009, respectively, representing the effect of changes in AIG's credit spreads on the valuation of the derivatives liabilities.
(d): During 2010, AIGFP terminated a super senior CDS transaction with its counterparty with a net notional amount of $296 million, included in Multi-sector CDOs. This transaction was terminated at approximately its fair value at the time of the termination. As a result, a $202 million loss, which was previously included in the fair value derivative liability as an unrealized market valuation loss, was realized. During 2010, AIGFP also paid $69 million to its counterparty with respect to multi-sector CDOs. Upon payment, a $69 million loss, which was previously included in the fair value derivative liability as an unrealized market valuation loss, was realized. Multi-sector CDOs also include $5.5 billion and $6.3 billion in net notional amount of credit default swaps written with cash settlement provisions at December 31, 2010 and December 31, 2009, respectively.
(e): During 2010, AIGFP terminated super senior CDS transactions with its counterparties with a net notional amount of $9.3 billion, included in Corporate debt/CLOs. These transactions were terminated at approximately their fair value at the time of the termination. As a result, an $83 million loss, which was previously included in the fair value derivative liability as an unrealized market valuation loss, was realized. In addition, AIGFP made a one time payment of $122 million in 2010 to an intermediary in exchange for eliminating all future collateral posting requirements on $10.7 billion of net notional of Corporate debt transactions. Corporate debt/CLOs also include $1.3 billion and $1.4 billion in net notional amount of credit default swaps written on the super senior tranches of CLOs at December 31, 2010 and December 31, 2009, respectively.
(f): Net of offsetting purchased CDS of $1.4 billion and $1.5 billion in net notional amount at December 31, 2010 and December 31, 2009, respectively.

All outstanding CDS transactions for regulatory capital purposes and the majority of the arbitrage portfolio have cash-settled structures in respect of a basket of reference obligations, where AIGFP's payment obligations, other than for posting collateral, may be triggered by payment shortfalls, bankruptcy and certain other events such as write-downs of the value of underlying assets. For the remainder of the CDS transactions in respect of the arbitrage portfolio, AIGFP's payment obligations are triggered by the occurrence of a credit event under a single reference security, and performance is limited to a single payment by AIGFP in return for physical delivery by the counterparty of the reference security.

The expected weighted average maturity of AIGFP's super senior credit derivative portfolios as of December 31, 2010 was 1.2 years for the regulatory capital corporate loan portfolio, 3.5 years for the regulatory capital prime residential mortgage portfolio, 4.8 years for the regulatory capital other portfolio, 6.2 years for the multi-sector CDO arbitrage portfolio and 5.0 years for the corporate debt/CLO portfolio.

Regulatory Capital Portfolio

The regulatory capital portfolio represents derivatives written for financial institutions in Europe, for the purpose of providing regulatory capital relief rather than for arbitrage purposes. In exchange for a periodic fee, the counterparties receive credit protection with respect to a portfolio of diversified loans they own, thus reducing their minimum capital requirements. These CDS transactions were structured with early termination rights for counterparties allowing them to terminate these transactions at no cost to AIGFP at a certain period of time or upon a regulatory event such as certain changes to regulatory capital standards. During 2010, $84.1 billion in net notional amount was terminated or matured at no cost to AIGFP. Through February 16, 2011, AIGFP had also received termination notices for an additional $1.4 billion in net notional amount with effective termination dates in 2011.

The regulatory capital relief CDS transactions require cash settlement and, other than for collateral posting, AIGFP is required to make a payment in connection with a regulatory capital relief transaction only if realized credit losses in respect of the underlying portfolio exceed AIGFP's attachment point.

All of the regulatory capital transactions directly or indirectly reference tranched pools of large numbers of whole loans that were originated by the financial institution (or its affiliates) receiving the credit protection, rather than structured securities containing loans originated by other third parties. In the vast majority of transactions, the loans are intended to be retained by the originating financial institution and in all cases the originating financial institution is the purchaser of the CDS, either directly or through an intermediary.

The super senior tranches of these CDS transactions continue to be supported by high levels of subordination, which, in most instances, have increased since origination. The weighted average subordination supporting the prime residential mortgage and corporate loan referenced portfolios at December 31, 2010 was 14.31 percent and 27.70 percent, respectively. The highest realized losses to date in any single residential mortgage and corporate loan pool were 2.61 percent and 0.52 percent, respectively. Each of the corporate loan transactions consists of several hundred secured and unsecured loans diversified by industry and, in some instances, by country, and have per-issuer concentration limits. Both types of transactions generally allow some substitution and replenishment of loans, subject to defined constraints, as older loans mature or are prepaid. These replenishment rights generally expire within the first few years of the trade, after which the proceeds of any prepaid or maturing loans are applied first to the super senior tranche (sequentially), thereby increasing the relative level of subordination supporting the balance of AIGFP's super senior CDS exposure.

The regulatory benefit of these transactions for AIGFP's financial institution counterparties are generally derived from the capital regulations promulgated by the Basel Committee on Banking Supervision known as Basel I. In December 2010, the Basel Committee on Banking Supervision finalized a new framework for international capital and liquidity standards known as Basel III, which, when fully implemented, may reduce or eliminate the regulatory benefits to certain counterparties from these transactions and thus may impact the period of time that such counterparties are expected to hold the positions. In prior years, it had been expected that financial institution counterparties would complete a transition from Basel I to an intermediate standard known as Basel II, which could have had similar effects on the benefits of these transactions, at the end of 2009. Basel III has now superseded Basel II, but the details of its implementation by the various European Central Banking districts have not been finalized. Should certain counterparties continue to receive favorable regulatory capital benefits from these transactions, those counterparties may not exercise their options to terminate the transactions in the expected time frame. AIGFP continues to reassess the expected maturity of this portfolio. As of December 31, 2010, AIGFP estimated that the weighted average expected maturity of the portfolio was 3.16 years.

Given the current performance of the underlying portfolios, the level of subordination and AIGFP's own assessment of the credit quality of the underlying portfolio, as well as the risk mitigants inherent in the transaction structures, AIGFP does not expect that it will be required to make payments pursuant to the contractual terms of those transactions providing regulatory relief.

Arbitrage Portfolio

The arbitrage portfolio includes arbitrage-motivated transactions written on multi-sector CDOs or designated pools of investment grade senior unsecured corporate debt or CLOs.

The outstanding multi-sector CDO portfolio at December 31, 2010 was written on CDO transactions (including synthetic CDOs) that generally held a concentration of RMBS, CMBS and inner CDO securities. At December 31, 2010, approximately $3.2 billion net notional amount (fair value liability of $1.9 billion) of this portfolio was written on super senior multi-sector CDOs that contain some level of sub-prime RMBS collateral, with a concentration in the 2005 and earlier vintages of sub-prime RMBS. AIGFP's portfolio also included both high grade and mezzanine CDOs.

The majority of multi-sector CDO CDS transactions require cash settlement and, other than for collateral posting, AIGFP is required to make a payment in connection with such transactions only if realized credit losses in respect of the underlying portfolio exceed AIGFP's attachment point. As of December 31, 2010, only one transaction, with a net notional amount of $389 million, has breached its attachment point. AIGFP has paid a total of $69 million on this trade all of which was paid in 2010. In the remainder of the portfolio, AIGFP's payment obligations are triggered by the occurrence of a credit event under a single reference security, and performance is limited to a single payment by AIGFP in return for physical delivery by the counterparty of the reference security.

Included in the multi-sector CDO portfolio are 2a-7 Puts. Holders of securities are required, in certain circumstances, to tender their securities to the issuer at par. If an issuer's remarketing agent is unable to resell the securities so tendered, AIGFP must purchase the securities at par so long as the security has not experienced a payment default or certain bankruptcy events with respect to the issuer of such security have not occurred. At December 31, 2009, there were $1.6 billion of net notional amount of 2a-7 Puts issued by AIGFP outstanding. During 2010, AIGFP terminated all 2a-7 Puts in respect of notes held by holders other than AIGFP and its affiliates. AIGFP is not a party to any commitments to issue any additional 2a-7 Puts.

The corporate arbitrage portfolio consists principally of CDS transactions written on portfolios of senior unsecured corporate obligations that were generally rated investment grade at inception of the CDS. These CDS transactions require cash settlement. Also, included in this portfolio are CDS transactions with a net notional amount of $1.3 billion written on the senior part of the capital structure of CLOs, which require physical settlement.

Certain of the super senior credit default swaps provide the counterparties with an additional termination right if AIG's rating level falls to BBB or Baa2. At that level, counterparties to the CDS transactions with a net notional amount of $1.6 billion at December 31, 2010 have the right to terminate the transactions early. If counterparties exercise this right, the contracts provide for the counterparties to be compensated for the cost to replace the transactions, or an amount reasonably determined in good faith to estimate the losses the counterparties would incur as a result of the termination of the transactions.

Because of long-term maturities of the CDS in the arbitrage portfolio, AIG is unable to make reasonable estimates of the periods during which any payments would be made. However, the net notional amount represents the maximum exposure to loss on the super senior credit default swap portfolio.

Collateral

Most of AIGFP's super senior credit default swaps are subject to collateral posting provisions, which typically are governed by International Swaps and Derivatives Association, Inc. (ISDA) Master Agreements (Master Agreements) and related Credit Support Annexes (CSA). These provisions differ among counterparties and asset classes. AIGFP has received collateral calls from counterparties in respect of certain super senior credit default swaps, of which a large majority relate to multi-sector CDOs. To a lesser extent, AIGFP has also received collateral calls in respect of certain super senior credit default swaps entered into by counterparties for regulatory capital relief purposes and in respect of corporate arbitrage.

The amount of future collateral posting requirements is a function of AIG's credit ratings, the rating of the reference obligations and the market value of the relevant reference obligations, with the latter being the most significant factor. While a high level of correlation exists between the amount of collateral posted and the valuation of these contracts in respect of the arbitrage portfolio, a similar relationship does not exist with respect to the regulatory capital portfolio given the nature of how the amount of collateral for these transactions is determined. Given the lack of observable data and the uncertainty regarding the potential effects on market prices of measures undertaken by the federal government to address the credit market disruption, AIGFP is unable to reasonably estimate the amounts of collateral that it may be required to post in the future.

At December 31, 2010 and December 31, 2009, the amounts of collateral postings with respect to AIGFP's super senior credit default swap portfolio (prior to offsets for other transactions) were $3.8 billion and $4.6 billion, respectively.

AIGFP Written Single Name Credit Default Swaps

AIGFP has also entered into credit default swap contracts referencing single-name exposures written on corporate, index and asset-backed credits, with the intention of earning spread income on credit exposure. Some of these transactions were entered into as part of a long-short strategy allowing AIGFP to earn the net spread between CDS it wrote and ones it purchased. At December 31, 2010, the net notional amount of these written CDS contracts was $377 million. AIGFP has hedged these exposures by purchasing offsetting CDS contracts of $188 million in net notional amount. The net unhedged position of approximately $189 million represents the maximum exposure to loss on these CDS contracts. The average maturity of the written CDS contracts is 13.36 years. At December 31, 2010, the fair value of derivative liability (which represents the carrying value) of the portfolio of CDS was $9 million.

Upon a triggering event (e.g., a default) with respect to the underlying credit, AIGFP would normally have the option to settle the position through an auction process (cash settlement) or pay the notional amount of the contract to the counterparty in exchange for a bond issued by the underlying credit obligor (physical settlement).

AIGFP wrote these written CDS contracts under Master Agreements. The majority of these Master Agreements include CSA, which provide for collateral postings at various ratings and threshold levels. At December 31, 2010, AIGFP had posted $21 million of collateral under these contracts.

All Other Derivatives

AIG's non-Capital Markets businesses also use derivatives and other instruments as part of their financial risk management programs. Interest rate derivatives (such as interest rate swaps) are used to manage interest rate risk associated with investments in fixed income securities, outstanding medium- and long-term notes and other interest rate sensitive assets and liabilities. In addition, foreign exchange derivatives (principally foreign exchange forwards and options) are used to economically mitigate risk associated with non-U.S. dollar denominated debt, net capital exposures and foreign exchange transactions. The derivatives are effective economic hedges of the exposures they are meant to offset.

In addition to hedging activities, AIG also uses derivative instruments with respect to investment operations, which include, among other things, credit default swaps and purchasing investments with embedded derivatives, such as equity linked notes and convertible bonds.

Matched Investment Program Written Credit Default Swaps

AIG's Matched Investment Program (MIP) operations, which are reported in AIG's Other operations category as part of Asset Management — Direct Investment business, are currently in run-off. Through the MIP, AIG has entered into CDS contracts as a writer of protection, with the intention of earning spread income on credit exposure in an unfunded form. The portfolio of CDS contracts were single-name exposures and, at inception, were predominantly high-grade corporate credits.

These contracts were written through AIG Markets, which then transacted directly with unaffiliated third parties under ISDA agreements. As of December 31, 2010, the notional amount of written CDS contracts was $1.9 billion with an average credit rating of BBB+. At that date, the average maturity of the written CDS contracts was 1.2 years and the fair value of the derivative liability (which represents the carrying value) of the MIP's written CDS was $25.4 million.

The majority of the ISDA agreements include CSA provisions, which provide for collateral postings at various ratings and threshold levels. At December 31, 2010, $1.8 million of collateral was posted for CDS contracts related to the MIP. The notional amount represents the maximum exposure to loss on the written CDS contracts. However, because of the average investment grade rating and expected default recovery rates, actual losses are expected to be less.

Upon a triggering event (e.g., a default) with respect to the underlying credit, AIG Markets would normally have the option to settle the position on behalf of the MIP through an auction process (cash settlement) or pay the notional amount of the contract to the counterparty in exchange for a bond issued by the underlying credit (physical settlement).

Credit Risk-Related Contingent Features

AIG transacts in derivative transactions directly with unaffiliated third parties under ISDA agreements. Many of the ISDA agreements also include CSA provisions, which provide for collateral postings at various ratings and threshold levels. In addition, AIG attempts to reduce credit risk with certain counterparties by entering into agreements that enable collateral to be obtained from a counterparty on an upfront or contingent basis.

The aggregate fair value of AIG's derivative instruments, including those of AIGFP, that contain credit risk-related contingent features that were in a net liability position at December 31, 2010, was approximately $5.2 billion. The aggregate fair value of assets posted as collateral under these contracts at December 31, 2010, was $5.2 billion. See Note 6 herein.

AIG estimates that at December 31, 2010, based on AIG's outstanding financial derivative transactions, including those of AIGFP at that date, a one-notch downgrade of AIG's long-term senior debt ratings to Baa1 by Moody's Investors Service (Moody's) and BBB+ by Standard & Poor's Financial Services LLC, a subsidiary of The McGraw-Hill Companies, Inc. (S&P), would permit counterparties to make additional collateral calls and permit the counterparties to elect early termination of contracts, resulting in up to approximately $0.7 billion of corresponding collateral postings and termination payments; a two-notch downgrade to Baa2 by Moody's and BBB by S&P would result in approximately $0.4 billion in additional collateral postings and termination payments above the one-notch downgrade amount; and a three-notch downgrade to Baa3 by Moody's and BBB- by S&P would result in approximately $0.2 billion in additional collateral postings and termination payments above the two-notch downgrade amount. Additional collateral postings upon downgrade are estimated based on the factors in the individual collateral posting provisions of the CSA with each counterparty and current exposure as of December 31, 2010. Factors considered in estimating the termination payments upon downgrade include current market conditions, the complexity of the derivative transactions, historical termination experience and other observable market events such as bankruptcy and downgrade events that have occurred at other companies. Management's estimates are also based on the assumption that counterparties will terminate based on their net exposure to AIG. The actual termination payments could significantly differ from management's estimates given market conditions at the time of downgrade and the level of uncertainty in estimating both the number of counterparties who may elect to exercise their right to terminate and the payment that may be triggered in connection with any such exercise.

Hybrid Securities with Embedded Credit Derivatives

AIG invests in hybrid securities (credit-linked notes). Upon the issuance of credit-linked notes, the cash received by the issuer is generally used to invest in highly rated securities in addition to entering into a derivative contract that exchanges the return on its highly-rated securities for the return on a separate portfolio of assets. The investments owned by the issuer serve as collateral for the derivative instrument written by the issuer. The return on the separate portfolio received by the issuer is used to pay the return owed on the credit-linked notes. These hybrid securities expose AIG to risks similar to the risks in RMBS, CMBS, CDOs and ABS, but such risk is derived from the separate portfolio rather than from direct mortgage or loan investments owned by the issuer. As with other investments in RMBS, CMBS, CDOs and other ABS, AIG invested in these hybrid securities with the intent of generating income, and not specifically to acquire exposure to embedded derivative risk. Similar to AIG's other investments in RMBS, CMBS, CDOs and ABS, AIG's investments in these hybrid securities are exposed to losses only up to the amount of AIG's initial investment in the hybrid security, as losses on the derivative contract will be paid via the collateral held by the entity that issues the hybrid security. Losses on the embedded derivative contracts may be triggered by events such as bankruptcy, failure to pay or restructuring associated with the obligations referenced by the derivative, and these losses in turn result in the reduction of the principal amount to be repaid to AIG and other investors in the hybrid securities. Other than AIG's initial investment in the hybrid securities, AIG has no further obligation to make payments on the embedded credit derivatives in the related hybrid securities.

Effective July 1, 2010, AIG elected to account for its investments in these hybrid securities with embedded written credit derivatives at fair value, with changes in fair value recognized in earnings. Through June 30, 2010, these hybrid securities had been accounted for as available for sale securities, and had been subject to other than temporary impairment accounting as applicable.

AIG's investments in these hybrid securities are reported as Bond trading securities on the Consolidated Balance Sheet. The fair value of these hybrid securities was $35 million at December 31, 2010. These securities have a current par amount of $331 million and have remaining stated maturity dates that extend to 2056.

Debt Outstanding

12 Months Ended

Dec. 31, 2010

Debt Outstanding

Debt Outstanding

15. Debt Outstanding

The following table summarizes AIG's total debt outstanding:

At December 31, (in millions)	2010		2009



FRBNY Credit Facility (secured)	$	20,985	$	23,435
Other long-term debt		85,476		113,298
Federal Reserve Bank of New York commercial paper funding facility		-		4,739

Total debt	$	106,461	$	141,472

AIG has issued long-term debt denominated in various currencies, although predominantly in U.S. dollars, with both fixed and variable interest rates.

The following table presents maturities of long-term debt (including unamortized original issue discount, hedge accounting valuation adjustments and fair value adjustments, when applicable), excluding borrowings of consolidated investments:

At December 31, 2010 (in millions)				Year Ending


At December 31, 2010 (in millions)		Total		2011		2012		2013		2014		2015		Thereafter

AIG general borrowings:
	FRBNY Credit Facility^(a)	$	20,985	$	-	$	-	$	20,985	$	-	$	-	$	-
	Notes and bonds payable		11,511		618		27		1,467		500		998		7,901
	Junior subordinated debt		11,740		-		-		-		-		-		11,740
	Junior subordinated debt attributable to equity units		2,169		-		-		-		-		-		2,169
	Loans and mortgages payable		218		146		-		-		-		2		70
	SunAmerica Financial Group, Inc. (SAFG, Inc.) notes and bonds payable		298		-		-		-		-		-		298
	Liabilities connected to trust preferred stock		1,339		-		-		-		-		-		1,339

Total AIG general borrowings			48,260		764		27		22,452		500		1,000		23,517

AIG borrowings supported by assets:
	MIP notes payable		11,318		3,073		2,277		869		437		405		4,257
	Series AIGFP matched notes and bonds payable		3,981		28		50		3		-		-		3,900
	GIAs, at fair value		8,212		450		268		310		677		586		5,921
	Notes and bonds payable, at fair value		3,253		612		815		171		76		221		1,358
	Loans and mortgages payable, at fair value		678		157		224		78		90		-		129

Total AIG borrowings supported by assets			27,442		4,320		3,634		1,431		1,280		1,212		15,565

ILFC^(b):
	Notes and bonds payable		16,908		4,544		3,571		3,541		1,040		1,260		2,952
	Junior subordinated debt		999		-		-		-		-		-		999
	ECA Facilities^(c)		2,778		442		429		429		424		336		718
	Bank financings and other secured financings^(d)		7,014		249		1,480		16		1,387		760		3,122

Total ILFC			27,699		5,235		5,480		3,986		2,851		2,356		7,791

Other subsidiaries^(b)			446		4		3		3		3		21		412

Total		$	103,847	$	10,323	$	9,144	$	27,872	$	4,634	$	4,589	$	47,285

(a): The FRBNY Credit Facility was fully repaid and terminated in January 2011 in connection with the closing of the Recapitalization.
(b): AIG does not guarantee these borrowings.
(c): Reflects future minimum payment for ILFC's borrowings under the 1999 and 2004 ECA Facilities
(d): Includes $114 million of secured financings that are non-recourse to ILFC. Prior to April 16, 2010, ILFC had a $2.5 billion five-year syndicated facility which was scheduled to expire in October 2011. On April 16, 2010, ILFC extended the maturity date of $2.16 billion of its $2.5 billion revolving credit facility from October 2011 to October 2012. In December 2010, ILFC paid down $800 million on its revolving credit facility. The amended facility prohibits ILFC from re-borrowing amounts repaid under this facility for any reason; therefore the size of the outstanding facility is $1.7 billion.

AIG General Borrowings

(i) FRBNY Credit Facility: On September 22, 2008, AIG entered into the $85 billion FRBNY Credit Agreement and a Guarantee and Pledge Agreement (the Pledge Agreement) with the FRBNY.

At December 31, 2010, a total of $21.0 billion was outstanding under the FRBNY Credit Facility, a net decrease of $2.5 billion from December 31, 2009. The amount outstanding at December 31, 2010 included $6.4 billion of accrued compounding interest and fees. On January 14, 2011, AIG used cash proceeds from the AIA initial public offering and the sale of ALICO to fully repay and terminate the FRBNY Credit Facility in connection with the closing of the Recapitalization. See Note 1 to the Consolidated Financial Statements for additional information.

Department of the Treasury Commitment: At December 31, 2010 a total of $7.5 billion was outstanding under the Department of the Treasury Commitment (Series F), an increase of $2.2 billion from December 31, 2009. On January 14, 2011 AIG drew down approximately $20.3 billion under this (Series F) Commitment to purchase a portion of the SPV Preferred Interests that were exchanged with the Department of the Treasury. In connection with the closing of the Recapitalization, $2 billion under the (Series F) Commitment was exchanged for the Series G Drawdown Right, and the Series G Drawdown Right became effective on that date. See Note 1 to the Consolidated Financial Statements for additional information.

(ii) Notes and bonds payable: In the fourth quarter of 2010, AIG raised approximately $2.5 billion in senior debt and contingent liquidity. AIG issued an aggregate of $2.0 billion in senior unsecured notes, comprised of $500 million in three-year notes and $1.5 billion in ten-year notes.

As of December 31, 2010, approximately $7.0 billion principal amount of senior notes were outstanding under AIG's medium-term note program, of which $3.2 billion was used for AIG's general corporate purposes, $453 million was used by AIGFP ("Series AIGFP matched notes and bonds payable" in the preceding tables) and $3.2 billion was used to fund the MIP. The maturity dates of these notes range from 2011 to 2052. To the extent considered appropriate, AIG may enter into swap transactions to manage its effective borrowing rates with respect to these notes.

As of December 31, 2010, the equivalent of $9.9 billion of notes were outstanding under AIG's Euro medium-term note program, of which $8.1 billion were used to fund MIP and the remainder was used for AIG's general corporate purposes. The aggregate amount outstanding includes a $602 million loss resulting from foreign exchange translation into U.S. dollars related to notes issued to fund the MIP. AIG has economically hedged the currency exposure arising from its foreign currency denominated notes.

AIG maintains a shelf registration statement in Japan, providing for the issuance of up to 300 billion Japanese Yen ($3.7 billion at the December 31, 2010 exchange rate) principal amount of senior notes, of which the equivalent of $618 million was outstanding at December 31, 2010.

(iii) Junior subordinated debt: During 2007 and 2008, AIG issued an aggregate of $12.5 billion of junior subordinated debentures denominated in U.S. dollars, British Pounds and Euros in eight series of securities. In connection with each series of junior subordinated debentures, AIG entered into a Replacement Capital Covenant (RCC) for the benefit of the holders of AIG's 6.25 percent senior notes due 2036. The RCCs provide that AIG will not repay, redeem, or purchase the applicable series of junior subordinated debentures on or before a specified date, unless AIG has received qualifying proceeds from the sale of replacement capital securities.

In May 2008, as adjusted for the one-for-twenty reverse split of AIG's Common Stock effective June 30, 2009, AIG raised a total of approximately $20 billion through the sale of (i) 9,835,526 shares of AIG Common Stock, in a public offering at a price per share of $760; (ii) 78.4 million Equity Units in a public offering at a price per unit of $75; and (iii) $6.9 billion in unregistered offerings of junior subordinated debentures in three series. The Equity Units and junior subordinated debentures receive hybrid equity treatment from the major rating agencies under their current policies but are recorded as long-term debt on the Consolidated Balance Sheet. The Equity Units consist of an ownership interest in AIG junior subordinated debentures and a stock purchase contract obligating the holder of an equity unit to purchase, and obligating AIG to sell, a variable number of shares of AIG Common Stock on three dates in 2011 (a minimum of 6,447,224 shares and a maximum of 7,736,904 shares, subject to anti-dilution adjustments).

In November 2010, AIG exchanged 49,474,600 of its Equity Units for 4,881,667 shares of AIG Common Stock plus $162 million in cash. Each Equity Unit was exchanged for 0.09867 shares of AIG Common Stock plus $3.2702 in cash. The stock and cash received by the Equity Unit holders was the result of netting payments from two separate transactions, a repurchase of the subordinated debentures and a cancellation of the stock purchase contracts.

Following the completion of the exchange offer, a total of 28,925,400 Equity Units remained outstanding. In addition, the remaining debentures continue to be subject to remarketing. In January 2011, AIG remarketed the first of three series of the remaining debentures connected to the Equity Units. AIG purchased and retired all of the Series B-1 Debentures representing approximately $723 million aggregate principal amount of the Series B-1 Debentures and as a result, no Series B-1 Debentures remain outstanding. The remarketing of the remaining debentures connected to the Equity Units will occur later in 2011.

SunAmerica Financial Group, Inc. (SAFG Inc.) (Formerly AIG Life Holdings (U.S.), Inc.)

At December 31, 2010, SAFG, Inc. notes and bonds payable aggregating $298 million were outstanding with maturity dates ranging from 2025 to 2029 at interest rates from 6.625 percent to 7.50 percent. AIG guarantees the notes and bonds of SAFG, Inc.

Liabilities Connected to Trust Preferred Stock

In connection with its acquisition of SAFG, Inc. in 2001, AIG entered into arrangements with SAFG, Inc. with respect to outstanding SAFG, Inc. capital securities. In 1996, SAFG, Inc. issued capital securities through a trust to institutional investors and funded the trust with SAFG, Inc. junior subordinated debentures issued to the trust. SAFG, Inc. guaranteed payments to the holders of capital securities only to the extent (i) the trust received payments on the debentures and (ii) these payments were available for the trust to pay to holders of capital securities. In 2001, AIG guaranteed the same payments to the holders of capital securities. Like the SAFG, Inc. guarantee, the AIG guarantee only applies to any payments actually made to the trust in respect of the debentures. If no payments are made on the debentures, AIG is not required to make any payments to the trust. AIG also guaranteed the debentures pursuant to a guarantee that is expressly subordinated to certain SAFG, Inc. senior debt securities. Under AIG's guarantee, AIG is not required to make any payments in respect of the debentures if such payment would be prohibited by the subordination provisions of the debentures. As a result, AIG will never be required to make a payment under its guarantee of the debentures for so long as SAFG, Inc. is prohibited from making a payment on the debentures.

At December 31, 2010, the preferred stock outstanding consisted of $300 million liquidation value of 8.5 percent preferred stock issued by American General Capital II in June 2000, $500 million liquidation value of 8.125 percent preferred stock issued by American General Institutional Capital B in March 1997 and $500 million liquidation value of 7.57 percent preferred stock issued by American General Institutional Capital A in December 1996.

AIG Borrowings Supported by Assets

(i) Series AIGFP matched notes and bonds payable: At December 31, 2010, AIG has outstanding $3.25 billion principal amount of senior unsecured notes that were issued in a Rule 144A/Regulation S offering which bear interest at a per annum rate of 8.25 percent and mature in 2018. The proceeds from the sale of these notes were used by the Direct Investment business for its general corporate purposes. In addition, the Direct Investment business has used $453 million of senior notes outstanding under AIG's medium-term note program. These notes are included within "Series AIGFP matched notes and bonds payable" in the preceding tables.

(ii) GIAs at fair value: Borrowings under obligations of GIAs, which are guaranteed by AIG, are recorded at fair value. Obligations may be called at various times prior to maturity at the option of the counterparty. Interest rates on these borrowings are primarily fixed, vary by maturity and range up to 9.8 percent.

