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Consolidated Balance Sheet - USD ($) $ in Millions	12 Months Ended
Dec. 31, 2009	Dec. 31, 2008
Fixed maturity securities:
Bonds available for sale, at fair value (amortized cost: 2009 - $364,358; 2008 - $373,600)	$ 365,462	$ 363,042
Bond trading securities, at fair value	31,243	37,248
Securities lending invested collateral, at fair value (cost: 2009 - $320; 2008 - $3,905)	277	3,844
Equity securities:
Common and preferred stock available for sale, at fair value (cost: 2009 - $6,464; 2008 - $8,381)	9,522	8,808
Common and preferred stock trading, at fair value	8,318	6,674
Mortgage and other loans receivable, net of allowance (portion measured at fair value: 2009 - $119; 2008 - $131)	27,461	34,687
Finance receivables, net of allowance	20,327	30,949
Flight equipment primarily under operating leases, net of accumulated depreciation	44,091	43,395
Other invested assets (portion measured at fair value: 2009 - $18,888; 2008 - $24,857)	45,235	57,639
Securities purchased under agreements to resell, at fair value	2,154	3,960
Short-term investments (portion measured at fair value: 2009 - $23,975; 2008 - $19,316)	47,075	46,666
Total investments	601,165	636,912
Cash	4,400	8,642
Accrued investment income	5,152	5,999
Premiums and other receivables, net of allowance	16,549	21,088
Reinsurance assets, net of allowance	22,425	23,495
Current and deferred income taxes	4,108	11,734
Deferred policy acquisition costs	40,814	45,782
Real estate and other fixed assets, net of accumulated depreciation	4,142	5,566
Unrealized gain on swaps, options and forward transactions, at fair value	9,130	13,773
Goodwill	6,195	6,952
Other assets, including prepaid commitment asset of $7,099 in 2009 and $15,458 in 2008 (portion measured at fair value: 2009 - $288; 2008 - $369)	18,976	29,333
Separate account assets, at fair value	58,150	51,142
Assets of businesses held for sale	56,379
Total assets	847,585	860,418
Liabilities:
Liability for unpaid claims and claims adjustment expense	85,386	89,258
Unearned premiums	21,363	25,735
Future policy benefits for life and accident and health insurance contracts	116,001	142,334
Policyholder contract deposits (portion measured at fair value: 2009 - $5,214; 2008 - $5,458)	220,128	226,700
Other policyholder funds	13,252	13,240
Commissions, expenses and taxes payable	4,950	5,436
Insurance balances payable	4,393	3,668
Funds held by companies under reinsurance treaties	774	2,133
Securities sold under agreements to repurchase (portion measured at fair value: 2009 - $3,221; 2008 - $4,508)	3,505	5,262
Securities and spot commodities sold but not yet purchased, at fair value	1,030	2,693
Unrealized loss on swaps, options and forward transactions, at fair value	5,403	6,238
Trust deposits and deposits due to banks and other depositors (portion measured at fair value: 2009 - $15; 2008 - $30)	1,385	4,498
Other liabilities (portion measured at fair value: 2009 - $0; 2008 - $1,355)	22,503	23,273
Commercial paper and other short-term debt		613
Federal Reserve Bank of New York Commercial Paper Funding Facility (portion measured at fair value: 2009 - $2,742; 2008 - $6,802)	4,739	15,105
Federal Reserve Bank of New York credit facility	23,435	40,431
Other long-term debt (portion measured at fair value: 2009 - $13,195; 2008 - $16,595)	113,298	137,054
Securities lending payable	256	2,879
Separate account liabilities	58,150	51,142
Liabilites of businesses held for sale	48,599
Total liabilities	$ 748,550	$ 797,692
Commitments, contingencies and guarantees (see Note 15)
Redeemable noncontrolling interest in partially owned consolidated subsidiaries (including $211 associated with businesses held for sale in 2009)	$ 959	$ 1,921
AIG shareholders' equity:
Preferred stock (See Note 16 for ownership details):	69,784	40,000
Common stock, $2.50 par value; 5,000,000,000 shares authorized; shares issued: 2009 - 141,732,263; 2008 - 147,401,900	354	368
Treasury stock, at cost; 2009 - 6,661,356; 2008 - 12,918,446 shares of common stock	(874)	(8,450)
Additional paid-in capital	6,358	39,488
Accumulated deficit	(11,491)	(12,368)
Accumulated other comprehensive income (loss)	5,693	(6,328)
Total AIG shareholders' equity	69,824	52,710
Noncontrolling interests:
Noncontrolling nonvoting, callable, junior and senior preferred interests held by Federal Reserve Bank of New York	24,540
Other (including $2,234 associated with businesses held for sale in 2009)	3,712	8,095
Total noncontrolling interests	28,252	8,095
Total equity	98,076	60,805
Total liabilities and equity	847,585	860,418
Series E
AIG shareholders' equity:
Preferred stock (See Note 16 for ownership details):	41,605	0
Series F
AIG shareholders' equity:
Preferred stock (See Note 16 for ownership details):	5,179	0
Series C
AIG shareholders' equity:
Preferred stock (See Note 16 for ownership details):	$ 23,000	0
Series D
AIG shareholders' equity:
Preferred stock (See Note 16 for ownership details):		$ 40,000

Derivatives and Hedge Accounting

12 Months Ended

Dec. 31, 2009

Notes to Consolidated Financial Statements

11. 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 has also transacted in derivatives as a dealer.

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 at fair value 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. Bifurcated embedded derivatives are recorded with the host contract on the Consolidated Balance Sheet.

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

		Derivative Assets				Derivative Liabilities


At December 31, 2009 (in millions)		Derivative Assets				Derivative Liabilities
At December 31, 2009 (in millions)		Notional Amount^(a)		Fair Value^(b)		Notional Amount^(a)		Fair Value^(b)

Derivatives designated as hedging instruments:
	Interest rate contracts^(c)	$	10,612	$	2,129	$	3,884	$	375

Total derivatives designated as hedging instruments			10,612		2,129		3,884		375

Derivatives not designated as hedging instruments:
	Interest rate contracts^(c)		345,614		27,451		300,847		23,718
	Foreign exchange contracts		16,662		720		9,719		939
	Equity contracts		8,175		1,184		7,713		1,064
	Commodity contracts		759		883		381		373
	Credit contracts		3,706		1,210		190,275		5,815
	Other contracts		34,605		928		23,310		1,101

Total derivatives not designated as hedging instruments			409,521		32,376		532,245		33,010

Total derivatives		$	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.
(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:

At December 31, 2009 (in millions)		Derivative Assets^(a)			Derivative Liabilities^(b)



	AIGFP derivatives	$	31,951		$	30,930
	Non-AIGFP derivatives		2,554			2,455

Total derivatives, gross			34,505			33,385

	Counterparty netting^(c)		(19,054	)		(19,054	)
	Cash collateral^(d)		(6,317	)		(8,166	)

Total derivatives, net		$	9,134		$	6,165

(a): Included in non-AIGFP derivatives are $4 million of bifurcated embedded derivatives of which $3 million and $1 million, respectively, are recorded in Bonds available for sale, at fair value, and Policyholder contract deposits.
(b): Included in non-AIGFP derivatives are $762 million of bifurcated embedded derivatives, of which $760 million and $2 million are recorded in Policyholder contract deposits and Common and preferred stock.
(c): Represents netting of derivative exposures covered by a qualifying master netting agreement.
(d): Represents cash collateral posted and received.

Hedge Accounting

AIG designated certain derivatives entered into by AIGFP with third parties as either fair value or cash flow hedges of certain debt issued by AIG Parent (including the Matched Investment Program (MIP)), International Lease Finance Corporation (ILFC) and AGF. 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, the matched terms method is utilized to assess hedge effectiveness.

During the twelve months ended December 31, 2009 AIG de-designated certain derivatives to which it was applying hedge accounting and recorded a reduction of other revenue of approximately $10 million related to the amortization of the basis adjustment. There were no instances of the discontinuation of hedge accounting during 2008.

Beginning in 2009, AIG began using 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 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 (1) the notional amount of the hedging debt instrument matches the designated portion of the net investment and (2) the hedging debt instrument is denominated in the same curre ncy as the functional currency of the hedged net investment, no ineffectiveness is recorded in earnings. For the year ended December 31, 2009, AIG recognized losses of $81 million 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):

Year Ended December 31, (in millions)		2009



Interest rate contracts^(a)(b)(c):
	Gain (Loss) Recognized in Earnings on Derivative	$	(240	)
	Gain (Loss) Recognized in Earnings on Hedged Item		343
	Gain (Loss) Recognized in Earnings for Ineffective Portion and Amount Excluded from Effectiveness Testing		87

(a): Gains and losses recognized in earnings on derivatives and hedged items are recorded in Interest expense. 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 $95 million for 2009 related to the ineffective portion and $(8) million for 2009 for amounts excluded from effectiveness testing.
(c): During 2008, AIG recognized a loss related to the ineffective portion of these hedges of $61 million, and a gain of $17 million related to amount excluded from effectiveness testing.

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

Year Ended December 31, (in millions)		2009



Interest rate contracts^(a)(b):
	Gain (Loss) Recognized in OCI on Derivatives and Hedge Items	$	91
	Gain (Loss) Reclassified from Accumulated OCI into Earnings^(c)		(4	)
	Gain (Loss) Recognized in Earnings on Derivatives for Ineffective Portion		5

(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): During 2008, AIG recognized a loss related to the ineffective portion these hedges of $13 million. In addition, all components of the derivative's gains and losses were included in the assessment of hedge effectiveness.
(c): The effective portion of the change in fair value of a derivative qualifying as a cash flow hedge is recorded in Accumulated other comprehensive loss until earnings are affected by the variability of cash flows in the hedged item. At December 31, 2009, $74 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):

Year Ended December 31, 2009 (in millions)	Gains (Losses) Recognized in Earnings^(a)



Interest rate contracts^(b)	$	907
Foreign exchange contracts		(681	)
Equity contracts		(863	)
Commodity contracts		(703	)
Credit contracts		2,093
Other contracts		1,727

Total	$	2,480

(a): Represents gains of $1.3 billion for 2009 recorded in Net realized capital gains, and gains of $1.2 billion for 2009, recorded in Other income.
(b): Includes cross currency swaps.

AIGFP Derivatives

AIGFP enters into derivative transactions to mitigate 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.

AIGFP's 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 internal 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 $566 million of securities to economically hedge its credit risk.

The timing and the amount of cash flows relating to AIGFP's 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.

AIGFP 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 AIGFP's 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 res pect 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 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 AIGFP 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)		2009^(a)(b)		2008^(a)		2009^(b)(c)(d)			2008^(c)(d)		2009^(d)			2008^(d)

Regulatory Capital:
	Corporate loans^(e)(f)	$	55,010	$	125,628	$	-		$	-	$	-		$	-
	Prime residential mortgages^(g)		93,276		107,246		(137	)		-		137			-
	Other^(e)(f)		1,760		1,575		21			379		35			(379	)

	Total		150,046		234,449		(116	)		379		172			(379	)

Arbitrage:
	Multi-sector CDOs^(h)(i)		7,926		12,556		4,418			5,906		(669	)		(25,700	)
	Corporate debt/CLOs^(j)		22,076		50,495		309			2,554		1,863			(2,328	)

	Total		30,002		63,051		4,727			8,460		1,194			(28,028	)

Mezzanine tranches^(f)(k)			3,478		4,701		143			195		52			(195	)

Total		$	183,526	$	302,201	$	4,754		$	9,034	$	1,418		$	(28,602	)

