UNITED STATES

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Form 10-K

(Mark One)
þ		ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
		For the fiscal year ended December 31, 2004
or
o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
		For the transition period from                 to

Commission file number 1-8787

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American International Group, Inc.

Delaware		13-2592361
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)
70 Pine Street, New York, New York (Address of principal executive offices)		10270 (Zip Code)

Registrant’s telephone number, including area code (212) 770-7000

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Securities registered pursuant to Section 12(b) of the Act:

		Name of each exchange
Title of each class		on which registered
Common Stock, Par Value $2.50 Per Share		New York Stock Exchange, Inc.

Securities registered pursuant to Section 12(g) of the Act:

Title of each class
None

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    Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes o         No þ

    Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. o

    Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). 
Yes þ         No o

    The aggregate market value of the voting and nonvoting common equity held by nonaffiliates of the registrant computed by reference to the price at which the common equity was last sold as of June 30, 2004 (the last business day of the registrant’s most recently completed second fiscal quarter), was approximately $148,570,190,000.

    As of March 31, 2005, there were outstanding 2,594,907,032 shares of Common Stock, $2.50 par value per share, of the registrant.

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TABLE OF CONTENTS

Page
PART I
	Item 1.		Business			3
	Item 2.		Properties			16
	Item 3.		Legal Proceedings			16
	Item 4.		Submission of Matters to a Vote of Security Holders			19
PART II
	Item 5.		Market for the Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities			20
	Item 6.		Selected Financial Data			21
	Item 7.		Management’s Discussion and Analysis of Financial Condition and Results of Operations			30
	Item 7A.		Quantitative and Qualitative Disclosures About Market Risk			97
	Item 8.		Financial Statements and Supplementary Data			97
	Item 9.		Changes in and Disagreements with Accountants on Accounting and Financial Disclosure			193
	Item 9A.		Controls and Procedures			193
	Item 9B.		Other Information			196
PART III
	Item 10.		Directors and Executive Officers of the Registrant			197
	Item 11.		Executive Compensation			199
	Item 12.		Security Ownership of Certain Beneficial Owners and Management			209
	Item 13.		Certain Relationships and Related Transactions			211
	Item 14.		Principal Accounting Fees and Services			211
PART IV
	Item 15.		Exhibits and Financial Statement Schedules			212
SIGNATURES						213

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PART I

ITEM 1.	Business

American International Group, Inc. (AIG), a Delaware corporation, is a holding company which, through its subsidiaries, is engaged in a broad range of insurance and insurance-related activities in the United States and abroad. AIG’s primary activities include both General Insurance and Life Insurance & Retirement Services operations. Other significant activities include Financial Services and Asset Management. The principal General Insurance company subsidiaries are American Home Assurance Company (American Home), National Union Fire Insurance Company of Pittsburgh, Pa. (National Union), New Hampshire Insurance Company (New Hampshire), Lexington Insurance Company (Lexington), The Hartford Steam Boiler Inspection and Insurance Company (HSB), Transatlantic Reinsurance Company, American International Underwriters Overseas, Ltd. (AIUO) and United Guaranty Residential Insurance Company. Significant Life Insurance & Retirement Services operations include those conducted through American Life Insurance Company (ALICO), American International Reinsurance Company, Ltd. (AIRCO), American International Assurance Company, Limited together with American International Assurance Company (Bermuda) Limited (AIA), Nan Shan Life Insurance Company, Ltd. (Nan Shan), The Philippine American Life and General Insurance Company (Philamlife), AIG Star Life Insurance Co., Ltd. (AIG Star Life), AIG Edison Life Insurance Company (AIG Edison Life), AIG Annuity Insurance Company (AIG Annuity), the AIG American General Life Companies (AIG American General), American General Life and Accident Insurance Company (AGLA), The United States Life Insurance Company in the City of New York (USLIFE), The Variable Annuity Life Insurance Company (VALIC), SunAmerica Life Insurance Company (SunAmerica Life) and AIG SunAmerica Life Assurance Company. AIG’s Financial Services operations are conducted primarily through International Lease Finance Corporation (ILFC), AIG Financial Products Corp. and AIG Trading Group Inc. (AIGTG) and their respective subsidiaries (collectively referred to as AIGFP), and American General Finance, Inc. and its subsidiaries (AGF). AIG’s Asset Management operations include AIG SunAmerica Asset Management Corp. (SAAMCo) and AIG Global Asset Management Holdings Corp. (formerly known as AIG Global Investment Group, Inc.) and its subsidiaries and affiliated companies (AIG Global Investment Group). For information on AIG’s business segments, see Note 3 of Notes to Financial Statements.

     All financial information herein gives effect to the restatement and adjustments for changes in estimates described in Management’s Discussion and Analysis of Financial Condition and Results of Operations. As of March 31, 2005, beneficial ownership of approximately 12.0 percent, 2.0 percent and 1.8 percent of AIG common stock, was held by Starr International Company, Inc. (SICO), The Starr Foundation and C.V. Starr & Co., Inc. (Starr), respectively. For a discussion of AIG’s current relationship with Starr and SICO, see Items 11, 12 and 13 of Part III of this Annual Report on Form 10-K and “Certain Factors Affecting AIG’s Business — The Relationships Between AIG and Starr and SICO.”

     At December 31, 2004, AIG and its subsidiaries had approximately 92,000 employees.

     AIG’s Internet address for its corporate website is www.aigcorporate.com. AIG makes available free of charge, through the Investor Information section of AIG’s corporate website, Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 as soon as reasonably practicable after such materials are electronically filed with, or furnished to, the Securities and Exchange Commission (SEC). AIG also makes available on its corporate website copies of its charters for its Audit, Nominating and Corporate Governance and Compensation Committees, as well as its Corporate Governance Guidelines and Director Independence Standards.

     Throughout this Annual Report on Form 10-K, AIG presents its operations in the way it believes will be most meaningful, as well as most transparent. Certain of the measurements used by AIG management are “non-GAAP financial measures” under SEC rules and regulations. Gross premiums written, statutory underwriting profit (loss) and combined ratios are determined in accordance with accounting principles prescribed by insurance regulatory authorities. For an explanation of why AIG management considers these “non-GAAP measures” useful to investors, see Management’s Discussion and Analysis of Financial Condition and Results of Operations.

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The following table shows the general development of the business of AIG on a consolidated basis, the contributions made to AIG’s consolidated revenues and operating income and the assets held, in the periods indicated, by its General Insurance, Life Insurance & Retirement Services, Financial Services and Asset Management operations and other realized capital gains (losses). For additional information, see Selected Financial Data, Management’s Discussion and Analysis of Financial Condition and Results of Operations and Notes 1, 2 and 3 of Notes to Financial Statements. AIG has restated its financial statements for 2003, 2002, 2001 and 2000. See Management’s Discussion and Analysis of Financial Condition and Results of Operations — “Restatement of Previously Issued Financial Statements” for a description of the adjustments included in the restatement and Selected Financial Data and Note 2 of Notes to Financial Statements for a reconciliation of previously reported amounts to the restated amounts.

Years Ended December 31,							2003				2002				2001				2000
(in millions)			2004				(Restated)				(Restated)				(Restated)				(Restated)
General Insurance operations:
	Gross premiums written		$	52,030			$	46,929			$	36,670			$	28,334			$	24,403
	Net premiums written			40,607				35,022				26,710				19,786				17,581
	Net premiums earned			38,511				31,387				23,572				18,932				16,338
	Underwriting profit (loss)(a)			(149	)(c)			2,074				(1,017	)(d)			(660	)(e)			(454	)
	Net investment income			3,166				2,527				2,423				2,552				2,696
	Realized capital gains (losses)			220				(62	)			(368	)			(194	)			(5	)
	Operating income			3,237	(c)			4,539				1,038	(d)			1,698	(e)			2,237
	Identifiable assets			131,513				117,156				105,929				88,847				81,370
	Loss ratio			78.8				73.2				83.2				79.5				79.2
	Expense ratio			21.3				19.3				21.5				23.8				23.3
	Combined ratio(b)			100.1	(c)			92.5				104.7	(d)			103.3	(e)			102.5
Life Insurance & Retirement Services operations:
	GAAP premiums			28,082				23,493				20,687				19,600				17,689
	Net investment income			15,268				12,941				11,298				10,463				10,027
	Realized capital gains (losses)			36				(181	)			(421	)			(221	)			(118	)
	Operating income			7,924				6,353				5,183				4,811	(f)			4,498
	Identifiable assets			447,896				372,175				289,966				256,731				217,873
	Insurance in-force at end of year			1,858,094				1,583,031				1,298,592				1,228,501				971,892
Financial Services operations:
	Interest, lease and finance charges(g)			7,982				6,341				6,604				6,278				7,220
	Operating income(g)			2,613				1,234				1,870				1,696				2,922
	Identifiable assets			163,287				140,078				127,615				108,638				93,919
Asset Management operations:
	Advisory and management fees and net investment income from GICs			4,692				3,643				3,485				3,562				3,120
	Operating income			1,790				1,078				1,006				990				923
	Identifiable assets			80,075				64,047				53,732				42,961				33,792
Other realized capital gains (losses)				(280	)			(377	)			(509	)			(504	)			(116	)
Revenues(h)				97,987				79,446				66,460				60,170				56,851
Total operating income(i)				14,950				11,655				7,982				5,914				9,175
Total assets				798,660				674,153				561,556				492,447				423,851

(a)	Underwriting profit (loss), a GAAP measure, is statutory underwriting profit (loss) adjusted primarily for changes in the deferral of policy acquisition costs. This adjustment is necessary to present the financial statements in accordance with GAAP.
(b)	Calculated on a statutory basis, includes catastrophe losses of $1.05 billion, $83 million, $61 million, $867 million and $44 million in 2004, 2003, 2002, 2001 and 2000, respectively.
(c)	Includes fourth quarter 2004 increase of $850 million to net loss reserves reflecting the change in estimate for asbestos and environmental reserves.
(d)	In the fourth quarter of 2002, after completion of its annual review of General Insurance loss and loss adjustment expense reserves, AIG increased its net loss reserves relating to accident years 1997 through 2001 by $2.1 billion.
(e)	Includes $769 million in World Trade Center and related losses (WTC losses).
(f)	Includes $100 million in WTC losses.
(g)	Includes the unrealized gain (loss) attributable to economic hedges not qualifying for hedge accounting treatment under FAS 133, including the related foreign exchange gains and losses. For 2004, 2003, 2002, 2001 and 2000, respectively, the amounts included in interest, lease and finance charges are $215 million, $(1.09) billion, $(192) million, $(74) million and $1.27 billion, and the amounts included in Financial Services operating income are $188 million, $(1.04) billion, $(172) million, $(55) million and $1.27 billion. See also Management’s Discussion and Analysis of Financial Condition and Results of Operations — “Restatement of Previously Issued Financial Statements” — Other GAAP Corrections — Accounting for Derivatives (FAS 133 Hedge Accounting).”
(h)	Represents the sum of General Insurance net premiums earned, Life Insurance & Retirement Services GAAP premiums, net investment income, Financial Services interest, lease and finance charges, Asset Management advisory and management fees and net investment income with respect to Guaranteed Investment Contracts (GICs), and realized capital gains (losses).
(i)	Represents income before income taxes, minority interest and cumulative effect of accounting changes. Includes segment operating income and other realized capital gains (losses) presented above, as well as AIG Parent and other operations of $(334) million, $(1.17) billion, $(606) million, $(760) million and $(974) million in 2004, 2003, 2002, 2001 and 2000, respectively, and acquisition, restructuring and related charges of $(2.02) billion in 2001 and $(315) million in 2000.

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	General Insurance Operations

AIG’s General Insurance subsidiaries are multiple line companies writing substantially all lines of property and casualty insurance. Domestic General Insurance operations are comprised of the Domestic Brokerage Group (DBG), which includes the operations of HSB; Transatlantic Holdings, Inc. (Transatlantic); Personal Lines, including 21st Century Insurance Group (21st Century); and United Guaranty Corporation (UGC).

     AIG’s primary domestic division is DBG. DBG’s business is derived from brokers in the United States and Canada and is conducted through its General Insurance subsidiaries including American Home, National Union, Lexington and certain other General Insurance company subsidiaries of AIG.

     DBG writes substantially all classes of business insurance, accepting such business mainly from insurance brokers. This provides DBG the opportunity to select specialized markets and retain underwriting control. Any licensed broker is able to submit business to DBG without the traditional agent-company contractual relationship, but such broker usually has no authority to commit DBG to accept a risk. AIG uses managing general agents owned by Starr to produce business in certain lines. See Item 13. Certain Relationships and Related Transactions.