At December 31, 2010, the fair value of securities pledged as collateral with respect to these obligations approximated $5.7 billion consisting primarily of securities of U.S. government and government sponsored entities.

(iii) Notes and bonds payable at fair value: Direct Investment business notes and bonds also include structured debt instruments whose payment terms are linked to one or more financial or other indices (such as an equity index or commodity index or another measure that is not considered to be clearly and closely related to the debt instrument). These notes contain embedded derivatives that otherwise would be required to be accounted for separately. The notes and bonds payable, including the structured debt instruments, are accounted for using the fair value option.

The following table presents AIG borrowings supported by assets:

		Currency			U.S. Dollar Carrying Value



2011 - 2054		U.S. dollar	0.26 - 10.00	%	$	16,533
2011 - 2047		Euro	0.98 - 9.74			5,327
2011 - 2040		Japanese yen	0.01 - 3.65			2,958
2011 - 2017		Swiss franc	0.78 - 3.39			1,435
2014		Canadian dollar	4.90			438
2016 - 2017		Mexican peso	7.98 - 8.59			315
2012		Swedish krona	2.03			297
2011 - 2017		Australian dollar	1.54 - 2.65			85
2013		Great Britain pound	1.10			44
2012 - 2017		Other				10

	Total				$	27,442

The Direct Investment business economically hedges its notes, bonds and GIAs. AIG Parent guarantees all Direct Investment business debt, except for MIP notes payable, which are direct obligations of AIG, Inc.

ILFC

(i) Notes and bonds payable: At December 31, 2010, notes aggregating $16.9 billion were outstanding, consisting of $6.9 billion of term notes, $10.0 billion of medium-term notes with maturities ranging from 2011 to 2020 and interest rates ranging from 0.61 percent to 8.88 percent and $1.0 billion of junior subordinated debt, as discussed below. Notes aggregating $2.0 billion are at floating interest rates and the remainder are at fixed rates. ILFC enters into swap transactions to manage its effective borrowing rates with respect to these notes.

On December 7, 2010, ILFC issued $1.0 billion aggregate principal amount of 8.25 percent senior notes due December 15, 2020.

On August 20, 2010, ILFC issued $500 million aggregate principal amount of 8.875 percent senior notes due September 1, 2017. Part of the proceeds from this debt issuance was used to repay loans from AIG, and then used by AIG to reduce the principal amount outstanding under the FRBNY Credit Facility.

On March 22, 2010 and April 6, 2010, ILFC issued a combined $1.25 billion aggregate principal amount of 8.625 percent senior notes due September 15, 2015, and $1.5 billion aggregate principal amount of 8.750 percent senior notes due March 15, 2017 in private placements. The notes are due in full on their scheduled maturity dates.

In 2009, ILFC entered into term loan agreements (the Term Loans) with AIG Funding in the amount of $3.9 billion. The Term Loans were secured by a portfolio of aircraft and all related equipment and leases. These Term Loans were scheduled to mature on September 13, 2013. The funds for the Term Loans were provided to AIG Funding through the FRBNY Credit Facility. ILFC prepaid the principal balance and an accrued interest amount of approximately $4.0 billion due under the Term Loans on August 20, 2010.

In addition, ILFC has a Euro medium-term note program for $7.0 billion, under which $1.2 billion in notes were outstanding at December 31, 2010. Notes issued under the Euro medium-term note program are included in ILFC notes and bonds payable in the preceding table of borrowings. ILFC has substantially eliminated the currency exposure arising from foreign currency denominated notes by hedging the note exposure through swaps.

(ii) Subordinated debt: In December 2005, ILFC issued two tranches of subordinated debt totaling $1.0 billion. Both tranches mature on December 21, 2065, but each tranche has a different call option. The $600 million tranche had a call option date of December 21, 2010, and the $400 million tranche has a call option date of December 21, 2015. ILFC did not exercise the call option at December 21, 2010 and the interest rate on the $600 million tranche changed from a fixed interest rate of 5.90 percent to a floating rate with an initial credit spread of 1.55 percent plus the highest of (i) 3 month LIBOR; (ii) 10-year constant maturity treasury; and (iii) 30-year constant maturity treasury. The interest rate will reset quarterly. The $400 million tranche has a fixed interest rate of 6.25 percent until the 2015 call option date, and, if ILFC does not exercise the call option, the interest rate will change to a floating rate, reset quarterly, based on the initial credit spread of 1.80 percent plus the highest of (i) 3 month LIBOR; (ii) 10-year constant maturity treasury; and (iii) 30-year constant maturity treasury. If ILFC chooses to redeem the $600 million tranche, they must pay 100 percent of the principal amount of the bonds being redeemed, plus any accrued and unpaid interest to the redemption date. If ILFC chooses to redeem only a portion of the outstanding bonds, at least $50 million principal amount of the bonds must remain outstanding.

(iii) Export credit agency facility: ILFC has a $4.3 billion 1999 Export Credit Agency Facility (1999 ECA Facility) that was used in connection with the purchase of 62 Airbus aircraft delivered through 2001. This facility is guaranteed by various European Export Credit Agencies. The interest rate varies from 5.83 percent to 5.86 percent on these amortizing ten-year borrowings depending on the delivery date of the aircraft. At December 31, 2010, ILFC had five loans with a remaining principal balance of $13 million outstanding under this facility and the net book value of the related aircraft was $1.6 billion. At December 31, 2009, ILFC had 32 loans with a remaining principal balance of $146 million outstanding under this facility. The net book value of the related aircraft was $1.8 billion. In January 2011, all of the amounts under the five remaining loans were repaid in full and no amounts remained outstanding under the 1999 ECA Facility.

ILFC has a similarly structured 2004 Export Credit Agency Facility (2004 ECA Facility), which was amended in May 2009 to allow ILFC to borrow up to a maximum of $4.6 billion to fund the purchase of Airbus aircraft delivered through June 30, 2010. This facility is also guaranteed by various European Export Credit Agencies. The interest rates are either LIBOR based with spreads ranging from (0.04) percent to 2.25 percent or at fixed rates ranging from 3.40 percent to 4.71 percent. At December 31, 2010, ILFC had financed 76 aircraft using approximately $4.3 billion under this facility and approximately $2.8 billion was outstanding. At December 31, 2009, ILFC had financed 66 aircraft using approximately $4.0 billion under this facility and approximately $2.9 billion was outstanding. At December 31, 2010, the interest rate of the loans outstanding ranged from 0.43 percent to 4.71 percent. At December 31, 2009, the interest rate of the loans outstanding ranged from 0.45 percent to 4.71 percent. The debt is collateralized by a pledge of shares of a subsidiary of ILFC, which holds title to the aircraft financed under the facility. At December 31, 2010, the net book value of the related aircraft was $4.3 billion. At December 31, 2009, the net book value of the related aircraft was $4.0 billion.

ILFC borrowed $327 million to refinance five aircraft and finance five new aircraft under the 2004 ECA Facility during 2010. ILFC's current credit ratings require (i) the segregation of security deposits, maintenance reserves and rental payments received for aircraft funded under its 2004 ECA Facilities into separate accounts, controlled by the trustees of the 2004 ECA Facilities; and (ii) the filings of individual mortgages on the aircraft funded under the facility in the respective local jurisdictions in which the aircraft is registered. At December 31, 2010, ILFC had segregated security deposits, maintenance reserves and rental payments aggregating $394 million related to such aircraft. Segregated rental payments are used to pay scheduled principal and interest on the 2004 ECA Facility as they become due.

During 2010, ILFC entered into agreements to cross-collateralize the two ECA Facilities. In conjunction with the agreement, ILFC agreed to an acceleration event, which would accelerate debt related to the ten aircraft financed during 2010 if, among other things, ILFC were to sell aircraft with an aggregate net book value exceeding an agreed upon amount, currently approximately $10.5 billion, within a period starting from the date of the agreement until December 31, 2012.

Borrowings with respect to these facilities are included in ILFC's notes and bonds payable in the preceding table of borrowings. New financings are no longer available to ILFC under either the 1999 or 2004 ECA facility.

(iv) Bank financings and other secured financings: At December 31, 2010, the total funded amount of ILFC's revolving credit facility was $1.7 billion, of which approximately $1.5 billion is secured. The maturity of the facility, as amended, is October 2011 for $235 million and October 2012 for approximately $1.5 billion. At December 31, 2010, the interest rates ranged from 0.95 percent to 2.45 percent. In addition, at December 31, 2010, ILFC has other secured financings of approximately $5.3 billion that mature through 2018, with interest rates ranging from 3.41 percent to 7.13 percent.

On August 20, 2010, ILFC issued $1.35 billion aggregate principal amount of 6.5 percent senior secured notes due September 1, 2014, $1.275 billion of aggregate principal amount of 6.75 percent senior secured notes due September 1, 2016, and $1.275 billion of aggregate principal amount of 7.125 percent senior secured notes due September 1, 2018. The proceeds from these debt issuances were used to repay loans from AIG, and then used by AIG to reduce the principal amount outstanding under the FRBNY Credit Facility.

In 2010, ILFC amended its $2.5 billion revolving credit facility to, among other things, extend the maturity date of $2.16 billion from October 2011 to October 2012, with the loan secured by aircraft with an initial loan-to-value ratio of 75 percent, and increased the interest rate by 150 basis points. In addition, ILFC pre-paid $485 million of bank term debt with original maturity dates through 2012. In December 2010, ILFC paid down $800 million of this revolving credit facility. The amended facility prohibits ILFC from re-borrowing amounts repaid under this facility for any reason; therefore the size of the outstanding facility is $1.7 billion.

On March 17, 2010, ILFC entered into a $750 million term loan agreement secured by 43 aircraft and all related equipment and leases. The loan matures on March 17, 2015, and bears interest at LIBOR plus a margin of 4.75 percent with a LIBOR floor of 2.0 percent. The principal of the loan is payable in full at maturity with no scheduled amortization; however, ILFC has the right to voluntarily prepay the loan at any time, subject to a 1.0 percent prepayment penalty prior to March 17, 2011. On March 17, 2010, ILFC also entered into an additional term loan agreement of $550 million, of which $63 million is subject to the satisfaction of certain collateralization milestones. The loan is secured by 37 aircraft and all related equipment and leases. The loan matures on March 17, 2016, and bears interest at LIBOR plus a margin of 5.0 percent with a LIBOR floor of 2.0 percent. The principal of the loan is payable in full at maturity with no scheduled amortization; however, ILFC has the right to voluntarily prepay the loan at any time, subject to a 2.0 percent prepayment penalty prior to March 17, 2011, and a 1.0 percent prepayment penalty prior to March 17, 2012.

AIG does not guarantee any of the debt obligations of ILFC.

Other Notes, Bonds, Loans and Mortgages Payable, consisted of the following:

At December 31, 2010 (in millions)	Uncollateralized Notes/Bonds/Loans Payable		Collateralized Loans and Mortgages Payable



AIG	$	218	$	-
Other subsidiaries		96		350

Total	$	314	$	350

Commitments, Contingencies and Guarantees

12 Months Ended

Dec. 31, 2010

Commitments, Contingencies and Guarantees

Commitments, Contingencies and Guarantees

16. Commitments, Contingencies and Guarantees

In the normal course of business, various commitments and contingent liabilities are entered into by AIG and certain of its subsidiaries. In addition, AIG guarantees various obligations of certain subsidiaries.

Although AIG cannot currently quantify its ultimate liability for unresolved litigation and investigation matters including those referred to below, it is possible that such liability could have a material adverse effect on AIG's consolidated financial condition or its consolidated results of operations or consolidated cash flows for an individual reporting period.

(a) Litigation and Investigations

Overview. AIG and its subsidiaries, in common with the insurance and financial services industries in general, are subject to litigation, including claims for punitive damages, in the normal course of their business. In AIG's insurance operations (including United Guaranty Corporation (UGC)), litigation arising from claims settlement activities is generally considered in the establishment of AIG's liability for unpaid claims and claims adjustment expense. However, the potential for increasing jury awards and settlements makes it difficult to assess the ultimate outcome of such litigation. AIG is also subject to derivative, class action and other claims asserted by its shareholders and others alleging, among other things, breach of fiduciary duties by its directors and officers and violations of federal and state securities laws. In the case of any derivative action brought on behalf of AIG, any recovery would accrue to the benefit of AIG.

Various regulatory and governmental agencies have been reviewing certain public disclosures, transactions and practices of AIG and its subsidiaries in connection with industry-wide and other inquiries into, among other matters, AIG's liquidity, compensation paid to certain employees, payments made to counterparties, and certain business practices and valuations of current and former operating insurance subsidiaries. AIG has cooperated, and will continue to cooperate, in producing documents and other information in response to subpoenas and other requests.

AIG's Subprime Exposure, Capital Markets Credit Default Swap Portfolio and Related Matters

AIG, AIGFP and certain directors and officers of AIG, AIGFP and other AIG subsidiaries have been named in various actions relating to AIG's exposure to the U.S. residential subprime mortgage market, unrealized market valuation losses on AIGFP's super senior credit default swap portfolio, losses and liquidity constraints relating to AIG's securities lending program and related disclosure and other matters (Subprime Exposure Issues).

Consolidated 2008 Securities Litigation. Between May 21, 2008 and January 15, 2009, eight purported securities class action complaints were filed against AIG and certain directors and officers of AIG and AIGFP, AIG's outside auditors, and the underwriters of various securities offerings in the United States District Court for the Southern District of New York (the Southern District of New York), alleging claims under the Securities Exchange Act of 1934 (the Exchange Act) or claims under the Securities Act of 1933 (the Securities Act). On March 20, 2009, the Court consolidated all eight of the purported securities class actions as In re American International Group, Inc. 2008 Securities Litigation (the Consolidated 2008 Securities Litigation).

On May 19, 2009, lead plaintiff in the Consolidated 2008 Securities Litigation filed a consolidated complaint on behalf of purchasers of AIG stock during the alleged class period of March 16, 2006 through September 16, 2008, and on behalf of purchasers of various AIG securities offered pursuant to AIG's shelf registration statements. The consolidated complaint alleges that defendants made statements during the class period in press releases, AIG's quarterly and year-end filings, during conference calls, and in various registration statements and prospectuses in connection with the various offerings that were materially false and misleading and that artificially inflated the price of AIG's stock. The alleged false and misleading statements relate to, among other things, the Subprime Exposure Issues. The consolidated complaint alleges violations of Sections 10(b) and 20(a) of the Exchange Act and Sections 11, 12(a)(2), and 15 of the Securities Act. On August 5, 2009, defendants filed motions to dismiss the consolidated complaint, and on September 27, 2010 the Court denied the motions to dismiss.

On November 24, 2010 and December 10, 2010, AIG and all other defendants filed answers to the consolidated complaint denying the material allegations therein and asserting their defenses.

As of February 16, 2011, plaintiffs have not specified an amount of alleged damages, discovery has only recently commenced and the Court has not determined if a class action is appropriate or the size or scope of any class. As a result, AIG is unable to reasonably estimate the possible loss or range of losses, if any, arising from the litigation.

ERISA Actions — Southern District of New York. Between June 25, 2008, and November 25, 2008, AIG, certain directors and officers of AIG, and members of AIG's Retirement Board and Investment Committee were named as defendants in eight purported class action complaints asserting claims on behalf of participants in certain pension plans sponsored by AIG or its subsidiaries. On March 19, 2009, the Court consolidated these eight actions as In re American International Group, Inc. ERISA Litigation II. On June 26, 2009, lead plaintiffs' counsel filed a consolidated amended complaint. The action purports to be brought as a class action under the Employee Retirement Income Security Act of 1974, as amended (ERISA) on behalf of all participants in or beneficiaries of certain benefit plans of AIG and its subsidiaries that offered shares of AIG's common stock. In the consolidated amended complaint, plaintiffs allege, among other things, that the defendants breached their fiduciary responsibilities to plan participants and their beneficiaries under ERISA, by continuing to offer the AIG Stock Fund as an investment option in the plans after it allegedly became imprudent to do so. The alleged ERISA violations relate to, among other things, the defendants' purported failure to monitor and/or disclose certain matters, including the Subprime Exposure Issues. On September 18, 2009, defendants filed motions to dismiss the consolidated amended complaint, and those motions are pending.

As of February 16, 2011, plaintiffs have not specified an amount of alleged damages and the Court has not decided defendants' motions to dismiss, or determined if a class action is appropriate or the size or scope of any class. As a result, AIG is unable to reasonably estimate the possible loss or range of losses, if any, arising from the litigation.

Consolidated 2007 Derivative Litigation. On November 20, 2007 and August 6, 2008, purported shareholder derivative actions were filed in the Southern District of New York naming as defendants directors and officers of AIG and its subsidiaries and asserting claims on behalf of nominal defendant AIG. The actions have been consolidated as In re American International Group, Inc. 2007 Derivative Litigation (the Consolidated 2007 Derivative Litigation). On June 3, 2009, lead plaintiff filed a consolidated amended complaint naming additional directors and officers of AIG and its subsidiaries as defendants. As amended, the factual allegations include the Subprime Exposure Issues and AIG and AIGFP employee retention payments and related compensation issues. The claims asserted on behalf of nominal defendant AIG include breach of fiduciary duty, waste of corporate assets, unjust enrichment, contribution and violations of Sections 10(b) and 20(a) of the Exchange Act. On August 5 and 26, 2009, AIG and defendants filed motions to dismiss the consolidated amended complaint. On December 18, 2009, a separate action, previously commenced in the United States District Court for the Central District of California (Central District of California) and transferred to the Southern District of New York on June 5, 2009, was consolidated into the Consolidated 2007 Derivative Litigation and dismissed without prejudice to the pursuit of the claims in the Consolidated 2007 Derivative Litigation.

On March 30, 2010, the Court dismissed the action due to plaintiff's failure to make a pre-suit demand on AIG's Board of Directors. On March 31, 2010, judgment was entered. On April 29, 2010, plaintiff filed a notice of appeal to the United States Court of Appeals for the Second Circuit (the Second Circuit).

Other Derivative Actions. Separate purported derivative actions, alleging similar claims as the Consolidated 2007 Derivative Litigation, have been brought asserting claims on behalf of the nominal defendant AIG in various jurisdictions. These actions are all stayed pending further proceedings in the Consolidated 2007 Derivative Litigation (except one of the Superior Court of California, Los Angeles County cases, which was voluntarily dismissed on January 10, 2011, and the Supreme Court of New York, New York County case, in which no defendant has been served). These actions are described below:

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Supreme Court of New York, Nassau County.  On February 29, 2008, a purported shareholder derivative complaint was filed in the Supreme Court of Nassau County, naming as defendants certain directors and officers of AIG and its subsidiaries.

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Supreme Court of New York, New York County.  On March 20, 2009, a purported shareholder derivative complaint was filed in the Supreme Court of New York County naming as defendants certain directors and officers of AIG and recipients of AIGFP retention payments. The complaint has not been served on any defendant.

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Delaware Court of Chancery.  On September 17, 2008, a purported shareholder derivative complaint was filed in the Delaware Court of Chancery, naming as defendants certain directors and officers of AIG and its subsidiaries.

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Delaware Court of Chancery.  On January 15, 2009, a purported shareholder derivative complaint was filed in the Delaware Court of Chancery, naming as defendants certain directors of AIG and Joseph Cassano, the former Chief Executive Officer of AIGFP.

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Superior Court for the State of California, Los Angeles County.  On April 1, 2009 and November 20, 2009, two purported shareholder derivative complaints were filed in the Superior Court for the State of California, Los Angeles County, naming as defendants certain directors and officers of AIG and its subsidiaries.

Southern District of New York. On January 4, 2011, Wanda Mimms, a participant in the AIG Incentive Savings Plan (the "Plan"), filed a purported derivative action on behalf of the Plan in the United States District Court for the Southern District of New York against PricewaterhouseCoopers, LLP (PwC) and asserting a claim for professional malpractice in conducting audits of AIG's 2007 financial statements. The complaint also asserts a claim for breach of fiduciary duty under ERISA against members of AIG's Board of Directors for failing to pursue a claim for professional malpractice on behalf of the Plan against PwC.

As of February 16, 2011, plaintiff has not specified an amount of alleged damages and no motions to dismiss have been filed by defendants. As a result, AIG is unable to reasonably estimate the possible loss or range of losses, if any, arising from the litigation.

Canadian Securities Class Action — Ontario Superior Court of Justice. On November 12, 2008, an application was filed in the Ontario Superior Court of Justice for leave to bring a purported class action against AIG, AIGFP, certain directors and officers of AIG and Joseph Cassano, the former Chief Executive Officer of AIGFP, pursuant to the Ontario Securities Act. If the Court grants the application, a class plaintiff will be permitted to file a statement of claim against defendants. The proposed statement of claim would assert a class period of November 10, 2006 through September 16, 2008 (later amended to March 16, 2006 through September 16, 2008) and would allege that during this period defendants made false and misleading statements and omissions in quarterly and annual reports and during oral presentations in violation of the Ontario Securities Act.

On April 17, 2009, defendants filed a motion record in support of their motion to stay or dismiss for lack of jurisdiction and forum non conveniens. On July 12, 2010, the Court adjourned a hearing on the motion pending a decision by the Supreme Court of Canada in another action with respect to similar issues raised in the action pending against AIG.

As of February 16, 2011, plaintiff has not specified an amount of alleged damages and the Court has not determined whether it has jurisdiction or granted plaintiff's application to file a statement of claim. As a result, AIG is unable to reasonably estimate the possible loss or range of losses, if any, arising from the litigation.

Other Litigation Related to AIGFP

On September 30, 2009, Brookfield Asset Management, Inc. and Brysons International, Ltd. (together, Brookfield) filed a complaint against AIG and AIGFP in the Southern District of New York. Brookfield seeks a declaration that a 1990 interest rate swap agreement between Brookfield and AIGFP (guaranteed by AIG) terminated upon the occurrence of certain alleged events that Brookfield contends constituted defaults under the swap agreement's standard "bankruptcy" default provision. Brookfield claims that it is excused from all future payment obligations under the swap agreement on the basis of the purported termination. At December 31, 2010, the estimated present value of expected future cash flows discounted at LIBOR was $1.3 billion, which represents AIG's maximum contractual loss from the alleged termination of the contract. It is AIG's position that no termination event has occurred and that the swap agreement remains in effect. A determination that a termination event has occurred could result in AIG losing its entitlement to all future payments under the swap agreement and result in a loss to AIG of the full value at which AIG is carrying the swap agreement.

A determination that AIG triggered a "bankruptcy" event of default under the swap agreement could also, depending on the Court's precise holding, affect other AIG or AIGFP agreements that contain the same or similar default provisions. Such a determination could also affect derivative agreements or other contracts between third parties, such as credit default swaps under which AIG is a reference credit, which could affect the trading price of AIG securities.

On December 17, 2009 defendants filed a motion to dismiss. On September 28, 2010, the Court issued a decision granting defendants' motion in part and denying it in part, holding that the complaint: (i) failed to allege that an event of default had occurred based upon defendants' failure to pay or inability to pay debts as they became due; but, (ii) sufficiently alleged that an event of default had occurred based upon other sections of the swap agreement's "bankruptcy" default provision. On January 26, 2011, Brookfield filed an amended complaint that seeks to reassert, on the basis of additional factual allegations, the claims that were dismissed from the initial complaint. On February 9, 2011, AIG filed a motion to dismiss the claim that Brookfield seeks to reassert in its amended complaint.

Securities Lending Dispute with Transatlantic Holdings Inc.

On May 24, 2010, Transatlantic Holdings, Inc. (Transatlantic) and two of its subsidiaries, Transatlantic Reinsurance Company and Trans Re Zurich Reinsurance Company Ltd. (collectively, Claimants), commenced an arbitration proceeding before the American Arbitration Association in New York against AIG and two of its subsidiaries (the AIG Respondents). Claimants allege breach of contract, breach of fiduciary duty, and common law fraud in connection with certain securities lending agency agreements between AIG's subsidiaries and Claimants. Claimants allege that AIG and its subsidiaries should be liable for the losses that Claimants purport to have suffered in connection with securities lending and investment activities, and seek damages of $350 million and other unspecified damages.

On June 29, 2010, AIG brought a petition in the Supreme Court of the State of New York, seeking to enjoin the arbitration on the ground that AIG is not a party to the securities lending agency agreements with Claimants. On July 29, 2010, the parties agreed to resolve that petition by consolidating the arbitration commenced by Claimants with a separate arbitration, commenced by AIG on June 29, 2010, in which AIG is seeking damages of Euro 17.6 million ($23.5 million at the December 31, 2010 exchange rate) from Transatlantic for breach of a Master Separation Agreement among Transatlantic, AIG and one of its subsidiary companies.

On September 13, 2010, the AIG Respondents submitted an answer to Claimants' claims asserting, among other things, that there was no breach of the securities lending agency agreements, and that Claimants' other allegations including purported breach of fiduciary duty and fraud are not meritorious. Transatlantic submitted an answer denying liability with respect to AIG's claim on September 13, 2010. The arbitration hearing is scheduled for December 2011. Because of the stage of the proceeding and the wide difference in damages sought by the parties, AIG is unable to reasonably estimate the possible loss or range of losses, if any, arising from this arbitration.

Employment Litigation against AIG and AIG Global Real Estate Investment Corporation

On December 9, 2009, AIG Global Real Estate Investment Corporation's (AIGGRE) former President, Kevin P. Fitzpatrick, several entities he controls, and various other single purpose entities (the SPEs) filed a complaint in the Supreme Court of the State of New York, New York County against AIG and AIGGRE. The case was removed to the Southern District of New York, and an amended complaint was filed on March 8, 2010. The amended complaint asserts that AIG and AIGGRE violated fiduciary duties to Fitzpatrick and his controlled entities and breached Fitzpatrick's employment agreement and agreements of SPEs that purportedly entitled him to carried interest fees arising out of the sale or disposition of certain real estate. Fitzpatrick has also brought derivative claims on behalf of the SPEs, purporting to allege that AIG and AIGGRE breached contractual and fiduciary duties in failing to fund the SPEs with various amounts allegedly due under the SPE agreements. Fitzpatrick has also requested injunctive relief, an accounting, and that a receiver be appointed to manage the affairs of the SPEs. He has further alleged that the SPEs are subject to a constructive trust. Fitzpatrick also has alleged a violation of ERISA relating to retirement benefits purportedly due. Fitzpatrick has claimed that his damages are at least $275 million, but has not provided an updated and finalized damage claim.

AIG and AIGGRE filed counterclaims against Fitzpatrick and a motion to dismiss. On September 28, 2010, the Court dismissed the defendants' counterclaims, and denied defendants' motion to dismiss. The case is currently in discovery, and trial is set for May 10, 2011.

Because discovery remains to be completed, AIG is unable to reasonably estimate the possible loss or range of losses, if any, arising from the litigation.

ALICO Life International Limited's Italian Internal Fund Suspensions

Certain policyholders of certain unit-linked funds offered by the Italian branch of ALICO Life International Limited (ALIL), the Irish subsidiary of ALICO, have either commenced or threatened litigation against ALIL's Italian branch as a result of the suspension of withdrawals from and diminution in value of those funds since late 2008, alleging damages for misrepresentation, mis-selling, improper or inadequate disclosures and other related claims against ALIL. Most of the lawsuits remain in the early stages of litigation.

In March 2010, ALIL learned that the public prosecutor in Milan had opened a formal investigation into the actions of employees and former employees of ALIL, as well as employees of ALIL's major distributor, based on a policyholder's complaint. The policyholder's complaint underlying the investigation was withdrawn in November 2010.

ALIL is continuing its cooperation with the Italian and Irish regulatory authorities, which have jurisdiction in connection with this matter, and is in discussions to address their concerns.

Under the terms of the ALICO Stock Purchase Agreement, pursuant to which MetLife has acquired ALICO as of November 1, 2010, AIG has agreed to indemnify MetLife and its affiliates in respect of any third party claims and regulatory fines associated with ALIL's suspended funds.

Settlement Agreement with the Starr Parties

On November 25, 2009, a settlement agreement and memorandum of understanding (the AIG/Greenberg MOU) was entered into by AIG, on the one hand, and AIG's former Chief Executive Officer, Maurice R. Greenberg, AIG's former Chief Financial Officer, Howard I. Smith, C.V. Starr & Company, Inc. (C.V. Starr) and Starr International Company, Inc. (SICO), on the other hand (the Starr Parties). Under the terms of the AIG/Greenberg MOU, the parties have agreed to release each other from all claims, including any claims by Greenberg and Smith against AIG for indemnification of future legal fees and expenses, or settlement costs.

In addition, pursuant to the AIG/Greenberg MOU:

•: SICO agreed to undertake to dismiss with prejudice an action it brought against AIG in the Tribuna del Circuito Civil, Panama City, Panama. On February 10, 2010, the parties filed a joint request to dismiss the case. On March 2, 2010, the Court posted its approval of the dismissal of claims and the action was terminated.
•: AIG agreed to undertake to dismiss with prejudice its direct claims against Greenberg and Smith in the Delaware 2004/2005 Derivative Litigation. On February 5, 2010, AIG, Greenberg and Smith submitted a stipulation to the Court dismissing AIG's direct claims against Greenberg and Smith.