(a): Net notional amounts presented are net of all structural subordination below the covered tranches.
(b): During 2009, AIGFP terminated certain super senior CDS transactions with its counterparties with a net notional amount of $14.0 billion, comprised of $1.5 billion in Regulatory Capital — Other, $3.0 billion in Multi-sector CDO and $9.5 billion in Corporate debt/CLOs. These transactions were terminated at approximately their fair value at the time of the termination. As a result, a $2.7 billion loss, which was previously included in the fair value derivative liability as an unrealized market valuation loss, was realized. During 2009, AIGFP also extinguished its obligation with respect to a Multi-sector CDO by purchasing the protected CDO security for $496 million, its principal amount outstanding related to this obligation. Upon purchase, the CDO security was included in the available for sale portfolio at fair value.
(c): Fair value amounts are shown before the effects of counterparty netting adjustments and offsetting cash collateral.
(d): Includes credit valuation adjustment gains of $52 million and $185 million in 2009 and 2008, respectively, representing the effect of changes in AIG's credit spreads on the valuation of the derivatives liabilities.
(e): During 2009, AIGFP reclassified one regulatory capital CDS transaction from Regulatory Capital — Corporate loans to Regulatory Capital — Other, given the understanding that the counterparty no longer receives regulatory capital benefits.
(f): During 2009, AIGFP reclassified two mezzanine trades having net notional amounts of $462 million and $240 million, respectively, into Regulatory Capital — Corporate loans and Regulatory Capital — Other, respectively, after determining that the trades were not stand-alone but rather part of the related regulatory capital trades. The effect on unrealized market valuation gain (loss) was not significant.
(g): During the fourth quarter of 2009, one counterparty notified AIG that it would not terminate early two of its prime residential mortgage transactions with a combined net notional amount of $32.8 billion that were expected to be terminated in the first quarter of 2010. With respect to these transactions, the counterparty no longer has any rights to terminate the transactions prior to maturity and is required to pay AIG fees on the original notional amounts reduced only by realized losses through the final contractual maturity. Since the two transactions have weighted average lives that are considerably less than their final contractual maturities, there is a value to AIGFP representing counterparty contractual fees to be received beyond the date at which the net notional amounts have fully amortized through the final contractual maturity date. As a result, the fair value of these two transactions as of December p;nbsp;31, 2009 is a derivative asset of $137nbsp;million./i/fontfont size="1" br / br //font/dd dt style="MARGIN-BOTTOM: -9pt; FONT-FAMILY: times"font size="1"i(h)/i/font/dt dd style="FONT-FAMILY: times; TEXT-ALIGN: justify"font size="1"iIncludes $6.3nbsp;billion and $9.7nbsp;billion in net notional amount of credit default swaps written with cash settlement provisions at Decembernbsp;31, 2009 and 2008, respectively./i/fontfont size="1" br / br //font/dd dt style="MARGIN-BOTTOM: -9pt; FONT-FAMILY: times"font size="1"i(i)/i/font/dt dd style="FONT-FAMILY: times; TEXT-ALIGN: justify"font size="1"iDuring the fourth quarter of 2008, AIGFP terminated the majority of the CDS transactions written on multi-sector CDOs in connection with the ML III transaction./i/fontfont size="1" br / br //font/dd dt style="MARGIN-BOTTOM: -9pt; FONT-FAMILY: times"font size="1"i(j)/i/font/dt dd style="FONT-FAMILY: times; TEXT-ALIGN: justify"font size="1"iIncludes $1.4nbsp;billion and $1.5nbsp;billion in net notional amount of credit default swaps written on the super senior tranches of CLOs as of Decembernbsp;31, 2009 and 2008, respectively./i/fontfont size="1" br / br //font/dd dt style="MARGIN-BOTTOM: -9pt; FONT-FAMILY: times"font size="1"i(k)/i/font/dt dd style="FONT-FAMILY: times; TEXT-ALIGN: justify"font size="1"iNet of offsetting purchased CDS of $1.5nbsp;billion and $2.0nbsp;billion in net notional amount at Decembernbsp;31, 2009 and 2008, respectively./i/font/dd/dl/div p style="FONT-FAMILY: times; TEXT-ALIGN: justify"font size="2"nbsp;nbsp;nbsp;nbsp;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. /font/p p style="FONT-FAMILY: times; TEXT-ALIGN: justify"font size="2"nbsp;nbsp;nbsp;nbsp;The expected weighted average maturity of AIGFP's super senior credit derivative portfolios as of Decembernbsp;31, 2009 was 0.6nbsp;years for the regulatory capital corporate loan portfolio, 1.8nbsp;years for the regulatory capital prime residential mortgage portfolio, 5.8nbsp;years for the regulatory capital other portfolio, 5.5nbsp;years for the multi-sector CDO arbitrage portfolio and 4.2nbsp;years for the corporate debt/CLO portfolio. /font/p p style="FONT-FAMILY: times; TEXT-ALIGN: justify"font size="2"iRegulatory Capital Portfolio /i/font/p p style="FONT-FAMILY: times; TEXT-ALIGN: justify"font size="2"nbsp;nbsp;nbsp;nbsp;A total of $150.0nbsp;billion in net notional amount of AIGFP's super senior credit default swap portfolio as of Decembernbsp;31, 2009 represented 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 the implementation of Basel II. During 2009, $62.9nbsp;billion in net notional amount was terminated or matured at no cost to AIGFP. Through Februarynbsp;17, 2010, AIGFP had also receive d a formal termination notice for an additional $25.6nbsp;billion in net notional amount with an effective termination date in 2010. /font/p p style="FONT-FAMILY: times; TEXT-ALIGN: justify"font size="2"nbsp;nbsp;nbsp;nbsp;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. /font/p p style="FONT-FAMILY: times; TEXT-ALIGN: justify"font size="2"nbsp;nbsp;nbsp;nbsp;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. /font/p p style="FONT-FAMILY: times; TEXT-ALIGN: justify"font size="2"nbsp;nbsp;nbsp;nbsp;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 Decembernbsp;31, 2009 was 13.23nbsp;percent and 22.76nbsp;percent, respectively. The highest level of realized losses to date in any single residential mortgage and corporate loan pool was 2.40nbsp;percent and 0.52nbsp;percent, respectively. The corporate loan transactions are each comprised 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 a re prepaid. These replenishment rights generally mature 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. /font/p p style="FONT-FAMILY: times; TEXT-ALIGN: justify"font size="2"nbsp;nbsp;nbsp;nbsp;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. AIGFP continues to reassess the expected maturity of this portfolio. As of Decembernbsp;31, 2009, AIGFP estimated that the weighted average expected maturity of the portfolio was 1.35nbsp;years. 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 the terms of Basel I that existed through the end of 2007 and which is in the process of being replaced by Basel II. It was expected that financial institution counterparties would have transitioned from Basel I to Basel II by the end of the two-year adoption period on Decembernbsp;31, 2009, after which they would have received little or no additional regulatory benefit from these CDS transactions, except in a small number of specific instances. However, the Basel Committee recently announced that it has agreed to keep in place the Basel I capital floors beyond the end of 2009, although it remains to be seen how this extension will be implemented by the various European Central Banking districts. 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. /font/p p style="FONT-FAMILY: times; TEXT-ALIGN: justify"font size="2"iArbitrage Portfolio /i/font/p p style="FONT-FAMILY: times; TEXT-ALIGN: justify"font size="2"nbsp;nbsp;nbsp;nbsp;A total of $30.0nbsp;billion and $63.1nbsp;billion in net notional amount of AIGFP's super senior credit default swaps as of Decembernbsp;31, 2009 and 2008, respectively, are arbitrage-motivated transactions written on multi-sector CDOs or designated pools of investment grade senior unsecured corporate debt or CLOs. /font/p p style="FONT-FAMILY: times; TEXT-ALIGN: justify"font size="2"nbsp;nbsp;nbsp;nbsp;The outstanding multi-sector CDO CDS portfolio at Decembernbsp;31, 2009 was written on CDO transactions that generally held a concentration of RMBS, CMBS and inner CDO securities. At Decembernbsp;31, 2009, approximately $3.8nbsp;billion net notional amount (fair value liability of $2.4nbsp;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. /font/p p style="FONT-FAMILY: times; TEXT-ALIGN: justify"font size="2"nbsp;nbsp;nbsp;nbsp;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. 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. /font/p p style="FONT-FAMILY: times; TEXT-ALIGN: justify"font size="2"nbsp;nbsp;nbsp;nbsp;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. /font/p p style="FONT-FAMILY: times; TEXT-ALIGN: justify"font size="2"nbsp;nbsp;nbsp;nbsp;At Januarynbsp;1, 2008, 2a-7 Puts with a net notional amount of $6.5nbsp;billion were outstanding and included as part of the multi-sector CDO portfolio. During 2008, AIGFP issued new 2a-7 Puts with a net notional amount of $5.4nbsp;billion on the super senior security issued by a CDO of AAA-rated CMBS pursuant to a facility that was entered into in 2005. At Decembernbsp;31, 2009 and Decembernbsp;31, 2008, there were $1.6nbsp;billion and $1.7nbsp;billion net notional amount of 2a-7 Puts issued by AIGFP outstanding. AIGFP is not a party to any commitments to issue any additional 2a-7 Puts. /font/p p style="FONT-FAMILY: times; TEXT-ALIGN: justify"font size="2"nbsp;nbsp;nbsp;nbsp;During 2008, AIGFP repurchased multi-sector CDO securities with a principal amount of $9.4nbsp;billion in connection with these obligations, of which $8.0nbsp;billion was funded using existing liquidity arrangements. In connection with the ML III transaction, ML III purchased $8.5nbsp;billion of multi-sector CDOs underlying 2a-7 Puts written by AIGFP. A portion of the net payment made by ML III to the counterparties for the purchase of the multi-sector CDOs facilitated the resolution of liquidity arrangements, which had funded certain of the multi-sector CDOs in connection with the 2a-7 Puts. /font/p p style="FONT-FAMILY: times; TEXT-ALIGN: justify"font size="2"nbsp;nbsp;nbsp;nbsp;Among the multi-sector CDOs purchased by ML III are certain CDO securities with a net notional amount of $1.7nbsp;billion for which the related 2a-7 Puts to AIGFP remained outstanding as of Decembernbsp;31, 2008, of which $1.6nbsp;billion remained outstanding as of Decembernbsp;31, 2009. In December 2008, ML III and AIGFP entered into an agreement with respect to the $252nbsp;million net notional amount of multi-sector CDOs held by ML III with 2a-7 Puts that may be exercised in 2009. Under that agreement, ML III agreed not to sell the multi-sector CDOs in 2009 and either not to exercise its put option on such multi-sector CDOs or simultaneously to exercise its put option with a par purchase of the multi-sector CDO securities. In exchange, AIGFP agreed to pay to ML III the consideration that it received for providing the put protection. /font/p p style="FONT-FAMILY: times; TEXT-ALIGN: justify"font size="2"nbsp;nbsp;nbsp;nbsp;In January 2010, AIGFP and ML III amended and restated such agreement in respect of the outstanding 2a-7 Puts as of the date of the agreement. Pursuant to this agreement, ML III has agreed not to exercise its put option on multi-sector CDOs or simultaneously to exercise its put option with a corresponding par purchase of the multi-sector CDOs with respect to the $867nbsp;million notional amount of multi-sector CDOs held by ML III with 2a-7 Puts that may be exercised on or prior to Decembernbsp;31, 2010 and $543nbsp;million notional amount of multi-sector CDOs held by ML III with 2a-7 Puts that may be exercised on or prior to Aprilnbsp;30, 2011. In addition, there are $186nbsp;million notional amount of multi-sector CDOs held by MLIII with 2a-7 Puts that may not be exercised on or prior to Decembernbsp;31, 2010, for which MLIII has only agreed not to exercise its put option on multi-sector CDOs or simultaneously to exercise its put option with a corresponding par purchase of the multi-sector CDOs through Decembernbsp;31, 2010. In exchange, AIGFP has agreed to pay to ML III the consideration that it receives for providing the put protection. Additionally, ML III has agreed that if it sells any such multi-sector CDO with a 2a-7 Put to a third-party purchaser , that such sale will be conditioned upon, among other things, such third-party purchaser agreeing that until the legal final maturity date of such multi-sector CDO it will not exercise its put option on such multi-sector CDO or it will make a corresponding par purchase of such multi-sector CDO simultaneously with the exercise of its put option. In exchange for such commitment from the third-party purchaser, AIGFP will agree to pay to such third-party purchaser the consideration that it receives for providing the put protection. /font/p p style="FONT-FAMILY: times; TEXT-ALIGN: justify"font size="2"nbsp;nbsp;nbsp;nbsp;ML III has agreed to assist AIGFP in efforts to mitigate or eliminate AIGFP's obligations under such 2a-7 Puts relating to multi-sector CDOs held by ML III prior to the expiration of ML III's obligations with respect to such multi-sector CDOs. There can be no assurances that such efforts will be successful. To the extent that such efforts are not successful with respect to a multi-sector CDO held by ML III with a 2a-7 Put and ML III has not sold such multi-sector CDO to a third-party who has committed not to exercise its put option on such multi-sector CDO or to make a corresponding par purchase of such multi-sector CDO simultaneously with the exercise of its put option then, upon the expiration of ML III's aforementioned obligations with respect to such multi-sector CDO, AIGFP will be obligated under the related 2a-7 Put to purchase such multi-sector CDO at par in the circumstances and subje ct to the limited conditions contained in the applicable agreements. /font/p p style="FONT-FAMILY: times; TEXT-ALIGN: justify"font size="2"nbsp;nbsp;nbsp;nbsp;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 of $1.4nbsp;billion written on the senior part of the capital structure of CLOs, which require physical settlement. /font/p p style="FONT-FAMILY: times; TEXT-ALIGN: justify"font size="2"nbsp;nbsp;nbsp;nbsp;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 $10.4nbsp;billion at Decembernbsp;31, 2009 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. /font/p p style="FONT-FAMILY: times; TEXT-ALIGN: justify"font size="2"nbsp;nbsp;nbsp;nbsp;Due to 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. /font/p p style="FONT-FAMILY: times; TEXT-ALIGN: justify"font size="2"iCollateral/i/font/p p style="FONT-FAMILY: times; TEXT-ALIGN: justify"font size="2"nbsp;nbsp;nbsp;nbsp;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,nbsp;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. /font/p p style="FONT-FAMILY: times; TEXT-ALIGN: justify"font size="2"nbsp;nbsp;nbsp;nbsp;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 severe market disruption, lack of observable data and the uncertainty of future market price movements, AIGFP is unable to reasonably estimate the amounts of collateral that it may be required to post in the future. /font/p p style="FONT-FAMILY: times; TEXT-ALIGN: justify"font size="2"nbsp;nbsp;nbsp;nbsp;At Decembernbsp;31, 2009 and Decembernbsp;31, 2008, the amount of collateral postings with respect to AIGFP's super senior credit default swap portfolio (prior to offsets for other transactions) was $4.6nbsp;billion and $8.8nbsp;billion, respectively. /font/p p style="FONT-FAMILY: times; TEXT-ALIGN: justify"font size="2"iAIGFP Written Single Name Credit Default Swaps /i/font/p p style="FONT-FAMILY: times; TEXT-ALIGN: justify"font size="2"nbsp;nbsp;nbsp;nbsp;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 they wrote and ones they purchased. At Decembernbsp;31, 2009, the net notional amount of these written CDS contracts was $2.1nbsp;billion. AIGFP has hedged these exposures by purchasing offsetting CDS contracts of $526nbsp;million in net notional amount. The net unhedged position of approximately $1.6nbsp;billion represents the maximum exposure to loss on these CDS contracts. The average maturity of the written CDS contracts is 6.5nbsp;years. At Decembernbsp;31, 2009, the fair value of derivative liability (which represents the ca rrying value) of the portfolio of CDS was $291nbsp;million. /font/p p style="FONT-FAMILY: times; TEXT-ALIGN: justify"font size="2"nbsp;nbsp;nbsp;nbsp;Upon a triggering event (e.g.,nbsp;a default) with respect to the underlying credit, AIGFP would normally have the option to settle the position through an auction process (cash settle) or pay the notional amount of the contract to the counterparty in exchange for a bond issued by the underlying credit obligor (physical settle). /font/p p style="FONT-FAMILY: times; TEXT-ALIGN: justify"font size="2"nbsp;nbsp;nbsp;nbsp;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 Decembernbsp;31, 2009, AIGFP had posted $354nbsp;million of collateral under these contracts. /font/p p style="FONT-FAMILY: times; TEXT-ALIGN: justify"font size="2"biNon-AIGFP Derivatives /i/b/font/p p style="FONT-FAMILY: times; TEXT-ALIGN: justify"font size="2"nbsp;nbsp;nbsp;nbsp;AIG and its subsidiaries (other than AIGFP) 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. /font/p p style="FONT-FAMILY: times; TEXT-ALIGN: justify"font size="2"nbsp;nbsp;nbsp;nbsp;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./font/p p style="FONT-FAMILY: times; TEXT-ALIGN: justify"font size="2"iMatched Investment Program Written Credit Default Swaps /i/font/p p style="FONT-FAMILY: times; TEXT-ALIGN: justify"font size="2"nbsp;nbsp;nbsp;nbsp;The MIP 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./font/p p style="FONT-FAMILY: times; TEXT-ALIGN: justify"font size="2"nbsp;nbsp;nbsp;nbsp;The MIP invested in written CDS contracts through an affiliate which then transacts directly with unaffiliated third parties under ISDA agreements. As of Decembernbsp;31, 2009, the notional amount of written CDS contracts was $3.97nbsp;billion with an average credit rating of BBB+. The average maturity of the written CDS contracts is 2.4nbsp;years as of Decembernbsp;31, 2009. As of Decembernbsp;31, 2009, the fair value of the derivative liability (which represents the carrying value) of the MIP's written CDS was $71.5nbsp;million. /font/p p style="FONT-FAMILY: times; TEXT-ALIGN: justify"font size="2"nbsp;nbsp;nbsp;nbsp;The majority of the ISDA agreements include CSA provisions, which provide for collateral postings at various ratings and threshold levels. At Decembernbsp;31, 2009, $26.1nbsp;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, due to the average investment grade rating and expected default recovery rates, actual losses are expected to be less. /font/p p style="FONT-FAMILY: times; TEXT-ALIGN: justify"font size="2"nbsp;nbsp;nbsp;nbsp;Upon a triggering event (e.g.,nbsp;a default) with respect to the underlying credit, the MIP 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 (physical settlement). /font/p p style="FONT-FAMILY: times; TEXT-ALIGN: justify"font size="2"biCredit Risk-Related Contingent Features /i/b/font/p p style="FONT-FAMILY: times; TEXT-ALIGN: justify"font size="2"nbsp;nbsp;nbsp;nbsp;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. These provisions are predominantly limited to additional collateral posting requirements contingent upon downgrade of AIG's credit rating. 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. /font/p p style="FONT-FAMILY: times; TEXT-ALIGN: justify"font size="2"nbsp;nbsp;nbsp;nbsp;The aggregate fair value of AIG's derivative instruments, including those of AIGFP, that contain credit risk-related contingent features that are in a net liability position at Decembernbsp;31, 2009 was approximately $9.8nbsp;billion. The aggregate fair value of assets posted as collateral under these contracts at Decembernbsp;31, 2009, was $9.9nbsp;billion. See Notenbsp;5 herein. /font/p p style="FONT-FAMILY: times; TEXT-ALIGN: justify"font size="2"nbsp;nbsp;nbsp;nbsp;It is estimated that as of the close of business on Decembernbsp;31, 2009, 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 Standardnbsp;amp; Poor's Financial Servicesnbsp;LLC, a subsidiary of The McGraw-Hill Companies,nbsp;Inc. (Samp;P), would permit counterparties to make additional collateral calls and permit the counterparties to elect early termination of contracts, resulting in up to approximately $1.8nbsp;billion of corresponding collateral postings and termination payments; a two-notch downgrade to Baa2 by Moody's and BBB by Samp;P would result in approximately $1.2nbsp;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 Samp;P would result in approximately $0.6nbsp;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 Decembernbsp;31, 2009. 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. 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. /font/p/td/tr/table

Consolidated Balance Sheet (parenthetical - equity) - USD ($)	Dec. 31, 2009	Dec. 31, 2008
AIG shareholders' equity:
Common stock, par value (in dollars per share)	$ 2.50	$ 2.50
Common stock, authorized (in shares)	5,000,000,000	5,000,000,000
Common stock, issued (in shares)	141,732,263	147,401,900
Treasury stock, shares of common stock (in shares)	6,661,356	12,918,446
Noncontrolling interests, Other, portion associated with businesses held for sale in 2009	$ 2,234,000,000
Series E
AIG shareholders' equity:
Preferred stock, par value (in dollars per share)	$ 5.00
Preferred stock, issued (in shares)	400,000
Series F
AIG shareholders' equity:
Preferred stock, par value (in dollars per share)	$ 5.00
Preferred stock, issued (in shares)	300,000
Preferred stock, aggregate liquidation value (in dollars)	$ 5,344,416,000
Series C
AIG shareholders' equity:
Preferred stock, par value (in dollars per share)	$ 5.00
Preferred stock, issued (in shares)	100,000
Preferred stock, aggregate liquidation value (in dollars)	$ 500,000
Series D
AIG shareholders' equity:
Preferred stock, par value (in dollars per share)		$ 5.00
Preferred stock, issued (in shares)		4,000,000

Consolidated Statement of Income (Loss) - USD ($) $ in Millions	12 Months Ended
	Dec. 31, 2009	Dec. 31, 2008	Dec. 31, 2007
Revenues:
Premiums and other considerations	$ 64,702	$ 78,564	$ 74,753
Net investment income	25,239	11,433	30,051
Net realized capital losses:
Total other-than-temporary impairments on available for sale securities	(7,008)	(48,146)	(3,692)
Portion of other-than-temporary impairments on available for sale fixed maturity securities recognized in Accumulated other comprehensive loss	242
Net other-than-temporary impairments on available for sale securities recognized in net income (loss)	(6,766)	(48,146)	(3,692)
Other realized capital gains (losses)	(88)	(4,559)	191
Total net realized capital losses	(6,854)	(52,705)	(3,501)
Unrealized market valuation gains (losses) on AIGFP super senior credit default swap portfolio	1,418	(28,602)	(11,472)
Other income	11,499	(1,794)	13,801
Total revenues	96,004	6,896	103,632
Benefits, claims and expenses:
Policyholder benefits and claims incurred	61,436	58,839	62,452
Policy acquisition and other insurance expenses	20,674	26,284	19,819
Interest expense	15,369	17,007	4,751
Restructuring expenses and related asset impairment and other expenses	1,386	804
Net (gains) losses on sale of divested businesses	1,271
Other expenses	9,516	10,490	8,476
Total benefits, claims and expenses	109,652	113,424	95,498
Income (loss) from continuing operations before income tax expense (benefit)	(13,648)	(106,528)	8,134
Income tax expense (benefit):
Current	1,781	1,703	3,180
Deferred	(3,659)	(10,597)	(1,913)
Total income tax expense (benefit)	(1,878)	(8,894)	1,267
Income (loss) from continuing operations	(11,770)	(97,634)	6,867
Income (loss) from discontinued operations, net of income tax expense (benefit) (See Note 2)	(543)	(2,753)	621
Net income (loss)	(12,313)	(100,387)	7,488
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	140
Other	(1,527)	(944)	1,259
Total income (loss) from continuing operations attributable to noncontrolling interests	(1,387)	(944)	1,259
Income (loss) from discontinued operations attributable to noncontrolling interest	23	(154)	29
Total net income (loss) attributable to noncontrolling interests	(1,364)	(1,098)	1,288
Net income (loss) attributable to AIG	(10,949)	(99,289)	6,200
Net income (loss) attributable to AIG common shareholders	$ (12,244)	$ (99,689)	$ 6,200
Basic:
Income (loss) from continuing operations (in dollars per share)	$ (86.30)	$ (737.12)	$ 43.40
Income (loss) from discontinued operations (in dollars per share)	(4.18)	(19.73)	4.58
Diluted:
Income (loss) from continuing operations (in dollars per share)	(86.30)	(737.12)	43.17
Income (loss) from discontinued operations (in dollars per share)	$ (4.18)	(19.73)	4.56
Dividends declared per common share (in dollars per share)		$ 8.40	$ 15.40
Weighted average shares outstanding:
Basic (in shares)	135,324,896	131,714,245	129,226,796
Diluted (in shares)	135,324,896	131,714,245	129,901,035

Consolidated Statement of Comprehensive Income (Loss) - USD ($) $ in Millions	12 Months Ended
	Dec. 31, 2009	Dec. 31, 2008	Dec. 31, 2007
Statement - Line items
Net income (loss)	$ (12,313)	$ (100,387)	$ 7,488
Other comprehensive income (loss):
Cumulative effect of change in accounting principle		(162)
Income tax benefit on above change in accounting principle		57
Unrealized appreciation (depreciation) of fixed maturity investments on which other-than-temporary credit impairments were taken	2,048
Income tax benefit (expense) on above changes	(724)
Unrealized appreciation (depreciation) of all other investments - net of reclassification adjustments	27,891	(13,966)	(8,115)
Income tax benefit (expense) on above changes	(9,802)	4,948	2,338
Foreign currency translation adjustments	2,932	(1,398)	1,420
Income tax benefit (expense) on above changes	(1,005)	356	(140)
Net derivative gains (losses) arising from cash flow hedging activities-net of reclassification adjustments	95	(156)	(133)
Income tax benefit (expense) on above changes	(32)	52	73
Change in retirement plan liabilities adjustment	370	(1,325)	173
Income tax benefit (expense) on above changes	(16)	352	(57)
Other comprehensive income (loss)	21,757	(11,242)	(4,441)
Comprehensive income (loss)	9,444	(111,629)	3,047
Comprehensive income (loss) attributable to noncontrolling interests	(1,116)	(1,369)	1,314
Comprehensive income (loss) attributable to noncontrolling nonvoting, callable, junior and senior preferred interests held by Federal Reserve Bank of New York	140
Comprehensive income (loss) attributable to AIG	$ 10,420	$ (110,260)	$ 1,733