     In addition to writing substantially all classes of business insurance, including large commercial or industrial property insurance, excess liability, inland marine, environmental, workers compensation and excess and umbrella coverages, DBG offers many specialized forms of insurance such as aviation, accident and health, equipment breakdown, directors and officers liability (D&O), difference-in-conditions, kidnap-ransom, export credit and political risk, and various types of professional errors and omissions coverages. The AIG Risk Management operation provides insurance and risk management programs for large corporate customers. The AIG Risk Finance operation is a leading provider of customized structured insurance products. Also included in DBG are the operations of AIG Environmental, which focuses specifically on providing specialty products to clients with environmental exposures. Lexington writes surplus lines, those risks for which conventional insurance companies do not readily provide insurance coverage, either because of complexity or because the coverage does not lend itself to conventional contracts.

     Certain of the products of the DBG companies include funding components or have been structured in a manner such that little or no insurance risk is actually transferred. Funds received in connection with these products are recorded as deposits, included in other liabilities, rather than premiums and incurred losses.

     The AIG Worldsource Division introduces and coordinates AIG’s products and services to U.S.-based multinational clients and foreign corporations doing business in the U.S. Transatlantic subsidiaries offer reinsurance capacity on both a treaty and facultative basis both in the U.S. and abroad. Transatlantic structures programs for a full range of property and casualty products with an emphasis on specialty risk.

     AIG’s personal lines operations engage in mass marketing of personal lines coverages, primarily private passenger auto and personal umbrella coverages, principally through American International Insurance Company and 21st Century. In 2003, AIG acquired the U.S.-based auto and home insurance business of General Electric Company (GE).

     The business of UGC and its subsidiaries is also included in the domestic operations of AIG. The principal business of the UGC subsidiaries is the writing of residential mortgage loan insurance, which is guaranty insurance on conventional first mortgage loans on single-family dwellings and condominiums. This type of insurance protects lenders against loss if borrowers default. UGC subsidiaries also write home equity and property improvement loan insurance on loans to finance residential property improvements, alterations and repairs and for other purposes not necessarily related to real estate. During 2003, UGC commenced providing guaranty insurance to providers of student loans. UGC had approximately $22 billion of guaranty risk in force at December 31, 2004.

     AIG’s Foreign General Insurance group accepts risks primarily underwritten through American International Underwriters (AIU), a marketing unit consisting of wholly owned agencies and insurance companies. The Foreign General Insurance group also includes business written by AIG’s foreign-based insurance subsidiaries. The Foreign General group uses various marketing methods and multiple distribution channels to write both business and personal lines insurance with certain refinements for local laws, customs and needs. AIU operates in Asia, the Pacific Rim, the United Kingdom, Europe, Africa, the Middle East and Latin America. See also Note 3 of Notes to Financial Statements.

     During 2004, DBG and the Foreign General Insurance group accounted for 55.4 percent and 23.1 percent, respectively, of AIG’s General Insurance net premiums written.

     AIG’s General Insurance company subsidiaries worldwide operate primarily by underwriting and accepting risks for their direct account and securing reinsurance on that portion of the risk in excess of the limit which they wish to retain. This operating policy differs from that of many insurance

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companies that will underwrite only up to their net retention limit, thereby requiring the broker or agent to secure commitments from other underwriters for the remainder of the gross risk amount.

     Certain of DBG’s commercial insurance is reinsured on a quota share basis by AIRCO. Various AIG profit centers, including AIU, AIG Reinsurance Advisors, Inc. and AIG Risk Finance, use AIRCO as a reinsurer for certain of their businesses, and AIRCO also receives premiums from offshore fronting arrangements for clients of AIG subsidiaries. In accordance with permitted accounting practices in Bermuda, AIRCO discounts reserves attributable to certain classes of business assumed from other AIG subsidiaries. See Management’s Discussion and Analysis of Financial Condition and Results of Operations – “Operating Review – Reserve for Losses and Loss Expenses.”

     The utilization of reinsurance is closely monitored by senior management and AIG’s Credit Risk Committee. AIG believes that no exposure to a single reinsurer represents an inappropriate concentration of risk to AIG, nor is AIG’s business substantially dependent upon any reinsurance contract. See also Management’s Discussion and Analysis of Financial Condition and Results of Operations and Note 5 of Notes to Financial Statements.

     AIG is diversified both in terms of classes of business and geographic locations. In General Insurance, approximately 13 percent of net premiums written for the year ended December 31, 2004 represented workers compensation business. During 2004, of the direct General Insurance premiums written (gross premiums less return premiums and cancellations, excluding reinsurance assumed and before deducting reinsurance ceded), 12.0 percent and 6.7 percent were written in California and New York, respectively. No other state accounted for more than five percent of such premiums.

     The majority of AIG’s General Insurance business is in the casualty classes, which tend to involve longer periods of time for the reporting and settling of claims. This may increase the risk and uncertainty with respect to AIG’s loss reserve development. See also the Discussion and Analysis of Consolidated Net Losses and Loss Expense Reserve Development and Management’s Discussion and Analysis of Financial Condition and Results of Operations.

	Discussion and Analysis of Consolidated Net Losses and Loss Expense Reserve Development

The reserve for net losses and loss expenses represents the accumulation of estimates for reported losses (“case basis reserves”) and provisions for losses incurred but not reported (IBNR), both reduced by applicable reinsurance recoverable and the discount for future investment income. Losses and loss expenses are charged to income as incurred.

     Loss reserves established with respect to foreign business are set and monitored in terms of the respective local or functional currency. Therefore, no assumption is included for changes in currency rates. See also Note 1(w) of Notes to Financial Statements.

     Management reviews the adequacy of established loss reserves through the utilization of a number of analytical reserve development techniques. Through the use of these techniques, management is able to monitor the adequacy of its established reserves and determine appropriate assumptions for inflation. Also, analysis of emerging specific development patterns, such as case reserve redundancies or deficiencies and IBNR emergence, allows management to determine any required adjustments. See also Management’s Discussion and Analysis of Financial Condition and Results of Operations.

     As a result of its internal review, AIG has determined that its carried reserves for net losses and loss expenses are required to be restated and adjusted. The tables below present those amounts as so restated and adjusted. In addition, AIG has increased the reserves for asbestos and environmental exposures included within the reserve for net losses and loss expenses by $850 million in the fourth quarter of 2004 to reflect a change in estimate. See Management’s Discussion and Analysis of Financial Condition and Results of Operations – “Restatement of Previously Issued Financial Statements,” “Fourth Quarter 2004 Changes in Estimates” and “Asbestos and Environmental Reserves.” See also Notes 1(cc) and 2 of Notes to Financial Statements.

     The “Analysis of Consolidated Net Losses and Loss Expense Reserve Development” table presents the development of net losses and loss expense reserves for calendar years 1994 through 2004. Immediately following this table is a second table that presents all data on a basis that excludes asbestos and environmental net losses and loss expense reserve development. The opening reserves held are shown at the top of the table for each year end date. The amount of loss reserve discount included in the opening reserve at each date is shown immediately below the reserves held for each year. The undiscounted reserve at each date is thus the sum of the discount and the reserve held. The upper half of the table shows the cumulative amounts paid during successive years related to the undiscounted opening loss reserves. For example, in the table that excludes asbestos and environmental losses, with respect to the net losses and loss expense reserve of $20.87 billion as of December 31, 1997, by the end of 2004 (seven years later) $18.97 billion had actually been paid in settlement of these net loss reserves. In addition, as

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     The bottom of each table below shows the remaining undiscounted and discounted net loss reserve for each year. For example, in the table that excludes asbestos and environmental losses, for the 2000 year-end, the remaining undiscounted reserves held as of December 31, 2004 are $8.80 billion, with a corresponding discounted net reserve of $8.21 billion.

     The reserves for net losses and loss expenses with respect to Transatlantic and 21st Century are included only in consolidated net losses and loss expenses commencing with the year ended December 31, 1998. Reserve development for these operations is included only for 1998 and subsequent periods. Thus, the presentation for 1997 and prior year ends is not fully comparable to that for 1998 and subsequent years in the tables below.

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	Analysis of Consolidated Losses and Loss Expense Reserve Development

The following table presents for each calendar year the losses and loss expense reserves and the development thereof including those with respect to asbestos and environmental claims. As a result of the internal review discussed in Management’s Discussion and Analysis of Financial Condition and Results of Operations, the amounts of carried reserves and the liabilities reestimated have been restated or adjusted for all periods presented. See also Management’s Discussion and Analysis of Financial Condition and Results of Operations.

(in millions)			1994				1995				1996				1997				1998				1999				2000				2001				2002				2003				2004
Reserves Held			$	18,888			$	19,890			$	20,632			$	21,038			$	25,559			$	25,807			$	25,860			$	26,437			$	29,768			$	36,738			$	47,747
Discount (in Reserves Held)				157				217				393				619				897				1,075				1,287				1,423				1,499				1,516				1,553
Reserves Held (Undiscounted)				19,045				20,107				21,025				21,657				26,456				26,882				27,147				27,860				31,267				38,254				49,300
Paid (Cumulative) as of:
	One year later			4,922				5,416				5,712				5,607				7,205				8,266				9,709				11,007				10,775				12,163
	Two years later			8,338				8,982				9,244				9,754				12,382				14,640				17,149				18,091				18,589
	Three years later			10,702				11,363				11,943				12,939				16,599				19,901				21,930				23,881
	Four years later			12,541				13,108				14,152				15,484				20,263				23,074				26,090
	Five years later			13,868				14,667				16,077				17,637				22,303				25,829
	Six years later			15,036				16,120				17,551				18,806				24,114
	Seven years later			16,079				17,212				18,415				19,919
	Eight years later			16,947				17,792				19,200
	Nine years later			17,359				18,379
	Ten years later			17,806

(in millions)			1994				1995				1996				1997				1998				1999				2000				2001				2002				2003				2004
Reserves Held (undiscounted)			$	19,045			$	20,107			$	21,025			$	21,657			$	26,456			$	26,882			$	27,147			$	27,860			$	31,267			$	38,254			$	49,300
Undiscounted Liability Restated as of:
	One year later			18,657				19,918				20,930				21,699				26,038				26,502				27,234				31,456				33,266				41,081
	Two years later			18,806				20,002				21,013				21,637				25,780				27,229				30,913				33,639				37,733
	Three years later			19,034				20,001				21,130				21,401				26,329				30,176				32,923				38,110
	Four years later			19,112				20,278				20,912				21,628				28,171				31,368				36,355
	Five years later			19,308				20,126				21,057				22,545				28,757				34,051
	Six years later			19,296				20,087				21,607				22,858				30,773
	Seven years later			19,253				20,471				21,806				24,346
	Eight years later			19,579				20,694				23,122
	Nine years later			19,756				21,871
	Ten years later			20,898
Redundancy/(Deficiency)				(1,852	)			(1,764	)			(2,097	)			(2,689	)			(4,317	)			(7,169	)			(9,209	)			(10,250	)			(6,466	)			(2,827	)
Remaining Reserves (Undiscounted)				3,091				3,493				3,922				4,426				6,659				8,221				10,266				14,229				19,144				28,918
Remaining Discount				205				240				281				332				404				490				596				789				915				1,139
Remaining Reserves				2,886				3,253				3,641				4,094				6,255				7,731				9,670				13,440				18,229				27,779

The table below shows the gross liability (before discount), reinsurance recoverable and net liability recorded at each year-end and the reestimation of these amounts as of December 31, 2004.

(in millions)		1994				1995				1996				1997				1998				1999				2000				2001				2002				2003				2004
Gross Liability, End of Year		$	31,116			$	32,434			$	32,741			$	32,186			$	37,114			$	37,449			$	39,398			$	43,061			$	48,594			$	53,897			$	63,924
Reinsurance Recoverable, End of Year			12,071				12,327				11,716				10,530				10,658				10,567				12,251				15,201				17,327				15,644				14,624
Net Liability, End of Year			19,045				20,107				21,025				21,657				26,456				26,882				27,147				27,860				31,267				38,254				49,300
Reestimated Gross Liability			34,630				36,688				37,361				39,225				47,370				51,478				55,386				57,447				56,861				57,516
Reestimated Reinsurance Recoverable			13,732				14,817				14,239				14,880				16,597				17,427				19,031				19,337				19,128				16,436
Reestimated Net Liability			20,898				21,871				23,122				24,346				30,773				34,051				36,355				38,110				37,733				41,081
Cumulative Gross Redundancy/(Deficiency)			(3,514	)			(4,254	)			(4,620	)			(7,039	)			(10,256	)			(14,029	)			(15,988	)			(14,386	)			(8,267	)			(3,619	)

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	Analysis of Consolidated Losses and Loss Expense Reserve Development Excluding Asbestos and Environmental Losses and Loss Expense Reserve Development

The following table presents for each calendar year the losses and loss expense reserves and the development thereof excluding those with respect to asbestos and environmental claims. As a result of the internal review discussed in Management’s Discussion and Analysis of Financial Condition and Results of Operations, the amounts of carried reserves and the liabilities reestimated have been restated or adjusted for all periods presented. See also Management’s Discussion and Analysis of Financial Condition and Results of Operations.