The Starr Parties have taken the position that the AIG/Greenberg MOU also releases certain of the derivative claims being pursued by the shareholder plaintiffs in the Delaware 2004/2005 Derivative Litigation and the New York 2004/2005 Derivative Litigation. AIG has taken the opposite position. The Delaware 2004/2005 Derivative Litigation and the New York 2004/2005 Derivative Litigation are described below under "Litigation Related to the Matters Underlying the 2006 Regulatory Settlements."

2006 Regulatory Settlements and Related Regulatory Matters

2006 Regulatory Settlements. In February 2006, AIG reached a resolution of claims and matters under investigation with the DOJ, the SEC, the Office of the New York Attorney General (NYAG) and the New York State Department of Insurance (DOI). The settlements resolved investigations conducted by the SEC, NYAG and DOI in connection with the accounting, financial reporting and insurance brokerage practices of AIG and its subsidiaries, as well as claims relating to the underpayment of certain workers' compensation premium taxes and other assessments. These settlements did not, however, resolve investigations by regulators from other states into insurance brokerage practices related to contingent commissions and other broker-related conduct, such as alleged bid rigging. Nor did the settlements resolve any obligations that AIG may have to state guarantee funds in connection with any of these matters.

As a result of these settlements, AIG made payments or placed amounts in escrow in 2006 totaling approximately $1.64 billion, $225 million of which represented fines and penalties.

In addition to the escrowed funds, $800 million was deposited into, and subsequently disbursed by, a fund under the supervision of the SEC, to resolve claims asserted against AIG by investors, including the securities class action and shareholder lawsuits described below. Amounts held in escrow totaling approximately $338 million, including interest thereon, (The Workers' Compensation Fund), are included in Other assets at December 31, 2010, and are specifically designated to satisfy liabilities related to workers' compensation premium reporting issues.

Also, as part of the settlements, AIG agreed to retain, for a period of three years which has been extended through June 30, 2011, an independent consultant to conduct a review that included, among other things, the adequacy of AIG's internal control over financial reporting, the policies, procedures and effectiveness of AIG's regulatory, compliance and legal functions and the remediation plan that AIG implemented as a result of its own internal review.

Other Regulatory Settlements. AIG's 2006 regulatory settlements with the SEC, DOJ, NYAG and DOI did not resolve investigations by regulators from other states into insurance brokerage practices. AIG entered into agreements effective in early 2008 with the Attorneys General of the States of Florida, Hawaii, Maryland, Michigan, Oregon, Texas and West Virginia; the Commonwealths of Massachusetts and Pennsylvania; and the District of Columbia; as well as the Florida Department of Financial Services and the Florida Office of Insurance Regulation, relating to their respective industry-wide investigations into producer compensation and insurance placement practices. The settlements called for total payments of $26 million by AIG, of which $4.4 million was paid under previous settlement agreements. During the term of the settlement agreements, which run through early 2018, AIG will continue to maintain certain producer compensation disclosure and ongoing compliance initiatives. AIG will also continue to cooperate with the industry-wide investigations. On April 7, 2010, it was announced that AIG and the Ohio Attorney General entered into a settlement agreement to resolve the Ohio Attorney General's claim concerning producer compensation and insurance placement practices. AIG paid the Ohio Attorney General $9 million as part of that settlement.

NAIC Examination of Workers' Compensation Premium Reporting. During 2006, the Settlement Review Working Group of the National Association of Insurance Commissioners (NAIC), under the direction of the States of Indiana, Minnesota and Rhode Island, began an investigation into AIG's reporting of workers' compensation premiums. In late 2007, the Settlement Review Working Group recommended that a multi-state targeted market conduct examination focusing on workers' compensation insurance be commenced under the direction of the NAIC's Market Analysis Working Group. AIG was informed of the multi-state targeted market conduct examination in January 2008. The lead states in the multi-state examination are Delaware, Florida, Indiana, Massachusetts, Minnesota, New York, Pennsylvania, and Rhode Island. All other states (and the District of Columbia) have agreed to participate in the multi-state examination. The examination focused on legacy issues related to AIG's writing and reporting of workers' compensation insurance prior to 1996 and current compliance with legal requirements applicable to such business.

On December 17, 2010, AIG and the lead states reached an agreement to settle all regulatory liabilities arising out of the subjects of the multistate examination. The regulatory settlement agreement includes, among other terms, (i) AIG's payment of $100 million in regulatory fines and penalties; (ii) AIG's payment of $46.5 million in outstanding premium taxes; (iii) AIG's agreement to enter into a compliance plan describing agreed-upon specific steps and standards for evaluating AIG's ongoing compliance with state regulations governing the setting of workers' compensation insurance premium rates and the reporting of workers' compensation premiums; and (iv) AIG's agreement to pay up to $150 million in contingent fines in the event that AIG fails to comply substantially with the compliance plan requirements. The $146.5 million in fines, penalties and premium taxes can be funded out of the $338 million held in the Workers' Compensation Fund to the extent that such monies have not already been used to fund the class action settlement discussed below. The regulatory settlement is contingent upon and will not become effective until, among other events: (i) at least 43 states sign on to the regulatory settlement agreement; (ii) a final, court-approved settlement is reached in all the lawsuits that comprise the Workers' Compensation Premium Reporting Litigation, discussed below, including the putative class action, except that such settlement need not resolve claims between AIG and the Liberty Mutual Group in order for the regulatory settlement to become effective, and (iii) a settlement is reached and consummated between AIG and certain state insurance guaranty funds that may assert claims against AIG for underpayment of guaranty-fund assessments.

AIG has established a reserve equal to the amounts payable under the proposed settlement.

Litigation Related to the Matters Underlying the 2006 Regulatory Settlements

AIG and certain present and former directors and officers of AIG have been named in various actions related to the matters underlying the 2006 Regulatory Settlements. These actions are described below.

The Consolidated 2004 Securities Litigation. Beginning in October 2004, a number of putative securities fraud class action suits were filed in the Southern District of New York against AIG and consolidated as In re American International Group, Inc. Securities Litigation (the Consolidated 2004 Securities Litigation). Subsequently, a separate, though similar, securities fraud action was also brought against AIG by certain Florida pension funds. The lead plaintiff in the Consolidated 2004 Securities Litigation is a group of public retirement systems and pension funds benefiting Ohio state employees, suing on behalf of themselves and all purchasers of AIG's publicly traded securities between October 28, 1999 and April 1, 2005. The named defendants are AIG and a number of present and former AIG officers and directors, as well as Starr, SICO, General Reinsurance Corporation (General Re), and PricewaterhouseCoopers LLP (PwC), among others. The lead plaintiff alleges, among other things, that AIG: (1) concealed that it engaged in anti-competitive conduct through alleged payment of contingent commissions to brokers and participation in illegal bid-rigging; (2) concealed that it used "income smoothing" products and other techniques to inflate its earnings; (3) concealed that it marketed and sold "income smoothing" insurance products to other companies; and (4) misled investors about the scope of government investigations. In addition, the lead plaintiff alleges that Greenberg manipulated AIG's stock price. The lead plaintiff asserts claims for violations of Sections 11 and 15 of the Securities Act, Section 10(b) of the Exchange Act and Rule 10b-5 promulgated thereunder, and Sections 20(a) and Section 20A of the Exchange Act.

In October 2009, the lead plaintiff advised the Court that it had entered into a settlement agreement with Greenberg, Smith, Christian M. Milton, Michael J. Castelli, SICO and Starr. At the lead plaintiff's request, the Court has entered an order dismissing all of the lead plaintiff's claims against these defendants "without prejudice" to any party. The settlement agreement between lead plaintiff and these defendants was filed with the Court on January 6, 2011.

On February 22, 2010, the Court issued an opinion granting, in part, lead plaintiffs' motion for class certification. The Court rejected lead plaintiffs' request to include in the class purchasers of certain AIG bonds and declined to certify a class with respect to certain counts of the complaint and dismissed those claims for lack of standing. With respect to the remaining claims under the Exchange Act on behalf of putative class members who had purchased AIG Common Stock, the Court declined to certify a class as to certain defendants other than AIG and rejected lead plaintiffs' claims that class members could establish injury based on disclosures on two of the six dates lead plaintiffs had proposed, but certified a class consisting of all shareholders who purchased or otherwise acquired AIG Common Stock during the class period of October 28, 1999 to April 1, 2005, and who possessed that stock over one or more of the dates October 14, 2004, October 15, 2004, March 17, 2005 or April 1, 2005, as well as persons who held AIG Common Stock in two companies at the time they were acquired by AIG in exchange for AIG Common Stock, and were allegedly damaged thereby. In light of the class certification decision, on March 5, 2010, the Court denied as moot General Re's and lead plaintiffs' motion to certify their proposed settlement, and on March 18, 2010, PwC withdrew its motion to approve its proposed settlement with lead plaintiffs. Lead plaintiffs and AIG each filed petitions requesting permission to file an interlocutory appeal of the class certification decision. AIG, General Re, Richard Napier and Ronald Ferguson each filed opposition briefs to lead plaintiffs' petition.

On May 17, 2010, PwC and lead plaintiffs jointly moved for final approval of their settlement as proposed prior to class certification. On November 30, 2010, the Court approved the settlement between lead plaintiffs and PwC. On December 13, 2010, four shareholders filed a notice of appeal of the final judgment. The appeal is currently pending in the Second Circuit.

On June 23, 2010, General Re and lead plaintiffs jointly moved for preliminary approval of their settlement. On September 10, 2010, the Court issued an opinion denying the motion for preliminary approval and, on September 23, 2010, the Court dismissed the lead plaintiffs' causes of action with respect to General Re. On October 21, 2010, lead plaintiffs filed a notice of appeal of the Court's September 23, 2010 order dismissing the claims against the Gen Re defendants, as well as the March 4, 2010 order refusing to preliminarily approve a settlement with the Gen Re defendants, and the February 22, 2010 class certification order to the extent it denied class certification for the claims against the Gen Re defendants.

On June 28, 2010, the Second Circuit granted AIG's petition seeking permission to file an interlocutory appeal of the class certification decision, and denied the petition by lead plaintiffs. On September 1, 2010, AIG and lead plaintiffs entered into a stipulation to withdraw AIG's interlocutory appeal without prejudice to reinstate the appeal in the future, which has been endorsed by the Second Circuit. On February 4, 2011, AIG and lead plaintiffs entered into a stipulation to extend the time by which the appeal must be reinstated, which has been endorsed by the U.S. Court of Appeals for the Second Circuit.

On July 14, 2010, AIG approved the terms of a settlement (the Settlement) with lead plaintiffs. The Settlement is conditioned on, among other things, court approval and a minimum level of shareholder participation. Under the terms of the Settlement, if consummated, AIG will pay an aggregate of $725 million, $175 million of which is to be paid into escrow within ten days of preliminary court approval. AIG's obligation to fund the remainder of the settlement amount is conditioned on its having consummated one or more common stock offerings raising net proceeds of at least $550 million prior to final court approval (Qualified Offering). AIG has agreed to use best efforts, consistent with the fiduciary duties of AIG's management and Board of Directors, to effect a Qualified Offering, but the decision as to whether market conditions or pending or contemplated corporate transactions make it commercially reasonable to proceed with such an offering will be within AIG's unilateral discretion. In the event that AIG effects a registered secondary offering of common stock on behalf of the Department of the Treasury resulting in the Department of the Treasury receiving proceeds of at least $550 million, then market access will be deemed to have been demonstrated and AIG shall be deemed to have consummated a Qualified Offering. AIG, in its sole discretion, also may fund the $550 million from other sources. If AIG does not fund the $550 million before final court approval of the Settlement, lead plaintiffs may terminate the agreement, elect to acquire freely transferable shares of AIG Common Stock with a market value of $550 million provided AIG is able to obtain all necessary approvals, or extend the period for AIG to complete a Qualified Offering.

On July 20, 2010, at the joint request of AIG and lead plaintiffs, the District Court entered an order staying all deadlines in the case. On November 30, 2010, AIG and lead plaintiffs executed their agreement of settlement and compromise. On November 30, 2010, lead plaintiffs filed a motion for preliminary approval of the settlement with AIG, which is currently pending.

As of December 31, 2010, AIG has an accrued liability for the full amount of the Settlement.

The New York 2004/2005 Derivative Litigation. Between October 25, 2004 and July 14, 2005, seven separate derivative actions were filed in the Southern District of New York, five of which were consolidated into a single action (the New York 2004/2005 Derivative Litigation). The complaint in this action contains nearly the same types of allegations made in the Consolidated 2004 Securities Litigation. The named defendants include current and former officers and directors of AIG, as well as Marsh & McLennan Companies, Inc. (Marsh), SICO, Starr, ACE Limited and subsidiaries (Ace), General Re, PwC, and certain employees or officers of these entity defendants. Plaintiffs assert claims for breach of fiduciary duty, gross mismanagement, waste of corporate assets, unjust enrichment, insider selling, auditor breach of contract, auditor professional negligence and disgorgement from Greenberg and Smith of incentive-based compensation and AIG share proceeds under Section 304 of the Sarbanes-Oxley Act, among others. Plaintiffs seek, among other things, compensatory damages, corporate governance reforms, and a voiding of the election of certain AIG directors. AIG's Board of Directors has appointed a special committee of independent directors (Special Committee) to review the matters asserted in the operative consolidated derivative complaint. The Court has entered an order staying this action pending resolution of the Delaware 2004/2005 Derivative Litigation discussed below. The Court also has entered an order that termination of certain named defendants from the Delaware action applies to this action without further order of the Court. On February 26, 2009, the Court dismissed those AIG officer and director defendants against whom the shareholder plaintiffs in the Delaware action had not pursued claims.

Under the AIG/Greenberg MOU, AIG agreed to undertake to dismiss with prejudice its claims against Greenberg and Smith in the New York 2004/2005 Derivative Litigation. The Starr Parties have taken the position that the AIG/Greenberg MOU also releases the derivative claims being pursued by the shareholder plaintiffs in this litigation. AIG has taken the opposite position.

On August 25, 2010, AIG entered into a settlement agreement with the other parties to the derivative litigations which was submitted by plaintiffs to the Delaware Court of Chancery on August 26, 2010. The settlement is conditioned on a separate agreement with AIG's directors and officers liability (D&O) insurers, under which the insurers would pay $150 million, $90 million of which would fund the settlement of the derivative claims and which, after the deduction of expenses and plaintiffs' counsel's attorneys' fees, would be paid to AIG. The remaining $60 million would be used to cover attorneys' fees and expenses incurred by Maurice Greenberg and Howard Smith. On November 11, 2010, the terms of the settlement agreement were agreed, and on January 25, 2011 the Delaware Court approved the settlement agreement and dismissed the suit with prejudice. Pursuant to the terms of the settlement agreement, after dismissal of the Delaware 2004/2005 Derivative Litigation, the plaintiffs in the New York 2004/2005 Derivative Litigation and the Supreme Court of New York Derivative Action sought dismissal of those actions. On February 4, 2011, plaintiffs in the New York 2004/2005 Derivative Litigation filed an unopposed motion to dismiss the suit with prejudice and for an award of attorneys' fees and expenses as well as supporting declarations and a memorandum of law. On February 4, 2011, the parties to the Supreme Court of New York Derivative Action submitted a stipulation and proposed order dismissing the case with prejudice.

The Delaware 2004/2005 Derivative Litigation. From October 2004 to April 2005, AIG shareholders filed five derivative complaints in the Delaware Chancery Court. All of these derivative lawsuits were consolidated into a single action as In re American International Group, Inc. Consolidated Derivative Litigation (the Delaware 2004/2005 Derivative Litigation). The amended consolidated complaint named 43 defendants (not including nominal defendant AIG) who, as in the New York 2004/2005 Derivative Litigation, were current and former officers and directors of AIG, as well as other entities and certain of their current and former employees and directors. The factual allegations, legal claims and relief sought in this action are similar to those alleged in the New York 2004/2005 Derivative Litigation, except that the claims are only under state law.

In early 2007, the Court approved an agreement that AIG be realigned as plaintiff, and, on June 13, 2007, acting on the direction of the Special Committee, AIG filed an amended complaint against former directors and officers Greenberg and Smith, alleging breach of fiduciary duty and indemnification. Also on June 13, 2007, the Special Committee filed a motion to terminate the litigation as to certain defendants, while taking no action as to others. Defendants Greenberg and Smith filed answers to AIG's complaint and brought third-party complaints against certain current and former AIG directors and officers, PwC and INS Regulatory Insurance Services, Inc. On September 28, 2007, AIG and the shareholder plaintiffs filed a combined amended complaint in which AIG continued to assert claims against defendants Greenberg and Smith and took no position as to the claims asserted by the shareholder plaintiffs in the remainder of the combined amended complaint. In that pleading, the shareholder plaintiffs are no longer pursuing claims against certain AIG officers and directors. On February 12, 2008, the Court granted AIG's motion to stay discovery pending the resolution of claims against AIG in the Consolidated 2004 Securities Litigation.

On April 11, 2008, the shareholder plaintiffs filed the First Amended Combined Complaint, which added claims against former AIG directors and officers Greenberg, Edward Matthews, and Thomas Tizzio for breach of fiduciary duty based on alleged bid-rigging in the municipal derivatives market. On June 13, 2008, certain defendants filed motions to dismiss the shareholder plaintiffs' portions of the complaint. On February 10, 2009, the Court denied the motions to dismiss filed by Greenberg, Matthews, and Tizzio; granted the motion to dismiss filed by PwC without prejudice; and granted the motion to dismiss filed by certain former employees of AIG without prejudice for lack of personal jurisdiction. On March 6, 2009, the Court granted an Order of Dismissal, Notice and Order of Voluntary Dismissal and Stipulation and Order of Dismissal to dismiss those individual defendants who were similarly situated to the individuals dismissed by the Court for lack of personal jurisdiction. On March 12, 2009, Defendant Greenberg filed his verified answer to AIG's complaint; cross-claims against Marsh, ACE, General Re, and Tizzio and a third-party complaint against certain current and former AIG directors and officers, as well as INS Regulatory Insurance Services, Inc. Defendant Smith has also filed his answer to AIG's complaint, which was amended on July 9, 2009 to add cross-claims against Tizzio and third-party claims against certain current and former AIG directors and officers, as well as INS Regulatory Insurance Services, Inc. On June 17, 2009, the Court issued an opinion granting the motions to dismiss filed by General Re, Marsh, ACE, and Susan Rivera. On July 13, 2009 and July 17, 2009, the Court entered final judgments in favor of PwC, General Re, Marsh, ACE, and Susan Rivera. Shortly thereafter, the shareholder plaintiffs filed separate appeals: one addressing the dismissal of PwC, and the other addressing the dismissals of ACE, General Re, and Marsh. The Delaware Supreme Court certified the question to the New York Court of Appeals as to whether, under certain circumstances, New York's in pari delicto doctrine would bar a derivative claim against a corporation's accountants for negligently failing to uncover a fraud by the corporation. On October 21, 2010 the New York Court of Appeals affirmatively answered the certified question.

On November 10, 2009, the Delaware Supreme Court granted AIG's motion to consolidate the appeal of its dismissal from the In re Marsh Derivative Litigation (see below, "Derivative Action — Delaware Chancery Court (Marsh)") with the appeal of the dismissals of Marsh, General Re and ACE from the Delaware 2004/2005 Derivative Litigation, and subsequently issued an order notifying the parties that the appeal would be heard by the Court en banc. On December 29, 2010, the Delaware Supreme Court affirmed the Chancery Court's decision dismissing claims against AIG, General Re, Marsh, and ACE.

On February 5, 2010, a stipulation of dismissal was filed with the Court dismissing AIG's direct claims against Greenberg and Smith, pursuant to the AIG/Greenberg MOU. On February 10, 2010, the shareholder plaintiffs informed the Court that they did not object to the dismissal of AIG's direct claims against Greenberg and Smith, but stated that the dismissal did not apply to their claim against Greenberg and Smith, and further stated that they intended to seek attorneys' fees for having initiated the claims against Greenberg and Smith. The Starr Parties have taken the position that the AIG/Greenberg MOU releases the derivative claims being pursued by the shareholder plaintiffs; AIG has taken the opposite position.

This action is also subject to the conditional settlement between the parties to the derivative actions, reached on August 25, 2010 (see The New York 2004/2005 Derivative Litigation herein).

Derivative Action — Supreme Court of New York. On February 11, 2009, shareholder plaintiffs in the Delaware 2004/2005 Derivative Litigation filed a derivative complaint in the Supreme Court of New York against the individual defendants who moved to dismiss the complaint in the Delaware 2004/2005 Derivative Litigation on personal jurisdiction grounds. The defendants include current and former officers and employees of AIG, Marsh, and General Re; AIG is named as a nominal defendant. The complaint in this action contains similar allegations to those made in the Delaware 2004/2005 Derivative Litigation described above. Defendants filed motions to dismiss the complaint on May 1, 2009. The shareholder plaintiffs have reached an agreement staying discovery as well as any motions to dismiss the General Re and Marsh defendants pending final adjudication of any claims against those parties in the Delaware 2004/2005 Derivative Litigation. The individual defendants have also filed motions to dismiss. Pursuant to the stipulation of settlement executed by the parties (see The New York 2004/2005 Derivative Litigation herein), the Court denied all pending motions to dismiss as moot.

This action is also subject to the conditional settlement between the parties to the derivative actions, reached on August 25, 2010 (see The New York 2004/2005 Derivative Litigation herein).

Derivative Action — Delaware Chancery Court (Marsh). AIG was also named as a defendant in a derivative action in the Delaware Chancery Court brought by shareholders of Marsh. On July 10, 2008, shareholder plaintiffs filed a second consolidated amended complaint, which contains claims against AIG for aiding and abetting a breach of fiduciary duty and contribution and indemnification in connection with alleged bid-rigging and steering practices in the commercial insurance market that are the subject of the Multi-District Litigation described below. On November 10, 2008, AIG and certain defendants filed motions to dismiss the shareholder plaintiffs' portions of the complaint. On June 17, 2009, the Court dismissed the claims against AIG, Greenberg, and Zachary Carter with prejudice and denied the motions to dismiss filed by the remaining defendants. The shareholder plaintiffs filed their notice of appeal on October 1, 2009. AIG moved to consolidate the appeal with the appeal of the dismissal of ACE, General Re, and Marsh in the Delaware 2004/2005 Derivative Litigation. The shareholders of Marsh moved to stay this appeal pending the decision in the appeal of the dismissal of ACE, General Re, and Marsh in the Delaware 2004/2005 Derivative Litigation. On November 10, 2009, the Delaware Supreme Court granted AIG's motion to consolidate the appeals for the purposes of oral argument and denied the Marsh shareholders' motion to stay. On February 22, 2010, the Court issued an order notifying the parties that the appeal would be heard by the Court en banc.

On December 22, 2009, the Marsh shareholder plaintiffs filed a stipulation of settlement, resolving their claims against the Marsh defendants.

On October 21, 2010, the Delaware Supreme Court asked the parties to brief the New York Court of Appeals' answer to the certified question regarding the dismissal of PwC from the Delaware 2004/2005 Derivative Litigation on the grounds of in pari delicto. The Delaware Supreme Court heard oral argument on the Marsh shareholders' appeal against AIG on December 15, 2010, and on December 29, 2010, the Delaware Supreme Court affirmed the Chancery Court's decision dismissing claims against AIG.

In light of the decision by the Delaware Supreme Court, this matter has concluded without any liability to AIG.

The Multi-District Litigation. Commencing in 2004, policyholders brought multiple federal antitrust and RICO class actions in jurisdictions across the nation against insurers and brokers, including AIG and a number of its subsidiaries, alleging that the insurers and brokers engaged in one or more broad conspiracies to allocate customers, steer business, and rig bids. These actions, including 24 complaints filed in different federal courts naming AIG or an AIG subsidiary as a defendant, were consolidated by the judicial panel on multi-district litigation and transferred to the United States District Court for the District of New Jersey (District of New Jersey) for coordinated pretrial proceedings. The consolidated actions have proceeded in that Court in two parallel actions, In re Insurance Brokerage Antitrust Litigation (the Commercial Complaint) and In re Employee Benefits Insurance Brokerage Antitrust Litigation (the Employee Benefits Complaint, and, together with the Commercial Complaint, the Multi-District Litigation).

The plaintiffs in the Commercial Complaint are a group of corporations, individuals and public entities that contracted with the broker defendants for the provision of insurance brokerage services for a variety of insurance needs. The broker defendants are alleged to have placed insurance coverage on the plaintiffs' behalf with a number of insurance companies named as defendants, including AIG subsidiaries. The Commercial Complaint also named various brokers and other insurers as defendants (three of which have since settled). The Commercial Complaint alleges that defendants engaged in a number of overlapping "broker-centered" conspiracies to allocate customers through the payment of contingent commissions to brokers and through purported "bid-rigging" practices. It also alleges that the insurer and broker defendants participated in a "global" conspiracy not to disclose to policyholders the payment of contingent commissions. Plaintiffs assert that the defendants violated the Sherman Antitrust Act, the Racketeer Influenced and Corrupt Organizations Act (RICO), and the antitrust laws of 48 states and the District of Columbia, and are liable under common law breach of fiduciary duty and unjust enrichment theories. Plaintiffs seek treble damages plus interest and attorneys' fees as a result of the alleged RICO and Sherman Antitrust Act violations.

The plaintiffs in the Employee Benefits Complaint are a group of individual employees and corporate and municipal employers alleging claims on behalf of two separate nationwide purported classes: an employee class and an employer class that acquired insurance products from the defendants from January 1, 1998 to December 31, 2004. The Employee Benefits Complaint names AIG, as well as various other brokers and insurers, as defendants. The activities alleged in the Employee Benefits Complaint, with certain exceptions, track the allegations of customer allocation through steering and bid-rigging made in the Commercial Complaint.

The District Court, in connection with the Commercial and Employee Benefits Complaints, granted (without leave to amend) defendants' motions to dismiss the federal antitrust and RICO claims on August 31, 2007 and September 28, 2007, respectively. The Court declined to exercise supplemental jurisdiction over the state law claims in the Commercial Complaint and therefore dismissed it in its entirety. Plaintiffs appealed the dismissal of the Commercial Complaint to the United States Court of Appeals for the Third Circuit (the Third Circuit) on October 10, 2007. On January 14, 2008, the District Court granted summary judgment to defendants on plaintiffs' ERISA claims in the Employee Benefits Complaint. On February 12, 2008, plaintiffs filed a notice of appeal to the Third Circuit with respect to the dismissal of the antitrust and RICO claims in the Employee Benefits Complaint.

On August 16, 2010, the Third Circuit affirmed the dismissal of the Employee Benefits Complaint in its entirety, affirmed in part and vacated in part the District Court's dismissal of the Commercial Complaint, and remanded the case for further proceedings consistent with the opinion. Specifically, the Third Circuit affirmed the dismissal of plaintiffs' broader antitrust and RICO claims, but the Court reversed the District Court's dismissal of alleged "Marsh-centered" antitrust and RICO claims based on allegations of bid-rigging involving excess casualty insurance. The Court remanded these Marsh-centered claims to the District Court for consideration as to whether plaintiffs had adequately pleaded them. Because the Third Circuit vacated in part the judgment dismissing the federal claims in the Commercial Complaint, the Third Circuit also vacated the District Court's dismissal of the state-law claims in the Commercial Complaint.

On October 1, 2010, defendants in the Commercial Complaint filed motions to dismiss the remaining remanded claims in the District Court of New Jersey.

As of February 16, 2011, plaintiffs have not specified an amount of alleged damages. Because the District Court has not ruled on the renewed motion to dismiss, discovery has not yet been completed, and AIG lacks sufficient information about the total amount of insurance premiums paid to other insurer defendants, AIG is unable to reasonably estimate the possible loss or range of losses, if any, arising from these remaining claims.

A number of complaints making allegations similar to those in the Multi-District Litigation have been filed against AIG and other defendants in state and federal courts around the country. The defendants have thus far been successful in having the federal actions transferred to the District of New Jersey and consolidated into the Multi-District Litigation. These additional consolidated actions are still pending in the District of New Jersey, but are currently stayed. In one of those consolidated actions, Palm Tree Computer Systems, Inc. v. Ace USA, which is brought by two named plaintiffs on behalf of a proposed class of insurance purchasers, the plaintiffs allege specifically with respect to their claim for breach of fiduciary duty against the insurer defendants that neither named plaintiff nor any member of the proposed class suffered damages "exceeding $74,999 each." Plaintiffs do not specify damages as to other claims against the insurer defendants in the complaint. The plaintiffs in Palm Tree have not yet sought certification of the class, as that case has been stayed by the District Court in New Jersey. Because discovery has not been completed and the District Court has not determined if a class action is appropriate or the size or scope of any class, AIG is unable to reasonably estimate the possible loss or range of losses, if any, arising from the Palm Tree litigation. In another consolidated action, The Heritage Corp. of South Florida v. National Union Fire Ins. Co., an individual plaintiff alleges damages "in excess of $75,000." Because discovery has not been completed, AIG is unable to reasonably estimate the possible loss or range of losses, if any, arising from the Heritage Corp. litigation. For the remaining consolidated actions, as of February 16, 2011, plaintiffs have not specified an amount of alleged damages arising from these actions. AIG is therefore unable to reasonably estimate the possible loss or range of losses, if any, arising from these matters.