Consolidated Statement of Cash Flows - USD ($) $ in Millions	12 Months Ended
	Dec. 31, 2009	Dec. 31, 2008	Dec. 31, 2007
Summary:
Net cash provided by (used in) operating activities	$ 18,584	$ (122)	$ 32,792
Net cash provided by (used in) investing activities	5,778	47,176	(67,241)
Net cash provided by (used in) financing activities	(28,997)	(40,734)	35,093
Effect of exchange rate changes on cash	533	38	50
Change in cash	(4,102)	6,358	694
Cash at beginning of period	8,642	2,284	1,590
Reclassification to assets held for sale	(140)
Cash at end of period	4,400	8,642	2,284
Cash flows from operating activities:
Net income (loss)	(12,313)	(100,387)	7,488
(Income) loss from discontinued operations	543	2,753	(621)
Noncash revenues, expenses, gains and losses included in income (loss):
Net (gains) losses on sales of securities available for sale and other assets	(1,489)	5,230	(1,217)
Net (gains) losses on sale of divested businesses	1,271
Unrealized (gains) losses in earnings - net	(4,823)	8,634	12,758
Equity in (income) loss from equity method investments, net of dividends or distributions	1,172	7,683	(4,745)
Depreciation and other amortization	14,631	15,445	15,245
Provision for mortgage, other loans and finance receivables	2,387	1,442	643
Impairments of assets	10,471	53,340	4,596
Amortization of costs and accrued interest and fees related to FRBNY Credit Facility	10,264	11,218
Changes in operating assets and liabilities:
General and life insurance reserves	6,329	9,113	13,015
Premiums and other receivables and payables - net	2,460	(6,491)	2,620
Reinsurance assets and funds held under reinsurance treaties	(280)	(741)	783
Capitalization of deferred policy acquisition costs	(12,149)	(14,201)	(15,127)
Other policyholder funds	734	717	1,353
Current and deferred income taxes - net	(2,119)	(9,613)	(3,814)
Other assets and liabilities - net	(1,460)	(2,714)	(61)
Trading securities	993	2,816	(2,554)
Securities sold under agreements to repurchase, net of securities purchased under agreements to resell	(18)	13,951	(2,050)
Securities and spot commodities sold but not yet purchased	(1,663)	(2,027)	633
Finance receivables and other loans held for sale - originations and purchases	(70)	(349)	(5,145)
Sales of finance receivables and other loans - held for sale	291	558	5,671
Other, net	149	583	(214)
Total adjustments	27,081	94,594	22,390
Net cash provided by (used in) operating activities - continuing operations	15,311	(3,040)	29,257
Net cash provided by (used in) operating activities - discontinued operations	3,273	2,918	3,535
Net cash provided by (used in) operating activities	18,584	(122)	32,792
Cash flows from investing activities:
Sales of available for sale investments	48,968	110,427	92,420
Maturities of fixed maturity securities available for sale and hybrid investments	20,934	18,502	44,491
Sales of trading securities	15,697	28,786
Sales or distributions of other invested assets (including flight equipment)	12,459	18,250	14,412
Sales of divested businesses, net	5,278
Principal payments received on mortgage and other loans receivable	5,691	6,014	8,211
Principal payments received on and sales of finance receivables held for investment	11,916	12,282	12,553
Funding to establish Maiden Lane III LLC		(5,000)
Purchases of available for sale investments	(81,616)	(118,813)	(142,197)
Purchases of trading securities	(7,298)	(25,498)
Purchases of other invested assets (including flight equipment)	(11,597)	(22,791)	(30,294)
Mortgage and other loans receivable issued	(3,750)	(5,154)	(11,348)
Finance receivables held for investment - originations and purchases	(5,571)	(13,523)	(15,266)
Change in securities lending invested collateral	3,838	51,565	(12,303)
Net additions to real estate, fixed assets, and other assets	(504)	(1,258)	(850)
Net change in short-term investments	(6,167)	(407)	(23,112)
Net change in non-AIGFP derivative assets and liabilities	(150)	(1,438)	217
Other, net	212	(270)	280
Net cash provided by (used in) investing activities - continuing operations	8,340	51,674	(62,786)
Net cash provided by (used in) investing activities - discontinued operations	(2,562)	(4,498)	(4,455)
Net cash provided by (used in) investing activities	5,778	47,176	(67,241)
Cash flows from financing activities:
Policyholder contract deposits	34,324	47,004	63,848
Policyholder contract withdrawals	(42,464)	(69,265)	(58,612)
Change in other deposits	652	(557)	(355)
Change in commercial paper and other short-term debt	(613)	(12,525)	(338)
Change in Federal Reserve Bank of New York Commercial Paper Funding Facility borrowings	(10,647)	15,061
Federal Reserve Bank of New York credit facility borrowings	32,526	96,650
Federal Reserve Bank of New York credit facility repayments	(26,426)	(59,850)
Issuance of other long-term debt	4,544	113,501	103,210
Repayments on other long-term debt	(23,912)	(138,951)	(79,738)
Change in securities lending payable	(2,670)	(76,916)	11,757
Proceeds from issuance of series D preferred stock		40,000
Drawdown on the Department of the Treasury Commitment	5,344
Issuance of common stock		7,343
Payments advanced to purchase shares		(1,000)	(6,000)
Cash dividends paid to shareholders		(1,628)	(1,881)
Other, net	175	557	2,261
Net cash provided by (used in) financing activities - continuing operations	(29,167)	(40,576)	34,152
Net cash provided by (used in) financing activities - discontinued operations	170	(158)	941
Net cash provided by (used in) financing activities	(28,997)	(40,734)	35,093
Cash (paid) received during the period for:
Interest	(5,777)	(7,437)	(8,818)
Taxes	(226)	(617)	(5,163)
Non-cash financing/investing activities:
Settlement of FRBNY Credit Facility in exchange for issuing 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 accounts included in financing activities	12,615	2,566	11,628
Treasury stock acquired using payments advanced to purchase shares		1,912	5,088
Present value of future contract adjustment payments related to issuance of equity units		431
Long-term debt reduction due to deconsolidations	$ 1,648
Debt assumed on acquisitions and warehoused investments		$ 153	$ 791