(in millions)			1994				1995				1996				1997				1998				1999				2000				2001				2002				2003				2004
Reserves Held			$	18,558			$	19,383			$	19,889			$	20,250			$	24,695			$	24,916			$	25,005			$	25,718			$	29,071			$	36,068			$	46,236
Discount (in Reserves Held)				157				217				393				619				897				1,075				1,287				1,423				1,499				1,516				1,553
Reserves Held (Undiscounted)				18,715				19,600				20,282				20,869				25,592				25,991				26,292				27,141				30,570				37,584				47,789
Paid (Cumulative) as of:
	One year later			4,847				5,309				5,603				5,467				7,084				8,195				9,515				10,861				10,632				11,999
	Two years later			8,156				8,771				8,996				9,500				12,190				14,376				16,808				17,801				18,283
	Three years later			10,417				11,013				11,582				12,618				16,214				19,490				21,447				23,430
	Four years later			12,117				12,645				13,724				14,972				19,732				22,521				25,445
	Five years later			13,332				14,139				15,460				16,983				21,630				25,116
	Six years later			14,435				15,404				16,792				18,014				23,282
	Seven years later			15,291				16,355				17,519				18,972
	Eight years later			16,018				16,798				18,149
	Nine years later			16,294				17,230
	Ten years later			16,588

(in millions)			1994				1995				1996				1997				1998				1999				2000				2001				2002				2003				2004
Reserves Held (undiscounted)			$	18,715			$	19,600			$	20,282			$	20,869			$	25,592			$	25,991			$	26,292			$	27,141			$	30,570			$	37,584			$	47,789
Undiscounted Liability Restated as of:
	One year later			18,074				19,072				20,040				20,713				25,031				25,581				26,326				30,618				32,482				39,411
	Two years later			17,893				19,019				19,923				20,521				24,743				26,259				29,886				32,714				35,952
	Three years later			17,983				18,815				19,912				20,257				25,244				29,084				31,810				36,189
	Four years later			17,858				18,965				19,666				20,445				26,964				30,190				34,247
	Five years later			17,927				18,787				19,773				21,244				27,464				31,878
	Six years later			17,889				18,710				20,208				21,474				28,486
	Seven years later			17,810				18,980				20,324				21,972
	Eight years later			18,022				19,119				20,651
	Nine years later			18,117				19,308
	Ten years later			18,270
Redundancy/(Deficiency)				445				292				(369	)			(1,103	)			(2,894	)			(5,887	)			(7,955	)			(9,049	)			(5,382	)			(1,827	)
Remaining Reserves (undiscounted)				1,682				2,078				2,502				3,001				5,204				6,762				8,801				12,759				17,669				27,413
Remaining Discount				205				240				281				332				404				490				596				789				915				1,139
Remaining Reserves				1,477				1,838				2,221				2,669				4,800				6,272				8,205				11,970				16,754				26,274

The table below shows the gross liability (before discount), reinsurance recoverable and net liability recorded at each year-end and the reestimation of these amounts as of December 31, 2004.

(in millions)		1994				1995				1996				1997				1998				1999				2000				2001				2002				2003				2004
Gross Liability, End of Year		$	29,702			$	30,491			$	30,437			$	29,877			$	34,615			$	34,837			$	36,953			$	40,832			$	46,457			$	51,873			$	60,391
Reinsurance Recoverable, End of Year			10,987				10,891				10,156				9,008				9,023				8,846				10,661				13,692				15,887				14,288				12,602
Net Liability, End of Year			18,715				19,600				20,282				20,869				25,592				25,991				26,292				27,141				30,570				37,584				47,789
Reestimated Gross Liability			26,984				29,386				30,461				32,768				41,241				45,754				50,183				52,771				52,527				53,589
Reestimated Reinsurance Recoverable			8,714				10,078				9,810				10,795				12,755				13,876				15,936				16,581				16,574				14,177
Reestimated Net Liability			18,270				19,308				20,651				21,972				28,486				31,878				34,247				36,189				35,952				39,411
Cumulative Gross Redundancy/(Deficiency)			2,718				1,105				(24	)			(2,891	)			(6,626	)			(10,917	)			(13,230	)			(11,939	)			(6,070	)			(1,716	)

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	Reconciliation of Net Reserves for Losses and Loss Expenses

			2004				2003				2002
(in millions)							(Restated)				(Restated)
Net reserve for losses and loss expenses at beginning of year			$	36,738			$	29,768			$	26,437
Acquisition				–				391	(a)			–
Losses and loss expenses incurred:
	Current year			27,129				20,663				15,723
	Prior years(b)			3,204	(c)			2,295				3,876
				30,333				22,958				19,599
Losses and loss expenses paid:
	Current year			7,161				5,604				5,261
	Prior years			12,163				10,775				11,007
				19,324				16,379				16,268
Net reserve for losses and loss expenses at end of year(d)			$	47,747			$	36,738			$	29,768

(a)	Reflects the opening balances with respect to the GE U.S.-based auto and home insurance business acquired in 2003.
(b)	Includes accretion of discount of $377 million in 2004, $296 million in 2003 and $280 million in 2002.

(c)	Includes fourth quarter charge of $850 million attributable to the change in estimate for asbestos and environmental reserves.

(d)	See also Note 6(a) of Notes to Financial Statements.

     For further discussion regarding net reserves for losses and loss expenses, see Management’s Discussion and Analysis of Financial Condition and Results of Operations.

     The adjustments made to the reserve for losses and loss expenses resulting from the internal review, including the fourth quarter charge attributable to a change in estimate for asbestos and environmental exposures, will be restated or adjusted as reported in the Annual Statements filed with state insurance departments and, where appropriate, with foreign regulatory authorities. In addition, because not all of AIG’s General Insurance operations are subject to regulatory filing requirements by the states, there are differences between the sum of reserves for losses and loss expenses as filed with the states and the reserves for losses and loss expenses as reported in AIG’s Consolidated Balance Sheet at December 31, 2004. See also Management’s Discussion and Analysis of Financial Condition and Results of Operations and Note 2 of Notes to Financial Statements.

	Life Insurance & Retirement Services Operations

AIG’s Life Insurance & Retirement Services subsidiaries offer a wide range of insurance and investment-oriented products both domestically and abroad. Insurance-oriented products consist of individual and group life, payout annuities, endowment and accident and health policies. Investment-oriented products consist generally of fixed and variable annuities. See also Management’s Discussion and Analysis of Financial Condition and Results of Operations.

     Life Insurance & Retirement Services operations in foreign countries comprised 78.0 percent of Life Insurance & Retirement Services GAAP premiums and 62.4 percent of Life Insurance & Retirement Services operating income in 2004. AIG operates overseas principally through ALICO, AIA, Nan Shan, Philamlife, AIG Star Life, and AIG Edison Life. ALICO is incorporated in Delaware and all of its business is written outside of the United States. ALICO has operations either directly or through subsidiaries in Europe, Latin America, the Caribbean, the Middle East, South Asia and the Far East, with Japan being the largest territory. AIG added significantly to its presence in Japan with the acquisition of GE Edison Life Insurance Company (now AIG Edison Life), which was consolidated beginning with the fourth quarter of 2003. AIA operates primarily in China (including Hong Kong), Singapore, Malaysia, Thailand, Korea, Australia, New Zealand, Vietnam, and India. The operations in India are conducted through a joint venture, Tata AIG Life Insurance Company Limited. Nan Shan operates in Taiwan. Philamlife is the largest life insurer in the Philippines. AIG Star Life operates in Japan. See also Note 3 of Notes to Financial Statements.

     AIRCO acts primarily as an internal reinsurance company for AIG’s foreign life operations. This facilitates insurance risk management (retention, volatility, concentrations) and capital planning locally (branch and subsidiary). It also allows AIG to pool its insurance risks and purchase reinsurance more efficiently at a consolidated level and manage global counterparty risk and relationships.

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     AIG’s principal domestic Life Insurance & Retirement Services operations include AGLA, AIG American General, AIG Annuity, USLIFE, VALIC and SunAmerica Life. These companies utilize multiple distribution channels including independent producers, brokerage, career agents and banks to offer life insurance, annuity and accident and health products and services as well as financial and investment products. The domestic Life Insurance & Retirement Services operations comprised 22.0 percent of total Life Insurance & Retirement Services GAAP premiums and 37.6 percent of Life Insurance & Retirement Services operating income in 2004.

     There was no significant adverse effect on AIG’s Life Insurance & Retirement Services results of operations from economic environments in any one state, country or geographic region for the year ended December 31, 2004. See also Management’s Discussion and Analysis of Financial Condition and Results of Operations.

     Life insurance products such as whole life and endowment continue to be significant in the overseas companies, especially in Southeast Asia, while a mixture of life insurance, accident and health and retirement services products are sold in Japan.

     In addition to the above, AIG also has subsidiary operations in Canada, Egypt, Mexico, Poland, Switzerland and Puerto Rico, and conducts life insurance business through a joint venture in Brazil and through an AIUO subsidiary company in Russia, and in certain countries in Central and South America.

     The Foreign Life Insurance & Retirement Services companies have over 250,000 full and part-time agents, as well as independent producers, and sell their products largely to indigenous persons in local and foreign currencies. In addition to the agency outlets, these companies also distribute their products through direct marketing channels, such as mass marketing, and through brokers and other distribution outlets, such as financial institutions.

	Insurance Investment Operations

A significant portion of AIG’s General Insurance and Life Insurance & Retirement Services operating revenues are derived from AIG’s insurance investment operations. See also Management’s Discussion and Analysis of Financial Condition and Results of Operations and Notes 1, 3 and 8 of Notes to Financial Statements.

The following table summarizes the investment results of the General Insurance operations. See also Management’s Discussion and Analysis of Financial Condition and Results of Operations and Note 8 of Notes to Financial Statements.

		Annual Average Cash and Invested Assets
		Cash
		(including												Return on				Return on
Years Ended December 31,		short-term				Invested								Average Cash				Average
(in millions)		invetments)				Assets(a)				Total				and Assets				Assets
2004			$2,012			$	73,361			$	75,373				4.2	%(b)			4.3	%(c)
2003 (Restated)			1,818				59,871				61,689				4.1	(b)			4.2	(c)
2002 (Restated)			1,537				47,481				49,018				4.9	(b)			5.1	(c)
2001 (Restated)			1,338				41,478				42,816				6.0	(b)			6.2	(c)
2000 (Restated)			1,152				39,686				40,838				6.6	(b)			6.8	(c)

(a)	Including investment income due and accrued, and real estate.
(b)	Net investment income divided by the annual average sum of cash and invested assets.
(c)	Net investment income divided by the annual average invested assets.

The following table summarizes the investment results of the Life Insurance & Retirement Services operations. See also Management’s Discussion and Analysis of Financial Condition and Results of Operations and Note 8 of Notes to Financial Statements.

		Annual Average Cash and Invested Assets
		Cash
		(including												Return on				Return on
Years Ended December 31,		short-term				Invested								Average Cash				Average
(in millions)		invetments)				Assets(a)				Total				and Assets				Assets
2004		$	5,089			$	308,538			$	313,627				4.9	%(b)			4.9	%(c)
2003 (Restated)			4,680				248,249				252,929				5.1	(b)			5.2	(c)
2002 (Restated)			3,919				200,130				204,049				5.5	(b)			5.6	(c)
2001 (Restated)			3,615				162,879				166,494				6.3	(b)			6.4	(c)
2000 (Restated)			4,644				137,944				142,588				7.0	(b)			7.3	(c)

(a)	Including investment income due and accrued, and real estate.
(b)	Net investment income divided by the annual average sum of cash and invested assets.
(c)	Net investment income divided by the annual average invested assets.

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     AIG’s worldwide insurance investment policy places primary emphasis on investments in government and other high quality, fixed income securities in all of its portfolios and, to a lesser extent, investments in high yield bonds, common stocks and partnerships, in order to preserve policyholders’ surplus and generate net investment income. The ability to implement this policy is somewhat limited in certain territories as there may be a lack of adequate long-term investments or investment restrictions may be imposed by the local regulatory authorities. See also Management’s Discussion and Analysis of Financial Condition and Results of Operations.

	Financial Services Operations

AIG’s Financial Services subsidiaries engage in diversified financial products and services including aircraft leasing, capital market transactions, and consumer and insurance premium financing.

     Aircraft Finance operations represent the operations of ILFC, which engages primarily in the acquisition of commercial jet aircraft and the leasing and remarketing of such aircraft to airlines around the world. ILFC also provides, for a fee, fleet management services to certain third-party operators. See also Note 3 of Notes to Financial Statements.

     During the third quarter of 2003, AIG integrated the operations of AIG Trading Group Inc. with AIG Financial Products Corp., establishing the Capital Markets reporting unit. AIGFP engages as principal in standard and customized interest rate, currency, equity, commodity, and credit products with top-tier corporations, financial institutions, governments, agencies, institutional investors, and high-net-worth individuals throughout the world. AIGFP also raises funds through municipal reinvestment contracts and other private and public security offerings, investing the proceeds in a diversified portfolio of high grade securities and derivative transactions. AIGFP engages in various commodity and foreign exchange trading and market-making activities. See also Note 3 of Notes to Financial Statements.