The AIG defendants have also sought to have state court actions making similar allegations stayed pending resolution of the Multi-District Litigation proceeding. These efforts have generally been successful, although four cases have proceeded; one each in Florida and New Jersey state courts that have settled, and one each in Texas and Kansas state courts have proceeded (although discovery is stayed in both actions). In the Texas action, plaintiff filed its Fourth Amended Petition on July 13, 2009 and on August 14, 2009, defendants filed renewed special exceptions. Plaintiff in the Texas action alleges a "maximum" of $125 million in total damages (after trebling). Because the Court has not rendered a decision on defendants' renewed special exceptions and discovery has not been completed, AIG is unable to reasonably estimate the possible loss or range of losses, if any, arising from the Texas action. In the Kansas action, defendants are appealing to the Kansas Supreme Court the trial court's denial of defendants' motion to dismiss on statute of limitations grounds. Briefing on the appeal was completed in December 2010. In the Kansas action, the plaintiff alleges damages in an amount "greater than $75,000" for each of the three claims directed against AIG in the complaint. Because the Kansas Supreme Court has not decided the appeal of the trial court's denial of defendants' motion to dismiss, and discovery has not been completed, AIG is unable to reasonably estimate the possible loss or range of losses, if any, from the Kansas action.

Workers' Compensation Premium Reporting. On May 24, 2007, the National Council on Compensation Insurance (NCCI), on behalf of the participating members of the National Workers' Compensation Reinsurance Pool (the NWCRP), filed a lawsuit in the United States District Court for the Northern District of Illinois (Northern District of Illinois) against AIG with respect to the underpayment by AIG of its residual market assessments for workers' compensation insurance. The complaint alleged claims for violations of RICO, breach of contract, fraud and related state law claims arising out of AIG's alleged underpayment of these assessments between 1970 and the present and sought damages purportedly in excess of $1 billion. On August 6, 2007, the Court denied AIG's motion seeking to dismiss or stay the complaint or, in the alternative, to transfer to the Southern District of New York. On December 26, 2007, the Court denied AIG's motion to dismiss the complaint.

On March 17, 2008, AIG filed an amended answer, counterclaims and third-party claims against NCCI (in its capacity as attorney-in-fact for the NWCRP), the NWCRP, its board members, and certain of the other insurance companies that are members of the NWCRP alleging violations of RICO, as well as claims for conspiracy, fraud, and other state law claims. The counterclaim-defendants and third-party defendants filed motions to dismiss on June 9, 2008. On January 26, 2009, AIG filed a motion to dismiss all claims in the complaint for lack of subject-matter jurisdiction. On February 23, 2009, the Court issued a decision and order sustaining AIG's counterclaims and sustaining, in part, AIG's third-party claims. The Court also dismissed certain of AIG's third-party claims without prejudice.

On April 13, 2009, third-party defendant Liberty Mutual filed third-party counterclaims against AIG, certain of its subsidiaries, and former AIG executives. On August 23, 2009, the Court granted AIG's motion to dismiss the NCCI complaint for lack of standing. On September 25, 2009, AIG filed its First Amended Complaint, reasserting its RICO claims against certain insurance companies that both underreported their workers' compensation premium and served on the NWCRP Board, and repleading its fraud and other state law claims. Defendants filed a motion to dismiss the First Amended Complaint on October 30, 2009. On October 8, 2009, Liberty Mutual filed an amended counterclaim against AIG. The amended counterclaim is substantially similar to the complaint initially filed by NCCI, but also seeks damages related to non-NWCRP states, guaranty funds, and special assessments, in addition to asserting claims for other violations of state law. The amended counterclaim also removes as defendants the former AIG executives. On October 30, 2009, AIG filed a motion to dismiss the Liberty amended counterclaim.

On April 1, 2009, Safeco Insurance Company of America and Ohio Casualty Insurance Company filed a complaint in the Northern District of Illinois, on behalf of a purported class of all NWCRP participant members, against AIG and certain of its subsidiaries with respect to the underpayment by AIG of its residual market assessments for workers' compensation insurance. The complaint was styled as an "alternative complaint," should the Court grant AIG's motion to dismiss the NCCI lawsuit for lack of subject-matter jurisdiction. The allegations in the class action complaint are substantially similar to those filed by the NWCRP, but the complaint names former AIG executives as defendants and asserts a RICO claim against those executives. On August 28, 2009, the class action plaintiffs filed an amended complaint, removing the AIG executives as defendants. On October 30, 2009, AIG filed a motion to dismiss the amended complaint. On July 16, 2010, Safeco Insurance Company and Ohio Casualty Insurance Company filed their motion for class certification, which AIG opposed on October 8, 2010.

On July 1, 2010, the Court ruled on the pending motions to dismiss that were directed at all parties' claims. With respect to the underreporting NWCRP companies' and board members' motion to dismiss AIG's first amended complaint, the Court denied the motion to dismiss all counts except AIG's claim for unjust enrichment, which it found to be precluded by the surviving claims for breach of contract. With respect to NCCI and the NWCRP's motion to dismiss AIG's first amended complaint, the Court denied the NCCI and the NWCRP's motions to dismiss AIG's claims for an equitable accounting and an action on an open, mutual, and current account. With respect to AIG's motions to dismiss Liberty's counterclaims and the class action complaint, the Court denied both motions, except that it dismissed the class claim for promissory estoppel. On July 30, 2010 the NWCRP filed a motion for reconsideration of the Court's ruling denying its motion to dismiss AIG's claims for an equitable accounting and an action on an open, mutual, and current account. The Court denied the NWCRP's motion for reconsideration on September 16, 2010. The plaintiffs filed a motion for class certification on July 16, 2010. AIG opposed the motion.

On January 5, 2011, AIG executed a term sheet with a group of intervening plaintiffs, made up of seven participating members of the NWCRP that filed a motion to intervene in the class action for the purpose of settling the claims at issue on behalf of a settlement class. The proposed class-action settlement would require AIG to pay $450 million to satisfy all liabilities to the class members arising out of the workers' compensation premium reporting issues, a portion of which would be funded out of the remaining amount held in the Workers' Compensation Fund less any amounts previously withdrawn to satisfy AIG's regulatory settlement obligations, as addressed above. On January 13, 2011, their motion to intervene was granted. On January 19, 2011, the intervening class plaintiffs filed their Complaint in Intervention. On January 28, 2011, AIG and the intervening class plaintiffs entered into a settlement agreement embodying the terms set forth in the January 5, 2011 term sheet and filed a joint motion for certification of the settlement class and preliminary approval of the settlement. If approved by the Court (and such approval becomes final), the settlement agreement will resolve and dismiss with prejudice all claims that have been made or that could have been made in the consolidated litigations pending in the Northern District of Illinois arising out of workers' compensation premium reporting, including the class action, other than claims that are brought by any class member that opts out of the settlement. The $450 million settlement amount along with the $146.5 million in fines, penalties, and premium taxes discussed in the NAIC Examination of Workers' Compensation Premium Reporting matter above may be funded in part from the $338 million held in the Workers' Compensation Fund. In the event that the proposed class action settlement is not approved, or that certain class members opt out of the settlement and continue to pursue their claims against AIG, the litigation will resume. AIG has an accrued liability equal to the amounts payable under the settlement. Amounts held in escrow totaling approximately $338 million, including interest thereon, are included in Other assets at December 31, 2010, and are specifically designated to satisfy liabilities related to workers' compensation premium reporting issues.

Litigation Matters Relating to AIG's Insurance Operations

Caremark. AIG and certain of its subsidiaries have been named defendants in two putative class actions in state court in Alabama that arise out of the 1999 settlement of class and derivative litigation involving Caremark Rx, Inc. (Caremark). The plaintiffs in the second-filed action intervened in the first-filed action, and the second-filed action was dismissed. An excess policy issued by a subsidiary of AIG with respect to the 1999 litigation was expressly stated to be without limit of liability. In the current actions, plaintiffs allege that the judge approving the 1999 settlement was misled as to the extent of available insurance coverage and would not have approved the settlement had he known of the existence and/or unlimited nature of the excess policy. They further allege that AIG, its subsidiaries, and Caremark are liable for fraud and suppression for misrepresenting and/or concealing the nature and extent of coverage. In addition, the intervenors originally alleged that various lawyers and law firms who represented parties in the underlying class and derivative litigation (the "Lawyer Defendants") were also liable for fraud and suppression, misrepresentation, and breach of fiduciary duty.

The complaints filed by the plaintiffs and the intervenors request compensatory damages for the 1999 class in the amount of $3.2 billion, plus punitive damages. AIG and its subsidiaries deny the allegations of fraud and suppression, assert that information concerning the excess policy was publicly disclosed months prior to the approval of the settlement, that the claims are barred by the statute of limitations, and that the statute cannot be tolled in light of the public disclosure of the excess coverage. The plaintiffs and intervenors, in turn, have asserted that the disclosure was insufficient to inform them of the nature of the coverage and did not start the running of the statute of limitations.

In November 2007, the trial court dismissed the intervenors' complaint against the Lawyer Defendants, and the Alabama Supreme Court affirmed that dismissal in September 2008. After the case was sent back down to the trial court, the intervenors retained additional counsel and filed an Amended Complaint in Intervention that named only Caremark and AIG and various subsidiaries as defendants, purported to bring claims against all defendants for deceit and conspiracy to deceive, and purported to bring a claim against AIG and its subsidiaries for aiding and abetting Caremark's alleged deception. The defendants moved to dismiss the Amended Complaint in Intervention, and the plaintiffs moved to disqualify all of the lawyers for the intervenors because, among other things, the newly retained firm had previously represented Caremark. The intervenors, in turn, moved to disqualify the lawyers for the plaintiffs in the first-filed action. The cross- motions to disqualify were withdrawn after the two sets of plaintiffs agreed that counsel for the original plaintiffs would act as lead counsel, and intervenors also withdrew their Amended Complaint in Intervention. The trial Court approved all of the foregoing steps and, in April 2009, established a schedule for class action discovery that was to lead to a hearing on class certification in March 2010. The Court has since appointed a special master to oversee class action discovery and has directed the parties to submit a new discovery schedule after certain discovery disputes are resolved. Class discovery is ongoing, and no schedule for the class certification hearing has been set.

As of February 16, 2011, the parties have not completed class action discovery, general discovery has not commenced, and the court has not determined if a class action is appropriate or the size or scope of any class. As a result, AIG is unable to reasonably estimate the possible loss or range of losses, if any, arising from the litigation.

(b): Commitments

Flight Equipment

At December 31, 2010, ILFC had committed to purchase 115 new aircraft deliverable from 2011 through 2019, at an estimated aggregate purchase price of approximately $13.5 billion. ILFC will be required to find lessees for any aircraft acquired and to arrange financing for a substantial portion of the purchase price.

Included in the 115 new aircraft are 74 Boeing 787 aircraft (B787s), with the first aircraft currently scheduled to be delivered in July 2012. ILFC is in discussions with Boeing related to revisions to the delivery schedule and potential delay compensation and penalties for which ILFC may be eligible. ILFC has signed contracts with customers for 37 of the 74 B787s on order. Under the terms of ILFC's B787 leases, the lessees may be entitled to share in certain compensation that ILFC receives from Boeing for late delivery of the aircraft.

The following table presents the minimum future rental income on noncancelable operating leases of flight equipment that has been delivered:

At December 31, 2010 (in millions)



2011	$	4,171
2012		3,590
2013		2,931
2014		2,247
2015		1,647
Remaining years after 2015		2,518

Total	$	17,104

Flight equipment is leased under operating leases with remaining terms ranging from one to eleven years.

Lease Commitments

AIG and its subsidiaries occupy leased space in many locations under various long-term leases and have entered into various leases covering the long-term use of data processing equipment.

The following table presents the future minimum lease payments under operating leases:

At December 31, 2010 (in millions)



2011	$	429
2012		362
2013		295
2014		233
2015		189
Remaining years after 2015		546

Total	$	2,054

Rent expense was $587 million, $733 million and $896 million for the years ended December 31, 2010, 2009 and 2008, respectively. These amounts include $118 million, $206 million and $225 million attributable to discontinued operations for the years ended December 31, 2010, 2009 and 2008, respectively.

Other Commitments

In the normal course of business, AIG enters into commitments to invest in limited partnerships, private equities, hedge funds and mutual funds and to purchase and develop real estate in the U.S. and abroad. These commitments totaled $4.1 billion at December 31, 2010.

AIG is obligated, subject to certain conditions, to make any payment that is not promptly paid with respect to the benefits accrued by certain employees of AIG and its subsidiaries under the SICO Plans (as discussed in (c) below under "Benefits Provided by Starr International Company, Inc.").

(c) Contingencies

Liability for unpaid claims and claims adjustment expense

Although AIG regularly reviews the adequacy of the established Liability for unpaid claims and claims adjustment expense, there can be no assurance that AIG's ultimate Liability for unpaid claims and claims adjustment expense will not develop adversely and materially exceed AIG's current Liability for unpaid claims and claims adjustment expense. Estimation of ultimate net claims, claims adjustment expenses and Liability for unpaid claims and claims adjustment expense is a complex process for long-tail casualty lines of business, which include excess and umbrella liability, D&O, professional liability, medical malpractice, workers' compensation, general liability, products liability and related classes, as well as asbestos and environmental exposures. Generally, actual historical loss development factors are used to project future loss development. However, there can be no assurance that future loss development patterns will be the same as in the past. Moreover, any deviation in loss cost trends or in loss development factors might not be discernible for an extended period of time subsequent to the recording of the initial loss reserve estimates for any accident year. Thus, there is the potential for reserves with respect to a number of years to be significantly affected by changes in loss cost trends or loss development factors that were relied upon in setting the reserves. These changes in loss cost trends or loss development factors could be attributable to changes in inflation, in labor and material costs or in the judicial environment, or in other social or economic phenomena affecting claims.

Benefits Provided by Starr International Company, Inc.

SICO has provided a series of two-year Deferred Compensation Profit Participation Plans (SICO Plans) to certain AIG employees. The SICO Plans were created in 1975 when the voting shareholders and Board of Directors of SICO, a private holding company whose principal asset is AIG Common Stock, decided that a portion of the capital value of SICO should be used to provide an incentive plan for the current and succeeding managements of all American International companies, including AIG.

None of the costs of the various benefits provided under the SICO Plans has been paid by AIG, although AIG has recorded a charge to reported earnings for the deferred compensation amounts paid to AIG employees by SICO, with an offsetting amount credited to Additional paid-in capital reflecting amounts considered to be contributed by SICO. The SICO Plans provide that shares currently owned by SICO are set aside by SICO for the benefit of the participant and distributed upon retirement. The SICO Board of Directors currently may permit an early payout of units under certain circumstances. Prior to payout, the participant is not entitled to vote, dispose of or receive dividends with respect to such shares, and shares are subject to forfeiture under certain conditions, including but not limited to the participant's voluntary termination of employment with AIG prior to normal retirement age. Under the SICO Plans, SICO's Board of Directors may elect to pay a participant cash in lieu of shares of AIG Common Stock. Following notification from SICO to participants in the SICO Plans that it will settle specific future awards under the SICO Plans with shares rather than cash, AIG modified its accounting for the SICO Plans from variable to fixed measurement accounting. AIG gave effect to this change in settlement method beginning on December 9, 2005, the date of SICO's notice to participants in the SICO Plans.

Under the Starr International Company, Inc. Assurance Agreement, dated as of June 27, 2005 (SICO Assurance Agreement), AIG has agreed that, in the event that SICO does not promptly deliver the shares as required under the express terms of the SICO Plans to participants who were employees of AIG and its subsidiaries as of May 18, 2005, AIG will pay the benefits due under the SICO Plans. At December 31, 2010, the maximum number of shares of AIG Common Stock that AIG could be required to deliver under the SICO Assurance Agreement was 238,613.

(d) Guarantees

Subsidiaries

AIG has issued unconditional guarantees with respect to the prompt payment, when due, of all present and future payment obligations and liabilities of AIGFP arising from transactions entered into by such companies.

In connection with AIGFP's leasing business, AIGFP has issued, in a limited number of transactions, standby letters of credit or similar facilities to equity investors in an amount equal to the termination value owing to the equity investor by the lessee in the event of a lessee default (the equity termination value). The total amount outstanding at December 31, 2010 was $1.0 billion. In those transactions, AIGFP has agreed to pay such amount if the lessee fails to pay. The amount payable by AIGFP is, in certain cases, partially offset by amounts payable under other instruments typically equal to the present value of a scheduled payment to be made by AIGFP. In the event that AIGFP is required to make a payment to the equity investor, the lessee is unconditionally obligated to reimburse AIGFP. To the extent that the equity investor is paid the equity termination value from the standby letter of credit and/or other sources, including payments by the lessee, AIGFP takes an assignment of the equity investor's rights under the lease of the underlying property. Because the obligations of the lessee under the lease transactions are generally economically defeased, lessee bankruptcy is the most likely circumstance in which AIGFP would be required to pay.

Asset Dispositions

General

AIG is subject to financial guarantees and indemnity arrangements in connection with the completed sales of businesses pursuant to its asset disposition plan. The various arrangements may be triggered by, among other things, declines in asset values, the occurrence of specified business contingencies, the realization of contingent liabilities, developments in litigation or breaches of representations, warranties or covenants provided by AIG. These arrangements are typically subject to various time limitations, defined by the contract or by operation of law, such as statutes of limitation. In some cases, the maximum potential obligation is subject to contractual limitations, while in other cases such limitations are not specified or are not applicable.

AIG is unable to develop a reasonable estimate of the maximum potential payout under certain of these arrangements. Overall, AIG believes that it is unlikely it will have to make any material payments related to completed sales under these arrangements, and no material liabilities related to these arrangements have been recorded in the Consolidated Balance Sheet. See Note 1 herein for additional information on sales of businesses and asset dispositions.

ALICO Sale

Pursuant to the terms of the ALICO stock purchase agreement, AIG has agreed to provide MetLife with certain indemnities, the most significant of which include:

•

Indemnification related to breaches of general representations and warranties with an aggregate deductible of $125 million and a maximum payout of $2.25 billion. The indemnification extends for 21 months after November 1, 2010.

•

Indemnifications related to specific product, investment, litigation and other matters that are excluded from the general representations and warranties indemnity. These indemnifications provide for various deductible amounts, which in certain cases are zero, and maximum exposures, which in certain cases are unlimited, and extend for various periods after the completion of the sale.

•

Tax indemnifications related to insurance reserves that extend for taxable periods ending on or before December 31, 2013 and that are limited to an aggregate of $200 million, and certain other tax-related representations and warranties that extend to the expiration of the statute of limitations and are subject to an aggregate deductible of $50 million.

•

Indemnification for taxes incurred by ALICO as a result of the proposed elections under Section 338 of the Internal Revenue Code (the Code). Such elections have the effect of shifting the federal income tax liability on the sale from the seller to ALICO.

In connection with the above, AIG placed $3 billion of sales proceeds (consisting of MetLife securities received upon the completion of the sale) into an escrow arrangement that declines to zero over a 30-month period ending in April 2013, with claims submitted related to the indemnifications reducing the amount that can be released. AIG has accrued for estimated liabilities for indemnities, including the Italian internal fund suspension matter discussed above.

AGF Sale

Under the terms of the sale of AGF, AIG and the purchaser have made certain customary representations, warranties and covenants in the stock purchase agreement and AIG agreed to provide the purchaser with certain indemnities. The transaction closed on November 30, 2010. In connection with entering into the stock purchase agreement, AIG and AGF amended their tax sharing agreement, which terminated on the closing of the transaction, (i) to provide that the parties' payment obligation under the tax sharing agreement shall be limited to the payments required to be made by AIG to AGF with respect to the 2009 taxable year in accordance with the tax sharing agreement and (ii) to include the terms of the promissory note to be issued by AIG in satisfaction of its 2009 taxable year payment obligation to AGF.

Star/Edison Sale

Pursuant to the terms of the Star/Edison stock purchase agreement, AIG has agreed to provide Prudential Financial, Inc. with certain indemnities, the most significant of which is indemnification related to breaches of general representations and warranties that exceed 4.1 billion Yen ($50 million at the December 31, 2010 exchange rate), with a maximum payout of 102 billion Yen ($1.3 billion at the December 31, 2010 exchange rate). Except for certain specified representations and warranties that may have a longer survival period. The indemnification extends for 21 months after the closing, which occurred on February 1, 2011.

Other

•

See Note 11 herein for commitments and guarantees associated with VIEs.

•

See Note 12 herein for disclosures on derivatives, including Capital Markets and MIP written credit default swaps and other derivatives with credit risk-related contingent features.

•

See Note 25 herein for additional disclosures on guarantees of outstanding debt.

Total Equity and Earnings (Loss) Per Share

12 Months Ended

Dec. 31, 2010

Total Equity and Earnings (Loss) Per Share

Total Equity and Earnings (Loss) Per Share

17. Total Equity and Earnings (Loss) Per Share

Shares Outstanding

The following table presents a rollforward of outstanding shares:

		Preferred Stock


Year Ended December 31, 2010		AIG Series E		AIG Series F		AIG Series C		AIG Series D		Common Stock		Treasury Stock

Shares issued, beginning of year			400,000		300,000		100,000		-		141,732,263		6,661,356
	Issuances		-		-		-		-		5,391,804		-
	Shares exchanged		-		-		-		-		-		(448	)

Shares issued, end of year			400,000		300,000		100,000		-		147,124,067		6,660,908

See Note 1 and 26 herein for a discussion of the Recapitalization.

Preferred Stock

During 2010, AIG drew approximately $2.2 billion under the Department of the Treasury Commitment and, as a result, the liquidation preference of the Series F Preferred Stock increased to $7.543 billion in the aggregate.

At December 31, 2010, a total of $7.5 billion was outstanding under the Department of the Treasury Commitment (Series F), an increase of $2.2 billion from December 31, 2009. On January 14, 2011 AIG drew down approximately $20.3 billion under this Department of the Treasury Commitment (Series F) to purchase a portion of the SPV Preferred Interests from the FRBNY that were exchanged with the Department of the Treasury. In connection with the closing of the Recapitalization, $2.0 billion under the Department of the Treasury Commitment (Series F) was exchanged for the Series G Drawdown Right, and the Series G Drawdown Right became effective on that date. See Note 1 herein.

On January 14, 2011, the Series C Preferred Stock, the Series E Preferred Stock and the Series F Preferred Stock were exchanged for AIG Common Stock and retired in connection with the Recapitalization (at which time the Series G Preferred Stock was issued). See Note 1 herein.

The following table presents a rollforward of preferred stock:

(in millions)		AIG Series E		AIG Series F			AIG Series C		AIG Series D			Total Preferred Stock



Balance, January 1, 2008		$	-	$	-		$	-	$	-		$	-
	AIG Series D issuance		-		-			-		40,000			40,000

Balance, December 31, 2008		$	-	$	-		$	-	$	40,000		$	40,000

	AIG Series C issuance		-		-			23,000		-			23,000
	AIG Series D exchange for AIG Series E		41,605		-			-		(40,000	)		1,605
	AIG Series F drawdown		-		5,344			-		-			5,344
	AIG Series F commitment fee		-		(165	)		-		-			(165	)

Balance, December 31, 2009		$	41,605	$	5,179		$	23,000	$	-		$	69,784

	AIG Series F drawdown		-		2,199			-		-			2,199

Balance, December 31, 2010		$	41,605	$	7,378		$	23,000	$	-		$	71,983

See Note 26 herein for the expected impact of the closing of the Recapitalization on Preferred stock.

Common Stock

AIG Treasury Stock Retirement

On November 30, 2009, AIG retired 6,111,158 common shares included in Treasury stock, which had a carrying value of $7.40 billion. These shares were returned to AIG's authorized but unissued common stock. AIG accounted for the retirement by reducing common stock by $15.28 million and Additional paid-in capital by $7.38 billion.

Dividends

Dividends declared per common share were $8.40 in 2008. No dividends were declared in 2010 and 2009 because effective September 23, 2008, AIG's Board of Directors (the Board) suspended the declaration of dividends on AIG Common Stock. Currently, pursuant to the terms of the AIG Series G Preferred Stock, AIG is not able to declare or pay any cash dividends on the AIG Common Stock while the AIG Series G Preferred Stock is outstanding. In addition, AIG was unable to pay dividends under the terms of other series of AIG preferred stock that were outstanding from November 2008 through January 14, 2011.

As a result of AIG's failure to declare and pay dividends on the Series E Preferred Stock and the Series F Preferred Stock for four quarterly dividend payment periods, the Department of the Treasury, as the sole holder of the Series E Preferred Stock and the Series F Preferred Stock, exercised its right and elected Ronald A. Rittenmeyer and Donald H. Layton (the Preferred Directors) to the Board of Directors of AIG (the Board) by written consent effective April 1, 2010. The Preferred Directors were re-elected by the United States Department of the Treasury, as the sole holder of the Series E Preferred Stock and the Series F Preferred Stock, at AIG's 2010 Annual Meeting of Shareholders and held office as Preferred Directors until the closing of the Recapitalization, at which time the Board determined that it was advisable and in the best interests of AIG and its shareholders to provide for the continued service of Messrs. Layton and Rittenmeyer as directors of AIG.

Share Issuances and Purchases

During the first six months of 2008, AIG purchased a total of 1,896,303 shares of AIG Common Stock. Pursuant to the FRBNY Credit Agreement, AIG was restricted from repurchasing shares of its common stock, and no shares have been purchased since the second quarter of 2008, except for the purchase of a total of 5,336,981 shares from AIA and ALICO prior to their divestiture, which had been reported as treasury shares.

In May 2008, AIG sold 9,835,526 shares of AIG Common Stock at a price per share of $760 for gross proceeds of $7.47 billion and 78.4 million equity units (the Equity Units) at a price per unit of $75 for gross proceeds of $5.88 billion. The Equity Units, the key terms of which are summarized below, are recorded as long-term debt in the Consolidated Balance Sheet.

Equity Units

In May 2008, AIG sold 78.4 million equity units (the Equity Units) at a price per unit of $75 for gross proceeds of $5.88 billion. Each Equity Unit has an initial stated amount of $75 and consists of a stock purchase contract issued by AIG and, initially, a 1/40th, or 2.5 percent, undivided beneficial ownership interest in three series of junior subordinated debentures (Series B-1, B-2 and B-3), each with a principal amount of $1,000.

The Equity Units also include a stock purchase contract obligating the holder of an Equity Unit to purchase, and obligating AIG to sell, a variable number of shares of AIG Common Stock for $25 in cash on each of February 15, 2011, May 1, 2011 and August 1, 2011. The number of shares that AIG is obligated to deliver on each stock purchase date is set forth in the chart below (where the "applicable market value" is an average of the trading prices of AIG Common Stock over the 20-trading-day period ending on the third business day prior to the relevant stock purchase date).

If the applicable market value is:		then AIG is obligated to issue:


• Greater than or equal to $912		• 0.02741 shares per stock purchase contract
• Between $912 and $760		• Shares equal to $25 divided by the applicable market value
• Less than or equal to $760		• 0.03289 shares per stock purchase contract

AIG is obligated to pay quarterly contract adjustment payments to the holders of the stock purchase contracts, at an initial annual rate of 2.71 percent applied to the stated amount. The present value of the contract adjustment payments, $431 million, was recognized at inception as a liability (a component of Other liabilities), and was recorded as a reduction to Additional paid-in capital.

In addition to the stock purchase contracts, as part of the Equity Units, AIG issued $1.96 billion of each of the Series B-1, B-2 and B-3 junior subordinated debentures, which initially pay interest at rates of 5.67 percent, 5.82 percent and 5.89 percent, respectively. AIG allocated the proceeds of the Equity Units between the stock purchase contracts and the junior subordinated debentures on a relative fair value basis. AIG determined that the fair value of the stock purchase contract at issuance was zero, and therefore all of the proceeds were allocated to the junior subordinated debentures.

The junior subordinated debentures are recorded as Other long-term debt in the Consolidated Balance Sheet. The principal amount owed by AIG on the subordinated debentures is equal to the amount owed to AIG under the related stock purchase contract.

On November 23, 2010, AIG commenced an offer to exchange up to 74,480,000 of its Equity Units for consideration per Equity Unit equal to 0.09867 share of AIG Common Stock plus $3.2702 in cash (the "Exchange Offer"). The stock and cash received will be the result of netting payments from two separate transactions, a repurchase of the subordinated debentures and a cancellation of the stock purchase contracts.