Summary of Significant Accounting Policies	12 Months Ended
Summary of Significant Accounting Policies	Dec. 31, 2009
Notes to Consolidated Financial Statements
Summary of Significant Accounting Policies	table style="font-size:10pt; font-family:'Times New Roman',times,serif;" tr td p style="FONT-FAMILY: times; TEXT-ALIGN: justify"font size="2"b1. Summary of Significant Accounting Policies /b/font/p p style="FONT-FAMILY: times; TEXT-ALIGN: justify"font size="2"buBasis of Presentation/u /b/font/p p style="FONT-FAMILY: times; TEXT-ALIGN: justify"font size="2"nbsp;nbsp;nbsp;nbsp;The consolidated financial statements include the accounts of American International Group,nbsp;Inc. (AIG), its controlled subsidiaries, and variable interest entities in which AIG is the primary beneficiary. Entities that AIG does not consolidate but in which it holds 20nbsp;percent to 50nbsp;percent of the voting rights and/or has the ability to exercise significant influence are accounted for under the equity method./font/p p style="FONT-FAMILY: times; TEXT-ALIGN: justify"font size="2"nbsp;nbsp;nbsp;nbsp;Certain of AIG's foreign subsidiaries included in the consolidated financial statements report on a fiscal year ended Novembernbsp;30. The effect on AIG's consolidated financial condition and results of operations of all material events occurring between Novembernbsp;30 and Decembernbsp;31 for all periods presented has been recorded. /font/p p style="FONT-FAMILY: times; TEXT-ALIGN: justify"font size="2"nbsp;nbsp;nbsp;nbsp;The accompanying consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (GAAP). AIG evaluated the need to disclose events that occurred subsequent to the balance sheet date through Februarynbsp;26, 2010, the date the financial statements were issued. All material intercompany accounts and transactions have been eliminated. /font/p p style="FONT-FAMILY: times; TEXT-ALIGN: justify"font size="2"biUse of Estimates /i/b/font/p p style="FONT-FAMILY: times; TEXT-ALIGN: justify"font size="2"nbsp;nbsp;nbsp;nbsp;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, and therefore viewed as critical accounting estimates, are those relating to items considered by management in the determination of /font/p ul li style="list-style: none" dl compact="compact" dt style="MARGIN-BOTTOM: -11pt; FONT-FAMILY: times"font size="2"#149;/font/dt dd style="FONT-FAMILY: times; TEXT-ALIGN: justify"font size="2"AIG's ability to continue as a going concern; /fontfont size="2"br / br //font/dd dt style="MARGIN-BOTTOM: -11pt; FONT-FAMILY: times"font size="2"#149;/font/dt dd style="FONT-FAMILY: times; TEXT-ALIGN: justify"font size="2"liability for general insurance unpaid claims and claims adjustment expenses; /fontfont size="2"br / br //font/dd dt style="MARGIN-BOTTOM: -11pt; FONT-FAMILY: times"font size="2"#149;/font/dt dd style="FONT-FAMILY: times; TEXT-ALIGN: justify"font size="2"future policy benefits for life and accident and health contracts; /fontfont size="2"br / br //font/dd dt style="MARGIN-BOTTOM: -11pt; FONT-FAMILY: times"font size="2"#149;/font/dt dd style="FONT-FAMILY: times; TEXT-ALIGN: justify"font size="2"recoverability of deferred policy acquisition costs (DAC); /fontfont size="2"br / br //font/dd dt style="MARGIN-BOTTOM: -11pt; FONT-FAMILY: times"font size="2"#149;/font/dt dd style="FONT-FAMILY: times; TEXT-ALIGN: justify"font size="2"estimated gross profits for investment-oriented products; /fontfont size="2"br / br //font/dd dt style="MARGIN-BOTTOM: -11pt; FONT-FAMILY: times"font size="2"#149;/font/dt dd style="FONT-FAMILY: times; TEXT-ALIGN: justify"font size="2"the allowance for finance receivable losses; /fontfont size="2"br / br //font/dd dt style="MARGIN-BOTTOM: -11pt; FONT-FAMILY: times"font size="2"#149;/font/dt dd style="FONT-FAMILY: times; TEXT-ALIGN: justify"font size="2"flight equipment recoverability; /fontfont size="2"br / br //font/dd dt style="MARGIN-BOTTOM: -11pt; FONT-FAMILY: times"font size="2"#149;/font/dt dd style="FONT-FAMILY: times; TEXT-ALIGN: justify"font size="2"other-than-temporary impairments; /fontfont size="2"br / br //font/dd dt style="MARGIN-BOTTOM: -11pt; FONT-FAMILY: times"font size="2"#149;/font/dt dd style="FONT-FAMILY: times; TEXT-ALIGN: justify"font size="2"goodwill impairment; /fontfont size="2"br / br //font/dd dt style="MARGIN-BOTTOM: -11pt; FONT-FAMILY: times"font size="2"#149;/font/dt dd style="FONT-FAMILY: times; TEXT-ALIGN: justify"font size="2"liabilities for legal contingencies; /fontfont size="2"br / br //font/dd dt style="MARGIN-BOTTOM: -11pt; FONT-FAMILY: times"font size="2"#149;/font/dt dd style="FONT-FAMILY: times; TEXT-ALIGN: justify"font size="2"estimates with respect to income taxes, including recoverability of deferred tax assets; and/font font size="2"br / br //font/dd dt style="MARGIN-BOTTOM: -11pt; FONT-FAMILY: times"font size="2"#149;/font/dt dd style="FONT-FAMILY: times; TEXT-ALIGN: justify"font size="2"fair value measurements of certain financial assets and liabilities, including credit default swaps and AIG's economic interest in Maiden Lane IInbsp;LLC (MLnbsp;II)nbsp;and equity interest in Maiden Lane IIInbsp;LLC (MLnbsp;III)nbsp;(together, the Maiden Lane Interests). See Notenbsp;5 herein. /font/dd/dl/li/ul p style="FONT-FAMILY: times; TEXT-ALIGN: justify"font size="2"nbsp;nbsp;nbsp;nbsp;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 would be materially affected. /font/p p style="FONT-FAMILY: times; TEXT-ALIGN: justify"font size="2"biRevisions and Reclassifications /i/b/font/p p style="FONT-FAMILY: times; TEXT-ALIGN: justify"font size="2"nbsp;nbsp;nbsp;nbsp;In 2009, AIG reclassified the paid-in capital in excess of par value, net of issuance costs, related to its Seriesnbsp;C Perpetual, Convertible, Participating Preferred Stock, par value $5.00 per share (AIG Seriesnbsp;C Preferred Stock), Seriesnbsp;D Fixed Rate Cumulative Perpetual Preferred Stock, par value $5.00 per share, (AIG Seriesnbsp;D Preferred Stock) Seriesnbsp;E Fixed Rate Non-Cumulative Perpetual Preferred Stock, par value $5.00 per share (AIG Seriesnbsp;E Preferred Stock) and AIG Seriesnbsp;F Fixed Rate Non-Cumulative Perpetual Preferred Stock, par value $5.00 per share (AIG Seriesnbsp;F Preferred Stock) from Additional paid-in capital to each of the respective AIG Seriesnbsp;C, D, E, and F Preferred Stock captions in the Consolidated Balance Sheet. Prior period amounts were reclassified to conform to the current period presentation. t;/font/p p style="FONT-FAMILY: times; TEXT-ALIGN: justify"font size="2"nbsp;nbsp;nbsp;nbsp;In 2009, AIG reclassified certain mutual fund investments from common stocksnbsp;#151; trading to Other invested assets. Accordingly, the Decembernbsp;31, 2008 Consolidated Balance Sheet has been revised to reflect the transfer of $5.7nbsp;billion of mutual fund investments from common stocksnbsp;#151; trading to Other invested assets. Certain other reclassifications have been made to prior period amounts to conform to the current period presentation. /font/p p style="FONT-FAMILY: times; TEXT-ALIGN: justify"font size="2"nbsp;nbsp;nbsp;nbsp;See Notenbsp;2 herein for discontinued operations and held for sale classification. /font/p p style="FONT-FAMILY: times; TEXT-ALIGN: justify"font size="2"biOut of Period Adjustments /i/b/font/p p style="FONT-FAMILY: times; TEXT-ALIGN: justify"font size="2"nbsp;nbsp;nbsp;nbsp;For the year ended Decembernbsp;31, 2009, AIG recorded out of period adjustments relating to prior years which increased the Loss before income tax benefit by $75nbsp;million and decreased Net loss attributable to AIG by $390nbsp;million. The $390nbsp;million primarily relates to income tax adjustments. /font/p p style="FONT-FAMILY: times; TEXT-ALIGN: justify"font size="2"nbsp;nbsp;nbsp;nbsp;With respect to the unaudited quarterly information included in Notenbsp;22, for the three months ended Decembernbsp;31, 2009, AIG recorded out of period adjustments related to prior periods which increased AIG's Loss before income tax benefit by $747nbsp;million and increased Net loss attributable to AIG by $390nbsp;million. Both amounts were primarily due to an intercompany elimination to Other income reported in the Other operations category. These entries primarily affected previously reported 2009 quarterly results. Had all adjustments been recorded in their appropriate periods, Net income (loss) attributable to AIG for the three-month periods ended Septembernbsp;30, 2009, Junenbsp;30, 2009 and Marchnbsp;31, 2009 would have decreased by $52nbsp;million, $478nbsp;million and increased by $250nbsp;million, respectively. The effect on compar able 2008 periods was insignificant./font/p p style="FONT-FAMILY: times; TEXT-ALIGN: justify"font size="2"nbsp;nbsp;nbsp;nbsp;While these adjustments were noteworthy for certain of the earlier 2009 quarters, 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. /font/p p style="FONT-FAMILY: times; TEXT-ALIGN: justify"font size="2"biGoing Concern Considerations /i/b/font/p p style="FONT-FAMILY: times; TEXT-ALIGN: justify"font size="2"nbsp;nbsp;nbsp;nbsp;In the 2008 Financial Statements, management disclosed the conditions and events that led management to conclude that AIG would have adequate liquidity to finance and operate AIG's businesses, execute its asset disposition plan and repay its obligations for at least the next twelve months. On Marchnbsp;2, 2009, the United States government issued the following statement referring to the March 2009 agreements in principle and other transactions they expected to be undertaken with AIG (many of which were subsequently taken) to strengthen AIG's capital position, enhance its liquidity, reduce its borrowing costs and facilitate its asset disposition program./font/p ul li style="list-style: none" p style="FONT-FAMILY: times; TEXT-ALIGN: justify"font size="2""The steps announced today provide tangible evidence of the U.S. government's commitment to the orderly restructuring of AIG over time in the face of continuing market dislocations and economic deterioration. Orderly restructuring is essential to AIG's repayment of the support it has received from U.S. taxpayers and to preserving financial stability. The U.S. government is committed to continuing to work with AIG to maintain its ability to meet its obligations as they come due." /font/p/li/ul p style="FONT-FAMILY: times; TEXT-ALIGN: justify"font size="2"iLiquidity of Parent and Subsidiaries /i/font/p p style="FONT-FAMILY: times; TEXT-ALIGN: justify"font size="2"nbsp;nbsp;nbsp;nbsp;AIG manages liquidity at both the parent and subsidiary levels. Since the fourth quarter of 2008, AIG has not had access to its traditional sources of long-term or short-term financing through the public debt markets. While no assurances can be given that AIG will be able to access these markets again, AIG has continued to periodically evaluate its ability to access the capital markets. /font/p p style="FONT-FAMILY: times; TEXT-ALIGN: justify"font size="2"nbsp;nbsp;nbsp;nbsp;Historically, AIG depended on dividends, distributions, and other payments from subsidiaries to fund payments on its obligations. In light of AIG's current financial situation, many of its regulated subsidiaries are restricted from making dividend payments, or advancing funds, to AIG. As a result, AIG has been dependent on the Federal Reserve Bank of New York (FRBNY) Credit Facility (the FRBNY Credit Facility) provided by the FRBNY under the Credit Agreement, dated as of Septembernbsp;22, 2008 (as amended, the FRBNY Credit Agreement), between AIG and the FRBNY; the FRBNY's Commercial Paper Funding Facility (CPFF); and other transactions with the FRBNY and the United States Department of the Treasury (the Department of the Treasury) as its primary sources of liquidity. Primary uses of cash flow are debt service and subsidiary funding. /font/p p style="FONT-FAMILY: times; TEXT-ALIGN: justify"font size="2"nbsp;nbsp;nbsp;nbsp;Certain subsidiaries also have been dependent on the FRBNY and the Department of the Treasury to meet collateral posting requirements, to make debt repayments as amounts come due, and to meet capital or liquidity requirements. /font/p p style="FONT-FAMILY: times; TEXT-ALIGN: justify"font size="2"iProgress on Management's Plans for Stabilization of AIG and Repayment of AIG's Obligations as They Come Due /i/font/p p style="FONT-FAMILY: times; TEXT-ALIGN: justify"font size="2"nbsp;nbsp;nbsp;nbsp;In 2009, AIG took a number of steps to execute its plans to provide stability to its businesses and provide for the timely repayment of the FRBNY Credit Facility and other obligations as they come due./font/p p style="FONT-FAMILY: times; TEXT-ALIGN: justify"font size="2"iuTransactions with the FRBNY/u /i/font/p p style="FONT-FAMILY: times; TEXT-ALIGN: justify"font size="2"uFRBNY Credit Agreement Amendments/u /font/p p style="FONT-FAMILY: times; TEXT-ALIGN: justify"font size="2"nbsp;nbsp;nbsp;nbsp;On Decembernbsp;1, 2009, AIG and the FRBNY completed two transactions pursuant to which AIG transferred to the FRBNY noncontrolling, nonvoting, callable, preferred equity interests (Preferred Interests) in two newly-formed special purpose vehicles (SPVs) in exchange for a $25nbsp;billion reduction of the balance outstanding and the maximum credit available under the FRBNY Credit Facility, which resulted in $5.2nbsp;billion of accelerated amortization of a portion of the prepaid commitment asset. Each SPV has (directly or indirectly) as its only asset 100nbsp;percent of the common stock of an operating subsidiary (American International Assurance Company,nbsp;Ltd. (AIA) in one case and American Life Insurance Company (ALICO) in the other). AIG owns all of the voting common equity interests of each SPV. AIG's purpose for entering into these agreements was to position AI A and ALICO for initial public offerings or third-party sale, depending on market conditions and subject to customary regulatory approvals. An equally important objective of the transactions was to enhance AIG's capitalization consistent with rating agency requirements in order to complete its restructuring plan and repay the support it has received from the FRBNY and the Department of the Treasury. See Notenbsp;16 herein for further discussion. /font/p p style="FONT-FAMILY: times; TEXT-ALIGN: justify"font size="2"nbsp;nbsp;nbsp;nbsp;On Decembernbsp;1, 2009, AIG and the FRBNY entered into Amendment No.nbsp;4 (Amendment No.nbsp;4) to the Credit Agreement in order to, among other things, provide for the consummation of the issuance of the Preferred Interests and reduction of the outstanding balance of the FRBNY Credit Facility and the maximum amount available to be borrowed thereunder by $25nbsp;billion. /font/p p style="FONT-FAMILY: times; TEXT-ALIGN: justify"font size="2"nbsp;nbsp;nbsp;nbsp;On Aprilnbsp;17, 2009, AIG and the FRBNY entered into Amendment No.nbsp;3 to the FRBNY Credit Agreement. The FRBNY Credit Agreement was amended, among other things, to remove the minimum 3.5nbsp;percent LIBOR borrowing rate floor. /font/p p style="FONT-FAMILY: times; TEXT-ALIGN: justify"font size="2"iuDepartment of the Treasury Commitment/u /i/font/p p style="FONT-FAMILY: times; TEXT-ALIGN: justify"font size="2"nbsp;nbsp;nbsp;nbsp;On Aprilnbsp;17, 2009, AIG entered into a Securities Purchase Agreement with the Department of the Treasury, pursuant to which the Department of the Treasury will provide an amount up to $29.835nbsp;billion (the Department of the Treasury Commitment) in exchange for increases in the liquidation preference of the AIG's Seriesnbsp;F Preferred Stock, so long as certain conditions are met, including (i)nbsp;AIG is not a debtor in a pending case under Title 11 of the United States Code; and (ii)nbsp;the AIG Credit Facility Trust, a trust established for the sole benefit of the United States Treasury (together with its trustees, acting in their capacities as trustees, the Trust), and the Department of the Treasury, in the aggregate, "beneficially own" more than 50nbsp;percent of the aggregate voting power of AIG's voting securities. Upon drawings under this commitment, the liquidation preference of the AIG Seriesnbsp;F Preferred Stock increases proportionately. /font/p p style="FONT-FAMILY: times; TEXT-ALIGN: justify"font size="2"iuSales of Businesses and Specific Asset Dispositions/u /i/font/p p style="FONT-FAMILY: times; TEXT-ALIGN: justify"font size="2"nbsp;nbsp;nbsp;nbsp;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 continually reassesses this plan to maximize value while maintaining flexibility in its liquidity and capital, and expects to accomplish these objectives over a longer time frame than originally contemplated. /font/p p style="FONT-FAMILY: times; TEXT-ALIGN: justify"font size="2"nbsp;nbsp;nbsp;nbsp;Dispositions of certain businesses will be subject to regulatory approval. Unless a waiver is obtained from the FRBNY, net proceeds from these dispositions, to the extent they do not represent capital of AIG's insurance subsidiaries required for regulatory or ratings purposes, are contractually required to be applied toward the repayment of the FRBNY Credit Facility as mandatory prepayments. /font/p p style="FONT-FAMILY: times; TEXT-ALIGN: justify"font size="2"nbsp;nbsp;nbsp;nbsp;During 2009 and through Februarynbsp;17, 2010, AIG entered into agreements to sell or completed the sale of operations and assets, excluding assets held by AIG Financial Products Corp. and AIG Trading Groupnbsp;Inc. and their respective subsidiaries (collectively, AIGFP), that had aggregate assets and liabilities with carrying values of $88.1nbsp;billion and $71.3nbsp;billion, respectively, at Decembernbsp;31, 2009 or the date of sale or deconsolidation, in the case of Transatlantic Holdings,nbsp;Inc. (Transatlantic). These transactions are expected to generate approximately $5.6nbsp;billion of aggregate net cash proceeds that will be available to repay outstanding borrowings and reduce the amount of the FRBNY Credit Facility, after taking into account taxes, transaction expenses, settlement of intercompany loan facilities, and capital required to be retaine d for regulatory or ratings purposes. Gains and losses recorded in connection with the dispositions of businesses include estimates that are subject to subsequent adjustment. Based on the transactions thus far, AIG does not believe that such adjustments will be material to future results of operations or cash flows. /font/p p style="FONT-FAMILY: times; TEXT-ALIGN: justify"font size="2"uAmerican General Finance,nbsp;Inc. (AGF) Portfolio Sales and Securitization Transaction/u /font/p p style="FONT-FAMILY: times; TEXT-ALIGN: justify"font size="2"nbsp;nbsp;nbsp;nbsp;During 2009, AGF received proceeds of $1.9nbsp;billion from real estate loan portfolio sales. In addition, on Julynbsp;30, 2009, AGF issued mortgage-backed certificates in a private on-balance sheet securitization transaction of certain AGF real estate loans and received cash proceeds of $967nbsp;million. /font/p p style="FONT-FAMILY: times; TEXT-ALIGN: justify"font size="2"iManagement's Assessment and Conclusion /i/font/p p style="FONT-FAMILY: times; TEXT-ALIGN: justify"font size="2"nbsp;nbsp;nbsp;nbsp;In assessing AIG's current financial position 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:/font/p ul li style="list-style: none" dl compact="compact" dt style="MARGIN-BOTTOM: -11pt; FONT-FAMILY: times"font size="2"#149;/font/dt dd style="FONT-FAMILY: times; TEXT-ALIGN: justify"font size="2"the commitment of the FRBNY and the Department of the Treasury to the orderly restructuring of AIG and their commitment to continuing to work with AIG to maintain its ability to meet its obligations as they come due; /fontfont size="2"br / br //font/dd dt style="MARGIN-BOTTOM: -11pt; FONT-FAMILY: times"font size="2"#149;/font/dt dd style="FONT-FAMILY: times; TEXT-ALIGN: justify"font size="2"the potential adverse effects on AIG's businesses that could result if there are further downgrades by rating agencies, including in particular, the uncertainty of estimates relating to the derivative transactions of AIGFP, such as estimates of both the number of counterparties who may elect to terminate under contractual termination provisions and the amount that would be required to be paid in the event of a downgrade; /fontfont size="2"br / br //font/dd dt style="MARGIN-BOTTOM: -11pt; FONT-FAMILY: times"font size="2"#149;/font/dt dd style="FONT-FAMILY: times; TEXT-ALIGN: justify"font size="2"the potential delays in asset dispositions and reduction in the anticipated proceeds therefrom; /fontfont size="2"br / br //font/dd dt style="MARGIN-BOTTOM: -11pt; FONT-FAMILY: times"font size="2"#149;/font/dt dd style="FONT-FAMILY: times; TEXT-ALIGN: justify"font size="2"the potential for declines in bond and equity markets; /fontfont size="2"br / br //font/dd dt style="MARGIN-BOTTOM: -11pt; FONT-FAMILY: times"font size="2"#149;/font/dt dd style="FONT-FAMILY: times; TEXT-ALIGN: justify"font size="2"future sales of significant subsidiaries; /fontfont size="2"br / br //font/dd dt style="MARGIN-BOTTOM: -11pt; FONT-FAMILY: times"font size="2"#149;/font/dt dd style="FONT-FAMILY: times; TEXT-ALIGN: justify"font size="2"the potential effect on AIG if the capital levels of its regulated and unregulated subsidiaries prove inadequate to support current business plans; /fontfont size="2"br / br //font/dd dt style="MARGIN-BOTTOM: -11pt; FONT-FAMILY: times"font size="2"#149;/font/dt dd style="FONT-FAMILY: times; TEXT-ALIGN: justify"font size="2"the effect on AIG's businesses of continued compliance with the covenants of the FRBNY Credit Agreement and other agreements with the FRBNY and the Department of the Treasury; /fontfont size="2"br / br //font/dd dt style="MARGIN-BOTTOM: -11pt; FONT-FAMILY: times"font size="2"#149;/font/dt dd style="FONT-FAMILY: times; TEXT-ALIGN: justify"font size="2"AIG's highly leveraged capital structure; /font/dd/dl/li/ul ul li style="list-style: none" dl compact="compact" dt style="MARGIN-BOTTOM: -11pt; FONT-FAMILY: times"font size="2"#149;/font/dt dd style="FONT-FAMILY: times; TEXT-ALIGN: justify"font size="2"the effect of the provisions of the Troubled Asset Relief Program (TARP) Standards for Compensation and Corporate Governance and the Determination Memoranda issued by the Office of the Special Master for TARP Executive Compensation with respect to AIG's compensation practices and structures on AIG's ability to retain and motivate key employees or hire new employees; /fontfont size="2"br / br //font/dd dt style="MARGIN-BOTTOM: -11pt; FONT-FAMILY: times"font size="2"#149;/font/dt dd style="FONT-FAMILY: times; TEXT-ALIGN: justify"font size="2"the potential that loss of key personnel could reduce the value of AIG's business and impair its ability to stabilize businesses and effect a successful asset disposition plan; and /fontfont size="2"br / br //font/dd dt style="MARGIN-BOTTOM: -11pt; FONT-FAMILY: times"font size="2"#149;/font/dt dd style="FONT-FAMILY: times; TEXT-ALIGN: justify"font size="2"the potential for regulatory actions in one or more countries, including possible actions resulting from the execution of management's plans for stabilization of AIG and repayment of AIG's obligations as they come due. /font/dd/dl/li/ul p style="FONT-FAMILY: times; TEXT-ALIGN: justify"font size="2"nbsp;nbsp;nbsp;nbsp;Based on the U.S. government's continuing commitment, the already completed transactions and the other expected transactions with the FRBNY, management's plans to stabilize AIG's businesses and dispose of certain assets, and after consideration of the risks and uncertainties of such plans, management believes that it will have adequate liquidity to finance and operate AIG's businesses, execute its asset disposition plan and repay its obligations for at least the next twelve months. /font/p p style="FONT-FAMILY: times; TEXT-ALIGN: justify"font size="2"nbsp;nbsp;nbsp;nbsp;It is possible that the actual outcome of one or more of management's plans could be materially different, or that one or more of management's significant judgments or estimates about the potential effects of these risks and uncertainties could prove to be materially incorrect or that the transactions with the FRBNY discussed above fail to achieve the desired objectives. If one or more of these possible outcomes is realized and financing is not available, AIG may need additional U.S. government support to meet its obligations as they come due. Without additional support from the U.S. government, in the future there could be substantial doubt about AIG's ability to continue as a going concern. /font/p p style="FONT-FAMILY: times; TEXT-ALIGN: justify"font size="2"nbsp;nbsp;nbsp;nbsp;In connection with making their going concern assessment and conclusion, management and the Board of AIG have confirmed that "as first stated by the U.S. Treasury and the Federal Reserve in connection with the announcement of the AIG Restructuring Plan on Marchnbsp;2, 2009, the U.S. Government remains committed to continuing to work with AIG to maintain its ability to meet its obligations as they come due." /font/p p style="FONT-FAMILY: times; TEXT-ALIGN: justify"font size="2"nbsp;nbsp;nbsp;nbsp;AIG's consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. These consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded assets or relating to the amounts and classification of liabilities that may be necessary should AIG be unable to continue as a going concern. /font/p p style="FONT-FAMILY: times; TEXT-ALIGN: justify"font size="2"buAccounting Policies/u /b/font/p p style="FONT-FAMILY: times; TEXT-ALIGN: justify"font size="2"nbsp;nbsp;nbsp;nbsp;/fontfont size="2"bi(a) Revenue recognition and expenses:/i/b/font/p p style="FONT-FAMILY: times; TEXT-ALIGN: justify"font size="2"nbsp;nbsp;nbsp;nbsp;/fontfont size="2"iPremiums and other considerations:/i/fontfont size="2" Premiums for short duration contracts and considerations received from retailers in connection with the sale 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. /font/p p style="FONT-FAMILY: times; TEXT-ALIGN: justify"font size="2"nbsp;nbsp;nbsp;nbsp;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. /font/p p style="FONT-FAMILY: times; TEXT-ALIGN: justify"font size="2"nbsp;nbsp;nbsp;nbsp;/fontfont size="2"iNet investment income:/i/fontfont size="2" Net investment income represents income primarily from the following sources in AIG's insurance operations and AIG parent: /font/p ul li style="list-style: none" dl compact="compact" dt style="MARGIN-BOTTOM: -11pt; FONT-FAMILY: times"font size="2"#149;/font/dt dd style="FONT-FAMILY: times; TEXT-ALIGN: justify"font size="2"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./font font size="2"br / br //font/dd dt style="MARGIN-BOTTOM: -11pt; FONT-FAMILY: times"font size="2"#149;/font/dt dd style="FONT-FAMILY: times; TEXT-ALIGN: justify"font size="2"Dividend income and distributions from common and preferred stock and other investments when receivable. /fontfont size="2"br / br //font/dd dt