     Consumer Finance operations include AGF as well as AIG Consumer Finance Group, Inc. (AIGCFG). See also Note 3 of Notes to Financial Statements.

     AGF provides a wide variety of consumer finance products, including real estate mortgages, consumer loans, retail sales finance and credit-related insurance to customers in the United States.

     AIGCFG, through its subsidiaries, is engaged in developing a multi-product consumer finance business with an emphasis on emerging markets.

     Together, the Aircraft Finance, Capital Markets and Consumer Finance operations generate the vast majority of the revenues produced by AIG’s consolidated Financial Services operations.

     Imperial A.I. Credit Companies also contribute to Financial Services income. This operation engages principally in insurance premium financing for both AIG’s customers and those of other insurers. See also Management’s Discussion and Analysis of Financial Condition and Results of Operations and Notes 1 and 12 of Notes to Financial Statements.

	Asset Management Operations

AIG’s Asset Management operations comprise a wide variety of investment-related services and investment products, including institutional and retail asset management, broker dealer services and spread-based investment business from the sale of guaranteed investment contracts, also known as funding agreements (GICs). Such products and services are offered to individuals and institutions both domestically and overseas.

     AIG’s principal Asset Management operations are conducted through certain subsidiaries of AIG Retirement Services, Inc. (AIG SunAmerica), including SAAMCo and the AIG Advisor Group broker dealers and AIG Global Investment Group. AIG SunAmerica sells and manages mutual funds and provides financial advisory services through independent-contractor registered representatives. AIG Global Investment Group manages invested assets on a global basis for third-party institutional, retail, private equity and real estate investment funds, provides securities lending and custodial services and organizes and manages the invested assets of institutional private equity investment funds. Each of these subsidiary operations receives fees for investment products and services provided. See also Management’s Discussion and Analysis of Financial Condition and Results of Operations and Note 3 of Notes to Financial Statements.

	Other Operations

Certain other AIG subsidiaries provide insurance-related services such as adjusting claims and marketing specialized products. Several wholly owned foreign subsidiaries of AIG operating in countries such as Ireland, Bermuda, Barbados and Gibraltar provide insurance and related administrative and back office services to a variety of insurance and reinsurance companies. These companies include captive insurance companies unaffiliated with AIG, subsidiaries of AIG and the subsidiaries of holding companies in which AIG holds an interest, such as IPC Holdings, Ltd (IPC) and Allied World Assurance Holdings, Ltd. (AWAC). AIG also has several other subsidiaries which engage in various businesses. For example, American

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	Additional Investments

AIG holds a 24.3 percent interest in IPC, a reinsurance holding company, a 23.4 percent interest in AWAC, a property-casualty insurance holding company, and a 24.5 percent interest in The Fuji Fire and Marine Insurance Co., Ltd., a general insurance company. See also Note 1(q) of Notes to Financial Statements.

	Locations of Certain Assets

As of December 31, 2004, approximately 31 percent of the consolidated assets of AIG were located in foreign countries (other than Canada), including $4.1 billion of cash and securities on deposit with foreign regulatory authorities. Foreign operations and assets held abroad may be adversely affected by political developments in foreign countries, including such possibilities as tax changes, nationalization, and changes in regulatory policy, as well as by consequence of hostilities and unrest. The risks of such occurrences and their overall effect upon AIG vary from country to country and cannot easily be predicted. If expropriation or nationalization does occur, AIG’s policy is to take all appropriate measures to seek recovery of such assets. Certain of the countries in which AIG’s business is conducted have currency restrictions which generally cause a delay in a company’s ability to repatriate assets and profits. See also Notes 1 and 3 of Notes to Financial Statements.

	Regulation

AIG’s operations around the world are subject to regulation by many different types of regulatory authorities, including insurance, securities, investment advisory, banking and thrift regulators in the United States and abroad. The regulatory environment can have a significant effect on AIG and its business. AIG’s operations have become more diverse and consumer-oriented, increasing the scope of regulatory supervision and the possibility of intervention. In addition, the recent investigations into financial accounting practices that led to the restatement of AIG’s financial statements have heightened regulatory scrutiny of AIG worldwide. See “Certain Factors Affecting AIG’s Business – Regulatory Investigations” and Note 2 of Notes to Financial Statements.

     Certain states require registration and periodic reporting by insurance companies that are licensed in such states and are controlled by other corporations. Applicable legislation typically requires periodic disclosure concerning the corporation that controls the registered insurer and the other companies in the holding company system and prior approval of intercorporate services and transfers of assets (including in some instances payment of dividends by the insurance subsidiary) within the holding company system. AIG’s subsidiaries are registered under such legislation in those states that have such requirements. See also Note 11 of Notes to Financial Statements.

     AIG’s insurance subsidiaries, in common with other insurers, are subject to regulation and supervision by the states and by other jurisdictions in which they do business. Within the United States, the method of such regulation varies but generally has its source in statutes that delegate regulatory and supervisory powers to an insurance official. The regulation and supervision relate primarily to approval of policy forms and rates, the standards of solvency that must be met and maintained, including risk-based capital measurements, the licensing of insurers and their agents, the nature of and limitations on investments, restrictions on the size of risks that may be insured under a single policy, deposits of securities for the benefit of policyholders, requirements for acceptability of reinsurers, periodic examinations of the affairs of insurance companies, the form and content of reports of financial condition required to be filed, and reserves for unearned premiums, losses and other purposes. In general, such regulation is for the protection of policyholders rather than the equity owners of these companies. See also Management’s Discussion and Analysis of Financial Condition and Results of Operations.

     AIG has not yet determined the effect of the restatement on the statutory income, net reserves or surplus of its insurance company subsidiaries. The adjustments that AIG will be required to make to the statutory financial statements may negatively affect certain ratios and other measurements applicable to insurance companies.

     AIG’s insurance operations are currently under review by various state regulatory agencies, and certain agencies have communicated to AIG concerns in various areas, including allocation of state workers compensation premiums and possible misrepresentations by and sales practices of AIG subsidiaries, including relationships with insurance brokers. AIG cannot at this time determine the effect that these investigations may have on the conduct of its insurance business. See Item 3. Legal Proceedings for a further description of these investigations and see “Certain Factors Affecting AIG’s Business – Regulatory Investigations” for more information on their application to AIG’s insurance businesses.

     Risk-Based Capital (RBC) is designed to measure the adequacy of an insurer’s statutory surplus in relation to the risks

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inherent in its business. Thus, inadequately capitalized general and life insurance companies may be identified.

     The RBC formula develops a risk adjusted target level of statutory surplus by applying certain factors to various asset, premium and reserve items. Higher factors are applied to more risky items and lower factors are applied to less risky items. Thus, the target level of statutory surplus varies not only as a result of the insurer’s size, but also on the risk profile of the insurer’s operations.

     The RBC Model Law provides for four incremental levels of regulatory attention for insurers whose surplus is below the calculated RBC target. These levels of attention range in severity from requiring the insurer to submit a plan for corrective action to placing the insurer under regulatory control.

     To the extent that any of AIG’s insurance entities would fall below prescribed levels of surplus, it would be AIG’s intention to infuse necessary capital to support that entity.

     A substantial portion of AIG’s General Insurance business and a majority of its Life Insurance business is carried on in foreign countries. The degree of regulation and supervision in foreign jurisdictions varies. Generally, AIG, as well as the underwriting companies operating in such jurisdictions, must satisfy local regulatory requirements. Licenses issued by foreign authorities to AIG subsidiaries are subject to modification or revocation by such authorities, and AIU or other AIG subsidiaries could be prevented from conducting business in certain of the jurisdictions where they currently operate. In the past, AIU has been allowed to modify its operations to conform with new licensing requirements in most jurisdictions.

     In addition to licensing requirements, AIG’s foreign operations are also regulated in various jurisdictions with respect to currency, policy language and terms, amount and type of security deposits, amount and type of reserves, amount and type of local investment and the share of profits to be returned to policyholders on participating policies. Some foreign countries regulate rates on various types of policies. Certain countries have established reinsurance institutions, wholly or partially owned by the state, to which admitted insurers are obligated to cede a portion of their business on terms which may not always allow foreign insurers, including AIG, full compensation. In some countries, regulations governing constitution of technical reserves and remittance balances may hinder remittance of profits and repatriation of assets.

     In 1999, AIG became a unitary thrift holding company when the Office of Thrift Supervision (OTS) granted AIG approval to organize AIG Federal Savings Bank. Annually, the OTS conducts an examination of AIG. The OTS examination involves assessing the organization’s overall risk profile.

	Competition

     AIG’s Insurance, Financial Services and Asset Management businesses operate in a highly competitive environment, both domestically and overseas. Principal sources of competition are insurance companies, banks, investment banks and other non-bank financial institutions.

     The insurance industry in particular is highly competitive. Within the United States, AIG’s General Insurance subsidiaries compete with approximately 3,100 other stock companies, specialty insurance organizations, mutual companies and other underwriting organizations. AIG’s subsidiaries offering Life Insurance and Retirement Services compete in the United States with approximately 2,100 life insurance companies and other participants in related financial services fields. Overseas, AIG subsidiaries compete for business with foreign insurance operations of the larger U.S. insurers, global insurance groups, and local companies in particular areas in which they are active.

     AIG’s strong ratings have historically provided a competitive advantage. The effect on the business of AIG of recent regulatory investigations, the restatement, and subsequent ratings actions is currently unknown, but these developments may adversely affect the competitive position of AIG and its subsidiaries.

	Certain Factors Affecting AIG’s Business

AIG’s Credit Ratings

     The recent downgrades in AIG’s credit ratings will increase AIG’s borrowing costs, may lessen AIG’s ability to compete in certain businesses and will require AIG to post additional collateral.

     From March through May of 2005, the major rating agencies downgraded AIG’s ratings in a series of actions. Standard & Poor’s, a division of The McGraw-Hill Companies, Inc. (S&P), lowered the long-term senior debt and counterparty ratings of AIG from ‘AAA’ to ‘AA+’ and placed the ratings on Credit Watch Negative. Moody’s Investors Service (Moody’s) lowered AIG’s long-term senior debt rating from ‘Aaa’ to ‘Aa2’ and placed the ratings on review for possible downgrade. Fitch Ratings (Fitch) downgraded the long-term senior debt ratings of AIG from ‘AAA’ to ‘AA’ and placed the ratings on Ratings Watch Negative.

     The agencies also took rating actions on AIG’s insurance subsidiaries. S&P and Fitch lowered to ‘AA+’ the insurance financial strength ratings of most of AIG’s insurance companies. Moody’s lowered the insurance financial strength ratings generally to either ‘Aa1’ or ‘Aa2’. A.M. Best downgraded the

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     In addition, S&P placed ILFC’s ‘AA-’ long-term senior debt rating and ‘A-1+’ short-term rating on Credit Watch Negative. Fitch downgraded ILFC’s long-term senior debt rating from ‘AA-’ to ‘A+’ and placed the rating on Rating Watch Negative and downgraded ILFC’s short-term debt rating from ‘F1+’ to ‘F1’. Fitch also placed the ‘A+’ long-term senior debt ratings of American General Finance Corporation and American General Finance, Inc. on Rating Watch Negative.

     These debt and financial strength ratings are current opinions of the rating agencies. As such, they may be changed, suspended or withdrawn at any time by the rating agencies as a result of changes in, or unavailability of, information or based on other circumstances. Ratings may also be withdrawn at AIG management’s request. This discussion of ratings is not a complete list of ratings of AIG and its subsidiaries.

     These ratings actions have affected and will continue to affect AIG’s business and results of operations in a number of ways.