On November 29, 2010, holders of 49,474,600 Equity Units accepted the Exchange Offer and their units were tendered in exchange for 4,881,667 shares of AIG Common Stock and $162 million in cash. The consideration offered per Equity Unit exchanged is the same number of shares and the same cumulative amount of cash per Equity Unit that a holder would receive if the holder did not tender into the Exchange Offer and instead held Equity Units and settled the respective stock purchase contract at its final stock purchase date with the proceeds from subordinated debentures. The execution of the Exchange Offer resulted in a loss on the extinguishment of the subordinated debentures of approximately $104 million and an increase to equity of approximately $3.7 billion.

Following the completion of the exchange offer, a total of 28,925,400 Equity Units remained outstanding. In addition, the remaining debentures continue to be subject to remarketing. The trading market for the Equity Units that remain outstanding after the Exchange Offer is expected to be more limited. AIG may, to the extent permitted by applicable law, after the settlement date of the Exchange Offer, purchase Equity Units and the subordinated debentures in a remarketing, in the open market, in privately negotiated transactions or otherwise.

Accumulated Other Comprehensive Income (Loss)

A rollforward of Accumulated other comprehensive income (loss) is as follows:

(in millions)		Unrealized Appreciation (Depreciation) of Fixed Maturity Investments on Which Other-Than- Temporary Credit Impairments Were Taken			Unrealized Appreciation (Depreciation) of All Other Investments			Foreign Currency Translation Adjustments			Net Derivative Gains (losses) Arising from Cash Flow Hedging Activities			Retirement Plan Liabilities Adjustment			Total



Balance, January 1, 2008, net of tax		$	-		$	4,375		$	880		$	(87	)	$	(525	)	$	4,643

	Cumulative effect of change in accounting principle, net of tax		-			(105	)		-			-			-			(105	)
	Unrealized depreciation of investments		-			(13,966	)		-			-			-			(13,966	)
	Net changes in foreign currency translation adjustments		-			-			(1,398	)		-			-			(1,398	)
	Net losses on cash flow hedges		-			-			-			(156	)		-			(156	)
	Net actuarial loss		-			-			-			-			(1,313	)		(1,313	)
	Prior service cost		-			-			-			-			(12	)		(12	)
	Deferred tax asset		-			4,948			356			52			352			5,708

Total other comprehensive loss			-			(9,123	)		(1,042	)		(104	)		(973	)		(11,242	)
Noncontrolling interests			-			(296	)		25			-			-			(271	)

Balance, December 31, 2008, net of tax		$	-		$	(4,452	)	$	(187	)	$	(191	)	$	(1,498	)	$	(6,328	)
Adjustment on April 1, 2009^*			(599	)		599			-			-			-			-

	Unrealized appreciation of investments		2,048			27,891			-			-			-			29,939
	Net changes in foreign currency translation adjustments		-			-			2,932			-			-			2,932
	Net gains on cash flow hedges		-			-			-			95			-			95
	Net actuarial gain		-			-			-			-			397			397
	Prior service cost		-			-			-			-			(27	)		(27	)
	Deferred tax liability		(724	)		(9,802	)		(1,005	)		(32	)		(16	)		(11,579	)

Total other comprehensive income			1,324			18,089			1,927			63			354			21,757
	Cumulative effect of change in accounting principle, net of tax		(2,537	)		(6,811	)		-			-			-			(9,348	)
Noncontrolling interests			(2	)		280			110			-			-			388

Balance, December 31, 2009, net of tax		$	(1,810	)	$	7,145		$	1,630		$	(128	)	$	(1,144	)	$	5,693

	Unrealized appreciation of investments		2,522			3,640			-			-			-			6,162
	Net changes in foreign currency translation adjustments		-			-			(1,873	)		-			-			(1,873	)
	Net gains on cash flow hedges		-			-			-			111			-			111
	Net actuarial gain		-			-			-			-			303			303
	Prior service cost		-			-			-			-			(4	)		(4	)
	Deferred tax asset (liability)		(1,293	)		(1,529	)		621			(17	)		(24	)		(2,242	)

Total other comprehensive income (loss)			1,229			2,111			(1,252	)		94			275			2,457
	Cumulative effect of change in accounting principle, net of tax		(76	)		(269	)		-			-			-			(345	)
Noncontrolling interests			2			99			80			-			-			181

Balance, December 31, 2010, net of tax		$	(659	)	$	8,888		$	298		$	(34	)	$	(869	)	$	7,624

*: Adjustment to reflect adoption of the new other-than-temporary impairment accounting standard.

As a result of divestitures in 2010, $2.1 billion of Foreign currency cumulative translation adjustment and $6.0 billion of Unrealized appreciation of investments were transferred to earnings as net gain on sale.

Noncontrolling interests

In connection with the ongoing execution of its orderly asset disposition plan, as well as plans to timely repay the FRBNY Credit Facility, AIG transferred two of its wholly owned businesses, AIA and ALICO, to two newly created special purpose vehicles (SPVs) in exchange for all the common and preferred interests of those SPVs. On December 1, 2009, AIG transferred the preferred interests in the SPVs to the FRBNY in consideration for a $25 billion reduction of the outstanding loan balance and of the maximum amount of credit available under the FRBNY Credit Facility and amended the terms of the FRBNY Credit Facility. The remaining preferred interests, with an aggregate liquidation preference of approximately $26.4 billion at December 31, 2010, were transferred by the FRBNY to the Department of the Treasury as part of the closing of the Recapitalization. The remaining preferred interests, which have an aggregate liquidation preference of approximately $20.3 billion following a partial repayment on January 14, 2011 with proceeds from the sale of ALICO, were transferred by the FRBNY to AIG and subsequently transferred to the Department of the Treasury as part of the Recapitalization. Under the terms of the SPVs' limited liability company agreements, the SPVs generally may not distribute funds to AIG until the liquidation preferences and preferred returns on the preferred interests have been repaid in full and concurrent distributions have been made on certain participating returns attributable to the preferred interests.

The common interests, which were retained by AIG, entitle AIG to 100 percent of the voting power of the SPVs. The voting power allows AIG to elect the boards of managers of the SPVs, who oversee the management and operation of the SPVs. Primarily due to the substantive participation rights of the preferred interests, the SPVs were determined to be variable interest entities. As the primary beneficiary of the SPVs, AIG consolidates the SPVs.

The rights held by the FRBNY through their ownership of the preferred interests are now held by the Department of the Treasury. In connection with the Recapitalization, AIG a agreed to cause the proceeds of certain asset dispositions to be used to redeem the remaining preferred interests.

For the years ended December 31, 2010 and 2009, the Noncontrolling interests balance declined by $2.2 billion and $4.4 billion. In 2009, this decline reflected the deconsolidation of Transatlantic in the second quarter of 2009 following the public offering of 29.9 million shares of Transatlantic common stock, after which AIG retained 13.9 percent of Transatlantic common stock outstanding. AIG also restructured certain relationships within the Institutional Asset Management business in 2009, resulting in the deconsolidation of a subsidiary and a related decline in goodwill of $476 million and noncontrolling interests of $1.9 billion for the year ended December 31, 2009, due to deconsolidation of certain entities.

As a result of the closing of the Recapitalization on January 14, 2011, the SPV non-controlling interests are no longer be considered permanent equity on AIG's Consolidated Balance Sheet, and will be classified as redeemable non-controlling interests in partially owned consolidated subsidiaries. See Notes 1 and 26 herein for a discussion of the Recapitalization.

Earnings (Loss) Per Share (EPS)

Basic and diluted earnings (loss) per share are based on the weighted average number of common shares outstanding, adjusted to reflect all stock dividends and stock splits. Diluted earnings per share is based on those shares used in basic EPS plus shares that would have been outstanding assuming issuance of common shares for all dilutive potential common shares outstanding, adjusted to reflect all stock dividends and stock splits. Basic earnings (loss) per share is not affected by outstanding stock purchase contracts. Diluted earnings per share is determined considering the potential dilution from outstanding stock purchase contracts using the treasury stock method and will not be affected by outstanding stock purchase contracts until the applicable market value per share exceeds $912.

In connection with the issuance of the Series C Preferred Stock, AIG began applying the two-class method for calculating EPS. The two-class method is an earnings allocation method for computing EPS when a company's capital structure includes either two or more classes of common stock or common stock and participating securities. This method determines EPS based on dividends declared on common stock and participating securities (i.e., distributed earnings) as well as participation rights of participating securities in any undistributed earnings.

The following table presents the computation of basic and diluted EPS:

Years Ended December 31, (dollars in millions, except per share data)			2010			2009			2008



Numerator for EPS:
	Income (loss) from continuing operations		$	12,077		$	(12,818	)	$	(93,346	)
	Net income (loss) from continuing operations attributable to noncontrolling interests:
		Noncontrolling nonvoting, callable, junior and senior preferred interests held by Federal Reserve Bank of New York		1,818			140			-
		Other		355			(1,576	)		(984	)

	Total net income (loss) from continuing operations attributable to noncontrolling interests			2,173			(1,436	)		(984	)

	Net income (loss) attributable to AIG from continuing operations			9,904			(11,382	)		(92,362	)

	Income (loss) from discontinued operations		$	(2,064	)	$	505		$	(7,041	)
	Income (loss) from discontinued operations attributable to noncontrolling interests			54			72			(114	)

	Net income (loss) attributable to AIG from discontinued operations			(2,118	)		433			(6,927	)

	Cumulative dividends on AIG Series D Fixed Rate Cumulative Perpetual Preferred Stock, par value $5.00 per share			-			(1,204	)		(400	)
	Deemed dividend to AIG Series D Preferred Stock exchanged for the Series E Preferred Stock			-			(91	)		-
	(Income) loss allocated to the Series C Preferred Stock – continuing operations			(7,890	)		-			-

Net income (loss) attributable to AIG from continuing operations, applicable to common stock for EPS				2,014			(12,677	)		(92,762	)

	(Income) loss allocated to the Series C Preferred Stock – discontinued operations			1,687			-			-

Net income (loss) attributable to AIG from discontinued operations, applicable to common stock for EPS			$	(431	)	$	433		$	(6,927	)

Denominator for EPS:
	Weighted average shares outstanding – basic			136,585,844			135,324,896			131,714,245
	Dilutive shares^*			63,436			-			-

	Weighted average shares outstanding – diluted			136,649,280			135,324,896			131,714,245

EPS attributable to AIG:
Basic:
	Income (loss) from continuing operations		$	14.75		$	(93.69	)	$	(704.26	)
	Income (loss) from discontinued operations		$	(3.15	)	$	3.21		$	(52.59	)
Diluted:
	Income (loss) from continuing operations		$	14.75		$	(93.69	)	$	(704.26	)
	Income (loss) from discontinued operations		$	(3.15	)	$	3.21		$	(52.59	)

*: Diluted shares are calculated using the treasury stock method and include dilutive shares from share-based employee compensation plans, and the warrants issued to the Department of the Treasury on April 17, 2009 to purchase up to 150 shares of AIG Common Stock (Series F Warrant). The number of shares excluded from diluted shares outstanding were 11 million, 12 million and 9 million for the years ended December 31, 2010, 2009 and 2008, respectively, because the effect would have been anti-dilutive.

- Definition

Disclosure related to equity and earnings per share. Disclosure related to accounts comprising shareholders' equity, including other comprehensive income. Includes: (1) balances of common stock, preferred stock, additional paid-in capital, other capital and retained earnings; (2) accumulated balance for each classification of other comprehensive income and total amount of comprehensive income; (3) amount and nature of changes in separate accounts, including the number of shares authorized and outstanding, number of shares issued upon exercise and conversion, and for other comprehensive income, the adjustments for reclassifications to net income; (4) rights and privileges of each class of stock authorized; (5) basis of treasury stock, if other than cost, and amounts paid and accounting treatment for treasury stock purchased significantly in excess of market; (6) dividends paid or payable per share and in the aggregate for each class of stock for each period presented; (7) dividend restrictions and accumulated preferred dividends in arrears (in aggregate and per share amount); (8) retained earnings appropriations or restrictions, such as dividend restrictions; (9) impact of change in accounting principle, initial adoption of new accounting principle and correction of an error in previously issued financial statements; (10) shares held in trust for Employee Stock Ownership Plan (ESOP); (11) deferred compensation related to issuance of capital stock; (12) note received for issuance of stock; (13) unamortized discount on shares; (14) description, terms and number of warrants or rights outstanding; (15) shares under subscription and subscription receivables; effective date of new retained earnings after quasi-reorganization and deficit eliminated by quasi-reorganization and, for a period of at least ten years after the effective date, the point in time from which the new retained dates; and (16) retroactive effective of subsequent change in capital structure. This element may be used to capture the complete disclosure pertaining to an entity's earnings per share.

+ References+ Details

Share-based Compensation and Other Plans

12 Months Ended

Dec. 31, 2010

Share-based Compensation and Other Plans

Share-based Compensation and Other Plans

19. Share-based Compensation and Other Plans

AIG's Consolidated Statement of Income included share-based compensation expense as follows:

Years Ended December 31, (in millions)	2010		2009		2008



Share-based compensation expense – pre-tax^*	$	333	$	209	$	389
Share-based compensation expense – after tax		216		151		284

*: Includes pre-tax share-based compensation expense related to discontinued operations for the years ended December 31, 2010, 2009 and 2008 of $12 million ($9 million after tax), $21 million ($13 million after tax), and $32 million ($22 million after tax), respectively.

Employee Plans

As of December 31, 2010, AIG employees had been granted awards under the following employee compensation plans:

•

AIG 1999 Stock Option Plan, as amended (1999 Plan) (superseded by the 2007 Plan);

•

AIG 2002 Stock Incentive Plan, as amended (2002 Plan), under which AIG has issued time-vested restricted stock units (RSUs) and performance restricted stock units (performance RSUs) (superseded by the 2007 Plan);

•

AIG 2007 Stock Incentive Plan, as amended (2007 Plan), under which AIG has issued restricted stock units (RSUs), performance restricted stock units (performance RSUs) and restricted stock (superseded by the 2010 Plan);

•

AIG 2010 Stock Incentive Plan, as amended (2010 Plan), under which AIG has issued restricted stock, restricted stock units and stock appreciation rights; and

•

SICO's Deferred Compensation Profit Participation Plans (SICO Plans).

Although awards granted under the plans listed above remain outstanding at December 31, 2010, future grants of restricted stock and other share-settled awards can be made only under the 2010 Plan. Share option exercises and other share awards to participants were settled by issuing previously acquired shares held in AIG's treasury account through November 30, 2009. Effective December 1, 2009, AIG is settling its share-settled awards with newly-issued shares of AIG Common Stock. Share awards made by SICO are settled by SICO.

Non-Employee Plans

AIG's non-employee directors received share- based compensation in the form of deferred stock units (DSUs) under the 2010 Plan and the 2007 Plan with delivery deferred until retirement from the Board. In 2010 and 2009, AIG granted to directors 14,484 and 9,106 DSUs, respectively.

Stock Options

AIG Stock Option Plan

Options granted under the 2007 Plan and the 1999 Plan remain outstanding at December 31, 2010. These awards generally vest over four years (25 percent vesting per year) and expire 10 years from the date of grant.

In 2010, AIG issued 600,994 shares in connection with previous exercises of options with delivery deferred.

Stock Option Valuation

AIG uses a binomial lattice model to calculate the fair value of stock option grants. A more detailed description of the valuation methodology is provided below. There were no stock options granted in 2010 and 2009.

The following weighted-average assumptions were used for stock options granted:





Expected annual dividend yield^(a)	3.77	%
Expected volatility^(b)	53.27	%
Risk-free interest rate^(c)	4.43	%
Expected term^(d)	4 years

(a): The dividend yield is determined at the grant date.
(b): Expected volatility is the average of historical volatility (based on seven years of daily stock price changes) and the implied volatility of actively traded options on AIG shares.
(c): The interest rate curves used in the valuation model were the U.S. Treasury STRIP rates with terms from 3 months to 10 years.
(d): The expected term is 4 years based on the average time to exercise derived from the output of the valuation model. In 2008, the contractual term of the option was generally 10 years with an expected term of seven years calculated based on an analysis of historical employee and executive exercise behavior and employee turnover (post-vesting terminations). The early exercise rate is a function of time elapsed since the grant. Fifteen years of historical data were used to estimate the early exercise rate.

The following table provides a roll forward of stock option activity:

As of or for the Year Ended December 31, 2010				Weighted Average Exercise Price		Weighted Average Remaining Contractual Life	Aggregate Intrinsic Values (in millions)



Options:
Outstanding at beginning of year		1,352,276		$	1,264.30		$	-
	Forfeited or expired	(329,869	)	$	1,350.06			-

Outstanding at end of year^*		1,022,407		$	1,236.64	3.20	$	-

Options exercisable at end of year		979,453		$	1,260.36	3.01	$	-

*: Includes vested and expected-to-vest options at December 31, 2010 of 1,020,338, with a weighted average exercise price of $1,237.85, a weighted average contractual life of 3.14 years and a zero aggregate intrinsic value.

At December 31, 2010, total unrecognized compensation cost (net of expected forfeitures) was $4 million with a blended weighted average period of 0.59 years. The cost of awards outstanding under these plans at December 31, 2010 is expected to be recognized over approximately one year.

The following table provides additional information about stock options:

As of or for the Year Ended December 31, (in millions, except weighted average grant date fair value of options granted)	2008



Intrinsic value of options exercised^*	$	2
Grant date fair value of options vesting		67
Weighted average grant date fair value of options granted^*		212.20
Cash received from exercise of stock options		16
Tax benefits realized on stock option exercises		1

*: There were no options granted or exercised in 2010 or 2009. The grant date fair value of options vesting in 2010 and 2009 was $7 million and $25 million, respectively.

Other Share-Settled Awards Under Share-Based Plans

AIG 2010 Stock Incentive Plan

The 2010 Plan was adopted at the 2010 Annual Meeting of Shareholders. The total number of shares of common stock that may be granted under the Plan is 60,000,000. The 2010 Plan supersedes the 2007 Plan and is currently the only plan under which share-based awards can be issued. During 2010, AIG granted DSUs, RSUs, restricted stock and stock appreciation rights under the 2010 Plan. Of the awards granted in 2010 under the 2010 Plan, only the DSUs and the restricted stock are share-settled. At December 31, 2010, there were 49,803,251 shares reserved for future grants under the 2010 Plan.

In December 2010, AIG granted 587,681 fully-vested shares of non-transferable AIG Common Stock (restricted stock) under the 2010 Stock Incentive Plan to certain of AIG's most highly compensated employees and executive officers. The restricted stock generally becomes transferable in March 2012 or on the third anniversary of grant in accordance with the terms of the employee's award.

AIG 2007 Stock Incentive Plan

The 2007 Plan was adopted at the 2007 Annual Meeting of Shareholders and amended and restated by AIG's Board of Directors on November 14, 2007. The total number of shares of Common Stock permitted to be issued under the Plan was 9,000,000. The 2010 Plan superseded the 2007 Plan, therefore, there were no grants made under the 2007 Plan subsequent to May 11, 2010. During 2010 and 2009, 114,521 and 12,426 RSUs, respectively, including performance RSUs, were granted under the 2007 Plan. The time-vested RSUs granted in 2010 and 2009 under the 2007 Plan vest on the third anniversary of the date of grant.

Fully-vested shares of non-transferable AIG Common Stock (restricted stock) were granted to certain of AIG's most highly compensated employees and executive officers under the 2007 Plan totaling 118,605 and 351,259, in 2010 and 2009, respectively. The restricted stock generally becomes transferable on the first, second or third anniversary of grant in accordance with the terms of the employee's award.

AIG 2002 Stock Incentive Plan

The 2002 Plan was adopted in 2002 and superseded by the 2007 Plan. In addition to 2,817 time-vested RSUs, only the AIG 2005-2006 Deferred Compensation Profit Participation Plan (AIG DCPPP) and the AIG Partners Plan, which provide share-based compensation to key AIG employees, including senior executive officers remained outstanding under the 2002 Plan at December 31, 2010.

The AIG DCPPP provides that a fixed number of time-vested RSUs would be allocated to each participant if AIG's cumulative adjusted earnings per share in 2005 and 2006 exceeded that of 2003 and 2004 as determined by AIG's Compensation and Management Resources Committee. This goal was met and 184,842 time-vested RSUs were awarded in 2007. Due to the modification in March 2008, the vesting periods for these RSUs have been shortened to vest in three installments with the final installment vesting in January 2012. At December 31, 2010, RSU awards with respect to 38,517 shares remained outstanding.

The AIG Partners Plan provides shares to the participants if certain performance measures were met over a specified period of time. The Compensation Committee eventually approved three grants with performance periods that ran from January 1, 2006 through December 31, 2007 for the first grant, January 1, 2007 through December 31, 2008 for the second grant, and January 1, 2008 through December 31, 2009 for the third grant. The second and third grants were cancelled because the performance thresholds were not met. The first grant vested 50 percent on the fourth and sixth anniversaries of the first day of the related performance period. At December 31, 2010, RSU awards with respect to 21,578 shares remained outstanding.

SICO Plans

The SICO Plans provide that shares of AIG Common Stock currently held by SICO are set aside for the benefit of the participant and distributed upon retirement. The SICO Board of Directors currently may permit an early payout of shares under certain circumstances. Prior to payout, the participant is not entitled to vote, dispose of or receive dividends with respect to such shares, and shares are subject to forfeiture under certain conditions, including but not limited to the participant's termination of employment with AIG prior to normal retirement age. A significant portion of the awards under the SICO Plans vest the year after the participant reaches age 65, provided that the participant remains employed by AIG through age 65. The portion of the awards for which early payout is available vest on the applicable payout date.

Although none of the costs of the various benefits provided under the SICO Plans have been paid by AIG, AIG has recorded compensation expense for the deferred compensation amounts payable to AIG employees by SICO, with an offsetting amount credited to Additional paid-in capital reflecting amounts deemed contributed by SICO.

The SICO Plans are also described in Note 16 herein.

Restricted Stock and Restricted Stock Unit Valuation

The fair value of restricted stock and RSUs is based on the closing price of AIG stock on the date of grant.

The following table summarizes outstanding share-settled awards under the foregoing plans*:

		Number of Shares															Weighted Average Grant-Date Fair Value


As of or for the Year Ended December 31, 2010		Time- vested RSUs			AIG DCPPP			Partners Plan			Total AIG Plan			Total SICO Plans			Time- vested RSUs		AIG DCPPP		Partners Plan		Total AIG Plans		Total SICO Plans

Unvested, beginning of year			218,839			87,680			20,968			327,487			319,789		$	1,053.11	$	1,140.99	$	860.62	$	1,064.32	$	1,219.07
	Granted		820,807			-			-			820,807			-			47.87		-		-		47.87		-
	Vested		(838,447	)		(54,870	)		(2,338	)		(895,655	)		(52,621	)		219.02		1,113.41		478.14		274.49		789.98
	Forfeited		(83,535	)		(5,496	)		(2,880	)		(91,911	)		(28,555	)		789.81		1,137.38		812.00		811.29		1,223.23

Unvested, end of year			117,664			27,314			15,750			160,728			238,613		$	171.21	$	1,134.30	$	811.98	$	397.67	$	1,215.16

*: Excludes DSUs and options, which are discussed under the Non-Employee Plans and Stock Options sections above. This table also excludes 112,362 shares of fully vested restricted stock granted to AIG's chief executive officer in 2010 as stock salary with a weighted average grant-date fair value of $35.60, which was issued under his employment agreement pursuant to the employment inducement award exemption to New York Stock Exchange rules.

The total unrecognized compensation cost (net of expected forfeitures) related to unvested share-settled compensation awards and the weighted-average periods over which those costs are expected to be recognized are as follows:

At December 31, 2010 (in millions)		Unrecognized Compensation Cost



Plans:
	Time-vested RSUs – 2007 Plan	$	4	0.72	2
	AIG DCPPP	$	6	0.63	1
	AIG Partners Plan	$	3	0.62	1
	Total AIG Plans	$	13	0.65	2
	Total SICO Plans	$	92	5.39	29

Liability Awards

AIG has issued various share-based grants, including restricted stock units, linked to AIG Common Stock, but providing for cash settlement to certain of its most highly compensated employees and executive officers. Share-based cash settled awards are recorded as liabilities until the final payout is made or the award is replaced with a stock-settled award. Unlike share-settled awards, which have a fixed grant-date fair value (unless the award is subsequently modified), the fair value of unsettled or unvested liability awards is remeasured at the end of each reporting period based on the change in fair value of one share of AIG Common Stock (except for long term performance units, the value of which is currently based on only 20 percent of AIG Common Stock as discussed below). The liability and corresponding expense are adjusted accordingly until the award is settled.

Stock Salary Awards

In 2009, AIG established a program of regular grants of vested stock or restricted stock units that is generally referred to as "Stock Salary". Stock Salary is determined as a dollar amount through the date that salary is earned and accrued at the same time or times as the salary would otherwise be paid in cash. Stock Salary was granted to any individual qualifying as a senior executive officer or one of AIG's next twenty most highly compensated employees (the Top 25). Stock salary for a Top 25 employee (other than AIG's CEO) will be settled in three equal installments on the first, second and third anniversary of grant. Stock salary granted to any individual qualifying as an executive officer or one of AIG's next 75 most highly compensated employees (Top 26-100) will be settled on either the first or third anniversary of grant in accordance with the terms of an employee's award. The Stock Salary grants issued in 2009 were awarded in the form of immediately vested RSUs, and the number of units awarded was based on the value of AIG Common Stock on the grant date. The RSUs are settled in cash based on the value of AIG Common Stock on the applicable settlement date. For the 2009 Stock Salary Awards, AIG paid $18 million to settle awards and recognized compensation expense of $36 million for unsettled awards to reflect increases in the price of AIG Common Stock during 2010.

In 2010, AIG adopted the Long-Term Performance Units Plan (LTPUs) and awarded Stock Salary in the form of LTPUs. The units are also fully vested on the date of grant and settlement terms are substantially the same as the 2009 Stock Salary awards. However, each unit is measured based on the underlying value of a mix of AIG hybrid securities and AIG Common Stock weighted 80 percent and 20 percent, respectively, on the date of grant. Both components of the LTPU are market observable. During 2010, compensation expense of approximately $156 million was recognized related to this plan. By their terms, the LTPUs will be converted into AIG Common Stock 90 days after the date on which at least 75 percent of the preferred securities in AIG held by the Department of the Treasury are exchanged for AIG Common Stock. The Recapitalization on January 14, 2011 included the exchange of more than 75 percent of the Department of the Treasury's preferred holdings for AIG Common Stock. Accordingly, on April 14, 2011 the AIG hybrid securities portion of any outstanding LTPU will be converted into AIG Common Stock based on the values of such securities and AIG Common Stock at the time of the conversion.

Restricted Stock Units

TARP RSUs

TARP RSUs awarded require the achievement of objective performance metrics as a condition to entitlement. TARP RSUs granted to the Top 25 (other than AIG's CEO) vest on the third anniversary of grant, while TARP RSUs granted to the Top 26-100 vest on the second anniversary of grant and are subject to transferability restrictions for an additional year after vesting. When vested and transferable, an award will be settled in 25 percent installments in proportion to AIG's repayment of its TARP obligations.

Other RSUs

Fully vested awards of RSUs will be issued in March 2011 to certain employees in the Top 26-100 based on 2010 performance. Similarly, 301,645 fully vested awards of RSUs were issued in March 2010 for performance in 2009. The RSUs for both awards will be cash-settled in March 2014 and 2013 for the 2010 and 2009 grants, respectively, based on the value of AIG Common Stock on each settlement date. AIG recorded expense of $8 million and $9 million in 2010 and 2009, respectively, related to these awards.

Long Term Incentive Plans

In 2009, AIG established the 2009 Long-Term Incentive Plan (2009 LTIP) under which middle management employees were offered the opportunity to receive additional compensation in the form of cash and stock appreciation rights (SARs) if certain performance metrics are met. The SARs component was added to the 2009 LTIP with the adoption of AIG's 2010 Long-Term Incentive Plan (2010 LTIP) in March 2010. The ultimate value of LTIP awards under the 2009 LTIP and the 2010 LTIP is contingent on the achievement of performance measures aligned to the participant's business unit over a two-year period and such value could range from zero to twice the target amount. Subsequent to the performance period, the earned awards are subject to an additional time-vesting period. This results in a graded vesting schedule for the cash portion of up to two years, while the SARs portion cliff-vests two years after the performance period ends. The strike price for the majority of SARs issued under the 2010 LTIP and the 2009 LTIP is $31.91, which is based on AIG's average share price over the 30 days prior to March 29, 2010, the grant date. The cash portion of the awards expensed in 2010 totaled approximately $258 million. AIG recognizes compensation expense over the respective vesting periods for these plans.