style="MARGIN-BOTTOM: -11pt; FONT-FAMILY: times"font size="2"#149;/font/dt dd style="FONT-FAMILY: times; TEXT-ALIGN: justify"font size="2"Realized and unrealized gains and losses from investments in trading securities accounted for at fair value. /fontfont size="2"br / br //font/dd dt style="MARGIN-BOTTOM: -11pt; FONT-FAMILY: times"font size="2"#149;/font/dt dd style="FONT-FAMILY: times; TEXT-ALIGN: justify"font size="2"Earnings from hedge funds and limited partnership investments accounted for under the equity method. /fontfont size="2"br / br //font/dd dt style="MARGIN-BOTTOM: -11pt; FONT-FAMILY: times"font size="2"#149;/font/dt dd style="FONT-FAMILY: times; TEXT-ALIGN: justify"font size="2"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. /fontfont size="2"br / br //font/dd dt style="MARGIN-BOTTOM: -11pt; FONT-FAMILY: times"font size="2"#149;/font/dt dd style="FONT-FAMILY: times; TEXT-ALIGN: justify"font size="2"Change in fair value of AIG's interest in ML II. /font/dd/dl/li/ul p style="FONT-FAMILY: times; TEXT-ALIGN: justify"font size="2"nbsp;nbsp;nbsp;nbsp;/fontfont size="2"iNet realized capital gains (losses):/i/fontfont size="2" 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: /font/p ul li style="list-style: none" dl compact="compact" dt style="MARGIN-BOTTOM: -11pt; FONT-FAMILY: times"font size="2"#149;/font/dt dd style="FONT-FAMILY: times; TEXT-ALIGN: justify"font size="2"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. /fontfont size="2"br / br //font/dd dt style="MARGIN-BOTTOM: -11pt; FONT-FAMILY: times"font size="2"#149;/font/dt dd style="FONT-FAMILY: times; TEXT-ALIGN: justify"font size="2"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. /fontfont size="2"br / br //font/dd dt style="MARGIN-BOTTOM: -11pt; FONT-FAMILY: times"font size="2"#149;/font/dt dd style="FONT-FAMILY: times; TEXT-ALIGN: justify"font size="2"Changes in fair value of derivatives except for (1)nbsp;those instruments at AIGFP, (2)nbsp;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)nbsp;those instruments that are designated as economic hedges of financial instruments for which the fair value option has been elected. /fontfont size="2"br / br //font/dd dt style="MARGIN-BOTTOM: -11pt; FONT-FAMILY: times"font size="2"#149;/font/dt dd style="FONT-FAMILY: times; TEXT-ALIGN: justify"font size="2"Exchange gains and losses resulting from foreign currency transactions. /font/dd/dl/li/ul p style="FONT-FAMILY: times; TEXT-ALIGN: justify"font size="2"nbsp;nbsp;nbsp;nbsp;/fontfont size="2"iUnrealized market valuation gains (losses) on AIGFP super senior credit default swap portfolio:/i/fontfont size="2" Includes the market valuation gains and losses associated with AIGFP's super senior credit default swap (CDS) portfolio./font/p p style="FONT-FAMILY: times; TEXT-ALIGN: justify"font size="2"nbsp;nbsp;nbsp;nbsp;/fontfont size="2"iOther income:/i/fontfont size="2" Other income includes income from flight equipment, noncore Asset Management operations, the operations of AIGFP excluding unrealized market valuation gains (losses) on AIGFP's CDS portfolio, finance charges on consumer loans, and the change in fair value of AIG's interest in ML III. /font/p p style="FONT-FAMILY: times; TEXT-ALIGN: justify"font size="2"nbsp;nbsp;nbsp;nbsp;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 future contractual aircraft maintenance. Gains and losses on flight equipment are recognized when flight equipment is sold and the risk of ownership of the equipment is passed to the new owner. /font/p p style="FONT-FAMILY: times; TEXT-ALIGN: justify"font size="2"nbsp;nbsp;nbsp;nbsp;Income from noncore Asset Management operations is generally recognized as revenues as services are performed with related expenses generally recognized consistent with related revenues. In addition, net realized gains and carried interest are contingent upon investment maturity levels and market conditions. /font/p p style="FONT-FAMILY: times; TEXT-ALIGN: justify"font size="2"nbsp;nbsp;nbsp;nbsp;Income from the operations of AIGFP included in Other income consists of the following: /font/p ul li style="list-style: none" dl compact="compact" dt style="MARGIN-BOTTOM: -11pt; FONT-FAMILY: times"font size="2"#149;/font/dt dd style="FONT-FAMILY: times; TEXT-ALIGN: justify"font size="2"Change in fair value relating to financial assets and liabilities for which the fair value option has been elected. /fontfont size="2"br / br //font/dd dt style="MARGIN-BOTTOM: -11pt; FONT-FAMILY: times"font size="2"#149;/font/dt dd style="FONT-FAMILY: times; TEXT-ALIGN: justify"font size="2"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. /font/dd dd style="FONT-FAMILY: times; TEXT-ALIGN: justify"nbsp;/dd/dl dl compact="compact" dt style="MARGIN-BOTTOM: -11pt; FONT-FAMILY: times"font size="2"#149;/font/dt dd style="FONT-FAMILY: times; TEXT-ALIGN: justify"font size="2"Dividend income and distributions from common and preferred stock and other investments when receivable. /fontfont size="2"br / br //font/dd dt style="MARGIN-BOTTOM: -11pt; FONT-FAMILY: times"font size="2"#149;/font/dt dd style="FONT-FAMILY: times; TEXT-ALIGN: justify"font size="2"Changes in the fair value of derivatives. In certain instances, no initial gain or loss was recognized. Prior to Januarynbsp;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 Januarynbsp;1, 2008 were recognized in beginning retained earnings when the fair value option was elected. /fontfont size="2"br / br //font/dd dt style="MARGIN-BOTTOM: -11pt; FONT-FAMILY: times"font size="2"#149;/font/dt dd style="FONT-FAMILY: times; TEXT-ALIGN: justify"font size="2"Changes in the fair value of trading securities and spot commodities sold but not yet purchased, futures and hybrid financial instruments. /fontfont size="2"br / br //font/dd dt style="MARGIN-BOTTOM: -11pt; FONT-FAMILY: times"font size="2"#149;/font/dt dd style="FONT-FAMILY: times; TEXT-ALIGN: justify"font size="2"Realized capital gains and losses from the sale of available for sale securities and investments in private equities, joint ventures, limited partnerships and other investments. /fontfont size="2"br / br //font/dd dt style="MARGIN-BOTTOM: -11pt; FONT-FAMILY: times"font size="2"#149;/font/dt dd style="FONT-FAMILY: times; TEXT-ALIGN: justify"font size="2"Exchange gains and losses resulting from foreign currency transactions. /fontfont size="2"br / br //font/dd dt style="MARGIN-BOTTOM: -11pt; FONT-FAMILY: times"font size="2"#149;/font/dt dd style="FONT-FAMILY: times; TEXT-ALIGN: justify"font size="2"Reductions to the cost basis of securities available for sale for other-than-temporary impairments. /fontfont size="2"br / br //font/dd dt style="MARGIN-BOTTOM: -11pt; FONT-FAMILY: times"font size="2"#149;/font/dt dd style="FONT-FAMILY: times; TEXT-ALIGN: justify"font size="2"Earnings from hedge funds and limited partnership investments accounted for under the equity method. /font/dd/dl/li/ul p style="FONT-FAMILY: times; TEXT-ALIGN: justify"font size="2"nbsp;nbsp;nbsp;nbsp;Finance charges on consumer loans are recognized as revenue using the interest method. Revenue ceases to be accrued when contractual payments are not received for four consecutive months for loans and retail sales contracts, and for six months for revolving retail accounts and private label receivables. Extension fees, late charges, and prepayment penalties are recognized as revenue when received. /font/p p style="FONT-FAMILY: times; TEXT-ALIGN: justify"font size="2"nbsp;nbsp;nbsp;nbsp;/fontfont size="2"iPolicyholder benefits and claims incurred:/i/fontfont size="2" Incurred policy losses 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 derivat ive gains and losses on related economic hedges). /font/p p style="FONT-FAMILY: times; TEXT-ALIGN: justify"font size="2"nbsp;nbsp;nbsp;nbsp;/fontfont size="2"iRestructuring expenses and related asset impairment and other expenses:/i/fontfont size="2" 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 key employee retention awards. /font/p p style="FONT-FAMILY: times; TEXT-ALIGN: justify"font size="2"nbsp;nbsp;nbsp;nbsp;/fontfont size="2"iNet loss on sale of divested businesses:/i/fontfont size="2" Includes gains or losses from the sale of businesses that do not qualify as discontinued operations. /font/p p style="FONT-FAMILY: times; TEXT-ALIGN: justify"font size="2"nbsp;nbsp;nbsp;nbsp;/fontfont size="2"bi(b) Income taxes:/i/b/fontfont size="2" 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 Notenbsp;21 herein for a further discussion of income taxes. /font/p p style="FONT-FAMILY: times; TEXT-ALIGN: justify"font size="2"nbsp;nbsp;nbsp;nbsp;/fontfont size="2"bi(c) Held for sale and discontinued operations:/i/b/fontfont size="2" 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. /font/p p style="FONT-FAMILY: times; TEXT-ALIGN: justify"font size="2"nbsp;nbsp;nbsp;nbsp;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 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 sale or adjustment of the carrying amount to fair value less cost to sell. /font/p p style="FONT-FAMILY: times; TEXT-ALIGN: justify"font size="2"nbsp;nbsp;nbsp;nbsp;/fontfont size="2"bi(d) Investments:/i/b/font/p p style="FONT-FAMILY: times; TEXT-ALIGN: justify"font size="2"nbsp;nbsp;nbsp;nbsp;/fontfont size="2"iFixed maturities and equity securities:/i/fontfont size="2" 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 Decembernbsp;31, 2009 and 2008. 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. /font/p p style="FONT-FAMILY: times; TEXT-ALIGN: justify"font size="2"nbsp;nbsp;nbsp;nbsp;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. /font/p p style="FONT-FAMILY: times; TEXT-ALIGN: justify"font size="2"nbsp;nbsp;nbsp;nbsp;Common and preferred stocks are carried at fair value. /font/p p style="FONT-FAMILY: times; TEXT-ALIGN: justify"font size="2"nbsp;nbsp;nbsp;nbsp;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. /font/p p style="FONT-FAMILY: times; TEXT-ALIGN: justify"font size="2"nbsp;nbsp;nbsp;nbsp;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 income taxes, in consolidated shareholders' equity. Investments in fixed maturities and equity securities are recorded on a trade-date basis. /font/p p style="FONT-FAMILY: times; TEXT-ALIGN: justify"font size="2"nbsp;nbsp;nbsp;nbsp;Trading securities include the investment portfolio of AIGFP and the Maiden Lane Interests, all of which are carried at fair value. /font/p p style="FONT-FAMILY: times; TEXT-ALIGN: justify"font size="2"nbsp;nbsp;nbsp;nbsp;Trading securities for AIGFP 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./font/p p style="FONT-FAMILY: times; TEXT-ALIGN: justify"font size="2"nbsp;nbsp;nbsp;nbsp;For discussion of AIG's other-than-temporary impairment policy, see Notenbsp;6 herein. /font/p p style="FONT-FAMILY: times; TEXT-ALIGN: justify"font size="2"nbsp;nbsp;nbsp;nbsp;/fontfont size="2"iSecurities lending invested collateral, at fair value and Securities lending payable:/i/fontfont size="2" In 2008, AIG exited the domestic securities lending program, and during 2009, AIG substantially curtailed its foreign securities lending activities. The fair value of securities pledged under securities lending arrangements was $277nbsp;million and $3.8nbsp;billion at Decembernbsp;31, 2009 and 2008, respectively. AIG's remaining foreign securities lending activities consist of the lending of securities and receipt of cash as collateral with respect to the securities lent. Invested collateral consists of interest-bearing cash equivalents and fixed and floating rate bonds, whose changes in fair value are recorded as a separate component of Accumulated other comprehensive income (loss), net of deferred income t axes. The invested collateral is evaluated for other-than-temporary impairment by applying the same criteria used for investments in fixed maturities. Income earned on invested collateral, net of interest payable to the collateral provider, is recorded in Net investment income. AIG generally obtains and maintains cash collateral from securities borrowers at current market levels for the securities lent./font/p p style="FONT-FAMILY: times; TEXT-ALIGN: justify"font size="2"nbsp;nbsp;nbsp;nbsp;During the fourth quarter of 2008, in connection with certain securities lending transactions, AIG failed to obtain or maintain collateral sufficient to fund substantially all of the cost of purchasing securities lent to various counterparties. In some cases, this shortfall in collateral has resulted in AIG accounting for individual securities lending transactions as sales combined with a forward purchase commitment rather than as secured borrowings. /font/p p style="FONT-FAMILY: times; TEXT-ALIGN: justify"font size="2"nbsp;nbsp;nbsp;nbsp;/fontfont size="2"iMortgage and other loans receivablenbsp;#151; net:/i/fontfont size="2" 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. /font/p p style="FONT-FAMILY: times; TEXT-ALIGN: justify"font size="2"nbsp;nbsp;nbsp;nbsp;Impairment of mortgage and other loans receivable is based on certain risk factors and recognized when collection of all amounts due under the 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. /font/p p style="FONT-FAMILY: times; TEXT-ALIGN: justify"font size="2"nbsp;nbsp;nbsp;nbsp;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. /font/p p style="FONT-FAMILY: times; TEXT-ALIGN: justify"font size="2"nbsp;nbsp;nbsp;nbsp;/fontfont size="2"iFinance receivablesnbsp;#151; net:/i/fontfont size="2" 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 expense and is maintained at a level considered adequate to absorb estimated 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 delin quency experience are considered in the evaluation of the allowance. /font/p p style="FONT-FAMILY: times; TEXT-ALIGN: justify"font size="2"nbsp;nbsp;nbsp;nbsp;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. /font/p p style="FONT-FAMILY: times; TEXT-ALIGN: justify"font size="2"nbsp;nbsp;nbsp;nbsp;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. American General Finance,nbsp;Inc. (AGF) recognizes net unrealized losses through a valuation allowance by charges to income. /font/p p style="FONT-FAMILY: times; TEXT-ALIGN: justify"font size="2"nbsp;nbsp;nbsp;nbsp;/fontfont size="2"iFlight equipment primarily under operating leasesnbsp;#151; net:/i/fontfont size="2" Flight equipment is stated at cost, 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 International Lease Finance Corporation (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 straig ht-line basis to a residual value of approximately 15nbsp;percent of the cost of the asset over its estimated useful life of 25nbsp;years. For freighter aircraft, depreciation is computed on the straight-line basis to a zero residual value over its useful life of 35nbsp;years. At Decembernbsp;31, 2009, ILFC had 10 freighter aircraft in its fleet. /font/p p style="FONT-FAMILY: times; TEXT-ALIGN: justify"font size="2"nbsp;nbsp;nbsp;nbsp;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. /font/p p style="FONT-FAMILY: times; TEXT-ALIGN: justify"font size="2"nbsp;nbsp;nbsp;nbsp;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. /font/p p style="FONT-FAMILY: times; TEXT-ALIGN: justify"font size="2"nbsp;nbsp;nbsp;nbsp;Accumulated depreciation on flight equipment was $13.9nbsp;billion and $12.3nbsp;billion at Decembernbsp;31, 2009 and 2008, respectively. /font/p p style="FONT-FAMILY: times; TEXT-ALIGN: justify"font size="2"nbsp;nbsp;nbsp;nbsp;/fontfont size="2"iOther invested assets:/i/fontfont size="2" 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. /font/p p style="FONT-FAMILY: times; TEXT-ALIGN: justify"font size="2"nbsp;nbsp;nbsp;nbsp;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. /font/p p style="FONT-FAMILY: times; TEXT-ALIGN: justify"font size="2"nbsp;nbsp;nbsp;nbsp;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./font/p p style="FONT-FAMILY: times; TEXT-ALIGN: justify"font size="2"nbsp;nbsp;nbsp;nbsp;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. At Decembernbsp;31, 2009, AIG's significant direct private equity investments included its 26nbsp;percent interest in Tata AIG Life Insurance Company,nbsp;Ltd., its 26nbsp;percent interest in Tata AIG General Insurance Company,nbsp;Ltd. and its 41.55nbsp;percent interest in The Fuji Fire and Marine Insurancenbsp;Co.,nbsp;Ltd. Dividends received from unconsolidated entities in which AIG's ownership interest is less than 50nbsp;percent were $1nbsp;million, $20nbsp;million and $30nbsp;million for the years ended Decembernbsp;31, 2009, 2008, and 2007, respectively. The undistributed earnings of unconsolidated entities in which AIG's ownership interest is less than 50nbsp;percent were $12nbsp;million, $227nbsp;million and $266nbsp;million at Decembernbsp;31, 2009, 2008 and 2007, respectively./font/p p style="FONT-FAMILY: times; TEXT-ALIGN: justify"font size="2"nbsp;nbsp;nbsp;nbsp;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 Notenbsp;6(e) herein for further information. /font/p p style="FONT-FAMILY: times; TEXT-ALIGN: justify"font size="2"nbsp;nbsp;nbsp;nbsp;/fontfont size="2"iSecurities purchased (sold) under agreements to resell (repurchase), at contract value:/i/fontfont size="2"nbsp;nbsp;Securities purchased under agreements to resell and Securities sold under agreements to repurchase are accounted for as collateralized borrowing or lending transactions and are recorded at their contracted resale or repurchase amounts, plus accrued interest other than those entered into by AIGFP. AIGFP carries such agreements at their current 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. /font/p p style="FONT-FAMILY: times; TEXT-ALIGN: justify"font size="2"nbsp;nbsp;nbsp;nbsp;AIG minimizes the credit 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. /font/p p style="FONT-FAMILY: times; TEXT-ALIGN: justify"font size="2"nbsp;nbsp;nbsp;nbsp;/fontfont size="2"iShort-term investments:/i/fontfont size="2"nbsp;nbsp;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. /font/p p style="FONT-FAMILY: times; TEXT-ALIGN: justify"font size="2"nbsp;nbsp;nbsp;nbsp;/fontfont size="2"bi(e)nbsp;nbsp;Cash:/i/b/fontfont size="2"nbsp;nbsp;Cash represents cash on hand and non-interest bearing demand deposits. /font/p p style="FONT-FAMILY: times; TEXT-ALIGN: justify"font size="2"nbsp;nbsp;nbsp;nbsp;/fontfont size="2"bi(f)nbsp;nbsp;Premiums and other receivables:/i/b/fontfont size="2"nbsp;nbsp;Premiums and other receivables includes premium balances receivable, amounts due from agents and brokers and insureds, trade receivables for AIGFP and other receivables. Trade receivables for AIGFP include receivables from derivative counterparties. The allowance for doubtful accounts on premiums and other receivables was $537nbsp;million and $578nbsp;million at Decembernbsp;31, 2009 and 2008, respectively. /font/p p style="FONT-FAMILY: times; TEXT-ALIGN: justify"font size="2"nbsp;nbsp;nbsp;nbsp;/fontfont size="2"bi(g)nbsp;nbsp;Reinsurance assetsnbsp;#151; net:/i/b/fontfont size="2"nbsp;nbsp;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 $440nbsp;million and $425nbsp;million at Decembernbsp;31, 2009 and 2008, respectively. /font/p p style="FONT-FAMILY: times; TEXT-ALIGN: justify"font size="2"nbsp;nbsp;nbsp;nbsp;/fontfont size="2"bi(h)nbsp;nbsp;Deferred policy acquisition costs:/i/b/fontfont size="2"nbsp;nbsp;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. /font/p p style="FONT-FAMILY: times; TEXT-ALIGN: justify"font size="2"nbsp;nbsp;nbsp;nbsp;/fontfont size="2"iShort-duration insurance contracts:/i/fontfont size="2"nbsp;nbsp;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. /font/p p style="FONT-FAMILY: times; TEXT-ALIGN: justify"font size="2"nbsp;nbsp;nbsp;nbsp;/fontfont size="2"iLong-duration insurance contracts:/i/fontfont size="2"nbsp;nbsp;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 assumpti ons. 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. /font/p p style="FONT-FAMILY: times; TEXT-ALIGN: justify"font size="2"nbsp;nbsp;nbsp;nbsp;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). /font/p p style="FONT-FAMILY: times; TEXT-ALIGN: justify"font size="2"nbsp;nbsp;nbsp;nbsp;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./font/p p style="FONT-FAMILY: times; TEXT-ALIGN: justify"font size="2"nbsp;nbsp;nbsp;nbsp;Beginning in 2008, for contracts accounted for at fair value, policy acquisition costs are expensed as incurred and not deferred or amortized. /font/p p style="FONT-FAMILY: times; TEXT-ALIGN: justify"font size="2"nbsp;nbsp;nbsp;nbsp;/fontfont size="2"bi(i)nbsp;nbsp;Real estate and other fixed assetsnbsp;#151; net:/i/b/fontfont size="2"nbsp;nbsp;The costs of buildings and furniture and equipment are depreciated principally on the straight-line basis over their estimated useful lives (maximum of 40nbsp;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. /font/p p style="FONT-FAMILY: times; TEXT-ALIGN: justify"font size="2"nbsp;nbsp;nbsp;nbsp;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. /font/p p style="FONT-FAMILY: times; TEXT-ALIGN: justify"font size="2"nbsp;nbsp;nbsp;nbsp;Real estate, fixed assets and other long-lived assets are assessed for impairment when impairment indicators exist. /font/p p style="FONT-FAMILY: times; TEXT-ALIGN: justify"font size="2"nbsp;nbsp;nbsp;nbsp;Accumulated depreciation on real estate and other fixed assets was $5.4nbsp;billion and $5.8nbsp;billion at Decembernbsp;31, 2009 and 2008, respectively. /font/p p style="FONT-FAMILY: times; TEXT-ALIGN: justify"font size="2"nbsp;nbsp;nbsp;nbsp;/fontfont size="2"bi(j)nbsp;nbsp;Unrealized gain and Unrealized loss on swaps, options and forward transactions:/i/b/fontfont size="2"nbsp;nbsp;Interest rate, currency, equity and commodity swaps, credit contracts (including AIGFP's 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, when income is not recognized at inception of the contract, income is recognized over the life of the contract and as observable market data becomes available. Aggregate asset or liability positions are netted on the Consolidated Balance Sheet to the extent permitted by qualifying master netting arrangements in p lace 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. /font/p p style="FONT-FAMILY: times; TEXT-ALIGN: justify"font size="2"nbsp;nbsp;nbsp;nbsp;/fontfont size="2"bi(k)nbsp;nbsp;Goodwill:/i/b/fontfont size="2"nbsp;nbsp;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 2009, AIG performed goodwill impairment tests at Marchnbsp;31, Junenbsp;30, Septembernbsp;30, and Decembernbsp;31, 2009. /font/p p style="FONT-FAMILY: times; TEXT-ALIGN: justify"font size="2"nbsp;nbsp;nbsp;nbsp;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 and recorded. Impairment is tested at the reporting unit level or, when all reporting units that comprise an operating segment have similar economic characteristics, impairment is tested at the operating segment level./font/p p style="FONT-FAMILY: times; TEXT-ALIGN: justify"font size="2"nbsp;nbsp;nbsp;nbsp;Management initially assesses the potential for impairment by estimating the fair value of each of AIG's reporting units or operating segments 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. As part of the impairment test, management compares the sum of the estimated fair values of all of AIG's reporting units with AIG's market capitalization as a basis for concluding on the reasonableness of the estimated reporting unit fair values. /font/p p style="FONT-FAMILY: times; TEXT-ALIGN: justify"font size="2"nbsp;nbsp;nbsp;nbsp;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 charge recognized in income, 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. /font/p p style="FONT-FAMILY: times; TEXT-ALIGN: justify"font size="2"bThe following table presents the changes in goodwill by reportable segment: /b/font/p div style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 10%; WIDTH: 57%; PADDING-TOP: 0pt; POSITION: relative" p style="FONT-FAMILY: times; TEXT-ALIGN: justify"font size="2"!-- COMMAND=ADD_TABLEWIDTH,"140%" --/font/p !-- User-specified TAGGED TABLE -- div align="center" table cellspacing="0" cellpadding="0" width="140%" border="0" tr style="HEIGHT: 0px"!-- TABLE COLUMN WIDTHS SET -- td style="FONT-FAMILY: times" align="left" width="9"/td td style="FONT-FAMILY: times" align="left" width="9"/td td style="FONT-FAMILY: times" align="left"/td td style="FONT-FAMILY: times" width="12"/td td style="FONT-FAMILY: times" align="right" width="6"/td td style="FONT-FAMILY: times" width="54"/td td style="FONT-FAMILY: times" width="12"/td td style="FONT-FAMILY: times" align="right" width="6"/td td style="FONT-FAMILY: times" width="73"/td td style="FONT-FAMILY: times" width="12"/td td style="FONT-FAMILY: times" align="right" width="6"/td td style="FONT-FAMILY: times" width="64"/td td style="FONT-FAMILY: times" width="12"/td td style="FONT-FAMILY: times" align="right" width="6"/td td style="FONT-FAMILY: times" width="50"/td td style="FONT-FAMILY: times" width="12"/td td style="FONT-FAMILY: times" align="right" width="6"/td td style="FONT-FAMILY: times" width="40"/td td style="FONT-FAMILY: times" width="12"/td td style="FONT-FAMILY: times" align="right" width="6"/td td style="FONT-FAMILY: times" width="41"/td td style="FONT-FAMILY: times" width="12"/td!