•	Downgrades in AIG’s debt ratings will adversely affect AIG’s results of operations. AIG relies on external sources of financing to fund several of its operations. The cost and availability of unsecured financing are generally dependent on the issuer’s long-term and short-term debt ratings. The recent downgrades and any future downgrades in AIG’s debt ratings will increase AIG’s borrowing costs and therefore adversely affect AIG’s results of operations.
•	The downgrade in AIG’s long-term senior debt ratings will adversely affect AIGFP’s ability to compete for certain businesses. Credit ratings are very important to the ability of financial institutions to compete in the derivative and structured transaction marketplaces. Historically, AIG’s triple-A ratings provided AIGFP a competitive advantage. The downgrades will reduce this advantage and, for specialized financial transactions that generally are conducted only by triple-A rated financial institutions, counterparties may be unwilling to transact business with AIGFP except on a secured basis. This could require AIGFP to post more collateral to counterparties in the future. See below for a further discussion of the effect that posting collateral may have on AIG’s liquidity.
•	Although the financial strength ratings of AIG’s insurance company subsidiaries remain high compared to many of their competitors, the downgrades have reduced the previous ratings differential. The competitive advantage of the ratings to AIG’s insurance company subsidiaries may be lessened accordingly. The recent regulatory inquiries, internal investigations, and delay in this Annual Report on Form 10-K, as well as negative publicity, have caused independent producers and distributors of AIG’s domestic life and retirement services products to be more cautious in placing business with AIG subsidiaries. AIG is unable to predict the effect of these issues on AIG’s business, including any increase in associated surrender or replacement activity.
•	As a result of the downgrades of AIG’s long-term senior debt ratings, AIG has been required to post approximately $1.16 billion of collateral with counterparties to municipal guaranteed investment contracts and financial derivatives transactions. In the event of a further downgrade, AIG will be required to post additional collateral. It is estimated that, as of the close of business on May 18, 2005, based on AIG’s outstanding municipal guaranteed investment contracts and financial derivatives transactions as of such date, a further downgrade of AIG’s long-term senior debt ratings to ‘Aa3’ by Moody’s or ‘AA-’ by S&P would permit counterparties to call for approximately $2.33 billion of additional collateral. Further, additional downgrades could result in requirements for substantial additional collateral, which could have a material effect on how AIG manages its liquidity. The actual amount of additional collateral that AIG would be required to post to counterparties in the event of such downgrades depends on market conditions, the market value of the outstanding affected transactions and other factors prevailing at the time of the downgrade. The requirement to post additional collateral may increase if additional counterparties begin to require credit support from AIG through collateralization agreements. Additional obligations to post collateral will increase the demand on AIG’s liquidity.

Regulatory Investigations

     AIG’s ability to engage in certain businesses may be impaired by the regulatory investigations. The regulatory investigations and civil actions pending against AIG may reduce the willingness of counterparties to engage in business with AIG. Uncertainty concerning the ultimate outcome of these actions and proceedings may also make AIG products and services less attractive in the marketplace. Further, these matters may affect the manner in which certain AIG subsidiaries conduct business and AIG’s ability to obtain regulatory approvals for new lines of business or for further acquisitions.

     Significant legal proceedings could adversely effect AIG’s results of operations. AIG is party to numerous legal and regulatory proceedings, including matters relating to insur-

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ance brokerage practices and non-traditional insurance products. See also Item 3. Legal Proceedings.

     Significant investigations into AIG’s business are continuing and the commencement of additional investigations is possible. Broad-ranging investigations into AIG’s business practices continue in respect of structured transactions, transactions involving insurance brokers, non-traditional insurance products, workers compensation lines and other matters. These investigations are being conducted by a large number of regulators and governmental authorities, and related actions by regulators both within and outside the United States may be undertaken in response. The review of large amounts of information by various regulatory authorities may result in the commencement of new areas of inquiry and, possibly, new legal proceedings. Gathering, reviewing and supplying such large amounts of information and documents to so many regulatory authorities imposes significant demands upon management and may involve significant expense.

The Relationships Between AIG and Starr and SICO

     The relationships between AIG and Starr and SICO may take an extended period of time to unwind and/or resolve. Although AIG is currently working on unwinding and resolving its relationships with Starr and SICO, AIG cannot predict what its future relationship with Starr and SICO will be.

     As discussed under Item 11. Executive Compensation, AIG will need to provide compensation programs that recognize the plans and programs previously provided to AIG executives by Starr and SICO. In addition, AIG has agreed, subject to certain conditions, to assure AIG’s current employees that all payments under the SICO Plans and redemption payments under the Starr stockholders’ agreement are made when required. See Note 12(f) of Notes to Financial Statements.

Certain Material Weaknesses

     Management has identified a number of material weaknesses in AIG’s internal control over financial reporting. A discussion of these material weaknesses can be found in Item 9A of Part II of this Annual Report on Form 10-K. Although remediation of these weaknesses has begun, the process is not yet complete. Delay in the implementation of remedial actions could affect the accuracy or timing of future filings with the SEC and other regulatory authorities.

Access to Capital Markets

     AIG does not expect to be able to access the public capital markets until all of its filings with the SEC are up to date, including any amendments to previously filed reports. When AIG is current in its filings with the SEC, AIG anticipates that it will be able to access the Rule 144A and Euro-markets. However, AIG will be unable to access the U.S. public securities markets until it has filed and the SEC has declared effective a new registration statement or post-effective amendments to its existing registration statements under the Securities Act of 1933. Depending upon the SEC’s review of these filings, this process may take several months or more.

ITEM 2.	Properties

AIG and its subsidiaries operate from approximately 2,200 offices in the United States, 8 offices in Canada and numerous offices in approximately 100 foreign countries. The offices in Springfield, Illinois; Amarillo, Ft. Worth and Houston, Texas; Wilmington, Delaware; Hato Rey and San Juan, Puerto Rico; Tampa, Florida; Livingston, New Jersey; Evansville, Indiana; Nashville, Tennessee; 70 Pine Street, 72 Wall Street and 175 Water Street in New York City; and offices in more than 30 foreign countries including Bermuda, Chile, Hong Kong, the Philippines, Japan, United Kingdom, Singapore, Switzerland, Taiwan and Thailand are located in buildings owned by AIG and its subsidiaries. The remainder of the office space utilized by AIG subsidiaries is leased.

ITEM 3.	Legal Proceedings

General

AIG and its subsidiaries, in common with the insurance industry in general, are subject to litigation, including claims for punitive damages, in the normal course of their business. See Notes 12(d), 12(g), 12(h) and 12(i) of Notes to Financial Statements, as well as the Discussion and Analysis of Consolidated Net Losses and Loss Expense Reserve Development and Management’s Discussion and Analysis of Financial Condition and Results of Operations.

PNC Settlement

     In November 2004, AIG and AIGFP reached a final settlement with the Securities and Exchange Commission (SEC), the Fraud Section of the United States Department of Justice (DOJ) and the United States Attorney for the Southern District of Indiana with respect to issues arising from certain structured transactions entered into with Brightpoint, Inc. and The PNC Financial Services Group, Inc. (PNC), the marketing of transactions similar to the PNC transactions and related matters.

     As part of the settlement, the SEC filed a civil complaint against AIG, alleging violations of certain antifraud provisions of the federal securities laws and for aiding and abetting violations of reporting and record keeping provisions of those laws. The SEC’s complaint was based on the conduct of AIG, primarily through AIGFP (i) in developing, marketing and entering into three transactions during 2001 that were intended to en-

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     AIG, without admitting or denying the allegations in the SEC complaint, consented to the issuance of a final judgment: (a) permanently enjoining it and its employees and related persons from violating section 10(b) of the Securities Exchange Act of 1934 (Exchange Act), Exchange Act Rule 10b-5, and section 17(a) of the Securities Act of 1933 (Securities Act) and from aiding and abetting violations of sections 13(a) and 13(b)(2)(A) of the Exchange Act and Exchange Act Rules 12b-20, 13a-1, and 13a-13; (b) ordering it to disgorge the $39,821,000 in fees that it received from the PNC transactions, plus prejudgment interest of $6,545,000; and (c) providing for AIG to establish a transaction review committee to review the appropriateness of certain future transactions and to retain an independent consultant to examine certain transactions entered into between 2000 and 2004 and review the policies and procedures of the transaction review committee. The independent consultant has a broad mandate to review transactions entered into by AIG during this period. The review of the independent consultant is now ongoing and AIG cannot at this time predict the outcome of this review.

     The DOJ filed a criminal complaint against AIGFP PAGIC Equity Holding Corp. (AIGFP PAGIC), a wholly-owned subsidiary of AIGFP. The complaint alleged that AIGFP PAGIC violated federal securities laws by aiding and abetting securities law violations by PNC, in connection with a transaction entered into in 2001 with PNC that was intended to enable PNC to remove certain assets from its balance sheet. The complaint alleges that AIGFP PAGIC knew, or was deliberately ignorant in not knowing, that the PNC transaction did not satisfy the requirements of GAAP for non-consolidation of special purpose entities. The AIGFP PAGIC transaction was the last of three similar transactions developed, marketed and entered into by AIGFP and its subsidiaries with PNC during 2001. The DOJ had notified AIGFP that, in its view, AIGFP acting through certain of its employees may have violated federal criminal law in connection with the PNC transactions and the marketing of similar transaction structures to other potential counterparties.

     The settlement with the DOJ consists of separate agreements with AIG and AIGFP and a complaint filed against, and deferred prosecution agreement with, AIGFP PAGIC. Under the terms of the settlement, AIGFP paid a monetary penalty of $80 million and, provided that AIG, AIGFP and AIGFP PAGIC satisfy their obligations under the DOJ agreements, the DOJ will seek a dismissal with prejudice of the AIGFP PAGIC complaint after 13 months and will not prosecute AIG or AIGFP in connection with the PNC transactions or the Brightpoint transaction that was settled by AIG with the SEC in 2003. The obligations of AIG, AIGFP and AIGFP PAGIC under the DOJ agreements relate principally to cooperating with the DOJ and other federal agencies in connection with their related investigations.

Investigations of Insurance Brokerage Practices

     On October 14, 2004, the Office of the New York State Attorney General (NYAG) brought a lawsuit challenging certain insurance brokerage practices related to contingent commissions. Neither AIG nor any of its subsidiaries is a defendant in that action, although two employees of an AIG subsidiary pleaded guilty in connection with the Attorney General’s investigation in October 2004 and two additional employees of the same subsidiary pleaded guilty in February 2005. AIG has cooperated, and will continue to cooperate, in the investigation. Regulators from several additional states have commenced investigations into the same matters, and AIG expects there will be additional investigations as well. Various parties, including insureds and shareholders, have also asserted putative class action and other claims against AIG or its subsidiaries alleging, among other things, violations of the antitrust and federal securities laws, and AIG expects that additional claims may be made.

     Various federal and state regulatory agencies are reviewing certain other transactions and practices of AIG and its subsidiaries in connection with industry-wide and other inquiries.

Investigation and Civil Complaint Concerning Non-Traditional Insurance Products and Other Transactions

     In February 2005, AIG received subpoenas from the NYAG and the SEC relating to investigations into the use of non-traditional insurance products and certain assumed reinsurance transactions and AIG’s accounting for such transactions. In March and April 2005, the SEC and NYAG issued additional subpoenas relating to certain transactions and entities discussed more fully in Management’s Discussion and Analysis of Financial Condition and Results of Operations, including, among others, SICO, Union Excess, Capco and certain Life Settlements (as such transactions and entities are defined in Management’s Discussion and Analysis of Financial Condition and Results of Operations). In April 2005, AIG received a subpoena from the NYAG relating to AIG’s opera-

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tions in Bermuda. The United States Department of Justice and state regulators, including the New York Department of Insurance (NY DOI), are also investigating these issues. Regulators from several additional states have commenced investigations into some of these matters, and AIG expects there will be additional investigations. In addition, the SEC, the U.S. Attorney’s Office for the Southern District of New York and the NYAG are investigating certain transactions involving the purchase of AIG stock. The NYAG and insurance regulators are investigating issues relating to workers compensation insurance written by AIG subsidiaries. Various former and current employees of AIG have also received subpoenas from the SEC and NYAG seeking documents and testimony concerning some of these matters. AIG has cooperated, and will continue to cooperate, with all these investigations, including by producing documents and other information in response to the subpoenas. As more fully described in Management’s Discussion and Analysis of Financial Condition and Results of Operations, AIG has concluded that the accounting for certain transactions and certain relationships needs to be restated or adjusted. See Note 2 of Notes to Financial Statements.

     On May 26, 2005, the NYAG and the New York Superintendent of Insurance filed a civil complaint against AIG as well as its former Chairman and Chief Executive Officer M.R. Greenberg, and former Vice Chairman and Chief Financial Officer Howard Smith, in the Supreme Court of the State of New York. The complaint asserts claims under New York’s Martin Act and Insurance Law, among others, and makes allegations concerning certain of the transactions discussed more fully in Management’s Discussion and Analysis of Financial Condition and Results of Operations, including, among others, Gen Re, Capco, AIRCO Reinsurance, Life Settlements, Richmond and Union Excess. The complaint seeks disgorgement, injunctive relief, punitive damages and costs, among other things. The NYAG has also stated that it fully expects that all issues with AIG concerning these matters can be resolved civilly, as opposed to by means of criminal indictment of AIG.

Other Actions

     A number of lawsuits have been filed regarding the subject matter of the investigations of insurance brokerage practices, including derivative actions, individual actions and class actions under the federal securities laws, ERISA and state common and corporate laws in both federal and state courts, including the federal district court in the Southern District of New York, in the Commonwealth of Massachusetts Superior Court and in Delaware Chancery Court. All of these actions generally allege that AIG and its subsidiaries violated the law by allegedly concealing a scheme to “rig bids” and “steer” business between insurance companies and insurance brokers as described in “Investigation of Insurance Brokerage Practices” above.