The following table presents a summary of SARs (based on target amounts) and cash-settled RSUs as well as the related expenses:

		Number of Units


As of or for the Year Ended December 31, 2010		SARs			TARP RSUs			RSUs^(a)

Unvested, beginning of year			-			367,875			-
	Granted		8,959,444			395,891			301,645
	Vested^(b)		(781,935	)		-			(301,645	)
	Forfeited		(216,632	)		(118,220	)		-

Unvested, end of year			7,960,877			645,546			-

Compensation expense for the year (in millions)		$	82		$	10		$	3

(a): Represent fully vested RSUs that were awarded in March 2010 based on 2009 performance. On December 20, 2010, 160,346 of these RSUs were replaced with restricted stock, which is reflected in the applicable table above.
(b): Pursuant to the terms of the LTIP, vesting was accelerated for SARs awarded to employees who became retirement eligible or whose business was sold during 2010.

The total unrecognized compensation cost (net of expected forfeitures) related to unvested SARs and cash-settled RSUs and the weighted-average periods over which those costs are expected to be recognized are as follows:

At December 31, 2010 (in millions)	Unrecognized Compensation Cost



SARs	$	132	1.30	3
TARP RSUs		24	1.15	3

Stock Appreciation Rights Valuation

The table below presents the weighted average assumptions used to estimate the fair value of SARs at December 31, 2010 using Monte Carlo simulation. Monte Carlo simulation incorporates range of assumptions for inputs and they are disclosed in the table below.





Expected dividend yield^(a)	-	%
Expected volatility^(b)	42.50	%
Risk-free interest rate^(c)	1.12	%
Expected term^(d)	2.7 years

(a): The dividend yield is estimated at zero percent given AIG's recent period dividend history.
(b): The expected volatilities are based on implied volatilities with the nearest maturity and strikes as of valuation date from traded stock options on AIG Common Stock.
(c): The risk-free interest rate for periods within the contractual life of the SARs is based on the swap yield curve in effect at the time of valuation.
(d): The expected term of stock options granted is the period of time the SARs are expected to be outstanding.

Modifications

In 2008, the Compensation and Management Resources Committee of the Board made the decision to shorten the vesting schedules of certain outstanding awards, as well as future awards, from four to three years, which resulted in an acceleration of expense. AIG also modified the metrics used to determine the level of performance achieved with respect to the AIG Partners Plan.

For accounting purposes, a modification of the terms or conditions of an equity award is treated as an exchange of the original award for a new award. As a result, the incremental value related to the remaining affected awards totaled $21 million and will, together with the unamortized originally-measured compensation cost, be amortized over shorter periods. At the time of the modifications net amortization of this cost was estimated to increase by $43 million and $98 million in 2009 and 2008, respectively, with a related reduction in amortization expense of $120 million in 2010 through 2012. However, AIG recognized a credit to expense of $31 million in 2010 and a charge of $12 million in 2009 due to forfeitures and the expense acceleration resulting from the modification. The related reduction in amortization expense expected through 2012 was revised to $61 million.

Employee Benefits

12 Months Ended

Dec. 31, 2010

Employee Benefits

Employee Benefits

20. Employee Benefits

Pension Plans

AIG, its subsidiaries and certain affiliated companies offer various defined benefit plans to eligible employees based on years of service.

AIG's U.S. qualified retirement plan is a noncontributory defined benefit plan which is subject to the provisions of ERISA. U.S. salaried employees who are employed by a participating company, have attained age 21 and completed 12 months of continuous service are eligible to participate in the plan. Employees generally vest after five years of service. Unreduced benefits are paid to retirees at normal retirement (age 65) and are based upon a percentage of final average compensation multiplied by years of credited service, up to 44 years. Non-U.S. defined benefit plans are generally either based on the employee's years of credited service and compensation in the years preceding retirement or on points accumulated based on the employee's job grade and other factors during each year of service.

AIG also sponsors several unfunded defined benefit plans for certain employees, including key executives, designed to supplement pension benefits provided by AIG's other retirement plans. These include the AIG Excess Retirement Income Plan (Excess), which provides a benefit equal to the reduction in benefits payable to certain employees under the AIG U.S. qualified retirement plan as a result of federal tax limitations on compensation and benefits payable and the Supplemental Executive Retirement Plan (Supplemental), which provides additional retirement benefits to designated executives. Under the Supplemental plan, an annual benefit accrues at a percentage of final average pay multiplied by each year of credited service, not greater than 60 percent of final average pay, reduced by any benefits from the current and any predecessor retirement plans (including the Excess plan and any comparable plans), Social Security, if any, and from any qualified pension plan of prior employers. AIG has complied with the Special Master's mandate to freeze future benefits in the non-qualified retirement plans for the Top 100 employees of AIG. The impact to AIG's financial statements was not significant.

Postretirement Plans

AIG and its subsidiaries also provide postretirement medical care and life insurance benefits in the U.S. and in certain non-U.S. countries. Eligibility in the various plans is generally based upon completion of a specified period of eligible service and attaining a specified age. Overseas, benefits vary by geographic location.

U.S. postretirement medical and life insurance benefits are based upon the employee electing immediate retirement and having a minimum of ten years of service. Medical benefits are contributory, while the life insurance benefits are non-contributory. Retiree medical contributions vary from requiring no cost for pre-1989 retirees to requiring actual premium payments reduced by certain credits for post-1993 retirees. These contributions are subject to adjustment annually. Other cost sharing features of the medical plan include deductibles, coinsurance, Medicare coordination and a lifetime maximum benefit of $5 million.

The following table presents the funded status of the plans, reconciled to the amount reported in the Consolidated Balance Sheet. The measurement date for most of the non-U.S. defined benefit pension and postretirement plans is November 30, consistent with the fiscal year end of the sponsoring companies. For all other plans, measurement occurs as of December 31.

			Pension												Postretirement^(a)


As of or for the Years Ended December 31, (in millions)			Non-U.S. Plans^(b)						U.S. Plans^(c)						Non-U.S. Plans						U.S. Plans
			2010			2009			2010			2009			2010			2009			2010			2009

Change in projected benefit obligation:
	Benefit obligation, beginning of year		$	2,313		$	2,080		$	3,687		$	3,745		$	106		$	101		$	274		$	285
	Service cost			137			121			150			155			8			11			8			8
	Interest cost			59			60			216			219			4			4			15			16
	Actuarial (gain) loss			(6	)		155			305			108			(10	)		(9	)		3			9
	Benefits paid:
		AIG assets		(52	)		(57	)		(10	)		(7	)		(1	)		(1	)		(13	)		(17	)
		Plan assets		(57	)		(40	)		(115	)		(110	)		-			-			-			-
	Curtailments			-			(3	)		(73	)		(119	)		-			-			(3	)		(16	)
	Settlements			(28	)		(46	)		(282	)		(320	)		-			-			(5	)		(8	)
	Foreign exchange effect			37			212			-			-			5			3			-			-
	Dispositions			(736	)		(170	)		-			-			(45	)		(10	)		-			-
	Acquisitions			329			-			-			-			-			11			-			-
	Other			(15	)		1			-			16			(1	)		(4	)		-			(3	)

Projected benefit obligation, end of year			$	1,981		$	2,313		$	3,878		$	3,687		$	66		$	106		$	279		$	274

Change in plan assets:
	Fair value of plan assets, beginning of year		$	750		$	765		$	3,362		$	2,733		$	-		$	-		$	-		$	-
	Actual return on plan assets, net of expenses			(3	)		49			456			541			-			-			-			-
	AIG contributions			161			146			11			446			1			1			13			17
	Benefits paid:
		AIG assets		(52	)		(57	)		(10	)		(7	)		(1	)		(1	)		(13	)		(17	)
		Plan assets		(57	)		(40	)		(115	)		(110	)		-			-			-			-
	Settlements			(27	)		(46	)		(279	)		(241	)		-			-			-			-
	Foreign exchange effect			39			69			-			-			-			-			-			-
	Dispositions			(159	)		(137	)		-			-			-			-			-			-
	Acquisitions			303			-			-			-			-			-			-			-
	Other			(1	)		1			-			-			-			-			-			-

Fair value of plan assets, end of year			$	954		$	750		$	3,425		$	3,362		$	-		$	-		$	-		$	-

Funded status, end of year			$	(1,027	)	$	(1,563	)	$	(453	)	$	(325	)	$	(66	)	$	(106	)	$	(279	)	$	(274	)

Amounts recognized in the consolidated balance sheet:
	Assets		$	43		$	23		$	-		$	-		$	-		$	-		$	-		$	-

	Liabilities			(1,070	)		(1,586	)		(453	)		(325	)		(66	)		(106	)		(279	)		(274	)

	Total amounts recognized		$	(1,027	)	$	(1,563	)	$	(453	)	$	(325	)	$	(66	)	$	(106	)	$	(279	)	$	(274	)

Pre tax amounts recognized in Accumulated other comprehensive income (loss):
	Net income (loss)		$	(539	)	$	(727	)	$	(838	)	$	(921	)	$	3		$	(10	)	$	(11	)	$	(7	)

	Prior service (cost) credit			36			58			(13	)		(15	)		1			(1	)		(15	)		(16	)

	Total amounts recognized		$	(503	)	$	(669	)	$	(851	)	$	(936	)	$	4		$	(11	)	$	(26	)	$	(23	)

(a): AIG does not currently fund postretirement benefits.
(b): Includes unfunded plans for which the aggregate pension benefit obligation was $627 million and $990 million at December 2010 and 2009, respectively. For 2010 and 2009, approximately 72 percent and 79 percent pertain to Japanese plans, which are not required by local regulation to be funded. The projected benefit obligation for these plans total $454 million and $785 million, respectively.
(c): Includes non-qualified unfunded plans, for which the aggregate projected benefit obligation was $219 million and $224 million at December 2010 and 2009, respectively.

At December 31, 2010, the funded status for the Non-U.S. pension plans was reduced by $536 million from December 31, 2009 primarily due to the divestitures of ALICO and AIA, which are included in dispositions in the table above.

The following table presents the accumulated benefit obligations for non-U.S. and U.S. pension benefit plans:

At December 31, (in millions)	2010		2009



Non-U.S. pension benefit plans	$	1,720	$	2,099
U.S. pension benefit plans	$	3,388	$	3,131

Defined benefit pension plan obligations in which the projected benefit obligation was in excess of the related plan assets and the accumulated benefit obligation was in excess of the related plan assets were as follows:

	PBO Exceeds Fair Value of Plan Assets								ABO Exceeds Fair Value of Plan Assets


At December 31, (in millions)	Non-U.S. Plans				U.S. Plans				Non-U.S. Plans				U.S. Plans
At December 31, (in millions)	2010		2009		2010		2009		2010		2009		2010		2009

Projected benefit obligation	$	1,716	$	2,249	$	3,878	$	3,687	$	1,594	$	2,216	$	219	$	237
Accumulated benefit obligation		1,720		2,099		3,388		3,131		1,496		2,035		167		192
Fair value of plan assets		646		663		3,425		3,362		612		650		-		11

The following table presents the components of net periodic benefit cost recognized in income and other amounts recognized in Accumulated other comprehensive income (loss) with respect to the defined benefit pension plans and other postretirement benefit plans:

		Pension																		Postretirement


		Non-U.S. Plans^(a)									U.S. Plans^(b)									Non-U.S. Plans^(a)								U.S. Plans^(b)
(in millions)		2010			2009			2008			2010			2009			2008			2010		2009			2008			2010			2009			2008

Components of net periodic benefit cost:
	Service cost	$	137		$	121		$	112		$	150		$	155		$	132		$	8	$	11		$	8		$	8		$	8		$	8
	Interest cost		59			60			62			216			219			202			4		4			4			15			16			16
	Expected return on assets		(31	)		(31	)		(44	)		(259	)		(226	)		(235	)		-		-			-			-			-			-
	Amortization of prior service (credit) cost		(9	)		(13	)		(11	)		1			-			(1	)		-		-			-			-			-			-
	Amortization of net (gain) loss		45			41			29			57			88			22			-		1			-			(1	)		1			-
	Net curtailment (gain) loss		(1	)		(2	)		(5	)		1			(4	)		-			-		-			-			(2	)		1			-
	Net settlement (gain) loss		3			11			4			58			14			-			-		-			-			(6	)		(8	)		-
	Other		2			1			-			-			-			2			-		-			-			-			-			5

Net periodic benefit cost		$	205		$	188		$	147		$	224		$	246		$	122		$	12	$	16		$	12		$	14		$	18		$	29

Total recognized in Accumulated other comprehensive income (loss)		$	167		$	(134	)	$	(361	)	$	85		$	492		$	(917	)	$	16	$	11		$	(16	)	$	(3	)	$	10		$	(17	)

Total recognized in net periodic benefit cost and other comprehensive income (loss)		$	(38	)	$	(322	)	$	(508	)	$	(139	)	$	246		$	(1,039	)	$	4	$	(5	)	$	(28	)	$	(17	)	$	(8	)	$	(46	)

(a): Amounts for non-U.S. plans include pension costs associated with discontinued operations totaling $123 million, $122 million and $87 million for the years ended December 31, 2010, 2009 and 2008, respectively.
(b): Amounts for U.S. plans include pension costs associated with discontinued operations totaling $18 million, $20 million and $11 million for the years ended December 31, 2010, 2009 and 2008, respectively.

The estimated net loss and prior service credit (cost) that will be amortized from Accumulated other comprehensive income into net periodic benefit cost over the next fiscal year are $70 million and $7 million, respectively, for AIG's combined defined benefit pension plans. For the defined benefit postretirement plans, the estimated amortization from Accumulated other comprehensive income for net gain (loss) and prior service credit (cost) that will be amortized into net periodic benefit cost over the next fiscal year will be less than $1 million in the aggregate.

The annual pension expense in 2011 for the AIG U.S. and non-U.S. defined benefit pension plans is expected to be approximately $282 million. A 100 basis point increase in the discount rate or expected long-term rate of return would decrease the 2011 expense by approximately $81 million and $44 million, respectively, with all other items remaining the same. Conversely, a 100 basis point decrease in the discount rate or expected long-term rate of return would increase the 2011 expense by approximately $97 million and $43 million, respectively, with all other items remaining the same.

Curtailments, Remeasurement and Settlements

In connection with the asset sales in 2010 and the designation of AGF as held for sale at September 30, 2010, AIG remeasured the AIG Retirement Plan. The assumptions used in the remeasurement were the same as those disclosed at December 31, 2009, except for the five percent discount rate which was derived from the rounded unadjusted Citigroup Pension Discount Curve at September 30, 2010. The remeasurement resulted in a decrease to Accumulated other comprehensive income of approximately $571 million.

In connection with the sale of AGF on November 30, 2010, AIG recognized a net settlement loss of $58 million in discontinued operations due to the transfer of certain pension and post retirement obligations to the buyer.

In connection with the sale of HSB on March 31, 2009, AIG recognized in income as part of the net gain from the sale, a net settlement gain of $57 million due to the transfer of certain HSB-sponsored pension plans in the first quarter.

In connection with the sale of 21st Century Insurance Group on July 1, 2009, AIG remeasured certain of its domestic pension and postretirement plans to determine the curtailment and settlement effects. The assumptions used in the remeasurement were the same as those disclosed at December 31, 2008, except for the 6.25 percent discount rate, which was derived from the rounded unadjusted Citigroup Pension Discount Curve at June 30, 2009. The remeasurement resulted in a decrease to Accumulated other comprehensive loss of approximately $123 million and a net settlement loss of approximately $59 million, which was reflected in the loss from the sale of 21st Century.

Assumptions

The following table summarizes the weighted average assumptions used to determine the benefit obligations:

	Pension						Postretirement


	Non-U.S. Plans^*			U.S. Plans			Non-U.S. Plans^*			U.S. Plans

December 31, 2010
Discount rate		2.25	%		5.50	%		4.00	%		5.25	%
Rate of compensation increase		3.00	%		4.00	%		3.00	%		N/A

December 31, 2009
Discount rate		2.75	%		6.00	%		3.75	%		5.75	%
Rate of compensation increase		3.50	%		4.00	%		3.75	%		N/A

*: The non-U.S. plans reflect those assumptions that were most appropriate for the local economic environments of each of the subsidiaries providing such benefits.

The following table summarizes assumed health care cost trend rates for the U.S. plans:

At December 31,



Following year:
	Medical (before age 65)	7.75	%	8.00	%
	Medical (age 65 and older)	7.00	%	7.00	%

Ultimate rate to which cost increase is assumed to decline		4.50	%	4.50	%

Year in which the ultimate trend rate is reached:
	Medical (before age 65)	2027	^*	2027
	Medical (age 65 and older)	2027	^*	2027

*: Increase in ultimate trend rate is based on the current expectation of future increases in medical and prescription drug costs.

A one percent point change in the assumed healthcare cost trend rate would have the following effect on AIG's postretirement benefit obligations:

	One Percent Increase				One Percent Decrease


At December 31, (in millions)	One Percent Increase				One Percent Decrease
At December 31, (in millions)	2010		2009		2010			2009

Non-U.S. plans	$	8	$	13	$	(6	)	$	(10	)
U.S. plans	$	4	$	5	$	(3	)	$	(4	)

AIG's postretirement plans provide benefits primarily in the form of defined employer contributions rather than defined employer benefits. Changes in the assumed healthcare cost trend rate are subject to caps for U.S. plans. AIG's non-U.S. postretirement plans are not subject to caps.

The following table presents the weighted average assumptions used to determine the net periodic benefit costs:

At December 31,		Pension						Postretirement


		Non-U.S. Plans^(a)			U.S. Plans			Non-U.S. Plans^(a)			U.S. Plans

2010
	Discount rate		2.75	%		6.00	^(b)		3.75	%		5.75
	Rate of compensation increase		3.50	%		4.00			3.75	%		N/A
	Expected return on assets		3.75	%		7.75			N/A			N/A
2009
	Discount rate		3.00	%		6.00	^(c)		3.50	%		6.00
	Rate of compensation increase		3.50	%		4.25			3.25	%		N/A
	Expected return on assets		4.75	%		7.75			N/A			N/A
2008
	Discount rate		3.25	%		6.50			4.50	%		6.50
	Rate of compensation increase		4.50	%		4.25			3.25	%		N/A
	Expected return on assets		4.50	%		7.75			N/A			N/A

(a): The non-U.S. plans reflect those assumptions that were most appropriate for the local economic environments of the subsidiaries providing such benefits.
(b): As a result of the 2010 asset sales and the designation of AGF as held for sale at September 30, 2010, the AIG Retirement Plan was remeasured at September 30, 2010 utilizing a five percent discount rate.
(c): As a result of the sale of 21st Century, certain U.S. plans were remeasured utilizing a 6.25 percent discount rate at July 1, 2009.

Discount Rate Methodology

The projected benefit cash flows under the U.S. AIG Retirement Plan were discounted using the spot rates derived from the unadjusted Citigroup Pension Discount Curve at December 31, 2010 and 2009 and an equivalent single discount rate was derived that resulted in the same liability. This single discount rate was rounded to the nearest 25 basis points, namely 5.5 and 6.0 percent at December 31, 2010 and 2009. The methodology for determining the discount rate for the other U.S. plans was consistent with this method.

In general, the discount rates for non-U.S. pension plans were developed based on the duration of liabilities on a plan by plan basis and were selected by reference to high quality corporate bonds in developed markets or local government bonds where developed markets are not as robust or nonexistent.

The projected benefit obligation for Japan represents approximately 76 and 74 percent of the total projected benefit obligations for AIG's non-U.S. pension plans at December 31, 2010 and 2009, respectively. The weighted average discount rate of 1.50 percent for Japan was selected by reference to the published Moody's/S&P AA Corporate Bond Universe at the measurement date based on the duration of the plans' liabilities.

Plan Assets

The investment strategy with respect to assets relating to AIG's U.S. and non-U.S. pension plans is designed to achieve investment returns that will (a) provide for the benefit obligations of the plans over the long term; (b) limit the risk of short-term funding shortfalls; and (c) maintain liquidity sufficient to address cash needs. Accordingly, the asset allocation strategy is designed to maximize the investment rate of return while managing various risk factors, including but not limited to, volatility relative to the benefit obligations, diversification and concentration, and the risk and rewards profile indigenous to each asset class.

There were no shares of AIG Common Stock included in the U.S. and non-U.S. pension plans assets at December 31, 2010 or 2009.

U.S. pension plans

The long-term strategic asset allocation is reviewed and revised approximately every three years. The plans' assets are monitored by the investment committee of AIG's Retirement Board and the investment managers, which can entail allocating the plans assets among approved asset classes within pre-approved ranges permitted by the strategic allocation.

The following table presents the asset allocation percentage by major asset class for U.S. pension plans and the target allocation:

At December 31,



Asset class:
	Equity securities	45	%	60	%	56	%
	Fixed maturity securities	30	%	22	%	25	%
	Other investments	25	%	17	%	16	%
	Cash and cash equivalents	-	%	1	%	3	%

Total		100	%	100	%	100	%

The expected long-term rate of return for the plan was 7.75 percent for both 2010 and 2009. The expected rate of return is an aggregation of expected returns within each asset class category. The expected asset return and any contributions made by AIG together are expected to maintain the plans' ability to meet all required benefit obligations. The expected asset return with respect to each asset class was developed based on a building block approach that considers historical returns, current market conditions, asset volatility and the expectations for future market returns. While the assessment of the expected rate of return is long-term and thus not expected to change annually, significant changes in investment strategy or economic conditions may warrant such a change.

Non-U.S. pension plans

The assets of the non-U.S. pension plans are held in various trusts in multiple countries and are invested primarily in equities and fixed maturity securities to maximize the long-term return on assets for a given level of risk.

The following table presents the asset allocation percentage by major asset class for Non-U.S. pension plans and the target allocation:

At December 31,



Asset class:
	Equity securities	42	%	57	%	46	%
	Fixed maturity securities	35	%	28	%	27	%
	Other investments	20	%	10	%	22	%
	Cash and cash equivalents	3	%	5	%	5	%

Total		100	%	100	%	100	%

The expected weighted average long-term rates of return for the non-U.S. pension plans was 3.75 percent and 4.75 percent for the years ended December 31, 2010 and 2009, respectively. The expected rate of return for each country is an aggregation of expected returns within each asset class for such country. For each country, the return with respect to each asset class was developed based on a building block approach that considers historical returns, current market conditions, asset volatility and the expectations for future market returns. While the assessment of the expected rate of return is long-term and not expected to change annually, significant changes in investment strategy or economic conditions may warrant such a change. The expected asset return and any contributions made by AIG together are expected to maintain the plan's ability to meet all required benefit obligations.

Assets Measured at Fair Value

AIG is required to disclose the level of the fair value measurement of its plan assets. The inputs and methodology used in determining the fair value of the plan assets are consistent with those used by AIG to measure its assets as noted in Note 6 herein.

The following table presents information about AIG's plan assets based on the level within the fair value hierarchy in which the fair value measurement falls:

			Non-U.S. Plans								U.S. Plans


(in millions)			Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total

At December 31, 2010
Assets:
	Cash & cash equivalents		$	41	$	3	$	-	$	44	$	37	$	-	$	-	$	37
	Equity securities:
		U.S.^(a)		24		-		-		24		1,731		13		-		1,744
		International^(b)		407		112		-		519		278		18		-		296
	Fixed maturity securities:
		U.S. investment grade^(c)		-		10		-		10		-		478		1		479
		International investment grade^(c)		8		219		-		227		-		-		-		-
		U.S. and international high yield^(d)		-		32		-		32		-		153		-		153
		Mortgage and other asset-backed securities^(e)		-		-		-		-		-		44		80		124
	Other investment types:
		Hedge funds^(f)		-		-		-		-		-		332		-		332
		Commodities		-		-		-		-		-		19		-		19
		Private equity^(g)		-		-		-		-		-		-		209		209
		Insurance contracts		-		64		34		98		-		32		-		32

Total			$	480	$	440	$	34	$	954	$	2,046	$	1,089	$	290	$	3,425

At December 31, 2009
Assets:
	Cash & cash equivalents		$	36	$	-	$	-	$	36	$	85	$	2	$	-	$	87
	Equity securities:
		U.S.^(a)		89		-		-		89		1,420		50		-		1,470
		International^(b)		219		35		-		254		392		16		-		408
	Fixed maturity securities:
		U.S. investment grade^(c)		-		9		-		9		-		422		1		423
		International investment grade^(c)		-		114		-		114		-		-		-		-
		U.S. and international high yield^(d)		-		79		-		79		-		132		1		133
		Mortgage and other asset-backed securities^(e)		-		-		-		-		-		245		52		297
	Other investment types:
		Hedge funds^(f)		-		21		-		21		-		302		-		302
		Commodities		-		-		-		-		-		33		-		33
		Real estate		-		-		19		19		-		-		-		-
		Private equity^(g)		-		-		21		21		-		-		175		175
		Insurance contracts		-		79		29		108		-		34		-		34

Total			$	344	$	337	$	69	$	750	$	1,897	$	1,236	$	229	$	3,362

(a): Includes index funds that primarily track several indices including S&P 500 and S&P 600 in addition to other actively managed accounts, comprised of investments in large cap companies.
(b): Includes investments in companies in emerging and developed markets.
(c): Represents investments in U.S. and non-U.S. government issued bonds, U.S. government agency or sponsored agency bonds, and investment grade corporate bonds.
(d): Consists primarily of investments in securities or debt obligations that have a rating below investment grade.
(e): Comprised primarily of investments that are guaranteed by a U.S. government agency.
(f): Includes funds comprised of macro, event driven, long/short equity, and controlled risk hedge fund strategies and a separately managed controlled risk strategy.
(g): Includes funds that are diverse by geography, investment strategy, and sector.

The inputs or methodologies used for valuing securities are not necessarily an indication of the risk associated with investing in these securities. Based on AIG's investment strategy, AIG has no significant concentrations of risks.

The U.S. pension plan holds a group annuity contract with US Life, an AIG subsidiary, which totaled $32 million and $34 million at December 31, 2010 and 2009, respectively.

The non-U.S. pension plans hold an insurance contract with AIG Star, an AIG subsidiary, which totaled $64 million and $79 million at December 31, 2010 and 2009, respectively.

Changes in Level 3 fair value measurements

The following table presents changes in AIG's non-U.S. and U.S. Level 3 plan assets measured at fair value:

At December 31, 2010 (in millions)			Balance Beginning of year		Net Realized and Unrealized Gains (Losses)			Purchases, Sales, Issuances and Settlements-Net			Transfers In (Out)			Balance at End of year		Changes in Unrealized Losses on Instruments Held at End of year



Non-U.S. Plan Assets:
	Real estate		$	19	$	-		$	-		$	(19	)	$	-	$	-
	Private equity			21		-			-			(21	)		-		-
	Insurance contracts			29		3			2			-			34		-

Total			$	69	$	3		$	2		$	(40	)	$	34	$	-

U.S. Plan Assets:
	Fixed maturity
		U.S. investment grade	$	1	$	-		$	-		$	-		$	1	$	-
		U.S. and international high yield		1		-			-			(1	)		-		(1	)
		Mortgage and other asset-backed securities		52		7			24			(3	)		80		(14	)
	Equities – U.S.			-		-			-			-			-		-
	Private equity			175		17			17			-			209		-

Total			$	229	$	24		$	41		$	(4	)	$	290	$	(15	)

At December 31, 2009
Non-U.S. Plan Assets:
	Real estate		$	22	$	(3	)	$	-		$	-		$	19	$	(3	)
	Private equity			17		4			-			-			21		-
	Insurance contracts			24		2			3			-			29		-

Total			$	63	$	3		$	3		$	-		$	69	$	(3	)

U.S. Plan Assets:
	Fixed maturity
		U.S. investment grade	$	3	$	1		$	(3	)	$	-		$	1	$	-
		U.S. and international high yield		1		-			-			-			1		-
		Mortgage and other asset-backed securities		49		3			(40	)		40			52		(44	)
	Equities – U.S.			1		-			-			(1	)		-		-
	Private equity			159		33			(18	)		1			175		(19	)

Total			$	213	$	37		$	(61	)	$	40		$	229	$	(63	)

Expected Cash Flows

Funding for the U.S. pension plan ranges from the minimum amount required by ERISA to the maximum amount that would be deductible for U.S. tax purposes. This range is generally not determined until the fourth quarter. Contributed amounts in excess of the minimum amounts are deemed voluntary. Amounts in excess of the maximum amount would be subject to an excise tax and may not be deductible under the Internal Revenue Code. Supplemental, Excess and postretirement plan payments are deductible when paid.

AIG's annual pension contribution in 2011 is expected to be approximately $144 million for non-U.S. and certain U.S. plans. These estimates are subject to change, since contribution decisions are affected by various factors including AIG's liquidity, asset dispositions, market performance and management's discretion.

The expected future benefit payments, net of participants' contributions, with respect to the defined benefit pension plans and other postretirement benefit plans, are as follows:

	Pension				Postretirement


(in millions)	Non-U.S. Plans		U.S. Plans		Non-U.S. Plans		U.S. Plans

2011	$	111	$	134	$	1	$	17
2012		101		146		1		18
2013		104		158		1		19
2014		98		170		1		19
2015		99		183		1		20
2016 - 2019		537		1,130		8		116

Defined Contribution Plans

In addition to several small defined contribution plans, AIG sponsors a voluntary savings plan for U.S. employees which provides for salary reduction contributions by employees and matching U.S. contributions by AIG of up to seven percent of annual salary depending on the employees' years of service subject to certain compensation limits. Pre-tax expense associated with this plan was $103 million, $100 million and $115 million in 2010, 2009 and 2008, respectively.