-- TABLE COLUMN WIDTHS END --/tr tr style="FONT-SIZE: 1.5pt; HEIGHT: 0px" valign="top" td style="BORDER-BOTTOM: #000000 1pt solid; FONT-FAMILY: times" valign="bottom" colspan="21"nbsp;/td td style="FONT-FAMILY: times" valign="bottom"nbsp;/td/tr tr style="HEIGHT: 0px" valign="bottom" th style="FONT-FAMILY: times" align="left" colspan="3"font size="2"i(in millions)/i/fontbr //th th style="FONT-FAMILY: times"font size="2"nbsp;/font/th th style="FONT-FAMILY: times" align="right" colspan="2"font size="2"General Insurance/fontbr //th th style="FONT-FAMILY: times"font size="2"nbsp;/font/th th style="FONT-FAMILY: times" align="right" colspan="2"font size="2"Domestic Life Insurancenbsp;amp; Retirement Services/fontbr //th th style="FONT-FAMILY: times"font size="2"nbsp;/font/th th style="FONT-FAMILY: times" align="right" colspan="2"font size="2"Foreign Life Insurancenbsp;amp; Retirement Services/fontbr //th th style="FONT-FAMILY: times"font size="2"nbsp;/font/th th style="FONT-FAMILY: times" align="right" colspan="2"font size="2"Financial Services/fontbr //th th style="FONT-FAMILY: times"font size="2"nbsp;/font/th th style="FONT-FAMILY: times" align="right" colspan="2"font size="2"Other/fontbr //th th style="FONT-FAMILY: times"font size="2"nbsp;/font/th th style="FONT-FAMILY: times" align="right" colspan="2"font size="2"Total/fontbr //th th style="FONT-FAMILY: times"font size="2"nbsp;/font/th/tr tr style="FONT-SIZE: 1.5pt; HEIGHT: 0px" valign="top" td style="BORDER-BOTTOM: #000000 2.25pt solid; FONT-FAMILY: times" valign="bottom" colspan="21"nbsp;/td td style="FONT-FAMILY: times" valign="bottom"nbsp;/td/tr tr style="HEIGHT: 0px" valign="bottom" bgcolor="#CCEEFF" td style="FONT-FAMILY: times" colspan="3" p style="MARGIN-LEFT: 9pt; TEXT-INDENT: -9pt; FONT-FAMILY: times"font size="2"bBalance, Decembernbsp;31, 2007:/b/font/p/td td style="FONT-FAMILY: times"font size="2"nbsp;/font/td td style="FONT-FAMILY: times"font size="2"nbsp;/font/td td style="FONT-FAMILY: times"font size="2"nbsp;/font/td td style="FONT-FAMILY: times"font size="2"nbsp;/font/td td style="FONT-FAMILY: times"font size="2"nbsp;/font/td td style="FONT-FAMILY: times"font size="2"nbsp;/font/td td style="FONT-FAMILY: times"font size="2"nbsp;/font/td td style="FONT-FAMILY: times"font size="2"nbsp;/font/td td style="FONT-FAMILY: times"font size="2"nbsp;/font/td td style="FONT-FAMILY: times"font size="2"nbsp;/font/td td style="FONT-FAMILY: times"font size="2"nbsp;/font/td td style="FONT-FAMILY: times"font size="2"nbsp;/font/td td style="FONT-FAMILY: times"font size="2"nbsp;/font/td td style="FONT-FAMILY: times"font size="2"nbsp;/font/td td style="FONT-FAMILY: times"font size="2"nbsp;/font/td td style="FONT-FAMILY: times"font size="2"nbsp;/font/td td style="FONT-FAMILY: times"font size="2"nbsp;/font/td td style="FONT-FAMILY: times"font size="2"nbsp;/font/td td style="FONT-FAMILY: times"font size="2"nbsp;/font/td/tr tr style="HEIGHT: 0px" valign="bottom" bgcolor="white" td style="FONT-FAMILY: times"font size="0"nbsp;/font/td td style="FONT-FAMILY: times" colspan="2" p style="MARGIN-LEFT: 9pt; TEXT-INDENT: -9pt; FONT-FAMILY: times"font size="2"Goodwillnbsp;#150; gross/font/p/td td style="FONT-FAMILY: times"font size="2"nbsp;/font/td td style="FONT-FAMILY: times" align="right"font size="2"$/font/td td style="FONT-FAMILY: times" align="right"font size="2"2,212/font/td td style="FONT-FAMILY: times"font size="2"nbsp;/font/td td style="FONT-FAMILY: times" align="right"font size="2"$/font/td td style="FONT-FAMILY: times" align="right"font size="2"1,302/font/td td style="FONT-FAMILY: times"font size="2"nbsp;/font/td td style="FONT-FAMILY: times" align="right"font size="2"$/font/td td style="FONT-FAMILY: times" align="right"font size="2"4,067/font/td td style="FONT-FAMILY: times"font size="2"nbsp;/font/td td style="FONT-FAMILY: times" align="right"font size="2"$/font/td td style="FONT-FAMILY: times" align="right"font size="2"712/font/td td style="FONT-FAMILY: times"font size="2"nbsp;/font/td td style="FONT-FAMILY: times" align="right"font size="2"$/font/td td style="FONT-FAMILY: times" align="right"font size="2"1,121/font/td td style="FONT-FAMILY: times"font size="2"nbsp;/font/td td style="FONT-FAMILY: times" align="right"font size="2"$/font/td td style="FONT-FAMILY: times" align="right"font size="2"9,414/font/td td style="FONT-FAMILY: times"font size="2"nbsp;/font/td/tr tr style="HEIGHT: 0px" valign="bottom" bgcolor="#CCEEFF" td style="FONT-FAMILY: times"font size="0"nbsp;/font/td td style="FONT-FAMILY: times" colspan="2" p style="MARGIN-LEFT: 9pt; TEXT-INDENT: -9pt; FONT-FAMILY: times"font size="2"Accumulated impairments/font/p/td td style="FONT-FAMILY: times"font size="2"nbsp;/font/td td style="FONT-FAMILY: times"font size="2"nbsp;/font/td td style="FONT-FAMILY: times" align="right"font size="2"-/font/td td style="FONT-FAMILY: times"font size="2"nbsp;/font/td td style="FONT-FAMILY: times"font size="2"nbsp;/font/td td style="FONT-FAMILY: times" align="right"font size="2"-/font/td td style="FONT-FAMILY: times"font size="2"nbsp;/font/td td style="FONT-FAMILY: times"font size="2"nbsp;/font/td td style="FONT-FAMILY: times" align="right"font size="2"-/font/td td style="FONT-FAMILY: times"font size="2"nbsp;/font/td td style="FONT-FAMILY: times"font size="2"nbsp;/font/td td style="FONT-FAMILY: times" align="right"font size="2"-/font/td td style="FONT-FAMILY: times"font size="2"nbsp;/font/td td style="FONT-FAMILY: times"font size="2"nbsp;/font/td td style="FONT-FAMILY: times" align="right"font size="2"-/font/td td style="FONT-FAMILY: times"font size="2"nbsp;/font/td td style="FONT-FAMILY: times"font size="2"nbsp;/font/td td style="FONT-FAMILY: times" align="right"font size="2"-/font/td td style="FONT-FAMILY: times"font size="2"nbsp;/font/td/tr tr style="FONT-SIZE: 1.5pt; HEIGHT: 0px" valign="top" td style="BORDER-BOTTOM: #000000 1pt solid; FONT-FAMILY: times" valign="bottom" colspan="21"nbsp;/td td style="FONT-FAMILY: times" valign="bottom"nbsp;/td/tr tr style="HEIGHT: 0px" valign="bottom" bgcolor="white" td style="FONT-FAMILY: times"font size="0"nbsp;/font/td td style="FONT-FAMILY: times" colspan="2" p style="MARGIN-LEFT: 9pt; TEXT-INDENT: -9pt; FONT-FAMILY: times"font size="2"Net goodwill/font/p/td td style="FONT-FAMILY: times"font size="2"nbsp;/font/td td style="FONT-FAMILY: times"font size="2"nbsp;/font/td td style="FONT-FAMILY: times" align="right"font size="2"2,212/font/td td style="FONT-FAMILY: times"font size="2"nbsp;/font/td td style="FONT-FAMILY: times"font size="2"nbsp;/font/td td style="FONT-FAMILY: times" align="right"font size="2"1,302/font/td td style="FONT-FAMILY: times"font size="2"nbsp;/font/td td style="FONT-FAMILY: times"font size="2"nbsp;/font/td td style="FONT-FAMILY: times" align="right"font size="2"4,067/font/td td style="FONT-FAMILY: times"font size="2"nbsp;/font/td td style="FONT-FAMILY: times"font size="2"nbsp;/font/td td style="FONT-FAMILY: times" align="right"font size="2"712/font/td td style="FONT-FAMILY: times"font size="2"nbsp;/font/td td style="FONT-FAMILY: times"font size="2"nbsp;/font/td td style="FONT-FAMILY: times" align="right"font size="2"1,121/font/td td style="FONT-FAMILY: times"font size="2"nbsp;/font/td td style="FONT-FAMILY: times"font size="2"nbsp;/font/td td style="FONT-FAMILY: times" align="right"font size="2"9,414/font/td td style="FONT-FAMILY: times"font size="2"nbsp;/font/td/tr tr style="FONT-SIZE: 1.5pt; HEIGHT: 0px" valign="top" td style="BORDER-BOTTOM: #000000 1pt solid; FONT-FAMILY: times" valign="bottom" colspan="21"nbsp;/td td style="FONT-FAMILY: times" valign="bottom"nbsp;/td/tr tr style="HEIGHT: 0px" valign="bottom" bgcolor="#CCEEFF" td style="FONT-FAMILY: times"font size="0"nbsp;/font/td td style="FONT-FAMILY: times" colspan="2" p style="MARGIN-LEFT: 9pt; TEXT-INDENT: -9pt; FONT-FAMILY: times"font size="2"Increase (decrease) due to:/font/p/td td style="FONT-FAMILY: times"font size="2"nbsp;/font/td td style="FONT-FAMILY: times"font size="2"nbsp;/font/td td style="FONT-FAMILY: times"font size="2"nbsp;/font/td td style="FONT-FAMILY: times"font size="2"nbsp;/font/td td style="FONT-FAMILY: times"font size="2"nbsp;/font/td td style="FONT-FAMILY: times"font size="2"nbsp;/font/td td style="FONT-FAMILY: times"font size="2"nbsp;/font/td td style="FONT-FAMILY: times"font size="2"nbsp;/font/td td style="FONT-FAMILY: times"font size="2"nbsp;/font/td td style="FONT-FAMILY: times"font size="2"nbsp;/font/td td style="FONT-FAMILY: times"font size="2"nbsp;/font/td td style="FONT-FAMILY: times"font size="2"nbsp;/font/td td style="FONT-FAMILY: times"font size="2"nbsp;/font/td td style="FONT-FAMILY: times"font size="2"nbsp;/font/td td style="FONT-FAMILY: times"font size="2"nbsp;/font/td td style="FONT-FAMILY: times"font size="2"nbsp;/font/td td style="FONT-FAMILY: times"font size="2"nbsp;/font/td td style="FONT-FAMILY: times"font size="2"nbsp;/font/td td style="FONT-FAMILY: times"font size="2"nbsp;/font/td/tr tr style="HEIGHT: 0px" valign="bottom" bgcolor="white" td style="FONT-FAMILY: times"font size="0"nbsp;/font/td td style="FONT-FAMILY: times"font size="0"nbsp;/font/td td style="FONT-FAMILY: times" p style="MARGIN-LEFT: 9pt; 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TEXT-INDENT: -9pt; FONT-FAMILY: times"font size="2"Goodwillnbsp;#150; gross/font/p/td td style="FONT-FAMILY: times"font size="2"nbsp;/font/td td style="FONT-FAMILY: times"font size="2"b$/b/font/td td style="FONT-FAMILY: times" align="right"font size="2"b2,480/b/font/td td style="FONT-FAMILY: times"font size="2"nbsp;/font/td td style="FONT-FAMILY: times" align="right"font size="2"b$/b/font/td td style="FONT-FAMILY: times" align="right"font size="2"b1,301/b/font/td td style="FONT-FAMILY: times"font size="2"nbsp;/font/td td style="FONT-FAMILY: times" align="right"font size="2"b$/b/font/td td style="FONT-FAMILY: times" align="right"font size="2"b4,842/b/font/td td style="FONT-FAMILY: times"font size="2"nbsp;/font/td td style="FONT-FAMILY: times" align="right"font size="2"b$/b/font/td td style="FONT-FAMILY: times" align="right"font size="2"b791/b/font/td td style="FONT-FAMILY: times"font size="2"nbsp;/font/td td style="FONT-FAMILY: times" align="right"font size="2"b$/b/font/td td style="FONT-FAMILY: times" align="right"font size="2"b1,559/b/font/td td style="FONT-FAMILY: times"font size="2"nbsp;/font/td td style="FONT-FAMILY: times" align="right"font size="2"b$/b/font/td td style="FONT-FAMILY: times" align="right"font size="2"b10,973/b/font/td td style="FONT-FAMILY: times"font size="2"nbsp;/font/td/tr tr style="HEIGHT: 0px" valign="bottom" bgcolor="#CCEEFF" td style="FONT-FAMILY: times"font size="0"nbsp;/font/td td style="FONT-FAMILY: times" colspan="2" p style="MARGIN-LEFT: 9pt; TEXT-INDENT: -9pt; FONT-FAMILY: times"font size="2"Accumulated impairments/font/p/td td style="FONT-FAMILY: times"font size="2"nbsp;/font/td td style="FONT-FAMILY: times"font size="2"nbsp;/font/td td style="FONT-FAMILY: times" align="right"font size="2"b(1,196/b/font/td td style="FONT-FAMILY: times"font size="2"b)/b/font/td td style="FONT-FAMILY: times"font size="2"nbsp;/font/td td style="FONT-FAMILY: times" align="right"font size="2"b(1,301/b/font/td td style="FONT-FAMILY: times"font size="2"b)/b/font/td td style="FONT-FAMILY: times"font size="2"nbsp;/font/td td style="FONT-FAMILY: times" align="right"font size="2"b-/b/font/td td style="FONT-FAMILY: times"font size="2"nbsp;/font/td td style="FONT-FAMILY: times"font size="2"nbsp;/font/td td style="FONT-FAMILY: times" align="right"font size="2"b(791/b/font/td td style="FONT-FAMILY: times"font size="2"b)/b/font/td td style="FONT-FAMILY: times"font size="2"nbsp;/font/td td style="FONT-FAMILY: times" align="right"font size="2"b(1,490/b/font/td td style="FONT-FAMILY: times"font size="2"b)/b/font/td td style="FONT-FAMILY: times"font size="2"nbsp;/font/td td style="FONT-FAMILY: times" align="right"font size="2"b(4,778/b/font/td td style="FONT-FAMILY: times"font size="2"b)/b/font/td/tr tr style="FONT-SIZE: 1.5pt; 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HEIGHT: 0px" valign="top" td style="BORDER-BOTTOM: #000000 2.25pt solid; FONT-FAMILY: times" valign="bottom" colspan="21"nbsp;/td td style="FONT-FAMILY: times" valign="bottom"nbsp;/td/tr/table/div !-- end of user-specified TAGGED TABLE --/div div style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 10%; PADDING-TOP: 0pt; POSITION: relative; TEXT-ALIGN: left" dl compact="compact" dt style="MARGIN-BOTTOM: -9pt; FONT-FAMILY: times"font size="1"i(a)/i/font/dt dd style="FONT-FAMILY: times; TEXT-ALIGN: justify"font size="1"iRepresents increase/decrease in AIG's ownership of consolidated investments./i/fontfont size="1" br / br //font/dd dt style="MARGIN-BOTTOM: -9pt; FONT-FAMILY: times"font size="1"i(b)/i/font/dt dd style="FONT-FAMILY: times; TEXT-ALIGN: justify"font size="1"iPrimarily represents foreign exchange translation and purchase price adjustments (PPA), including a PPA of approximately $1nbsp;billion related to a proprietary investment in 2008./i/font/dd/dl/div p style="FONT-FAMILY: times; TEXT-ALIGN: justify"font size="2"nbsp;nbsp;nbsp;nbsp;/fontfont size="2"bi(l)nbsp;nbsp;Other assets:/i/b/fontfont size="2"nbsp;nbsp;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 and intangible assets other than goodwill. The prepaid commitment fee asset related to the FRBNY Credit Agreement is being amortized as interest expense ratably over the five-year term of the agreement, accelerated for actual pay-downs that reduce the total credit available. Based on the level of completed and contemplated transactions that will give rise to mandatory prepayments, AIG estimates that the total credit available will be reduced to zero before maturity, and thus the asset will be fully amortized prior to maturity of the FRBNY Credit Agreement. The actual amortization period will depend upon the timing of such transactions and the values realized./font/p p style="FONT-FAMILY: times; TEXT-ALIGN: justify"font size="2"nbsp;nbsp;nbsp;nbsp;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 $207nbsp;million and $640nbsp;million at Decembernbsp;31, 2009 and 2008, respectively. The amount of expense amortized into income was $173nbsp;million, $483nbsp;million and $395nbsp;million, for the years ended 2009, 2008 and 2007, respectively. /font/p p style="FONT-FAMILY: times; TEXT-ALIGN: justify"font size="2"nbsp;nbsp;nbsp;nbsp;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 $ 1.3nbsp;billion and $1.8nbsp;billion at Decembernbsp;31, 2009 and 2008, respectively. The amortization expense associated with these assets is reported within Policyholder benefits and claims incurred in the Consolidated Statement of Income. Such amortization expense totaled $259nbsp;million, $56nbsp;million and $149nbsp;million for the years ended Decembernbsp;31, 2009, 2008 and 2007, respectively. /font/p p style="FONT-FAMILY: times; TEXT-ALIGN: justify"font size="2"nbsp;nbsp;nbsp;nbsp;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. /font/p p style="FONT-FAMILY: times; TEXT-ALIGN: justify"font size="2"nbsp;nbsp;nbsp;nbsp;See Notenbsp;11 herein for a discussion of derivatives. /font/p p style="FONT-FAMILY: times; TEXT-ALIGN: justify"font size="2"nbsp;nbsp;nbsp;nbsp;/fontfont size="2"bi(m)nbsp;nbsp;Separate accounts:/i/b/fontfont size="2"nbsp;nbsp;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. /font/p p style="FONT-FAMILY: times; TEXT-ALIGN: justify"font size="2"nbsp;nbsp;nbsp;nbsp;/fontfont size="2"bi(n)nbsp;nbsp;Liability for unpaid claims and claims adjustment expense:/i/b/fontfont size="2"nbsp;nbsp;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 per mitted by the domiciliary statutory regulatory authorities. /font/p p style="FONT-FAMILY: times; TEXT-ALIGN: justify"font size="2"nbsp;nbsp;nbsp;nbsp;/fontfont size="2"bi(o)nbsp;nbsp;Future policy benefits for life and accident and health contracts and Policyholder contract deposits:/i/b/fontfont size="2"nbsp;nbsp;The liability for future policy benefits and policyholder contract deposits are established using assumptions described in Notenbsp;12 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 fe ature. 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)nbsp;certain guarantee benefits accounted for as embedded derivatives at fair value, (b)nbsp;annuities issued in a structured settlement arrangement with no life contingency and (c)nbsp;certain contracts that AIG has elected to account for at fair value beginning in 2008. /font/p p style="FONT-FAMILY: times; TEXT-ALIGN: justify"font size="2"nbsp;nbsp;nbsp;nbsp;See Notenbsp;5 herein for additional fair value disclosures. /font/p p style="FONT-FAMILY: times; TEXT-ALIGN: justify"font size="2"nbsp;nbsp;nbsp;nbsp;/fontfont size="2"bi(p)nbsp;nbsp;Other policyholder funds:/i/b/fontfont size="2"nbsp;nbsp;Other policyholder funds are reported at cost and include any policyholders' funds on deposit that encompass premium deposits and similar items. /font/p p style="FONT-FAMILY: times; TEXT-ALIGN: justify"font size="2"nbsp;nbsp;nbsp;nbsp;/fontfont size="2"bi(q)nbsp;nbsp;Securities and spot commodities sold but not yet purchased, at fair value:/i/b/fontfont size="2"nbsp;nbsp;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. Beginning Januarynbsp;1, 2008, AIGFP elected the fair value option for these debt host contracts. /font/p p style="FONT-FAMILY: times; TEXT-ALIGN: justify"font size="2"nbsp;nbsp;nbsp;nbsp;/fontfont size="2"bi(r)nbsp;nbsp;Other liabilities:/i/b/fontfont size="2"nbsp;nbsp;Other liabilities consist of other funds on deposit, and other payables. AIG has entered into certain insurance and reinsurance contracts, primarily in its General Insurance 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 AIGFP which include option premiums rece ived and payables to counterparties that relate to unrealized gains and losses on futures, forwards, and options and balances due to clearing brokers and exchanges. /font/p p style="FONT-FAMILY: times; TEXT-ALIGN: justify"font size="2"nbsp;nbsp;nbsp;nbsp;/fontfont size="2"bi(s)nbsp;nbsp;Commercial Paper and Extendible Commercial Notes and Long-Term Debt:/i/b/fontfont size="2"nbsp;nbsp;AIG's funding consists, in part, of medium and long-term debt and commercial paper. Commercial paper, when issued at a discount, is recorded at the proceeds received and accreted to its par value. Long-term debt is carried at the principal amount borrowed, net of unamortized discounts or premiums. See Notenbsp;14 herein for additional information. Long-term debt also includes liabilities connected to trust preferred stock principally related to outstanding securities issued by AIG Life Holdings (US),nbsp;Inc. (AIGLH), a wholly owned subsidiary of AIG. Cash distributions on such preferred stock are accounted for as interest expense./font/p p style="FONT-FAMILY: times; TEXT-ALIGN: justify"font size="2"nbsp;nbsp;nbsp;nbsp;/fontfont size="2"bi(t)nbsp;nbsp;FRBNY Credit Facility and Commercial Paper Funding Facility:/i/b/fontfont size="2"nbsp;nbsp;In 2008, AIG obtained funding under the FRBNY Credit Facility and the CPFF. Amounts borrowed under the FRBNY Credit Facility and the CPFF are carried at the principal amount borrowed, and in the case of the FRBNY Credit Facility, also include accrued compounding interest and fees, except for AIGFP's CPFF borrowings which are carried at fair value. /font/p p style="FONT-FAMILY: times; TEXT-ALIGN: justify"font size="2"nbsp;nbsp;nbsp;nbsp;/fontfont size="2"bi(u)nbsp;nbsp;Contingent Liabilities:/i/b/fontfont size="2"nbsp;nbsp;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. /font/p p style="FONT-FAMILY: times; TEXT-ALIGN: justify"font size="2"nbsp;nbsp;nbsp;nbsp;/fontfont size="2"bi(v)nbsp;nbsp;Foreign Currency:/i/b/fontfont size="2"nbsp;nbsp;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. Income statement accounts expressed in functional currencies are translated using average exchange rates during the period. The adjustments resulting from translation of financial statement s 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. /font/p p style="FONT-FAMILY: times; TEXT-ALIGN: justify"font size="2"nbsp;nbsp;nbsp;nbsp;/fontfont size="2"bi(w)nbsp;nbsp;Noncontrolling Interests: Noncontrolling nonvoting, callable, junior and senior preferred interests held by Federal Reserve Bank of New York:/i/b/fontfont size="2"nbsp;nbsp;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 $25nbsp;billion reduction of the FRBNY Credit Facility. The preferred interests have a liquidation preference of $25nbsp;billion and have a preferred return of 5nbsp;percent per year compounded quarterly through Septembernbsp;22, 2013 and 9nbsp;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. /font/p p style="FONT-FAMILY: times; TEXT-ALIGN: justify"font size="2"nbsp;nbsp;nbsp;nbsp;/fontfont size="2"iOther Noncontrolling interests:/i/fontfont size="2"nbsp;nbsp;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 (Seriesnbsp;A and B)nbsp;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 (49nbsp;days) on the basis of orders placed in an auction. At Decembernbs p;31, 2009, the dividend rate for each of the Seriesnbsp;A and Seriesnbsp;B MAPS was 0.44nbsp;percent. /font/p p style="FONT-FAMILY: times; TEXT-ALIGN: justify"font size="2"nbsp;nbsp;nbsp;nbsp;/fontfont size="2"bi(x)nbsp;nbsp;Earnings (Loss) per Share:/i/b/fontfont size="2"nbsp;nbsp;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. /font/p p style="FONT-FAMILY: times; TEXT-ALIGN: justify"font size="2"nbsp;nbsp;nbsp;nbsp;See Notenbsp;16 herein for additional earnings (loss) per share disclosures. /font/p p style="FONT-FAMILY: times; TEXT-ALIGN: justify"font size="2"nbsp;nbsp;nbsp;nbsp;/fontfont size="2"bi(y)nbsp;nbsp;Recent Accounting Standards:/i/b/fontfont size="2"nbsp;nbsp;/font/p p style="FONT-FAMILY: times; TEXT-ALIGN: justify"font size="2"iAccounting Changes /i/font/p p style="FONT-FAMILY: times; TEXT-ALIGN: justify"font size="2"nbsp;nbsp;nbsp;nbsp;AIG adopted the following accounting standards during 2007: /font/p p style="FONT-FAMILY: times; TEXT-ALIGN: justify"font size="2"iuDeferred Acquisition Costs/u /i/font/p p style="FONT-FAMILY: times; TEXT-ALIGN: justify"font size="2"nbsp;nbsp;nbsp;nbsp;In September 2005, the American Institute of Certified Public Accountants issued an accounting standard that provides guidance on accounting for internal replacements of insurance and investment contracts other than those specifically described in the accounting standard for certain long-duration contracts issued by insurance enterprises. The statement defines an internal replacement as a modification in product benefits, features, rights, or coverage that occurs by the exchange of a contract for a new contract, or by amendment, endorsement, or rider to a contract, or by the election of a feature or coverage within a contract. Internal replacements that result in a substantially changed contract are accounted for as a termination and a replacement contract. /font/p p style="FONT-FAMILY: times; TEXT-ALIGN: justify"font size="2"nbsp;nbsp;nbsp;nbsp;The statement became effective on Januarynbsp;1, 2007 and generally affects the accounting for internal replacements occurring after that date. In the first quarter of 2007, AIG recorded a cumulative effect reduction of $82nbsp;million, net of tax, to the opening balance of retained earnings on the date of adoption. This adoption reflected changes in unamortized DAC, VOBA, deferred sales inducement assets, unearned revenue liabilities and future policy benefits for life and accident and health insurance contracts resulting from a shorter expected life related to certain group life and health insurance contracts and the effect on the gross profits of investment-oriented products related to previously anticipated future internal replacements. This cumulative effect adjustment affected only the domestic and foreign life insurancenbsp;amp; retirement services operations. / font/p p style="FONT-FAMILY: times; TEXT-ALIGN: justify"font size="2"iuUncertainty in Income Taxes/u /i/font/p p style="FONT-FAMILY: times; TEXT-ALIGN: justify"font size="2"nbsp;nbsp;nbsp;nbsp;In July 2006, the FASB issued an accounting standard which clarifies the accounting for uncertainty in income tax positions. The standard prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of an income tax position taken or expected to be taken in a tax return. The standard also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, and additional disclosures. AIG adopted the standard on Januarynbsp;1, 2007. Upon adoption, AIG recognized a $71nbsp;million increase in the liability for unrecognized tax benefits, which was accounted for as a decrease to opening retained earnings as of Januarynbsp;1, 2007. See Notenbsp;21 herein for additional disclosures. /font/p p style="FONT-FAMILY: times; TEXT-ALIGN: justify"font size="2"iuAccounting for Change In Cash Flows Relating to Income Taxes Generated by a Leveraged Lease Transaction/u /i/font/p p style="FONT-FAMILY: times; TEXT-ALIGN: justify"font size="2"nbsp;nbsp;nbsp;nbsp;In July 2006, the FASB issued an accounting standard that addresses how a change or projected change in the timing of cash flows relating to income taxes generated by a leveraged lease transaction affects the accounting for the lease by the lessor, and directs that the tax assumptions be consistent with any uncertain tax position related to the lease. AIG adopted the standard on Januarynbsp;1, 2007. Upon adoption, AIG recorded a $50nbsp;million decrease in the opening balance of retained earnings, net of tax, to reflect the cumulative effect of this change in accounting. /font/p p style="FONT-FAMILY: times; TEXT-ALIGN: justify"font size="2"nbsp;nbsp;nbsp;nbsp;AIG adopted the following accounting standards during 2008: /font/p p style="FONT-FAMILY: times; TEXT-ALIGN: justify"font size="2"iuFair Value Measurements/u /i/font/p p style="FONT-FAMILY: times; TEXT-ALIGN: justify"font size="2"nbsp;nbsp;nbsp;nbsp;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. /font/p p style="FONT-FAMILY: times; TEXT-ALIGN: justify"font size="2"nbsp;nbsp;nbsp;nbsp;AIG adopted the standard on Januarynbsp;1, 2008, its required effective date. The standard must be applied prospectively, except for certain stand-alone derivatives and hybrid instruments, which must be applied as a cumulative effect of change in accounting principle to retained earnings at Januarynbsp;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 $4nbsp;million. /font/p p style="FONT-FAMILY: times; TEXT-ALIGN: justify"font size="2"nbsp;nbsp;nbsp;nbsp;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 $1.8nbsp;billion ($1.2nbsp;billion after tax) for 2008. The effects of the changes in AIG's own credit spreads on pre-tax income for AIGFP was an increase of $1.4nbsp;billion for 2008. The effect of the changes in counterparty credit spreads for assets measured at fair value at AIGFP was a decrease in pre-tax income of $10.7nbsp;billion for 2008. /font/p p style="FONT-FAMILY: times; TEXT-ALIGN: justify"font size="2"nbsp;nbsp;nbsp;nbsp;See Notenbsp;5 herein for additional disclosures. /font/p p style="FONT-FAMILY: times; TEXT-ALIGN: justify"font size="2"iuFair Value Option/u /i/font/p p style="FONT-FAMILY: times; TEXT-ALIGN: justify"font size="2"nbsp;nbsp;nbsp;nbsp;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. /font/p p style="FONT-FAMILY: times; TEXT-ALIGN: justify"font size="2"nbsp;nbsp;nbsp;nbsp;AIG adopted the standard on Januarynbsp;1, 2008, its required effective date. The adoption of the standard with respect to elections made in the Domestic and Foreign Life Insurancenbsp;amp; Retirement Services segments resulted in an after-tax decrease to 2008 opening retained earnings of $559nbsp;million. The adoption of this standard with respect to elections made by AIGFP resulted in an after-tax decrease to 2008 opening retained earnings of $448nbsp;million. Included in this amount are net unrealized gains of $105nbsp;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 Januarynbsp;1, 2008 for which the fair value option was elected. /font/p p style="FONT-FAMILY: times; TEXT-ALIGN: justify"font size="2"nbsp;nbsp;nbsp;nbsp;See Notenbsp;5 herein for additional fair value disclosures. /font/p p style="FONT-FAMILY: times; TEXT-ALIGN: justify"font size="2"iuFair Value Measurements and Fair Value Option/u /i/font/p p style="FONT-FAMILY: times; TEXT-ALIGN: justify"font size="2"bThe 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:/b/font/p div style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 10%; WIDTH: 80%; PADDING-TOP: 0pt; POSITION: relative" p style="FONT-FAMILY: times; TEXT-ALIGN: justify"font size="2"!-- COMMAND=ADD_TABLEWIDTH,"100%" --/font/p !-- User-specified TAGGED TABLE -- div align="center" table cellspacing="0" cellpadding="0" width="100%" border="0" tr style="HEIGHT: 0px"!