     Between October 19, 2004 and May 23, 2005, AIG was named as a defendant in twelve complaints that were filed in federal court and one that was originally filed in Florida state court and removed to federal court. These cases generally allege that AIG and its subsidiaries violated federal and various state antitrust laws, as well as federal RICO laws, various state deceptive and unfair practice laws and certain state laws governing fiduciary duties. The alleged basis of these claims is that there was a conspiracy between insurance companies and insurance brokers with regard to the bidding practices for insurance coverage in certain sectors of the insurance industry. The Judicial Panel on Multidistrict Litigation entered an order consolidating most of these cases and transferring them to the United States District Court for the District of New Jersey. The remainder of these cases are in the process of being transferred to the District of New Jersey. In addition, two complaints were filed in Massachusetts state court making claims similar to those in the federal cases above.

     In April and May, amended complaints were filed in the consolidated derivative and securities cases, as well as in one of the ERISA lawsuits, pending in the federal district court in the Southern District of New York adding allegations concerning AIG’s accounting treatment for non-traditional insurance products that have been the subject of AIG’s press releases and are described more fully in Management’s Discussion and Analysis of Financial Condition and Results of Operations. Also in April, new actions were filed in the Delaware Chancery Court asserting claims premised on the same allegations concerning AIG’s accounting treatment for non-traditional insurance products.

     In late 2002, an unrelated derivative action was filed in Delaware Chancery Court in connection with AIG’s transactions with certain entities affiliated with Starr. AIG’s Board of Directors appointed a special committee of independent directors to review the complaint; the special committee has issued a report concluding that it was not in the best interest of AIG or its shareholders to pursue the litigation and moved the Delaware Chancery Court to terminate the litigation. In May 2005, the plaintiff filed an amended complaint which adds additional claims premised on allegations relating to insurance brokerage practices and AIG’s non-traditional insurance products.

Effect on AIG

     AIG cannot at this time predict the outcome of the matters described above or estimate the potential costs related to these

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ITEM 4.	Submission of Matters to a Vote of Security Holders

There were no matters submitted to a vote of security holders during the fourth quarter of 2004.

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PART II

ITEM 5.	Market for the Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

     (a) AIG’s common stock is listed in the U.S. on the New York Stock Exchange and ArcaEx, as well as the stock exchanges in London, Paris, Switzerland and Tokyo.

The table below shows the high and low closing sales prices per share of AIG’s common stock on the New York Stock Exchange Composite Tape, for each quarter of 2004 and 2003.

		2004								2003
		High				Low				High				Low
First quarter		$	75.12			$	66.79			$	63.50			$	44.47
Second quarter			76.77				69.39				60.20				50.60
Third quarter			72.66				66.48				64.70				55.54
Fourth quarter			68.72				54.70				66.28				56.59

     (b) In 2004, AIG paid a quarterly dividend of 6.5 cents in March and June and 7.5 cents in September and December for a total cash payment of 28.0 cents per share of common stock. In 2003, AIG paid a quarterly dividend of 4.7 cents in March and June and 6.5 cents in September and December for a total cash payment of 22.4 cents per share of common stock. Subject to the dividend preference of any of AIG’s serial preferred stock which may be outstanding, the holders of shares of common stock are entitled to receive such dividends as may be declared by the Board of Directors from funds legally available therefor.

     See Note 11(a) of Notes to Financial Statements for a discussion of certain restrictions on the payment of dividends to AIG by some of its insurance subsidiaries.

     (c) The approximate number of holders of common stock as of March 31, 2005, based upon the number of record holders, was 60,000.

     (d) The following table summarizes AIG’s stock repurchases for the three month period ended December 31, 2004:

    

														Maximum Number
										Total Number of				of Shares that May
										Shares Purchased				Yet Be Purchased
		Total				Average				as Part of Publicly				Under the Plans
		Number of				Price Paid				Announced Plans				or Programs
Period		Shares Purchased(a)(b)				per Share				or Programs				at End of Month(c)
October 1 - 31, 2004			5,324,000				62.01				5,324,000				42,841,400
November 1 - 30, 2004			1,684,500				60.92				1,684,500				41,156,900
December 1 - 31, 2004			2,137,100				65.03				2,137,100				39,019,800
Total			9,145,600			$	62.52				9,145,600

(a)	Does not include 28,045 shares delivered or attested to in satisfaction of the exercise price by holders of AIG employee stock options exercised during the three months ended December 31, 2004.

(b)	Does not include 14,000 shares purchased by International Lease Finance Corporation at a price of $55.95 per share to satisfy obligations under a deferred compensation plan.

(c)	On July 19, 2002, AIG announced that its Board of Directors had authorized the open market purchase of up to 10 million shares of common stock. On February 13, 2003, AIG announced that the Board had expanded the existing program through the authorization of an additional 50 million shares. The purchase program has no set expiration or termination date.

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ITEM 6.	Selected Financial Data

AMERICAN INTERNATIONAL GROUP, INC. AND SUBSIDIARIES

AIG has restated its financial statements for each of 2003, 2002, 2001 and 2000. The restated financial statements reflect corrections of errors, misapplications of GAAP and changes to conform to the current presentation. The Selected Consolidated Financial Data should be read in conjunction with Management’s Discussion and Analysis of Financial Condition and Results of Operations and the consolidated financial statements and accompanying notes included elsewhere herein. A reconciliation of previously reported financial statements to the restated financial statements follows the table below.

Years Ended December 31,			2004				2003				2002				2001				2000
(in millions, except per share amounts)							(Restated)				(Restated)				(Restated)				(Restated)
Revenues(a):
	Premiums and other considerations		$	66,593			$	54,880			$	44,259			$	38,532			$	34,027
	Net investment income			18,434				15,468				13,721				13,015				12,723
	Realized capital gains (losses)			(24	)			(620	)			(1,298	)			(919	)			(239	)
	Other revenues(b)			12,984				9,718				9,778				9,542				10,340
Total revenues				97,987				79,446				66,460				60,170				56,851
Benefits and expenses:
	Incurred policy losses and benefits(c)			58,313				46,145				39,987				34,249				30,609
	Insurance acquisition and other operating expenses			24,724				21,646				18,491				17,990				16,752
	Acquisition, restructuring and related charges			–				–				–				2,017				315
Total benefits and expenses				83,037				67,791				58,478				54,256				47,676
Income before income taxes, minority interest and cumulative effect of accounting changes(d)				14,950				11,655				7,982				5,914				9,175
Income taxes				4,620				3,403				1,956				1,505				2,839
Income before minority interest and cumulative effect of accounting changes				10,330				8,252				6,026				4,409				6,336
Minority interest				(455	)			(252	)			(160	)			(101	)			(195	)
Income before cumulative effect of accounting changes				9,875				8,000				5,866				4,308				6,141
Cumulative effect of accounting changes, net of tax				(144	)			9				–				(136	)			–
Net income				9,731				8,009				5,866				4,172				6,141
Earnings per common share(e):
	Basic
	Income before cumulative effect of accounting changes			3.79				3.07				2.25				1.64				2.36
	Cumulative effect of accounting changes, net of tax			(0.06	)			–				–				(0.05	)			–
	Net income			3.73				3.07				2.25				1.59				2.36
	Diluted(f)
	Income before cumulative effect of accounting changes			3.75				3.04				2.22				1.62				2.33
	Cumulative effect of accounting changes, net of tax			(0.06	)			–				–				(0.05	)			–
	Net income			3.69				3.04				2.22				1.57				2.33
Cash dividends per common share(g)				.28				.22				.18				.16				.14
Total assets				798,660				674,153				561,556				492,447				423,851
Long-term debt and commercial paper(h)
	Guaranteed by AIG			8,498				7,469				7,144				8,141				3,855
	Liabilities connected to trust preferred stock			1,489				1,682				–				–				–
	Matched/not guaranteed by AIG			85,276				71,058				64,941				56,976				49,865
Total Liabilities(i)				717,854				603,931				500,598				439,717				374,413
Shareholders’ equity			$	80,607			$	70,030			$	58,805			$	50,528			$	46,024

(a)	Represents the sum of General Insurance net premiums earned, Life Insurance & Retirement Services GAAP premiums, net investment income, Financial Services interest, lease and finance charges, Asset Management advisory and management fees and net investment income with respect to guaranteed investment contracts, and realized capital gains (losses).
(b)	Includes the unrealized gain (loss) attributable to economic hedges not qualifying for hedge accounting treatment under FAS 133, including the related foreign exchange gains and losses. For 2004, 2003, 2002, 2001 and 2000, respectively, the amounts included are $215 million, $(1.09) billion, $(192) million, $(74) million and $1.27 billion. See also Management’s Discussion and Analysis of Financial Condition and Results of Operations – “Restatement of Previously Issued Financial Statements — Other GAAP Corrections – Accounting for Derivatives (FAS 133 Hedge Accounting).”
(c)	Includes fourth quarter 2004 charge of $850 million attributable to change in estimate for asbestos and environmental reserves.
(d)	Includes catastrophe losses of $1.16 billion in 2004, net loss reserve charge of $2.1 billion in 2002 and World Trade Center losses of $900 million in 2001.
(e)	Per share amounts for all periods presented reflect the adoption of Statement of Financial Accounting Standards No. 128, “Earnings per Share.”
(f)	Assumes conversion of contingently convertible bonds due to the adoption of EITF Issue No. 04-8 “Accounting Issues Related to Certain Features of Contingently Convertible Debt and the Effect on Diluted Earnings per Share.”
(g)	Cash dividends have not been restated to reflect dividends paid by AGC which was acquired by AIG on August 29, 2001.
(h)	Including that portion of long-term debt maturing in less than one year. See also Note 9 of Notes to Financial Statements.

(i)	Includes $2.1 billion, $2.2 billion and $1.4 billion for the years ended 2002, 2001 and 2000, respectively, of other liabilities connected to the consolidation of the Muni Tender Option Bond Program trusts. See also Management’s Discussion and Analysis of Financial Condition and Results of Operations – “Restatement of Previously Issued Financial Statements”.

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    The following tables present the effect of the adjustments resulting from the restatement and the fourth quarter 2004 changes in estimates on AIG’s previously announced 2004 results and on the Condensed Consolidated Balance Sheets and the Consolidated Statements of Income as of and for the years ended December 31, 2004, 2003, 2002, 2001 and 2000, including the percentage increase or decrease. See Management’s Discussion and Analysis of Financial Condition and Results of Operations — “Restatement of Previously Issued Financial Statements” and “Fourth Quarter 2004 Changes in Estimates” on pages 31 through 52 for a description of each transaction, accounting entry or entity category resulting in the adjustments and for analyses of the effect of the adjustments on the principal consolidated balance sheet and statement of income accounts affected. See also Note 2 of Notes to Financial Statements.

CONDENSED CONSOLIDATED BALANCE SHEET

December 31, 2004				Previously*												Percent
(in millions)				Announced				Adjustments				As Revised				Change
Assets:
	Total investments, financial services assets and cash			$	635,865			$	2,973			$	638,838				0.5	%
	Investment income due and accrued				5,970				(382	)			5,588				(6.4	)
	Premiums and insurance balances receivable, net of allowance of $225				17,202				(2,065	)			15,137				(12.0	)
	Reinsurance assets				26,171				(6,213	)			19,958				(23.7	)
	Deferred policy acquisition costs				30,310				(574	)			29,736				(1.9	)
	Other assets				15,062				260				15,322				1.7
	All other assets				74,027				54				74,081				0.1
Total assets					804,607				(5,947	)			798,660				(0.7	)
Liabilities:
	Reserve for losses and loss expenses				64,641				(2,270	)			62,371				(3.5	)
	Reserve for unearned premiums				23,072				22				23,094				0.1
	Future policy benefits for life and accident and health insurance contracts				105,385				(648	)			104,737				(0.6	)
	Policyholders’ contract deposits				216,477				178				216,655				0.1
	Funds held by companies under reinsurance treaties				5,386				(1,982	)			3,404				(36.8	)
	Income taxes payable:
		Current			1,883				(1,883	)			–				(100.0	)
		Deferred			8,255				(1,213	)			7,042				(14.7	)
	Financial services securities sold under agreements to repurchase, at contract value				19,203				2,061				21,264				10.7
	Financial services unrealized loss on swaps, options and forward transactions				20,479				(2,347	)			18,132				(11.5	)
	Notes, bonds, loans and mortgages payable				63,557				1,605				65,162				2.5
	Other liabilities				21,101				2,510				23,611				11.9
	All other liabilities				172,098				284				172,382				0.2
Total liabilities					721,537				(3,683	)			717,854				(0.5	)
Preferred shareholders’ equity in subsidiary companies					199				–				199				–
Total shareholders’ equity					82,871				(2,264	)			80,607				(2.7	)
Total liabilities, preferred shareholders’ equity in subsidiary companies and shareholders’ equity				$	804,607			$	(5,947	)		$	798,660				(0.7	)%

*	Announced by AIG on February 9, 2005 in its earnings release.