- Definition

Description containing the entire pension and other postretirement benefits disclosure as a single block of text.

+ References

Reference 1: http://www.xbrl.org/2003/role/presentationRef

-Publisher FASB

-Name Statement of Financial Accounting Standard (FAS)

-Number 158

-Paragraph 7, 21, 22

Reference 2: http://www.xbrl.org/2003/role/presentationRef

-Publisher FASB

-Name Statement of Financial Accounting Standard (FAS)

-Number 132R

-Paragraph 5, 6, 7, 8

Reference 3: http://www.xbrl.org/2003/role/presentationRef

-Publisher FASB

-Name Statement of Financial Accounting Standard (FAS)

-Number 132R

-Paragraph 8

-Subparagraph m

Reference 4: http://www.xbrl.org/2003/role/presentationRef

-Publisher FASB

-Name Statement of Financial Accounting Standard (FAS)

-Number 106

-Paragraph 518

Reference 5: http://www.xbrl.org/2003/role/presentationRef

-Publisher FASB

-Name Statement of Financial Accounting Standard (FAS)

-Number 87

-Paragraph 264

Reference 6: http://www.xbrl.org/2003/role/presentationRef

-Publisher FASB

-Name Statement of Financial Accounting Standard (FAS)

-Number 132R

-Paragraph 5

-Subparagraph b

Reference 7: http://www.xbrl.org/2003/role/presentationRef

-Publisher FASB

-Name Statement of Financial Accounting Standard (FAS)

-Number 132R

-Paragraph 5

-Subparagraph a

Reference 8: http://www.xbrl.org/2003/role/presentationRef

-Publisher FASB

-Name Statement of Financial Accounting Standard (FAS)

-Number 132R

-Paragraph 5

-Subparagraph h

Reference 9: http://www.xbrl.org/2003/role/presentationRef

-Publisher FASB

-Name Statement of Financial Accounting Standard (FAS)

-Number 132R

-Paragraph 5

-Subparagraph q

Reference 10: http://www.xbrl.org/2003/role/presentationRef

-Publisher FASB

-Name FASB Staff Position (FSP)

-Number FAS106-2

-Paragraph 20, 21, 22

Reference 11: http://www.xbrl.org/2003/role/presentationRef

-Publisher FASB

-Name Emerging Issues Task Force (EITF)

-Number 03-2

-Paragraph 8

Reference 12: http://www.xbrl.org/2003/role/presentationRef

-Publisher AICPA

-Name Accounting Principles Board Opinion (APB)

-Number 30

-Paragraph 26

Reference 13: http://www.xbrl.org/2003/role/presentationRef

-Publisher FASB

-Name Implementation Guide (Q and A)

-Number FAS88

-Paragraph 63

+ Details

Income Taxes

12 Months Ended

Dec. 31, 2010

Income Taxes

Income Taxes

22. Income Taxes

The following table presents income (loss) from continuing operations before income tax expense (benefit) by U.S. and foreign location in which such pretax income (loss) was earned or incurred.

Years Ended December 31, (in millions)	2010		2009			2008



U.S.	$	13,208	$	(17,122	)	$	(103,552	)
Foreign		4,728		2,815			523

Total	$	17,936	$	(14,307	)	$	(103,029	)

The following table presents the income tax expense (benefit) attributable to pre-tax income (loss) from continuing operations:

Years Ended December 31, (in millions)			2010			2009			2008



Foreign and U.S. components of actual income tax expense:
	Foreign:
		Current	$	807		$	1,573		$	1,135
		Deferred		318			3,661			(1,511	)
	U.S.:
		Current		(163	)		1,229			(86	)
		Deferred		4,897			(7,952	)		(9,221	)

Total			$	5,859		$	(1,489	)	$	(9,683	)

AIG's actual income tax (benefit) expense differs from the statutory U.S. federal amount computed by applying the federal income tax rate due to the following:

				2010									2009									2008


(dollars in millions)				Pre-tax Income			Amount			Percent of Pre-tax Income			Pre-tax Loss			Amount			Percent of Pre-tax Income			Pre-tax Loss			Amount			Percent of Pre-tax Income

U.S. federal income tax at statutory rate				$	17,711		$	6,199			35.0	%	$	(15,423	)	$	(5,398	)		35.0	%	$	(108,761	)	$	(38,065	)		35.0	%
	Adjustments:
		Tax exempt interest						(587	)		(3.3	)					(677	)		4.4						(837	)		0.8
		Investment in subsidiaries and partnerships						(1,319	)		(7.5	)					(473	)		3.1						490			(0.5	)
		Variable Interest Entities						(2	)		(0.0	)					435			(2.8	)					279			(0.3	)
		Uncertain Tax Positions						(37	)		(0.2	)					874			(5.7	)					1,000			(0.9	)
		Dividends received deduction						(108	)		(0.6	)					(117	)		0.8						(90	)		0.1
		Effect of foreign operations						206			1.2						(130	)		0.8						2,546			(2.3	)
		Bargain purchase gain						(116	)		(0.7	)					-			-						-			-
		State income taxes						162			0.9						(1,371	)		8.9						(166	)		0.2
		Goodwill						2			-						1			-						1,282			(1.2	)
		Other						183			1.0						313			(2.1	)					1,680			(1.6	)
		Effect of discontinued operations						(642	)		(3.6	)					(1,012	)		6.6						2,644			(2.4	)
		Effect of discontinued operations – goodwill						1,268			7.2						3			(0.0	)					119			(0.1	)
		State tax valuation allowance – continuing operations						(289	)		(1.6	)					1,526			(9.9	)					71			(0.1	)
		Valuation allowance:
			Continuing operations					1,486			8.4						3,137			(20.3	)					20,121			(18.5	)
			Discontinued operations					1,292			7.3						(221	)		1.4						552			(0.5	)

Total income tax expense (benefit)					17,711			7,698			43.5			(15,423	)		(3,110	)		20.2			(108,761	)		(8,374	)		7.7
Amount included in discontinued operations					(225	)		1,839			(817.3	)		(1,116	)		(1,621	)		145.3			(5,732	)		1,309			(22.8	)

Tax expense (benefit) from continuing operations				$	17,936		$	5,859			32.7	%	$	(14,307	)	$	(1,489	)		10.4	%	$	(103,029	)	$	(9,683	)		9.4	%

For the year ended December 31, 2010, the effective tax rate on pretax income from continuing operations was 32.7 percent. The effective tax rate for the year ended December 31, 2010, attributable to continuing operations differs from the statutory rate primarily due to tax benefits of $1.3 billion associated with AIG's investment in subsidiaries and partnerships, principally the AIA SPV which is treated as a partnership for U.S. tax purposes, and $587 million associated with tax exempt interest, partially offset by an increase in the valuation allowance attributable to continuing operations of $1.5 billion.

The effective tax rate on the pre-tax loss from continuing operations for the year ended December 31, 2009, differs from the statutory rate primarily due to increases in the valuation allowance of $3.1 billion and reserve for uncertain tax positions of $874 million, partially offset by tax exempt interest of $677 million and the change in investment in subsidiaries and partnerships of $473 million which was principally related to changes in the estimated U.S. tax liability with respect to the potential sales of subsidiaries.

The effective tax rate on the pre-tax loss from continuing operations for the year ended December 31, 2008, differs from the statutory rate primarily due to the change in investment in subsidiaries and partnerships of $490 million, effect of foreign operations of $2.5 billion, nondeductible goodwill impairment of $1.3 billion, reserve for uncertain tax positions of $1.0 billion, and an increase in the valuation allowance of $20.1 billion.

The following table presents the components of the net deferred tax asset:

December 31, (in millions)		2010			2009



Deferred tax assets:
	Losses and tax credit carryforwards	$	25,195		$	26,204
	Unrealized loss on investments		3,223			8,651
	Adjustment to life policy reserves		(458	)		2,794
	Accruals not currently deductible, and other		3,036			2,616
	Investments in foreign subsidiaries and joint ventures		2,207			2,194
	Loss reserve discount		1,264			1,613
	Loan loss and other reserves		1,093			1,461
	Unearned premium reserve reduction		825			1,467
	Employee benefits		1,034			1,088

Total deferred tax assets			37,419			48,088

Deferred tax liabilities:
	Deferred policy acquisition costs		(4,387	)		(12,110	)
	Flight equipment, fixed assets and intangible assets		(4,753	)		(5,030	)
	Unrealized gains related to available for sale debt securities		(3,317	)		(835	)
	Other		(466	)		(524	)

Total deferred tax liabilities			(12,923	)		(18,499	)

Net deferred tax assets before valuation allowance			24,496			29,589
Valuation allowance			(25,773	)		(23,705	)

Net deferred tax assets (liabilities)		$	(1,277	)	$	5,884

The following table presents AIG's U.S. consolidated income tax group tax losses and credits carryforwards as of December 31, 2010 on a tax return basis.

December 31, 2010 (in millions)	Gross		Tax Effected



Net operating loss carryforwards	$	32,281	$	11,298	20 years/2028-2030
Capital loss carryforwards – Life		23,172		8,110	5 years/2013-2014
Capital loss carryforwards – Non-Life		4,633		1,621	5 years/2014-2015
Foreign tax credit carryforwards		-		4,575	10 years/2015-2020
Other carryforwards and other		-		424	various

Total AIG U.S. consolidated income tax group tax losses and credits carryforwards			$	26,028

The following table provides a rollforward of the net deferred tax asset (liability) from December 31, 2009 to December 31, 2010.

		2010


(in millions)		Net Deferred Tax Asset Before Valuation Allowance			Valuation Allowance			Net Deferred Tax Asset (Liability)

Net deferred tax asset, beginning of year		$	29,589		$	(23,705	)	$	5,884
	Provision – continuing operations		(4,018	)		(1,197	)		(5,215	)
	Benefit (provision) – discontinued operations		1			(1,292	)		(1,291	)
	Deferred taxes on components of shareholders' equity		(2,490	)		(66	)		(2,556	)
	Deferred taxes of acquired entities		621			(693	)		(72	)
	Deferred taxes of deconsolidated entities		140			1,180			1,320
	Net deferred tax liabilities reclassified as held for sale		653			-			653

Net deferred tax asset (liability), end of year		$	24,496		$	(25,773	)	$	(1,277	)

Assessment of Deferred Tax Asset Valuation Allowances

AIG evaluates the recoverability of the deferred tax asset and establishes a valuation allowance, if necessary, to reduce the deferred tax asset to an amount that is more likely than not to be realized (a likelihood of more than 50 percent). Significant judgment is required to determine whether a valuation allowance is necessary and the amount of such valuation allowance, if appropriate.

When assessing the realization of its deferred tax asset, AIG considers all available evidence, including:

•: the nature, frequency, and severity of cumulative financial reporting losses in recent years;
•: the carryforward periods for the net operating loss, capital loss and foreign tax credit carryforwards;
•: predictability of future operating profitability of the character necessary to realize the asset;
•: certain transactions, including the recognition of the gains and losses on dispositions;
•: prudent and feasible tax planning strategies that would be implemented, if necessary, to protect against the loss of the deferred tax asset; and
•: the effect of reversing taxable temporary differences.

The evaluation of the recoverability of the deferred tax asset requires AIG to weigh all positive and negative evidence to reach a conclusion that it is more likely than not that all or some portion of the deferred tax assets will not be realized. The weight given to the evidence is commensurate with the extent to which it can be objectively verified. The more negative evidence that exists, the more positive evidence is necessary and the more difficult it is to support a conclusion that a valuation allowance is not needed. As part of the evaluation at December 31, 2010, despite several favorable developments, including the completion of the Recapitalization in January 2011, the wind-down of AIGFP's portfolios, and the sale of AGF, AIG has recent negative evidence of cumulative operating losses and a lack of predictable profits. Based on this evidence, AIG cannot assert that it is more likely than not that any U.S. member deferred tax assets will be realized at December 31, 2010.

However, if in the future AIG demonstrates consistent profitability, ability to accurately project income by jurisdiction and the resultant annual effective tax rate, or develops prudent and feasible tax planning strategies, the evaluation of the recoverability of the deferred tax asset could change and the valuation allowance could be released in whole or in part.

The following table presents the net deferred tax assets (liabilities) for December 31, 2010, and December 31, 2009, respectively, on a U.S. GAAP basis:

	December 31,


(in millions)	2010			2009

Net U.S. consolidated return group deferred tax assets	$	26,563		$	28,267
Net deferred tax assets in Other comprehensive income		(2,901	)		413
Valuation Allowance		(23,840	)		(20,452	)

Net U.S. consolidated return group deferred tax assets		(178	)		8,228

Net foreign, state & local deferred tax assets*		834			909
Valuation allowance		(1,933	)		(3,253	)

Net foreign, state & local deferred tax assets		(1,099	)		(2,344	)

Total AIG net deferred tax (liabilities) assets	$	(1,277	)	$	5,884

*: Amount includes deferred tax liabilities for certain jurisdictions which are not available to offset deferred tax assets from other jurisdictions.

Deferred tax asset of U.S. consolidated income tax group

At December 31, 2009, AIG had a partial deferred tax asset valuation allowance of $20.4 billion as $8.2 billion of the U.S. consolidated income tax group deferred tax asset was supported by gains expected to be realized from the planned divestitures of businesses and assets, principally AIA and ALICO. All of these divestitures were completed in 2010.

At December 31, 2010, and December 31, 2009, AIG's U.S. consolidated income tax group had net deferred tax liability after valuation allowance of $178 million and net deferred tax asset after valuation allowance of $8.2 billion, respectively. At December 31, 2010, and December 31, 2009, AIG's U.S. consolidated income tax group had deferred tax asset valuation allowances of $23.9 billion and $20.4 billion, respectively.

For the year ended December 31, 2010, AIG recorded an increase in the U.S. consolidated income tax group deferred tax asset valuation allowance of $3.4 billion. The increase in the deferred tax asset valuation allowance was primarily attributable to a $1.8 billion increase in the deferred tax asset associated with operating losses excluding divestiture gains that resulted in the realization of previously recognized deferred tax assets, $525 million related to lower than expected realized value from the divestiture of AIA, $1.3 billion related to a reduction in the estimated U.S. tax liability related to the investment in subsidiaries as a result of goodwill impairment charges, a $533 million increase in the deferred tax asset attributable to the pre-tax loss on the disposition of AGF, $589 million related to a reduction in tax planning strategies, and a transfer of deferred tax asset valuation allowance to the U.S. consolidated income tax group of $582 million as a result of a U.S. tax election to treat a foreign insurance company as a U.S. insurance company for U.S. federal income tax purposes. These increases in the deferred tax asset valuation allowance were partially offset by $1.9 billion reduction associated primarily with the appreciation in the available for sale securities portfolio.

The significant unrealized appreciation in the available for sale securities portfolio partially offset by activity in other comprehensive income reduced the net deferred tax asset before valuation allowances, allowing a reduction of $1.9 billion of valuation allowance.

During the year ended December 31, 2010, AIG changed its planned securitization of an insurance portfolio because it is pursuing more attractive opportunities to provide liquidity. This planned securitization previously supported $589 million of the U.S. consolidated income tax group's deferred tax assets.

For the year ended December 31, 2010, $1.5 billion of the increase in valuation allowance was allocated to continuing operations, $1.2 billion was allocated to discontinued operations, and $66 million was allocated to Accumulated other comprehensive income. This allocation was based on the primacy of continuing operations, which requires a net increase in valuation allowance to be attributed to continuing operations to the extent of the related deferred tax benefit attributable to continuing operations. The amount allocated to continuing operations also included the $589 million of change related to a reduction in tax planning strategies. The increase in valuation allowance of $1.2 billion was allocated to discontinued operations to principally offset the deferred tax benefit on losses.

Deferred tax liability — foreign, state and local

At December 31, 2010 and December 31, 2009, AIG had net deferred tax liabilities of $1.1 billion and $2.3 billion, respectively, related to foreign subsidiaries, state and local tax jurisdictions, and certain domestic subsidiaries that file separate tax returns.

At December 31, 2010 and December 31, 2009, AIG had deferred tax asset valuation allowances of $1.9 billion and $3.3 billion, respectively, related to foreign subsidiaries, state and local tax jurisdictions, and certain domestic subsidiaries that file separate tax returns. The change is primarily due to a reduction in deferred tax asset valuation allowance of $1.1 billion related to entities sold, a reduction in state and local jurisdictions valuation allowances of $269 million, and a transfer of deferred tax asset valuation allowance to the U.S. consolidated income tax group of $582 million as a result of a U.S. tax election to treat a foreign insurance company as a U.S. insurance company for U.S. federal income tax purposes, partially offset by an additional deferred tax asset valuation allowance of $693 million associated with the purchase of additional shares of Fuji, recorded through purchase accounting.

Tax Examinations and Litigation

AIG and its eligible U.S. subsidiaries file a consolidated U.S. federal income tax return. Several U.S. subsidiaries included in the consolidated financial statements file separate U.S. federal income tax returns and are not part of the AIG U.S. consolidated income tax group. Subsidiaries operating outside the U.S. are taxed, and income tax expense is recorded, based on applicable U.S. and foreign law.

The statute of limitations for all tax years prior to 2000 has now expired for AIG's consolidated federal income tax return. AIG is currently under examination for the tax years 2000 through 2005.

In April 2008, AIG filed a refund claim for years 1997 through 2006. A refund claim filed in June 2007 for years 1991 through 1996 is pending. These refund claims relate to the tax effects of the restatements of AIG's 2004 and prior financial statements.

On March 20, 2008, AIG received a Statutory Notice of Deficiency (Notice) from the IRS for years 1997 to 1999. The Notice asserted that AIG owes additional taxes and penalties for these years primarily due to the disallowance of foreign tax credits associated with cross-border financing transactions. The transactions that are the subject of the Notice extend beyond the period covered by the Notice, and the IRS is challenging the later periods. It is also possible that the IRS will consider other transactions to be similar to these transactions. AIG has paid the assessed tax plus interest and penalties for 1997. On February 26, 2009, AIG filed a complaint in the United States District Court for the Southern District of New York seeking a refund of approximately $306 million in taxes, interest and penalties paid with respect to its 1997 taxable year. AIG alleges that the IRS improperly disallowed foreign tax credits and that AIG's taxable income should be reduced as a result of AIG's 2005 restatement of its consolidated financial statements. AIG has also paid additional taxes, interest, and penalties assessed for 1998 and 1999, and filed an administrative refund claim on September 9, 2010 for these periods. AIG will vigorously defend its position, and continues to believe that it has adequate reserves for any liability that could result from the IRS actions.

Accounting for Uncertainty in Income Taxes

The following table presents a rollforward of the beginning and ending balances of the total amounts of gross unrecognized tax benefits:

Year Ended December 31, (in millions)		2010			2009			2008



Gross unrecognized tax benefits, beginning of year		$	4,843		$	3,368		$	1,310
	Increases in tax positions for prior years		888			1,628			1,175
	Decreases in tax positions for prior years		(470	)		(132	)		(248	)
	Increases in tax positions for current year		49			142			1,092
	Lapse in statute of limitations		(6	)		(47	)		(26	)
	Settlements		(12	)		(9	)		(25	)
	Activity of discontinued operations		-			(46	)		90
	Less: Unrecognized tax benefits of held for sale entities		4			(61	)		-

Gross unrecognized tax benefits, end of year		$	5,296		$	4,843		$	3,368

At December 31, 2010, 2009 and 2008, AIG's unrecognized tax benefits, excluding interest and penalties, were $5.3 billion, $4.8 billion and $3.4 billion, respectively. At December 31, 2010, 2009 and 2008, AIG's unrecognized tax benefits were $1.7 billion, $1.4 billion and $665 million, respectively, related to tax positions that if recognized would not affect the effective tax rate as they relate to such factors as the timing, rather than the permissibility, of the deduction. Accordingly, at December 31, 2010, 2009 and 2008, the amounts of unrecognized tax benefits that, if recognized, would favorably affect the effective tax rate were $3.6 billion, $3.4 billion and $2.7 billion, respectively.

Interest and penalties related to unrecognized tax benefits are recognized in income tax expense. At December 31, 2010 and 2009, AIG had accrued $952 million and $835 million, respectively, for the payment of interest (net of the federal benefit) and penalties. For the years ended December 31, 2010, 2009 and 2008, AIG had accrued $152 million, $393 million and $146 million, respectively, for the payment of interest (net of the federal benefit) and penalties.

AIG regularly evaluates adjustments proposed by taxing authorities. At December 31, 2010, such proposed adjustments would not have resulted in a material change to AIG's consolidated financial condition, although it is possible that the effect could be material to AIG's consolidated results of operations for an individual reporting period. Although it is reasonably possible that a change in the balance of unrecognized tax benefits may occur within the next 12 months, based on the information currently available, AIG does not expect any change to be material to AIG's consolidated financial condition.

Listed below are the tax years that remain subject to examination by major tax jurisdictions:

At December 31, 2010



Major Tax Jurisdiction
	United States	2000 - 2009
	France	2007 - 2009
	Hong Kong	2004 - 2009
	Japan	2003 - 2009
	Korea	2009
	Malaysia	2002 - 2009
	Singapore	2001 - 2009
	Taiwan	2005 - 2009
	Thailand	2005 - 2009
	United Kingdom	2008 - 2009

Information Provided in Connection With Outstanding Debt

12 Months Ended

Dec. 31, 2010

Information Provided in Connection With Outstanding Debt

Information Provided in Connection With Outstanding Debt

25. Information Provided in Connection With Outstanding Debt

The following condensed consolidating financial statements reflect the results of SAFG, Inc. formerly known as AIG Life Holdings (US), Inc. (AIGLH), a holding company and a wholly owned subsidiary of AIG. AIG provides a full and unconditional guarantee of all outstanding debt of SAFG, Inc.

Condensed Consolidating Balance Sheet

(in millions)		American International Group, Inc. (As Guarantor)		SAFG, Inc.^(a)		Other Subsidiaries			Reclassifications and Eliminations			Consolidated AIG



December 31, 2010
Assets:
	Short-term investments^(a)	$	5,602	$	-	$	38,354		$	(1,771	)	$	42,185
	Other investments		5,852		-		488,047			(125,672	)		368,227

	Total investments		11,454		-		526,401			(127,443	)		410,412
	Cash		49		-		1,509			-			1,558
	Loans to subsidiaries^(b)		61,630		-		(61,630	)		-			-
	Debt issuance costs, including prepaid commitment asset of $3,628		3,838		-		241			-			4,079
	Investment in consolidated subsidiaries^(b)		93,511		33,354		(6,788	)		(120,077	)		-
	Other assets, including current and deferred income taxes		7,852		2,717		150,157			(785	)		159,941
	Assets held for sale		-		-		107,453			-			107,453

Total assets		$	178,334	$	36,071	$	717,343		$	(248,305	)	$	683,443

Liabilities:
	Insurance liabilities	$	-	$	-	$	278,776		$	(984	)	$	277,792
	Federal Reserve Bank of New York credit facility		20,985		-		-			-			20,985
	Other long-term debt		40,443		1,637		167,532			(124,136	)		85,476
	Other liabilities, including intercompany balances^(a)(c)		31,587		4,793		54,788			(2,963	)		88,205
	Liabilities held for sale		-		-		97,300			12			97,312

Total liabilities			93,015		6,430		598,396			(128,071	)		569,770

Redeemable noncontrolling interests in partially owned consolidated subsidiaries (including $12 associated with businesses held for sale)			-		-		207			227			434
Total AIG shareholders' equity			85,319		29,641		117,641			(147,282	)		85,319
Noncontrolling interests:
	Noncontrolling nonvoting, callable, junior and senior preferred interest held by Federal Reserve Bank of New York		-		-		-			26,358			26,358
	Other (including $204 million associated with businesses held for sale)		-		-		1,099			463			1,562

Total noncontrolling interests			-		-		1,099			26,821			27,920

Total equity			85,319		29,641		118,740			(120,461	)		113,239

Total liabilities and equity		$	178,334	$	36,071	$	717,343		$	(248,305	)	$	683,443

(in millions)			American International Group, Inc. (As Guarantor)		SAFG, Inc.^(a)		Other Subsidiaries			Reclassifications and Eliminations			Consolidated AIG



December 31, 2009
Assets:
	Short-term investments^(a)		$	1,311	$	-	$	45,996		$	(44	)	$	47,263
	Other investments			9,391		-		690,981			(146,470	)		553,902

	Total investments			10,702		-		736,977			(146,514	)		601,165
	Cash			57		2		4,341			-			4,400
	Loans to subsidiaries^(b)			72,926		-		(72,926	)		-			-
	Debt issuance costs, including prepaid commitment asset of $7,099			7,383		-		159			-			7,542
	Investment in consolidated subsidiaries^(b)			71,419		28,580		(980	)		(99,019	)		-
	Other assets, including current and deferred income taxes			10,986		2,618		164,670			(175	)		178,099
	Assets held for sale			-		-		56,379			-			56,379

Total assets			$	173,473	$	31,200	$	888,620		$	(245,708	)	$	847,585

Liabilities:
	Insurance liabilities		$	-	$	-	$	461,706		$	(409	)	$	461,297
	Federal Reserve Bank of New York Commercial
		Paper Funding Facility		-		-		4,739			-			4,739
	Federal Reserve Bank of New York credit facility			23,435		-		-			-			23,435
	Other long-term debt			45,436		2,097		210,512			(144,747	)		113,298
	Other liabilities, including intercompany balances^(a)(c)			34,778		4,209		60,135			(1,940	)		97,182
	Liabilities held for sale			-		-		48,599			-			48,599

Total liabilities				103,649		6,306		785,691			(147,096	)		748,550

Redeemable noncontrolling interests in partially owned consolidated subsidiaries (including $211 associated with businesses held for sale)				-		-		177			782			959
Total AIG shareholders' equity				69,824		24,894		83,303			(108,197	)		69,824
Noncontrolling interests:
	Noncontrolling nonvoting, callable, junior and senior preferred interest held by Federal Reserve Bank of New York			-		-		15,596			8,944			24,540
	Other (including $2.2 billion associated with businesses held for sale in 2009)			-		-		3,853			(141	)		3,712

Total noncontrolling interests				-		-		19,449			8,803			28,252

Total equity				69,824		24,894		102,752			(99,394	)		98,076

Total liabilities and equity			$	173,473	$	31,200	$	888,620		$	(245,708	)	$	847,585

(a): Includes intercompany derivative positions, which are reported at fair value before credit valuation adjustment.
(b): Eliminated in consolidation.
(c): For December 31, 2010 and December 31, 2009, includes intercompany tax payable of $28.1 billion and $28.7 billion, respectively, for American International Group, Inc. (As Guarantor) and intercompany tax receivable of $152 million and $45 million, respectively, for SAFG, Inc.