-- TABLE COLUMN WIDTHS SET -- td style="FONT-FAMILY: times" align="left"/td td style="FONT-FAMILY: times" width="12"/td td style="FONT-FAMILY: times" align="right" width="6"/td td style="FONT-FAMILY: times" width="79"/td td style="FONT-FAMILY: times" width="12"/td td style="FONT-FAMILY: times" align="right" width="6"/td td style="FONT-FAMILY: times" width="47"/td td style="FONT-FAMILY: times" width="12"/td td style="FONT-FAMILY: times" align="right" width="6"/td td style="FONT-FAMILY: times" width="82"/td td style="FONT-FAMILY: times" width="12"/td!-- TABLE COLUMN WIDTHS END --/tr tr style="FONT-SIZE: 1.5pt; HEIGHT: 0px" valign="top" td style="BORDER-BOTTOM: #000000 1pt solid; FONT-FAMILY: times" valign="bottom" colspan="10"nbsp;/td td style="FONT-FAMILY: times" valign="bottom"nbsp;/td/tr tr style="HEIGHT: 0px" valign="bottom" th style="FONT-FAMILY: times" align="left"font size="2"bAt Januarynbsp;1, 2008br //b/fontfont size="2"i(in millions)/i/fontbr //th th style="FONT-FAMILY: times"font size="2"nbsp;/font/th th style="FONT-FAMILY: times" align="right" colspan="2"font size="2"Accumulatedbr / Otherbr / Comprehensivebr / Income/(Loss)/fontbr //th th style="FONT-FAMILY: times"font size="2"nbsp;/font/th th style="FONT-FAMILY: times" align="right" colspan="2"font size="2"Retainedbr / Earnings/fontbr //th th style="FONT-FAMILY: times"font size="2"nbsp;/font/th th style="FONT-FAMILY: times" align="right" colspan="2"font size="2"Cumulativebr / Effectnbsp;ofbr / Accountingbr / Changes/fontbr //th th style="FONT-FAMILY: times"font size="2"nbsp;/font/th/tr tr style="FONT-SIZE: 1.5pt; HEIGHT: 0px" valign="top" td style="BORDER-BOTTOM: #000000 2.25pt solid; FONT-FAMILY: times" valign="bottom" colspan="10"nbsp;/td td style="FONT-FAMILY: times" valign="bottom"nbsp;/td/tr tr style="HEIGHT: 0px" valign="top" bgcolor="#CCEEFF" td style="FONT-FAMILY: times" valign="bottom" p style="MARGIN-LEFT: 9pt; TEXT-INDENT: -9pt; FONT-FAMILY: times"font size="2"Fair Value Measurements/font/p/td td style="FONT-FAMILY: times" valign="bottom"font size="2"nbsp;/font/td td style="FONT-FAMILY: times" valign="bottom" align="right"font size="2"$/font/td td style="FONT-FAMILY: times" valign="bottom" align="right"font size="2"-/font/td td style="FONT-FAMILY: times" valign="bottom"font size="2"nbsp;/font/td td style="FONT-FAMILY: times" valign="bottom" align="right"font size="2"$/font/td td style="FONT-FAMILY: times" valign="bottom" align="right"font size="2"4/font/td td style="FONT-FAMILY: times" valign="bottom"font size="2"nbsp;/font/td td style="FONT-FAMILY: times" valign="bottom" align="right"font size="2"$/font/td td style="FONT-FAMILY: times" valign="bottom" align="right"font size="2"4/font/td td style="FONT-FAMILY: times" valign="bottom"font size="2"nbsp;/font/td/tr tr style="HEIGHT: 0px" valign="top" bgcolor="white" td style="FONT-FAMILY: times" valign="bottom" p style="MARGIN-LEFT: 9pt; TEXT-INDENT: -9pt; FONT-FAMILY: times"font size="2"Fair Value Option/font/p/td td style="FONT-FAMILY: times" valign="bottom"font size="2"nbsp;/font/td td style="FONT-FAMILY: times" valign="bottom"font size="2"nbsp;/font/td td style="FONT-FAMILY: times" valign="bottom" align="right"font size="2"(105/font/td td style="FONT-FAMILY: times" valign="bottom"font size="2")/font/td td style="FONT-FAMILY: times" valign="bottom"font size="2"nbsp;/font/td td style="FONT-FAMILY: times" valign="bottom" align="right"font size="2"(1,007/font/td td style="FONT-FAMILY: times" valign="bottom"font size="2")/font/td td style="FONT-FAMILY: times" valign="bottom"font size="2"nbsp;/font/td td style="FONT-FAMILY: times" valign="bottom" align="right"font size="2"(1,112/font/td td style="FONT-FAMILY: times" valign="bottom"font size="2")/font/td/tr tr style="FONT-SIZE: 1.5pt; HEIGHT: 0px" valign="top" td style="BORDER-BOTTOM: #000000 1pt solid; FONT-FAMILY: times" valign="bottom" colspan="10"nbsp;/td td style="FONT-FAMILY: times" valign="bottom"nbsp;/td/tr tr style="HEIGHT: 0px" valign="top" bgcolor="#CCEEFF" td style="FONT-FAMILY: times" valign="bottom" p style="MARGIN-LEFT: 9pt; TEXT-INDENT: -9pt; FONT-FAMILY: times"font size="2"Cumulative effect of change in accounting principles/font/p/td td style="FONT-FAMILY: times" valign="bottom"font size="2"nbsp;/font/td td style="FONT-FAMILY: times" valign="bottom" align="right"font size="2"$/font/td td style="FONT-FAMILY: times" valign="bottom" align="right"font size="2"(105/font/td td style="FONT-FAMILY: times" valign="bottom"font size="2")/font/td td style="FONT-FAMILY: times" valign="bottom" align="right"font size="2"$/font/td td style="FONT-FAMILY: times" valign="bottom" align="right"font size="2"(1,003/font/td td style="FONT-FAMILY: times" valign="bottom"font size="2")/font/td td style="FONT-FAMILY: times" valign="bottom" align="right"font size="2"$/font/td td style="FONT-FAMILY: times" valign="bottom" align="right"font size="2"(1,108/font/td td style="FONT-FAMILY: times" valign="bottom"font size="2")/font/td/tr tr style="FONT-SIZE: 1.5pt; HEIGHT: 0px" valign="top" td style="BORDER-BOTTOM: #000000 2.25pt solid; FONT-FAMILY: times" valign="bottom" colspan="10"nbsp;/td td style="FONT-FAMILY: times" valign="bottom"nbsp;/td/tr/table/div !-- end of user-specified TAGGED TABLE --/div p style="FONT-FAMILY: times; TEXT-ALIGN: justify"font size="2"iuOffsetting of Amounts Related to Certain Contracts/u /i/font/p p style="FONT-FAMILY: times; TEXT-ALIGN: justify"font size="2"nbsp;nbsp;nbsp;nbsp;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 Januarynbsp;1, 2008, which requires retrospective application to all prior periods presented. At Decembernbsp;31, 2008, the amounts of cash collateral received and posted that were offset against net derivative positions totaled $7.1nbsp;billion and $19.2nbsp;billion, respectively. The cash collateral received and paid related to AIGFP derivative instruments was previously recorded in Other liabilities and Premiums and other receivables. Cash collateral received related to non-AIGFP derivative instruments was previously recorded in Other liabilities. /font/p p style="FONT-FAMILY: times; TEXT-ALIGN: justify"font size="2"iuDisclosures about Credit Derivatives and Certain Guarantees/u /i/font/p p style="FONT-FAMILY: times; TEXT-ALIGN: justify"font size="2"nbsp;nbsp;nbsp;nbsp;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 Notenbsp;11 herein. /font/p p style="FONT-FAMILY: times; TEXT-ALIGN: justify"font size="2"iuFair Value of Financial Assets in Inactive Markets/u /i/font/p p style="FONT-FAMILY: times; TEXT-ALIGN: justify"font size="2"nbsp;nbsp;nbsp;nbsp;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 and results of operations were not material. /font/p p style="FONT-FAMILY: times; TEXT-ALIGN: justify"font size="2"iuDisclosures about Transfers of Financial Assets and Variable Interest Entities/u /i/font/p p style="FONT-FAMILY: times; TEXT-ALIGN: justify"font size="2"nbsp;nbsp;nbsp;nbsp;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 Decembernbsp;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 Notenbsp;10 herein./font/p p style="FONT-FAMILY: times; TEXT-ALIGN: justify"font size="2"iuAmendment to Impairment Guidance/u /i/font/p p style="FONT-FAMILY: times; TEXT-ALIGN: justify"font size="2"nbsp;nbsp;nbsp;nbsp;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 debt 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 and results of operations were not material./font/p p style="FONT-FAMILY: times; TEXT-ALIGN: justify"font size="2"nbsp;nbsp;nbsp;nbsp;AIG adopted the following accounting standards during 2009: /font/p p style="FONT-FAMILY: times; TEXT-ALIGN: justify"font size="2"iuBusiness Combinations/u /i/font/p p style="FONT-FAMILY: times; TEXT-ALIGN: justify"font size="2"nbsp;nbsp;nbsp;nbsp;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 100nbsp;percent of the fair value of certain assets acquired, liabilities assumed, and noncontrolling (i.e.,nbsp;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./font/p p style="FONT-FAMILY: times; TEXT-ALIGN: justify"font size="2"nbsp;nbsp;nbsp;nbsp;AIG adopted the new business combination standard for business combinations for which the acquisition date is on or after Januarynbsp;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 Decembernbsp;31, 2009, but will affect the future accounting for business combinations, if any, as well as goodwill impairment assessments. /font/p p style="FONT-FAMILY: times; TEXT-ALIGN: justify"font size="2"iuNoncontrolling Interests in Consolidated Financial Statements/u /i/font/p p style="FONT-FAMILY: times; TEXT-ALIGN: justify"font size="2"nbsp;nbsp;nbsp;nbsp;In December 2007, the FASB issued an accounting standard that requires noncontrolling (i.e.,nbsp;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 th e Consolidated Statement of Income (Loss). /font/p p style="FONT-FAMILY: times; TEXT-ALIGN: justify"font size="2"nbsp;nbsp;nbsp;nbsp;AIG adopted the new standard on Januarynbsp;1, 2009 and applied it prospectively, except for presentation and disclosure requirements. The Consolidated Statement of Income (loss) for the years ended Decembernbsp;31, 2008 and 2007 have been retrospectively recast to include net income (loss) attributable to both the controlling and noncontrolling interests. Of the $10.0nbsp;billion minority interest on the Consolidated Balance Sheet at Decembernbsp;31, 2008, $1.9nbsp;billion was reclassified from minority interest liability to Redeemable noncontrolling interests in partially owned consolidated subsidiaries and $8.1nbsp;billion was reclassified to a separate component of total equity entitled Noncontrolling interests. /font/p p style="FONT-FAMILY: times; TEXT-ALIGN: justify"font size="2"nbsp;nbsp;nbsp;nbsp;For the year ended Decembernbsp;31, 2009, the Noncontrolling interests balance declined by $4.4nbsp;billion, of which $1.4nbsp;billion related to the deconsolidation of Transatlantic in the second quarter of 2009 following the public offering of 29.9nbsp;million shares of Transatlantic common stock, after which AIG retained 13.9nbsp;percent of Transatlantic common stock outstanding. AIG recognized a pre-tax loss of $497nbsp;million related to the deconsolidation of Transatlantic. AIG also restructured certain relationships within the Institutional Asset Management business in the second quarter of 2009, resulting in the deconsolidation of a subsidiary and a related decline in goodwill of $476nbsp;million and noncontrolling interests of $1.9nbsp;billion for the year ended Decembernbsp;31, 2009, due to deconsolidation of certain entities. /font t;/p p style="FONT-FAMILY: times; TEXT-ALIGN: justify"font size="2"nbsp;nbsp;nbsp;nbsp;Noncontrolling interests also includes junior and senior non-voting, callable preferred interests issued in connection with the $25nbsp;billion reduction in the outstanding balance and maximum borrowing commitment under the FRBNY Credit Facility. See Notenbsp;16 herein for further discussion. /font/p p style="FONT-FAMILY: times; TEXT-ALIGN: justify"font size="2"iuDisclosures about Derivative Instruments and Hedging Activities/u /i/font/p p style="FONT-FAMILY: times; TEXT-ALIGN: justify"font size="2"nbsp;nbsp;nbsp;nbsp;In March 2008, the FASB issued an accounting standard that requires enhanced disclosures about (a)nbsp;how and why AIG uses derivative instruments, (b)nbsp;how derivative instruments and related hedged items are accounted for, and (c)nbsp;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 Januarynbsp;1, 2009. See Notenbsp;11 herein for related disclosures. /font/p p style="FONT-FAMILY: times; TEXT-ALIGN: justify"font size="2"iuSubsequent Events/u /i/font/p p style="FONT-FAMILY: times; TEXT-ALIGN: justify"font size="2"nbsp;nbsp;nbsp;nbsp;In May 2009, the FASB issued an accounting standard that requires disclosure of the date through which a company evaluated the events that occurred subsequent to the balance sheet date and whether that date represents the date the financial statements were issued or were available to be issued. AIG adopted the new standard for the period ended Junenbsp;30, 2009. The adoption of the new standard did not affect AIG's consolidated financial condition, results of operations or cash flows. /font/p p style="FONT-FAMILY: times; TEXT-ALIGN: justify"font size="2"iuAccounting for Transfers of Financial Assets and Repurchase Financing Transactions/u /i/font/p p style="FONT-FAMILY: times; TEXT-ALIGN: justify"font size="2"nbsp;nbsp;nbsp;nbsp;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. /font/p p style="FONT-FAMILY: times; TEXT-ALIGN: justify"font size="2"iuDetermining Whether an Instrument (or Embedded Feature) is Indexed to an Entity's Own Stock/u /i/font/p p style="FONT-FAMILY: times; TEXT-ALIGN: justify"font size="2"nbsp;nbsp;nbsp;nbsp;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 Januarynbsp;1, 2009, which resulted in a $15nbsp;million cumulative effect adjustment to opening Accumulated deficit and a $91nbsp;million reduction in Additional paid-in capital. /font/p p style="FONT-FAMILY: times; TEXT-ALIGN: justify"font size="2"iuInterim Disclosures about Fair Value of Financial Instruments/u /i/font/p p style="FONT-FAMILY: times; TEXT-ALIGN: justify"font size="2"nbsp;nbsp;nbsp;nbsp;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 Aprilnbsp;1, 2009. /font/p p style="FONT-FAMILY: times; TEXT-ALIGN: justify"font size="2"iuRecognition and Presentation of Other-Than-Temporary Impairments/u /i/font/p p style="FONT-FAMILY: times; TEXT-ALIGN: justify"font size="2"nbsp;nbsp;nbsp;nbsp;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 Notenbsp;6 herein for the expanded disclosure s. /font/p p style="FONT-FAMILY: times; TEXT-ALIGN: justify"font size="2"nbsp;nbsp;nbsp;nbsp;AIG adopted the new standard on Aprilnbsp;1, 2009 and recorded an after-tax cumulative effect adjustment to increase AIG shareholders' equity by $2.5nbsp;billion as of Aprilnbsp;1, 2009, consisting of a decrease in Accumulated deficit of $11.8nbsp;billion and an increase to Accumulated other comprehensive loss of $9.3nbsp;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 Notenbsp;21 herein). The cumulative effect adjustment resulted in an increase of approximately $16nbsp;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 under lying 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)./font/p p style="FONT-FAMILY: times; TEXT-ALIGN: justify"font size="2"nbsp;nbsp;nbsp;nbsp;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 Notenbsp;6 herein for a more detailed discussion of the changes in policy): /font/p ul li style="list-style: none" dl compact="compact" dt style="MARGIN-BOTTOM: -11pt; FONT-FAMILY: times"font size="2"#149;/font/dt dd style="FONT-FAMILY: times; TEXT-ALIGN: justify"font size="2"Impairment charges for non-credit (e.g.,nbsp;severity) losses are no longer recognized;/font font size="2"br / br //font/dd dt style="MARGIN-BOTTOM: -11pt; FONT-FAMILY: times"font size="2"#149;/font/dt dd style="FONT-FAMILY: times; TEXT-ALIGN: justify"font size="2"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 /fontfont size="2"br / br //font/dd dt style="MARGIN-BOTTOM: -11pt; FONT-FAMILY: times"font size="2"#149;/font/dt dd style="FONT-FAMILY: times; TEXT-ALIGN: justify"font size="2"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./font/dd/dl/li/ul p style="FONT-FAMILY: times; TEXT-ALIGN: justify"font size="2"nbsp;nbsp;nbsp;nbsp;The following table presents the components of the change in AIG shareholders' equity at Aprilnbsp;1, 2009 due to the adoption of the new accounting standard for other-than-temporary impairments: /font/p div style="PADDING-RIGHT: 0pt; PADDING-LEFT: 0pt; PADDING-BOTTOM: 0pt; MARGIN-LEFT: 10%; WIDTH: 80%; PADDING-TOP: 0pt; POSITION: relative" p style="FONT-FAMILY: times; TEXT-ALIGN: justify"font size="2"!-- COMMAND=ADD_TABLEWIDTH,"100%" --/font/p !-- User-specified TAGGED TABLE -- div align="center" table cellspacing="0" cellpadding="0" width="100%" border="0" tr style="HEIGHT: 0px"!-- TABLE COLUMN WIDTHS SET -- td style="FONT-FAMILY: times" align="left" width="9"/td td style="FONT-FAMILY: times" align="left"/td td style="FONT-FAMILY: times" width="12"/td td style="FONT-FAMILY: times" align="right" width="6"/td td style="FONT-FAMILY: times" width="65"/td td style="FONT-FAMILY: times" width="12"/td td style="FONT-FAMILY: times" align="right" width="6"/td td style="FONT-FAMILY: times" width="101"/td td style="FONT-FAMILY: times" width="12"/td td style="FONT-FAMILY: times" align="right" width="6"/td td style="FONT-FAMILY: times" width="68"/td td style="FONT-FAMILY: times" width="12"/td!-- TABLE COLUMN WIDTHS END --/tr tr style="FONT-SIZE: 1.5pt; HEIGHT: 0px" valign="top" td style="BORDER-BOTTOM: #000000 1pt solid; FONT-FAMILY: times" valign="bottom" colspan="11"nbsp;/td td style="FONT-FAMILY: times" valign="bottom"nbsp;/td/tr tr style="HEIGHT: 0px" valign="bottom" th style="FONT-FAMILY: times" align="left" colspan="2"font size="2"i(in billions)/i/fontbr //th th style="FONT-FAMILY: times"font size="2"nbsp;/font/th th style="FONT-FAMILY: times" align="right" colspan="2"font size="2"Accumulatedbr / Deficit/fontbr //th th style="FONT-FAMILY: times"font size="2"nbsp;/font/th th style="FONT-FAMILY: times" align="right" colspan="2"font size="2"Accumulatednbsp;Otherbr / Comprehensivenbsp;Loss/fontbr //th th style="FONT-FAMILY: times"font size="2"nbsp;/font/th th style="FONT-FAMILY: times" align="right" colspan="2"font size="2"AIGbr / Shareholders'br / Equity/fontbr //th th style="FONT-FAMILY: times"font size="2"nbsp;/font/th/tr tr style="FONT-SIZE: 1.5pt; HEIGHT: 0px" valign="top" td style="BORDER-BOTTOM: #000000 2.25pt solid; FONT-FAMILY: times" valign="bottom" colspan="11"nbsp;/td td style="FONT-FAMILY: times" valign="bottom"nbsp;/td/tr tr style="HEIGHT: 0px" valign="bottom" bgcolor="#CCEEFF" td style="FONT-FAMILY: times" colspan="2" p style="MARGIN-LEFT: 9pt; TEXT-INDENT: -9pt; FONT-FAMILY: times"font size="2"Increase (decrease) to:/font/p/td td style="FONT-FAMILY: times"font size="2"nbsp;/font/td td style="FONT-FAMILY: times"font size="2"nbsp;/font/td td style="FONT-FAMILY: times"font size="2"nbsp;/font/td td style="FONT-FAMILY: times"font size="2"nbsp;/font/td td style="FONT-FAMILY: times"font size="2"nbsp;/font/td td style="FONT-FAMILY: times"font size="2"nbsp;/font/td td style="FONT-FAMILY: times"font size="2"nbsp;/font/td td style="FONT-FAMILY: times"font size="2"nbsp;/font/td td style="FONT-FAMILY: times"font size="2"nbsp;/font/td td style="FONT-FAMILY: times"font size="2"nbsp;/font/td/tr tr style="HEIGHT: 0px" valign="bottom" bgcolor="white" td style="FONT-FAMILY: times"font size="0"nbsp;/font/td td style="FONT-FAMILY: times" p style="MARGIN-LEFT: 9pt; TEXT-INDENT: -9pt; FONT-FAMILY: times"font size="2"Net effect of the increase in amortized cost of available for sale fixed maturity securities/font/p/td td style="FONT-FAMILY: times"font size="2"nbsp;/font/td td style="FONT-FAMILY: times" align="right"font size="2"$/font/td td style="FONT-FAMILY: times" align="right"font size="2"16.1/font/td td style="FONT-FAMILY: times"font size="2"nbsp;/font/td td style="FONT-FAMILY: times" align="right"font size="2"$/font/td td style="FONT-FAMILY: times" align="right"font size="2"(16.1/font/td td style="FONT-FAMILY: times"font size="2")/font/td td style="FONT-FAMILY: times" align="right"font size="2"$/font/td td style="FONT-FAMILY: times" align="right"font size="2"-/font/td td style="FONT-FAMILY: times"font size="2"nbsp;/font/td/tr tr style="HEIGHT: 0px" valign="bottom" bgcolor="#CCEEFF" td style="FONT-FAMILY: times"font size="0"nbsp;/font/td td style="FONT-FAMILY: times" p style="MARGIN-LEFT: 9pt; TEXT-INDENT: -9pt; FONT-FAMILY: times"font size="2"Net effect of related DAC, SIA and other insurance balances/font/p/td td style="FONT-FAMILY: times"font size="2"nbsp;/font/td td style="FONT-FAMILY: times"font size="2"nbsp;/font/td td style="FONT-FAMILY: times" align="right"font size="2"(1.8/font/td td style="FONT-FAMILY: times"font size="2")/font/td td style="FONT-FAMILY: times"font size="2"nbsp;/font/td td style="FONT-FAMILY: times" align="right"font size="2"1.8/font/td td style="FONT-FAMILY: times"font size="2"nbsp;/font/td td style="FONT-FAMILY: times"font size="2"nbsp;/font/td td style="FONT-FAMILY: times" align="right"font size="2"-/font/td td style="FONT-FAMILY: times"font size="2"nbsp;/font/td/tr tr style="HEIGHT: 0px" valign="bottom" bgcolor="white" td style="FONT-FAMILY: times"font size="0"nbsp;/font/td td style="FONT-FAMILY: times" p style="MARGIN-LEFT: 9pt; TEXT-INDENT: -9pt; FONT-FAMILY: times"font size="2"Net effect on deferred income tax assets/font/p/td td style="FONT-FAMILY: times"font size="2"nbsp;/font/td td style="FONT-FAMILY: times"font size="2"nbsp;/font/td td style="FONT-FAMILY: times" align="right"font size="2"(2.5/font/td td style="FONT-FAMILY: times"font size="2")/font/td td style="FONT-FAMILY: times"font size="2"nbsp;/font/td td style="FONT-FAMILY: times" align="right"font size="2"5.0/font/td td style="FONT-FAMILY: times"font size="2"nbsp;/font/td td style="FONT-FAMILY: times"font size="2"nbsp;/font/td td style="FONT-FAMILY: times" align="right"font size="2"2.5/font/td td style="FONT-FAMILY: times"font size="2"nbsp;/font/td/tr tr style="FONT-SIZE: 1.5pt; HEIGHT: 0px" valign="top" td style="BORDER-BOTTOM: #000000 1pt solid; FONT-FAMILY: times" valign="bottom" colspan="11"nbsp;/td td style="FONT-FAMILY: times" valign="bottom"nbsp;/td/tr tr style="HEIGHT: 0px" valign="bottom" bgcolor="#CCEEFF" td style="FONT-FAMILY: times" colspan="2" p style="MARGIN-LEFT: 9pt; TEXT-INDENT: -9pt; FONT-FAMILY: times"font size="2"Net increase in AIG shareholders' equity/font/p/td td style="FONT-FAMILY: times"font size="2"nbsp;/font/td td style="FONT-FAMILY: times" align="right"font size="2"$/font/td td style="FONT-FAMILY: times" align="right"font size="2"11.8/font/td td style="FONT-FAMILY: times"font size="2"nbsp;/font/td td style="FONT-FAMILY: times" align="right"font size="2"$/font/td td style="FONT-FAMILY: times" align="right"font size="2"(9.3/font/td td style="FONT-FAMILY: times"font size="2")/font/td td style="FONT-FAMILY: times" align="right"font size="2"$/font/td td style="FONT-FAMILY: times" align="right"font size="2"2.5/font/td td style="FONT-FAMILY: times"font size="2"nbsp;/font/td/tr tr style="FONT-SIZE: 1.5pt; HEIGHT: 0px" valign="top" td style="BORDER-BOTTOM: #000000 2.25pt solid; FONT-FAMILY: times" valign="bottom" colspan="11"nbsp;/td td style="FONT-FAMILY: times" valign="bottom"nbsp;/td/tr/table/div !-- end of user-specified TAGGED TABLE --/div p style="FONT-FAMILY: times; TEXT-ALIGN: justify"font size="2"iuDetermining Fair Value When the Volume and Level of Activity for the Asset or Liability Have Significantly Decreased and Identifying Transactions That Are Not Orderly/u /i/font/p p style="FONT-FAMILY: times; TEXT-ALIGN: justify"font size="2"nbsp;nbsp;nbsp;nbsp;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 Aprilnbsp;1, 2009, did not have a material effect on AIG's consolidated financial condition, results of operations or cash flows. /font/p p style="FONT-FAMILY: times; TEXT-ALIGN: justify"font size="2"iuEmployers' Disclosures about Postretirement Benefit Plan Assets/u /i/font/p p style="FONT-FAMILY: times; TEXT-ALIGN: justify"font size="2"nbsp;nbsp;nbsp;nbsp;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 Decembernbsp;15, 2009. The adoption of the new standard had no effect on AIG's consolidated financial condition, results of operations or cash flows. See Notenbsp;19 herein for disclosures. /font/p p style="FONT-FAMILY: times; TEXT-ALIGN: justify"font size="2"iuMeasuring Liabilities at Fair Value/u /i/font/p p style="FONT-FAMILY: times; TEXT-ALIGN: justify"font size="2"nbsp;nbsp;nbsp;nbsp;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 Octobernbsp;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. /font/p p style="FONT-FAMILY: times; TEXT-ALIGN: justify"font size="2"iuInvestments in Certain Entities That Calculate Net Asset Value per Share (or Its Equivalent)/u /i/font/p p style="FONT-FAMILY: times; TEXT-ALIGN: justify"font size="2"nbsp;nbsp;nbsp;nbsp;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 Decembernbsp;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 Notenbsp;5 herein for disclosure. /font/p p style="FONT-FAMILY: times; TEXT-ALIGN: justify"font size="2"iuAccounting and Reporting for Decreases in Ownership of a Subsidiary/u /i/font/p p style="FONT-FAMILY: times; TEXT-ALIGN: justify"font size="2"nbsp;nbsp;nbsp;nbsp;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)nbsp;a business that is not in the legal form of a subsidiary, (2)nbsp;transactions with equity method investees and joint ventures, (3)nbsp;exchanges of groups of assets that constitute businesses for noncontrolling interests in other entities, (4)nbsp;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./font/p gt; p style="FONT-FAMILY: times; TEXT-ALIGN: justify"font size="2"iFuture Application of Accounting Standards /i/font/p p style="FONT-FAMILY: times; TEXT-ALIGN: justify"font size="2"iuAccounting for Transfers of Financial Assets/u /i/font/p p style="FONT-FAMILY: times; TEXT-ALIGN: justify"font size="2"nbsp;nbsp;nbsp;nbsp;In June 2009, the FASB issued an accounting standard addressing transfers of financial assets that removes the concept of a qualifying special-purpose entity (QSPE) from the FASB Accounting Standards Codification and removes the exception from applying the consolidation rules to QSPEs. The new standard is effective for interim and annual periods beginning on Januarynbsp;1, 2010 for AIG. Earlier application is prohibited. AIG expects adoption of this standard will increase both assets and liabilities by approximately $1.3nbsp;billion as a result of consolidating two previously unconsolidated QSPEs. AIG does not expect the effect of adopting this new standard on its results of operations or cash flows to be material. /font/p p style="FONT-FAMILY: times; TEXT-ALIGN: justify"font size="2"iuConsolidation of Variable Interest Entities/u /i/font/p p style="FONT-FAMILY: times; TEXT-ALIGN: justify"font size="2"nbsp;nbsp;nbsp;nbsp;In June 2009, the FASB issued an accounting standard that amends the rules addressing consolidation of 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)nbsp;the obligation to absorb losses of the entity or (2)nbsp;the right to receive benefits from the entity. The new standard also requires enhanced financial reporting by enterprises involved with variable interest entities. The new standard is effective for interim and annual periods beginning on Januarynbsp;1, 2010 for AIG. Earlier application is prohibited. AIG expects adoption of this standard will increase assets, liabilities, noncontrolling interest and retained earnings by approximately $8.8nbsp;billion, $7.4nbsp;billion, $1.2nbs p;billion, and $200nbsp;million, respectively, as a result of consolidating previously unconsolidated VIEs. AIG does not expect the effect of adopting this new standard on its results of operations or cash flows to be material. /font/p/td/tr/table