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CONDENSED CONSOLIDATED BALANCE SHEET

December 31, 2003				Previously												Percent
(in millions)				Reported				Adjustments				As Restated				Change
Assets:
	Total investments, financial services assets and cash			$	516,438			$	3,270			$	519,708				0.6	%
	Investment income due and accrued				4,959				(347	)			4,612				(7.0	)
	Premiums and insurance balances receivable, net of allowance of $235				14,166				(977	)			13,189				(6.9	)
	Reinsurance assets				27,962				(7,014	)			20,948				(25.1	)
	Deferred policy acquisition costs				26,398				(478	)			25,920				(1.8	)
	Other assets				12,820				1,370				14,190				10.7
	All other assets				75,603				(17	)			75,586				–
Total assets					678,346				(4,193	)			674,153				(0.6	)
Liabilities:
	Reserve for losses and loss expenses				56,118				(3,737	)			52,381				(6.7	)
	Reserve for unearned premiums				20,762				148				20,910				0.7
	Future policy benefits for life and accident and health insurance contracts				92,970				(58	)			92,912				(0.1	)
	Policyholders’ contract deposits				171,989				(72	)			171,917				–
	Funds held by companies under reinsurance treaties				4,664				(1,621	)			3,043				(34.8	)
	Income taxes payable:
		Current			1,977				(1,611	)			366				(81.5	)
		Deferred			5,778				(1,145	)			4,633				(19.8	)
	Financial services securities sold under agreements to repurchase, at contract value				14,810				1,003				15,813				6.8
	Financial services unrealized loss on swaps, options and forward transactions				15,268				(610	)			14,658				(4.0	)
	Notes, bonds, loans and mortgages payable				56,003				1,249				57,252				2.2
	Other liabilities				18,282				2,909				21,191				15.9
	All other liabilities				148,280				575				148,855				0.4
Total liabilities					606,901				(2,970	)			603,931				(0.5	)
Preferred shareholders’ equity in subsidiary companies					192				–				192				–
Total shareholders’ equity					71,253				(1,223	)			70,030				(1.7	)
Total liabilities, preferred shareholders’ equity in subsidiary companies and shareholders’ equity				$	678,346			$	(4,193	)		$	674,153				(0.6	)%

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CONDENSED CONSOLIDATED BALANCE SHEET

December 31, 2002				Previously												Percent
(in millions)				Reported				Adjustments				As Restated				Change
Assets:
	Total investments, financial services assets and cash			$	424,761			$	3,617			$	428,378				0.9	%
	Investment income due and accrued				4,297				(283	)			4,014				(6.6	)
	Premiums and insurance balances receivable, net of allowance of $153				13,088				(1,230	)			11,858				(9.4	)
	Reinsurance assets				29,882				(6,831	)			23,051				(22.9	)
	Deferred policy acquisition costs				22,256				(411	)			21,845				(1.8	)
	Other assets				7,661				5,035				12,696				65.7
	All other assets				59,284				430				59,714				0.7
Total assets					561,229				327				561,556				0.1
Liabilities:
	Reserve for losses and loss expenses				51,539				(4,444	)			47,095				(8.6	)
	Reserve for unearned premiums				16,336				(37	)			16,299				(0.2	)
	Future policy benefits for life and accident and health insurance contracts				72,547				(263	)			72,284				(0.4	)
	Policyholders’ contract deposits				142,160				(49	)			142,111				–
	Funds held by companies under reinsurance treaties				3,425				(1,214	)			2,211				(35.4	)
	Income taxes payable:
		Current			793				(793	)			–				(100.0	)
		Deferred			4,289				(383	)			3,906				(8.9	)
	Financial services securities sold under agreements to repurchase, at contract value				9,162				197				9,359				2.2
	Financial services unrealized loss on swaps, options and forward transactions				11,265				393				11,658				3.5
	Notes, bonds, loans and mortgages payable				47,923				200				48,123				0.4
	Other liabilities				12,189				6,689				18,878				54.9
	All other liabilities				128,345				329				128,674				0.3
Total liabilities					499,973				625				500,598				0.1
Preferred shareholders’ equity in subsidiary companies					2,153				–				2,153				–
Total shareholders’ equity					59,103				(298	)			58,805				(0.5	)
Total liabilities, preferred shareholders’ equity in subsidiary companies and shareholders’ equity				$	561,229			$	327			$	561,556				0.1	%

See Management’s Discussion and Analysis of Financial Condition and Results of Operations – “Restatement of Previously Issued Financial Statements” and “Fourth Quarter 2004 Changes in Estimates.” See also Note 2 of Notes to Financial Statements.

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CONDENSED CONSOLIDATED BALANCE SHEET

December 31, 2001				Previously												Percent
(in millions)				Reported				Adjustments				As Restated				Change
Assets:
	Total investments, financial services assets and cash			$	358,622			$	1,861			$	360,483				0.5	%
	Investment income due and accrued				3,681				(159	)			3,522				(4.3	)
	Premiums and insurance balances receivable, net of allowance of $127				12,412				(1,416	)			10,996				(11.4	)
	Reinsurance assets				27,199				(6,381	)			20,818				(23.5	)
	Deferred policy acquisition costs				19,357				(327	)			19,030				(1.7	)
	Other assets				8,000				4,965				12,965				62.1
	All other assets				63,790				843				64,633				1.3
Total assets					493,061				(614	)			492,447				(0.1	)
Liabilities:
	Reserve for losses and loss expenses				44,792				(3,154	)			41,638				(7.0	)
	Reserve for unearned premiums				13,148				(211	)			12,937				(1.6	)
	Future policy benefits for life and accident and health insurance contracts				64,998				(145	)			64,853				(0.2	)
	Policyholders’ contract deposits				119,402				(22	)			119,380				–
	Funds held by companies under reinsurance treaties				2,685				(1,103	)			1,582				(41.1	)
	Income taxes payable:
		Current			405				(405	)			–				(100.0	)
		Deferred			2,881				(706	)			2,175				(24.5	)
	Financial services securities sold under agreements to repurchase, at contract value				11,818				(340	)			11,478				(2.9	)
	Financial services unrealized loss on swaps, options and forward transactions				8,813				1,566				10,379				17.8
	Notes, bonds, loans and mortgages payable				37,447				(614	)			36,833				(1.6	)
	Other liabilities				10,807				5,936				16,743				54.9
	All other liabilities				121,513				206				121,719				0.2
Total liabilities					438,709				1,008				439,717				0.2
Preferred shareholders’ equity in subsidiary companies					2,202				–				2,202				–
Total shareholders’ equity					52,150				(1,622	)			50,528				(3.1	)
Total liabilities, preferred shareholders’ equity in subsidiary companies and shareholders’ equity				$	493,061			$	(614	)		$	492,447				(0.1	)%

See Management’s Discussion and Analysis of Financial Condition and Results of Operations – “Restatement of Previously Issued Financial Statements” and “Fourth Quarter 2004 Changes in Estimates.” See also Note 2 of Notes to Financial Statements.

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CONDENSED CONSOLIDATED BALANCE SHEET

December 31, 2000				Previously												Percent
(in millions)				Reported				Adjustments				As Restated				Change
Assets:
	Total investments, financial services assets and cash			$	299,809			$	876			$	300,685				0.3	%
	Investment income due and accrued				3,522				(109	)			3,413				(3.1	)
	Premiums and insurance balances receivable, net of allowance of $88				11,215				(2,600	)			8,615				(23.2	)
	Reinsurance assets				23,386				(5,807	)			17,579				(24.8	)
	Deferred policy acquisition costs				16,647				(103	)			16,544				(0.6	)
	Other assets				9,806				4,175				13,981				42.6
	All other assets				62,286				748				63,034				1.2
Total assets					426,671				(2,820	)			423,851				(0.7	)
Liabilities:
	Reserve for losses and loss expenses				40,613				(2,502	)			38,111				(6.2	)
	Reserve for unearned premiums				12,510				(473	)			12,037				(3.8	)
	Future policy benefits for life and accident and health insurance contracts				51,532				(127	)			51,405				(0.2	)
	Policyholders’ contract deposits				99,327				–				99,327				–
	Funds held by companies under reinsurance treaties				1,435				(1,040	)			395				(72.5	)
	Income taxes payable:
		Current			189				(189	)			–				(100.0	)
		Deferred			3,032				(523	)			2,509				(17.2	)
	Financial services securities sold under agreements to repurchase, at contract value				11,308				(216	)			11,092				(1.9	)
	Financial services unrealized loss on swaps, options and forward transactions				8,581				333				8,914				3.9
	Notes, bonds, loans and mortgages payable				27,681				(700	)			26,981				(2.5	)
	Other liabilities				8,645				4,128				12,773				47.8
	All other liabilities				110,965				(96	)			110,869				(0.1	)
Total liabilities					375,818				(1,405	)			374,413				(0.4	)
Preferred shareholders’ equity in subsidiary companies					3,414				–				3,414				–
Total shareholders’ equity					47,439				(1,415	)			46,024				(3.0	)
Total liabilities, preferred shareholders’ equity in subsidiary companies and shareholders’ equity				$	426,671			$	(2,820	)		$	423,851				(0.7	)%

See Management’s Discussion and Analysis of Financial Condition and Results of Operations – “Restatement of Previously Issued Financial Statements” and “Fourth Quarter 2004 Changes in Estimates.” See also Note 2 of Notes to Financial Statements.

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CONSOLIDATED STATEMENT OF INCOME

				Year Ended December 31, 2004
				Previously								As				Percent
(in millions, except per share amounts)				Announced*				Adjustments				Revised				Change
Revenues:
	Premiums and other considerations			$	67,852			$	(1,259	)		$	66,593				(1.9	)%
	Net investment income				19,127				(693	)			18,434				(3.6	)
	Realized capital gains (losses)				(92	)			68				(24	)			–
	Other revenues				11,728				1,256				12,984				10.7	%
	Total revenues				98,615				(628	)			97,987				(0.6	)
Benefits and expenses:
	Incurred policy losses and benefits				57,697				616				58,313				1.1
	Insurance acquisition and other operating expenses				23,668				1,056				24,724				4.5
	Total benefits and expenses				81,365				1,672				83,037				2.1
Income before income taxes, minority interest and cumulative effect of accounting changes					17,250				(2,300	)			14,950				(13.3	)
Income Taxes:
	Current				3,575				(899	)			2,676				(25.1	)
	Deferred				1,898				46				1,944				2.4
					5,473				(853	)			4,620				(15.6	)
Income before minority interest and cumulative effect of accounting changes					11,777				(1,447	)			10,330				(12.3	)
Minority interest					(548	)			93				(455	)			–
Income before cumulative effect of accounting changes					11,229				(1,354	)			9,875				(12.1	)
Cumulative effect of accounting changes, net of tax					(181	)			37				(144	)			–
Net Income				$	11,048			$	(1,317	)		$	9,731				(11.9	)%
Earnings per common share:
	Basic
		Income before cumulative effect of accounting changes		$	4.31			$	(0.52	)		$	3.79				(12.1	)%
		Cumulative effect of accounting changes, net of tax			(0.07	)			0.01				(0.06	)			–
		Net Income			4.24				(0.51	)			3.73				(12.0	)
	Diluted
		Income before cumulative effect of accounting changes		$	4.26			$	(0.51	)		$	3.75				(12.0	)%
		Cumulative effect of accounting changes, net of tax			(0.07	)			0.01				(0.06	)			–
		Net Income			4.19				(0.50	)			3.69				(11.9	)
	Average shares outstanding:
		Basic			2,606								2,606
		Diluted			2,637								2,637

*	Announced by AIG on February 9, 2005 in its earnings release.