Condensed Consolidating Statement of Income (Loss)

(in millions)		American International Group, Inc. (As Guarantor)			SAFG, Inc.			Other Subsidiaries			Reclassifications and Eliminations			Consolidated AIG



Year Ended December 31, 2010
Revenues:
	Equity in undistributed net income (loss) of consolidated subsidiaries^(a)	$	16,210		$	1,683		$	-		$	(17,893	)	$	-
	Dividend income from consolidated subsidiaries^(a)		1,830			-			-			(1,830	)		-
	Other revenue^(b)		2,942			246			74,113			-			77,301

Total revenues			20,982			1,929			74,113			(19,723	)		77,301

Expenses:
	Accrued and compounding interest		636			-			-			(32	)		604
	Amortization of prepaid commitment asset		3,471			-			-			(47	)		3,424

	Total interest expense on FRBNY Credit Facility		4,107			-			-			(79	)		4,028
	Other interest expense		2,279			378			1,170			4			3,831
	Restructuring expenses and related asset impairment and other expenses		451			-			-			-			451
	Other expense		1,213			-			49,842			-			51,055

Total expenses			8,050			378			51,012			(75	)		59,365

Income (loss) from continuing operations before income tax expense			12,932			1,551			23,101			(19,648	)		17,936
Income tax expense^(c)			5,144			(105	)		820			-			5,859

Income (loss) from continuing operations			7,788			1,656			22,281			(19,648	)		12,077
Loss from discontinued operations			(2	)		-			(1,983	)		(79	)		(2,064	)

Net income (loss)			7,786			1,656			20,298			(19,727	)		10,013
Less:
Net income from continuing operations attributable to noncontrolling interests:
	Noncontrolling nonvoting, callable, junior and senior preferred interests held by Federal Reserve Bank of New York		-			-			-			1,818			1,818
	Other		-			-			355			-			355

Total income from continuing operations attributable to noncontrolling interests			-			-			355			1,818			2,173
Income (loss) from discontinued operations attributable to noncontrolling interests			-			-			54			-			54

Total net income (loss) attributable to noncontrolling interests			-			-			409			1,818			2,227

Net income (loss) attributable to AIG		$	7,786		$	1,656		$	19,889		$	(21,545	)	$	7,786

(in millions)		American International Group, Inc. (As Guarantor)			SAFG, Inc.			Other Subsidiaries			Reclassifications and Eliminations			Consolidated AIG



Year Ended December 31, 2009
Revenues:
	Equity in undistributed net income (loss) of consolidated subsidiaries^(a)	$	(3,479	)	$	(472	)	$	-		$	3,951		$	-
	Dividend income from consolidated subsidiaries^(a)		2,002			169			-			(2,171	)		-
	Change in fair value of ML III		(1,401	)		-			1,820			-			419
	Other revenue^(b)		4,166			199			70,568			-			74,933

Total revenues			1,288			(104	)		72,388			1,780			75,352

Expenses:
	Accrued and compounding interest		2,022			-			-			(41	)		1,981
	Amortization of prepaid commitment asset		8,359			-			-			(48	)		8,311

	Total interest expense on FRBNY Credit Facility		10,381			-			-			(89	)		10,292
	Other interest expense		2,496			355			1,095			-			3,946
	Restructuring expenses and related asset impairment and other expenses		407			-			742			-			1,149
	Other expenses		1,230			-			73,042			-			74,272

Total expenses			14,514			355			74,879			(89	)		89,659

Income (loss) from continuing operations before income tax expense (benefit)			(13,226	)		(459	)		(2,491	)		1,869			(14,307	)
Income tax expense (benefit)^(c)			(2,277	)		15			773			-			(1,489	)

Income (loss) from continuing operations			(10,949	)		(474	)		(3,264	)		1,869			(12,818	)
Income (loss) from discontinued operations			-			-			594			(89	)		505

Net income (loss)			(10,949	)		(474	)		(2,670	)		1,780			(12,313	)
Less:
Net income (loss) from continuing operations attributable to noncontrolling interests:
	Noncontrolling nonvoting, callable, junior and senior preferred interests held by Federal Reserve Bank of New York		-			-			96			44			140
	Other		-			-			(1,576	)		-			(1,576	)

Total income (loss) from continuing operations attributable to noncontrolling interests			-			-			(1,480	)		44			(1,436	)
Income from discontinued operations attributable to noncontrolling interests			-			-			72			-			72

Total net income (loss) attributable to noncontrolling interests			-			-			(1,408	)		44			(1,364	)

Net income (loss) attributable to AIG		$	(10,949	)	$	(474	)	$	(1,262	)	$	1,736		$	(10,949	)

(in millions)		American International Group, Inc. (As Guarantor)			SAFG, Inc.			Other Subsidiaries			Reclassifications and Eliminations			Consolidated AIG



Year Ended December 31, 2008
Revenues:
	Equity in undistributed net income (loss) of consolidated subsidiaries^(a)	$	(61,542	)	$	(17,027	)	$	-		$	78,569		$	-
	Dividend income from consolidated subsidiaries^(a)		2,401			75			-			(2,476	)		-
	Change in fair value of ML III		(900	)		-			-			-			(900	)
	Other revenue^(b)		(2,931	)		198			(3,207	)		-			(5,940	)

Total revenues			(62,972	)		(16,754	)		(3,207	)		76,093			(6,840	)

Expenses:
	Accrued and compounding interest		2,116			-			-			(26	)		2,090
	Amortization of prepaid commitment asset		9,279			-			-			(29	)		9,250

	Total interest expense on FRBNY Credit Facility		11,395			-			-			(55	)		11,340
	Other interest expense		2,393			275			1,705			-			4,373
	Restructuring expenses and related asset impairment and other expenses		189			-			582			-			771
	Other expenses		2,706			15			76,984			-			79,705

Total expenses			16,683			290			79,271			(55	)		96,189

Income (loss) from continuing operations before income tax expense (benefit)			(79,655	)		(17,044	)		(82,478	)		76,148			(103,029	)
Income tax expense (benefit)^(c)			19,634			(17	)		(29,300	)		-			(9,683	)

Income (loss) from continuing operations			(99,289	)		(17,027	)		(53,178	)		76,148			(93,346	)
Loss from discontinued operations			-			-			(6,986	)		(55	)		(7,041	)

Net income (loss)			(99,289	)		(17,027	)		(60,164	)		76,093			(100,387	)
Less:
Net loss attributable to noncontrolling interests:
	Loss from continuing operations attributable to noncontrolling interests		-			-			(984	)		-			(984	)
	Loss from discontinued operations attributable to noncontrolling interests		-			-			(114	)		-			(114	)

Total net loss attributable to noncontrolling interests			-			-			(1,098	)		-			(1,098	)

Net income (loss) attributable to AIG		$	(99,289	)	$	(17,027	)	$	(59,066	)	$	76,093		$	(99,289	)

(a): Eliminated in consolidation.
(b): Includes Interest income of $3.2 billion, $4.1 billion, and $2.7 billion for 2010, 2009, and 2008, respectively, for American International Group, Inc. (As Guarantor).
(c): Income taxes recorded by American International Group, Inc. (As Guarantor) include deferred tax expense attributable to the pending sales of foreign businesses and a valuation allowance to reduce the consolidated deferred tax asset to the amount more likely than not to be realized. See Note 22 herein for additional information.

Condensed Consolidating Statement of Cash Flows

(in millions)		American International Group, Inc. (As Guarantor)			SAFG, Inc.			Other Subsidiaries and Eliminations			Consolidated AIG



Year Ended December 31, 2010
Net cash (used in) provided by operating activities – continuing operations		$	(1,942	)	$	(141	)	$	11,786		$	9,703
Net cash (used in) provided by operating activities – discontinued operations			-			-			7,207			7,207

Net cash (used in) provided by operating activities			(1,942	)		(141	)		18,993			16,910

Cash flows from investing activities:
	Sales of investments		3,997			-			89,091			93,088
	Sales of divested businesses, net		278			-			21,482			21,760
	Purchase of investments		(55	)		-			(93,056	)		(93,111	)
	Loans to subsidiaries – net		5,703			-			(5,703	)		-
	Contributions to subsidiaries – net		(2,574	)		-			2,574			-
	Other, net		(4,774	)		-			(27,906	)		(32,680	)

Net cash (used in) provided by investing activities – continuing operations			2,575			-			(13,518	)		(10,943	)
Net cash (used in) provided by investing activities – discontinued operations			-			-			718			718

Net cash (used in) provided by investing activities			2,575			-			(12,800	)		(10,225	)

Cash flows from financing activities:
	Federal Reserve Bank of New York credit facility borrowings		19,900			-			-			19,900
	Federal Reserve Bank of New York credit facility repayments		(19,110	)		-			(4,068	)		(23,178	)
	Issuance of other long-term debt		1,996			-			11,050			13,046
	Repayments on other long-term debt		(3,681	)		(500	)		(11,795	)		(15,976	)
	Drawdown on the Department of the Treasury Commitment		2,199			-			-			2,199
	Intercompany loans – net		(1,777	)		639			1,138			-
	Other, net		(168	)		-			(1,368	)		(1,536	)

Net cash (used in) provided by financing activities – continuing operations			(641	)		139			(5,043	)		(5,545	)
Net cash (used in) provided by financing activities – discontinued operations			-			-			(3,716	)		(3,716	)

Net cash (used in) provided by financing activities			(641	)		139			(8,759	)		(9,261	)
Effect of exchange rate changes on cash			-			-			39			39

Change in cash			(8	)		(2	)		(2,527	)		(2,537	)
Cash at beginning of period			57			2			4,341			4,400
Reclassification to assets held for sale			-			-			(305	)		(305	)

Cash at end of period		$	49		$	-		$	1,509		$	1,558

(in millions)		American International Group, Inc. (As Guarantor)			SAFG, Inc.			Other Subsidiaries and Eliminations			Consolidated AIG



Year Ended December 31, 2009
Net cash (used in) provided by operating activities – continuing operations		$	(1,393	)	$	(120	)	$	13,796		$	12,283
Net cash (used in) provided by operating activities – discontinued operations			-			-			6,301			6,301

Net cash (used in) provided by operating activities			(1,393	)		(120	)		20,097			18,584

Cash flows from investing activities:
	Sales of investments		1,981			-			86,199			88,180
	Sales of divested businesses, net		857			169			4,252			5,278
	Purchase of investments		(400	)		-			(79,866	)		(80,266	)
	Loans to subsidiaries – net		(5,927	)		-			5,927			-
	Contributions to subsidiaries – net		(5,683	)		(2,350	)		8,033			-
	Other, net		547			-			(7,333	)		(6,786	)

Net cash (used in) provided by investing activities – continuing operations			(8,625	)		(2,181	)		17,212			6,406
Net cash (used in) provided by investing activities – discontinued operations			-			-			(628	)		(628	)

Net cash (used in) provided by investing activities			(8,625	)		(2,181	)		16,584			5,778

Cash flows from financing activities:
	Federal Reserve Bank of New York credit facility borrowings		32,526			-			-			32,526
	Federal Reserve Bank of New York credit facility repayments		(26,400	)		-			(26	)		(26,426	)
	Issuance of other long-term debt		-			-			3,452			3,452
	Repayments on other long-term debt		(2,931	)		-			(16,520	)		(19,451	)
	Drawdown on the Department of the Treasury Commitment		5,344			-			-			5,344
	Intercompany loans – net		1,554			1,103			(2,657	)		-
	Other, net		(121	)		1,200			(17,534	)		(16,455	)

Net cash (used in) provided by financing activities – continuing operations			9,972			2,303			(33,285	)		(21,010	)
Net cash (used in) provided by financing activities – discontinued operations			-			-			(7,987	)		(7,987	)

Net cash (used in) provided by financing activities			9,972			2,303			(41,272	)		(28,997	)

Effect of exchange rate changes on cash			-			-			533			533

Change in cash			(46	)		2			(4,058	)		(4,102	)
Cash at beginning of period			103			-			8,539			8,642
Reclassification to assets held for sale			-			-			(140	)		(140	)

Cash at end of period		$	57		$	2		$	4,341		$	4,400

(in millions)		American International Group, Inc. (As Guarantor)			SAFG, Inc.			Other Subsidiaries and Eliminations			Consolidated AIG



Year Ended December 31, 2008
Net cash (used in) provided by operating activities – continuing operations		$	284		$	(27	)	$	(12,346	)	$	(12,089	)
Net cash (used in) provided by operating activities – discontinued operations			-			-			11,967			11,967

Net cash (used in) provided by operating activities			284			(27	)		(379	)		(122	)

Cash flows from investing activities:
	Sales of investments		1,017			-			154,383			155,400
	Funding to establish Maiden Lane III LLC		(5,000	)		-			-			(5,000	)
	Purchase of investments		(4,200	)		-			(141,909	)		(146,109	)
	Loans to subsidiaries – net		(76,358	)		-			76,358			-
	Contributions to subsidiaries – net		(12,153	)		-			12,153			-
	Other, net		2,356			(16	)		36,770			39,110

Net cash (used in) provided by investing activities – continuing operations			(94,338	)		(16	)		137,755			43,401
Net cash (used in) provided by investing activities – discontinued operations			-			-			3,775			3,775

Net cash (used in) provided by investing activities			(94,338	)		(16	)		141,530			47,176

Cash flows from financing activities:
	Federal Reserve Bank of New York credit facility borrowings		96,650			-			-			96,650
	Federal Reserve Bank of New York credit facility repayments		(59,850	)		-			-			(59,850	)
	Issuance of other long-term debt		16,295			-			91,029			107,324
	Repayments on other long-term debt		(3,592	)		-			(130,627	)		(134,219	)
	Issuance of common stock		7,343			-			-			7,343
	Proceeds from issuance of AIG Series D preferred stock		40,000			-			-			40,000
	Intercompany loans – net		4,846			223			(5,069	)		-
	Payments advanced to purchase shares		(1,000	)		-			-			(1,000	)
	Cash dividends paid to shareholders		(1,628	)		(180	)		180			(1,628	)
	Other, net		(4,991	)		-			(74,822	)		(79,813	)

Net cash (used in) provided by financing activities – continuing operations			94,073			43			(119,309	)		(25,193	)
Net cash (used in) provided by financing activities – discontinued operations			-			-			(15,541	)		(15,541	)

Net cash (used in) provided by financing activities			94,073			43			(134,850	)		(40,734	)

Effect of exchange rate changes on cash			-			-			38			38

Change in cash			19			-			6,339			6,358
Cash at beginning of period			84			-			2,200			2,284

Cash at end of period		$	103		$	-		$	8,539		$	8,642

Supplementary disclosure of cash flow information:

		American International Group, Inc. (As Guarantor)			SAFG, Inc.			Other Subsidiaries and Eliminations			Consolidated AIG



Cash (paid) received during the year ended December 31, 2010 for:
Interest:
	Third party	$	(2,493	)	$	(152	)	$	(2,521	)	$	(5,166	)
	Intercompany		(12	)		(226	)		238			-
Taxes:
	Income tax authorities	$	(32	)	$	-		$	(970	)	$	(1,002	)
	Intercompany		859			-			(859	)		-

Cash (paid) received during the year ended December 31, 2009 for:
Interest:
	Third party	$	(2,595	)	$	(166	)	$	(3,016	)	$	(5,777	)
	Intercompany		(6	)		(186	)		192			-
Taxes:
	Income tax authorities	$	1,140		$	-		$	(1,366	)	$	(226	)
	Intercompany		(1,287	)		(21	)		1,308			-

Cash (paid) received during the year ended December 31, 2008 for:
Interest:
	Third party	$	(2,122	)	$	(174	)	$	(5,141	)	$	(7,437	)
	Intercompany		(2	)		(97	)		99			-
Taxes:
	Income tax authorities	$	1,334		$	-		$	(1,951	)	$	(617	)
	Intercompany		(2,240	)		6			2,234			-

American International Group, Inc. (As Guarantor) supplementary disclosure of non-cash activities:

Year Ended December 31, (in millions)		2010		2009		2008



Intercompany non-cash financing and investing activities:
	Paydown of FRBNY Credit Facility by subsidiary	$	4,068	$	26	$	-
	Capital contributions to subsidiaries through forgiveness of loans		2,510		287		11,350
	Intercompany loan receivable offset by intercompany payable		1,364		-		-
	Exchange of intercompany payable with loan payable		469		-		-
	Investment assets received through reduction of intercompany loan receivable		468		-		-
	Other capital contributions – net		346		2,834		513
	Settlement of payable to subsidiary with return of capital from subsidiary		-		15,500		-
	Exchange of intercompany receivable with loan receivable		-		528		-
	Capital contributions in the form of bonds		-		2,698		3,160
	Settlement of repurchase agreement with loan receivable		-		-		3,160

SAFG, Inc. supplementary disclosure of non-cash activities:

Year Ended December 31, (in millions)		2010		2009		2008



Intercompany non-cash financing/investing activities:
	Loans receivable forgiven through capital contributions	$	-	$	-	$	17,225
	Other capital contributions in the form of forgiveness of payables and contribution of assets – net	$	-	$	-	$	1,394

- Definition

Text block that encapsulates the detailed table comprising the condensed financial statements (balance sheet, income statement and statement of cash flows), normally using the registrant (parent) as the sole domain member. If condensed consolidating financial statements are being presented, other domain members (in addition to parent) such as guarantor subsidiaries, non-guarantor subsidiaries, and the consolidation eliminations, will be included in order that the respective monetary amounts for each of the domains will aggregate to the respective amounts on the consolidated financial statements. The line items are the various captions used to compile the condensed financial statements. Using extensions, most, if not all, of the elements representing condensed financial statement captions will be the same as those used for the consolidated financial statements captions.

+ References+ Details

Condensed Financial Information of Registrant

12 Months Ended

Dec. 31, 2010

Condensed Financial Information of Registrant

Condensed Financial Information of Registrant

Condensed Financial Information of Registrant

Schedule II

Balance Sheet — Parent Company Only

December 31, (in millions)			2010			2009



Assets:
		Short-term investments	$	5,602		$	1,311
		Other investments		5,852			9,391

	Total investments			11,454			10,702
	Cash			49			57
	Loans to subsidiaries^*			61,630			72,926
	Due from affiliates – net^*			380			382
	Current and deferred income taxes			3,957			7,470
	Debt issuance costs including prepaid commitment asset of $3,628 in 2010 and $7,099 in 2009			3,838			7,383
	Investments in consolidated subsidiaries^*			93,511			71,419
	Other assets			3,515			3,134

Total assets			$	178,334		$	173,473

Liabilities:
	Intercompany tax payable^*		$	28,083		$	28,729
	Federal Reserve Bank of New York credit facility			20,985			23,435
	Parent company long-term debt			24,953			28,299
	MIP notes payable			11,318			13,376
	Series AIGFP matched notes and bonds payable			3,703			3,760
	Loans Payable			469			-
	Intercompany loans payable^*			1			1,778
	Other liabilities (includes intercompany derivative liabilities of $150 in 2010 and $1,278 in 2009)			3,503			4,272

Total liabilities				93,015			103,649

AIG Shareholders' equity:
	Preferred stock			71,983			69,784
	Common stock			368			354
	Treasury stock			(873	)		(874	)
	Additional paid-in capital			9,683			6,358
	Accumulated deficit			(3,466	)		(11,491	)
	Accumulated other comprehensive income			7,624			5,693

Total AIG shareholders' equity				85,319			69,824

Total liabilities and equity			$	178,334		$	173,473

*: Eliminated in consolidation.

See Accompanying Notes to Financial Statements — Parent Company Only.

Statement of Income (Loss) — Parent Company Only

Years Ended December 31, (in millions)		2010			2009			2008



Income
	Equity in undistributed net income (loss) of consolidated subsidiaries^*	$	16,210		$	(3,479	)	$	(61,542	)
	Interest income		3,249			4,126			2,741
	Change in fair value of ML III		-			(1,401	)		(900	)
	Dividend income from consolidated subsidiaries^*		1,830			2,002			2,401
	Net realized capital losses		(313	)		(54	)		(5,745	)
	Other revenues		6			94			73
Expenses
	Accrued and compounding interest		(636	)		(2,022	)		(2,116	)
	Amortization of prepaid commitment asset		(3,471	)		(8,359	)		(9,279	)

	Total interest expense on FRBNY Credit Facility		(4,107	)		(10,381	)		(11,395	)
	Other interest expense		(2,279	)		(2,496	)		(2,393	)
	Restructuring expense and related asset impairment and other expenses		(451	)		(407	)		(189	)
	Other expenses, net		(1,213	)		(1,230	)		(2,706	)

Income (loss) from continuing operations before income tax expense (benefit)			12,932			(13,226	)		(79,655	)
Income tax expense (benefit)			5,144			(2,277	)		19,634

Net income (loss)			7,788			(10,949	)		(99,289	)
Income (loss) from discontinued operations			(2	)		-			-

Net income (loss) attributable to AIG Parent Company		$	7,786		$	(10,949	)	$	(99,289	)

*: Eliminated in consolidation.

See Accompanying Notes to Financial Statements — Parent Company Only.

Statement of Cash Flows — Parent Company Only

Years Ended December 31, (in millions)



Net cash provided by (used in) operating activities		(1,942	)	(1,393	)	284

Cash flows from investing activities:
	Sale of investments	3,201		1,466		743
	Maturities of investments	11		-		5
	Sales of divested businesses	278		857		-
	Funding to establish Maiden Lane III LLC	-		-		(5,000	)
	Purchase of investments	(27	)	(172	)	(4,016	)
	Change in short-term investments	(4,474	)	801		(254	)
	Contributions to subsidiaries – net	(2,574	)	(5,683	)	(12,153	)
	Mortgage and other loan receivables – originations and purchases	(28	)	(228	)	(184	)
	Payments received on mortgages and other loan receivables	785		515		269
	Loans to subsidiaries – net	5,703		(5,927	)	(76,358	)
	Other, net	(300	)	(254	)	2,610

Net cash provided by (used in) investing activities		2,575		(8,625	)	(94,338	)

Cash flows from financing activities:
	Federal Reserve Bank of New York credit facility borrowings	19,900		32,526		96,650
	Federal Reserve Bank of New York credit facility repayments	(19,110	)	(26,400	)	(59,850	)
	Issuance of other long-term debt	1,996		-		16,295
	Repayment of other long-term debt	(3,681	)	(2,931	)	(3,592	)
	Drawdown on the Department of the Treasury Commitment	2,199		5,344		-
	Loans from subsidiaries – net	(1,777	)	1,563		4,846
	Proceeds from issuance of AIG Series D preferred stock and common stock warrant	-		-		40,000
	Issuance of common stock	-		-		7,343
	Payments advanced to purchase shares	-		-		(1,000	)
	Cash dividends paid to shareholders	-		-		(1,628	)
	Other, net	(168	)	(130	)	(4,991	)

Net cash provided by (used in) financing activities		(641	)	9,972		94,073

Change in cash		(8	)	(46	)	19
Cash at beginning of year		57		103		84

Cash at end of year		49		57		103

Supplementary disclosure of cash flow information:

		Years Ended December 31,


(in millions)		2010		2009		2008

Intercompany non-cash financing and investing activities:
	Settlement of repurchase agreement with loan receivable	$	-	$	-	$	3,160
	Capital contributions in the form of bonds		-		2,698		3,160
	Capital contributions to subsidiaries through forgiveness of loans		2,510		287		11,350
	Other capital contributions – net		346		2,834		513
	Paydown of FRBNY Credit Facility by subsidiary		4,068		26		-
	Investment assets received through reduction of intercompany loan receivable		468		-		-
	Exchange of intercompany payable with loan payable		469		-		-
	Settlement of payable to subsidiary with return of capital from subsidiary		-		15,500		-
	Exchange of intercompany receivable with loan receivable		-		528		-
	Intercompany loan receivable offset by intercompany payable		1,364		-		-

See Accompanying Notes to Financial Statements — Parent Company Only.

Notes To Condensed Financial Information of Registrant

American International Group, Inc.'s (the Registrant) investments in consolidated subsidiaries are stated at cost plus equity in undistributed income of consolidated subsidiaries. The accompanying condensed financial statements of the Registrant should be read in conjunction with the consolidated financial statements and notes thereto of American International Group, Inc. and subsidiaries included in the Registrant's 2010 Annual Report on Form 10-K for the year ended December 31, 2010 (2010 Annual Report on Form 10-K) filed with the Securities and Exchange Commission on February 24, 2011.

The Registrant includes in its statement of income (loss) dividends from its subsidiaries and equity in undistributed income (loss) of consolidated subsidiaries, which represents the net income (loss) of each of its wholly-owned subsidiaries.

On December 1, 2009, the Registrant and the Federal Reserve Bank of New York (FRBNY) completed two transactions that reduced the outstanding balance and the maximum amount of credit available under the FRBNY Credit Facility by $25 billion. In connection with one of those transactions, the Registrant assigned $16 billion of its obligation under the FRBNY Credit Agreement to a subsidiary. The Registrant subsequently settled its obligation to the subsidiary with a $15.5 billion non-cash dividend from the subsidiary. The difference will be recognized over the remaining term of the FRBNY Credit Agreement as a reduction to interest expense. The remaining difference will be derecognized by AIG through earnings due to the repayment of all amounts owed under, and the termination of, the FRBNY Credit Facility.

Certain prior period amounts have been reclassified to conform to the current period presentation.

The five-year debt maturity schedule is incorporated by reference from Note 15 to Consolidated Financial Statements.

The Registrant files a consolidated federal income tax return with certain subsidiaries and acts as an agent for the consolidated tax group when making payments to the Internal Revenue Service. The Registrant and its subsidiaries have adopted, pursuant to a written agreement, a method of allocating consolidated Federal income taxes. Amounts allocated to the subsidiaries under the written agreement are included in Due to Affiliates in the accompanying Condensed Balance Sheets.

Income taxes in the accompanying Condensed Balance Sheets are comprised of the Registrant's current and deferred tax assets, the consolidated group's current income tax receivable, deferred taxes attributable to the potential sales of foreign and domestic businesses and a valuation allowance to reduce the consolidated deferred tax asset to an amount more likely than not to be realized. See Note 22 herein for additional information.

The consolidated U.S. deferred tax asset for net operating loss and tax credit carryforwards and valuation allowance are recorded by the Parent Company, which files the consolidated U.S. Federal income tax return, and are not allocated to its subsidiaries. As, and if, the consolidated net operating losses and other tax attribute carryforwards are utilized, the intercompany tax balance will be settled with the subsidiaries.

- Definition

This element can be used to encapsulate the entire condensed financial information disclosure, including the financial position, cash flows, and the results of operations of the registrant (parent company) as of the same dates or for the same periods for which audited consolidated financial statements are being presented. Alternatively, the details of this disclosure can be reported by the specific parent company taxonomy elements, indicating the appropriate date and period contexts in an instance document.

+ References+ Details

Consolidated Balance Sheet (Parenthetical - Equity) (USD $) In Millions, except Share data, unless otherwise specified	Dec. 31, 2010	Dec. 31, 2009
AIG shareholders' equity (see Notes 1 and 26):
Common stock, par value (in dollars per share)	$ 2.50	$ 2.50
Common stock, shares authorized	5,000,000,000	5,000,000,000
Common stock, shares issued	147,124,067	141,732,263
Treasury stock, shares of common stock	6,660,908	6,661,356
Noncontrolling interests, other, portion associated with businesses held for sale (in dollars)	$ 204	$ 2,234
Series E
AIG shareholders' equity (see Notes 1 and 26):
Preferred stock, par value (in dollars per share)	$ 5.00	$ 5.00
Preferred stock, shares issued	400,000	400,000
Series F
AIG shareholders' equity (see Notes 1 and 26):
Preferred stock, par value (in dollars per share)	$ 5.00	$ 5.00
Preferred stock, shares issued	300,000	300,000
Preferred stock, aggregate liquidation value (in dollars)	7,543.0	5,344.0
Series C
AIG shareholders' equity (see Notes 1 and 26):
Preferred stock, par value (in dollars per share)	$ 5.00	$ 5.00
Preferred stock, shares issued	100,000	100,000
Preferred stock, aggregate liquidation value (in dollars)	$ 0.5	$ 0.5

Consolidated Statement of Equity (Parenthetical) (USD $) In Millions, unless otherwise specified	12 Months Ended
	Dec. 31, 2010	Dec. 31, 2009	Dec. 31, 2008
Consolidated Statement of Equity
Net gains attributable to redeemable noncontrolling interests	$ 73	$ 280	$ (524)
Net income attributable to noncontrolling nonvoting, callable, junior and senior preferred interests held by the Federal Reserve Bank of New York	1,800	140
Other comprehensive income attributable to redeemable noncontrolling interests	$ 5

Consolidated Statement of Cash Flows (Parenthetical) (USD $) In Billions, unless otherwise specified	12 Months Ended
	Dec. 31, 2008
Consolidated Statement of Cash Flows
Change in securities lending invested collateral in investing activities	$ 48.5
Change in securities lending payable in financing activities	$ 72.8

Document and Entity Information (USD $)	12 Months Ended
Document and Entity Information (USD $)	Dec. 31, 2010	Jan. 31, 2011	Jun. 30, 2010
Document and Entity Information
Entity Registrant Name	AMERICAN INTERNATIONAL GROUP INC
Entity Central Index Key	0000005272
Document Type	10-K
Document Period End Date	Dec. 31, 2010
Amendment Flag	false
Current Fiscal Year End Date	--12-31
Entity Well-known Seasoned Issuer	Yes
Entity Voluntary Filers	No
Entity Current Reporting Status	Yes
Entity Filer Category	Large Accelerated Filer
Entity Public Float			$ 4,397,000,000
Entity Common Stock, Shares Outstanding		1,795,503,716
Document Fiscal Year Focus	2010
Document Fiscal Period Focus	FY

Consolidated Balance Sheet (Parenthetical - Assets and Liabilities) (USD $) In Millions, unless otherwise specified	Dec. 31, 2010	Dec. 31, 2009
Assets:
Bonds available for sale, amortized cost	$ 220,669	$ 364,491
Common and preferred stock available for sale, cost	2,571	6,464
Mortgage and other loans receivable, net of allowance, portion measured at fair value	143	119
Other invested assets, portion measured at fair value	21,356	18,888
Short-term investments, portion measured at fair value	22,307	23,975
Other assets, restricted cash	30,232	2,907
Other assets, prepaid commitment asset	3,628	7,099
Other assets, including restricted cash and prepaid commitment asset, portion measured at fair value	14	288
Liabilities:
Policyholder contract deposits, portion measured at fair value	445	5,214
Securities sold under agreements to repurchase, portion measured at fair value	2,119	3,221
Trust deposits and deposits due to banks and other depositors, portion measured at fair value	15	15
Federal Reserve Bank of New York Commercial Paper Funding Facility, portion measured at fair value		2,742
Other long-term debt, portion measured at fair value	12,143	13,195
Redeemable noncontrolling interests in partially owned consolidated subsidiaries, portion associated with businesses held for sale	$ 12	$ 211