Consolidated Balance Sheet (parenthetical - assets and liabilities) - USD ($) $ in Millions	Dec. 31, 2009	Dec. 31, 2008
Assets:
Bonds available for sale, amortized cost	$ 364,358	$ 373,600
Securities lending invested collateral, cost	320	3,905
Common and preferred stock available for sale, cost	6,464	8,381
Mortgage and other loans receivable, net of allowance, portion measured at fair value	119	131
Other invested assets, portion measured at fair value	18,888	24,857
Short-term investments, portion measured at fair value	23,975	19,316
Other assets: Prepaid commitment asset	7,099	15,458
Other assets, including prepaid commitment asset, portion measured at fair value	288	369
Liabilities:
Policyholder contract deposits, portion measured at fair value	5,214	5,458
Securities sold under agreements to repurchase, portion measured at fair value	3,221	4,508
Trust deposits and deposits due to banks and other depositors, portion measured at fair value	15	30
Other liabilities, portion measured at fair value	0	1,355
Federal Reserve Bank of New York Commercial Paper Funding Facility, portion measured at fair value	2,742	6,802
Other long-term debt, portion measured at fair value	13,195	$ 16,595
Redeemable noncontrolling interests in partially owned consolidated subsidiaries, portion associated with businesses held for sale in 2009	$ 211