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				Years Ended December 31,
				2003																2002
				Previously								As				Percent				Previously								As				Percent
(in millions, except per share amounts)				Reported				Adjustments				Restated				Change				Reported				Adjustments				Restated				Change
Revenues:
	Premiums and other considerations			$	55,226			$	(346	)		$	54,880				(0.6	)%		$	45,135			$	(876	)		$	44,259				(1.9	)%
	Net investment income				16,596				(1,128	)			15,468				(6.8	)			14,714				(993	)			13,721				(6.7	)
	Realized capital gains (losses)				(1,433	)			813				(620	)			–				(2,441	)			1,143				(1,298	)			–
	Other revenues				10,914				(1,196	)			9,718				(11.0	)			10,074				(296	)			9,778				(2.9	)
	Total revenues				81,303				(1,857	)			79,446				(2.3	)			67,482				(1,022	)			66,460				(1.5	)
Benefits and expenses:
	Incurred policy losses and benefits				46,390				(245	)			46,145				(0.5	)			41,402				(1,415	)			39,987				(3.4	)
	Insurance acquisition and other operating expenses				21,005				641				21,646				3.1				17,938				553				18,491				3.1
	Total benefits and expenses				67,395				396				67,791				0.6				59,340				(862	)			58,478				(1.5	)
Income before income taxes, minority interest and cumulative effect of accounting changes					13,908				(2,253	)			11,655				(16.2	)			8,142				(160	)			7,982				(2.0	)
Income Taxes:
	Current				3,407				(621	)			2,786				(18.2	)			1,972				(290	)			1,682				(14.7	)
	Deferred				857				(240	)			617				(28.0	)			356				(82	)			274				(23.0	)
					4,264				(861	)			3,403				(20.2	)			2,328				(372	)			1,956				(16.0	)
Income before minority interest and cumulative effect of accounting changes					9,644				(1,392	)			8,252				(14.4	)			5,814				212				6,026				3.6
Minority interest					(379	)			127				(252	)			–				(295	)			135				(160	)			–
Income before cumulative effect of accounting changes					9,265				(1,265	)			8,000				(13.7	)			5,519				347				5,866				6.3
Cumulative effect of accounting changes, net of tax					9				–				9				–				–				–				–				–
Net Income				$	9,274			$	(1,265	)		$	8,009				(13.6	)%		$	5,519			$	347			$	5,866				6.3	%
Earnings per common share:
	Basic
		Income before cumulative effect of accounting changes		$	3.55			$	(0.48	)		$	3.07				(13.5	)%		$	2.11			$	0.14			$	2.25				6.6	%
		Cumulative effect of accounting changes, net of tax			–				–				–				–				–				–				–				–
		Net Income			3.55				(0.48	)			3.07				(13.5	)			2.11				0.14				2.25				6.6
	Diluted
		Income before cumulative effect of accounting changes		$	3.52			$	(0.48	)		$	3.04				(13.6	)%		$	2.09			$	0.13			$	2.22				6.2	%
		Cumulative effect of accounting changes, net of tax			–				–				–				–				–				–				–				–
		Net Income			3.52				(0.48	)			3.04				(13.6	)			2.09				0.13				2.22				6.2
	Average shares outstanding:
		Basic			2,610								2,610								2,612								2,612
		Diluted			2,637								2,637								2,643								2,643

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				Years Ended December 31,
				2001																2000
				Previously								As				Percent				Previously								As				Percent
(in millions, except per share amounts)				Reported				Adjustments				Restated				Change				Reported				Adjustments				Restated				Change
Revenues:
	Premiums and other considerations			$	39,194			$	(662	)		$	38,532				(1.7	)%		$	35,298				$(1,271	)		$	34,027				(3.6	)%
	Net investment income				13,698				(683	)			13,015				(5.0	)			12,831				(108	)			12,723				(0.8	)
	Realized capital gains (losses)				(836	)			(83	)			(919	)			–				(314	)			75				(239	)			–
	Other revenues				9,710				(168	)			9,542				(1.7	)			8,523				1,817				10,340				21.3
	Total revenues				61,766				(1,596	)			60,170				(2.6	)			56,338				513				56,851				0.9
Benefits and expenses:
	Incurred policy losses and benefits				34,864				(615	)			34,249				(1.8	)			30,776				(167	)			30,609				(0.5	)
	Insurance acquisition and other operating expenses				16,746				1,244				17,990				7.4				15,224				1,528				16,752				10.0
	Acquisition restructuring and related charges				2,017				–				2,017				–				315				–				315				–
	Total benefits and expenses				53,627				629				54,256				1.2				46,315				1,361				47,676				2.9
Income before income taxes, minority interest and cumulative effect of accounting changes					8,139				(2,225	)			5,914				(27.3	)			10,023				(848	)			9,175				(8.5	)
Income Taxes:
	Current				1,919				(379	)			1,540				(19.7	)			1,697				(168	)			1,529				(9.9	)
	Deferred				420				(455	)			(35	)			(108.3	)			1,274				36				1,310				2.8
					2,339				(834	)			1,505				(35.7	)			2,971				(132	)			2,839				(4.4	)
Income before minority interest and cumulative effect of accounting changes					5,800				(1,391	)			4,409				(24.0	)			7,052				(716	)			6,336				(10.2	)
Minority interest					(301	)			200				(101	)			–				(413	)			218				(195	)			–
Income before cumulative effect of accounting changes					5,499				(1,191	)			4,308				(21.7	)			6,639				(498	)			6,141				(7.5	)
Cumulative effect of accounting changes, net of tax					(136	)			–				(136	)			–				–				–				–				–
Net Income				$	5,363			$	(1,191	)		$	4,172				(22.2	)%		$	6,639			$	(498	)		$	6,141				(7.5	)%
Earnings per common share:
	Basic
		Income before cumulative effect of accounting changes		$	2.10			$	(0.46	)		$	1.64				(21.9	)%		$	2.55			$	(0.19	)		$	2.36				(7.5	)%
		Cumulative effect of accounting changes, net of tax			(0.05	)			–				(0.05	)			–				–				–				–				–
		Net Income			2.05				(0.46	)			1.59				(22.4	)			2.55				(0.19	)			2.36				(7.5	)
	Diluted
		Income before cumulative effect of accounting changes		$	2.07			$	(0.45	)		$	1.62				(21.7	)%		$	2.52			$	(0.19	)		$	2.33				(7.5	)%
		Cumulative effect of accounting changes, net of tax			(0.05	)			–				(0.05	)			–				–				–				–				–
		Net Income			2.02				(0.45	)			1.57				(22.3	)			2.52				(0.19	)			2.33				(7.5	)
	Average shares outstanding:
		Basic			2,621								2,621								2,607								2,607
		Diluted			2,659								2,659								2,638								2,638

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ITEM 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations

Throughout this Management’s Discussion and Analysis of Financial Condition and Results of Operations, AIG presents its operations in the way it believes will be most meaningful. Gross premiums written, statutory underwriting profit (loss) and combined ratios are presented in accordance with accounting principles prescribed by insurance regulatory authorities because these are standard measures of performance used in the insurance industry and thus allow more meaningful comparisons with AIG’s insurance competitors. AIG has also incorporated into this discussion a number of cross-references to additional information included throughout this Form 10-K to assist readers seeking related information on a particular subject.

INDEX TO FINANCIAL INFORMATION

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

Management’s Discussion and Analysis of Financial Condition and Results of Operations is designed to provide the reader a narrative with respect to AIG’s operations, financial condition and liquidity and certain other significant matters.

INDEX

				Page
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION					30
RESTATEMENT OF PREVIOUSLY ISSUED FINANCIAL STATEMENTS					31
FOURTH QUARTER 2004 CHANGES IN ESTIMATES					42
OVERVIEW OF OPERATIONS AND BUSINESS RESULTS					53
	Consolidated Results				54
CRITICAL ACCOUNTING ESTIMATES					57
OPERATING REVIEW					57
	General Insurance Operations				57
		General Insurance Results			59
		Reinsurance			60
		Reserve for Losses and Loss Expenses			62
		Asbestos and Environmental Reserves			67
	Life Insurance & Retirement Services Operations				71
		Life Insurance & Retirement Services Results			72
		Underwriting and Investment Risk			73
	Insurance and Asset Management Invested Assets				75
		Credit Quality			76
		Valuation of Invested Assets			76
	Financial Services Operations				79
		Financial Services Results			81
		Financial Services Invested Assets			82
	Asset Management Operations				84
		Asset Management Results			84
	Other Operations				85
CAPITAL RESOURCES					85
		Borrowings			85
		Contractual Obligations and Other Commercial Commitments			89
		Shareholders’ Equity			90
		Stock Purchase			90
		Dividends from Insurance Subsidiaries			90
		Regulation and Supervision			91
LIQUIDITY					91
SPECIAL PURPOSE VEHICLES AND OFF BALANCE SHEET ARRANGEMENTS					92
DERIVATIVES					93
MANAGING MARKET RISK					94
		Insurance			94
		Financial Services			95
RECENT ACCOUNTING STANDARDS					96

	Cautionary Statement Regarding Forward-Looking Information

This Annual Report and other publicly available documents may include, and AIG’s officers and representatives may from time to time make, statements which may constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are not historical facts but instead represent only AIG’s belief regarding future events, many of which, by their nature, are inherently uncertain and outside AIG’s control. These statements may address, among other things, the status and potential future outcome of the current regulatory and civil proceedings against AIG and their potential effect on AIG’s businesses, financial position, results of operations, cash flows and liquidity, the effect of the credit rating downgrades on AIG’s businesses and competitive position, the effect of the severing of ties between AIG and Starr and SICO, AIG’s strategy for growth, product development, market position, financial results and reserves. It is possible that AIG’s actual results and financial condition may differ, possibly materially, from the anticipated results and financial condition indicated in these forward-looking statements. Important factors that could cause AIG’s actual results to differ, possibly materially, from those in the specific forward-looking statements are discussed under “Certain Factors Affecting AIG’s Business” in Item 1 of Part I and throughout this Management’s Discussion and Analysis of Financial Condition and Results of Operations. AIG is not under any obligation (and expressly disclaims any such obligations) to update or alter any forward-looking statement, whether written or oral, that may be made from time to time, whether as a result of new information, future events or otherwise.

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	Restatement of Previously Issued Financial Statements

     Subpoenas. In February 2005, AIG received subpoenas from the Office of the Attorney General for the State of New York (NYAG) and the Securities and Exchange Commission (SEC) relating to investigations into the use of non-traditional insurance products and certain assumed reinsurance transactions and AIG’s accounting for such transactions. The United States Department of Justice and various state regulators are also investigating related issues. During these investigations, in March 2005, AIG’s then Chairman and Chief Executive Officer retired. In addition, AIG’s then Chief Financial Officer was terminated for failure to cooperate in the investigations. Subsequently, certain other AIG executives, including its former comptroller, were terminated for similar reasons. On May 26, 2005, the NYAG and the New York Superintendent of Insurance filed a civil complaint against AIG relating to these investigations. For more information on these investigations, see Item 3. Legal Proceedings.

     Internal Review. In connection with the preparation of AIG’s consolidated financial statements included in this Annual Report on Form 10-K, AIG’s current management initiated an internal review of AIG’s books and records, which was substantially expanded in mid-March. The internal review, conducted under the direction of current senior management with the oversight of the Audit Committee of the Board of Directors, spanned AIG’s major business units globally, and included a review of information and a number of transactions from 2000 to the present. In certain cases, items in periods prior to 2000 were examined due to the nature of the transactions under review. The business units subject to review were Domestic General Insurance, Foreign General Insurance, Reinsurance, Financial Services, Domestic and Foreign Life Insurance & Retirement Services and Asset Management. The internal review encompassed AIG’s books and records, thousands of files and e-mails and interviews with current and former employees and members of management. Management believes that the scope and process of its internal review was sufficient to identify issues of a material nature that could affect AIG’s financial statements.

     AIG’s internal review was complemented by investigations by outside counsel for AIG and for the Audit Committee of the Board of Directors. PricewaterhouseCoopers LLP, an independent registered public accounting firm (PwC or independent auditors), was consulted on the scope of the internal review for certain matters and reviewed the results of the internal review.

     As a result of the findings of the internal review, together with the results of investigations conducted by outside counsel at the request of AIG’s Audit Committee and in consultation with AIG’s independent auditors, AIG has concluded that the accounting for certain transactions and certain relationships needs to be restated or adjusted.

     Restatement. AIG has restated its financial statements for the years ended December 31, 2003, 2002, 2001 and 2000, the quarters ended March 31, June 30 and September 30, 2004 and 2003 and the quarter ended December 31, 2003. AIG’s previously issued financial statements for these and prior periods should no longer be relied upon. See Selected Financial Data and Note 2 of Notes to Financial Statements for a reconciliation of previously reported amounts to the restated amounts.

     As part of its internal review, AIG evaluated the financial reporting consolidation process and the resulting financial statements as well as the appropriateness of AIG’s prior accounting and reporting decisions. Based on this evaluation, the restatement includes corrections of errors in current or prior accounting periods for improper or inappropriate transactions or entries identified by the review. In many cases these transactions or entries appear to have had the purpose of achieving an accounting result that would enhance measures believed to be important to the financial community and may have involved documentation that did not accurately reflect the true nature of the arrangements. In certain instances, these transactions or entries may also have involved misrepresentations to members of management, regulators and AIG’s independent auditors. The restatement includes adjustments, some of which had been previously identified but considered not to be sufficiently material to require correction. In addition, AIG has determined that certain accounts should be adjusted for the year ended December 31, 2004 to reflect changes in estimates made in the fourth quarter of 2004. The aggregate effect of these changes in estimates resulted in an after tax charge of approximately $1.19 billion. See “Fourth Quarter 2004 Changes in Estimates” herein and Note 1(cc) of Notes to Financial Statements.

     Details of Accounting Adjustments included in the Restatement. The accounting adjustments relate primarily to the categories described below. Many of the adjustments that do not affect previously reported net income or consolidated shareholders’ equity do, however, change both the consolidated and business segment reporting of premiums, underwriting results, net investment income, realized capital gains and losses and operating income, as well as other items. Adjustments that affect reported net income and consolidated shareholders’ equity relate to both the timing and recognition of revenues and expenses and affect the comparison of period-to-period results. Following the description of each transaction, accounting entry or entity category is a summary of the principal consolidated

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statement of income and balance sheet accounts affected by the adjustments relating to that category.

•	Risk Transfer. To recognize the cash flows under an insurance contract as premium and losses, GAAP requires the transfer of risk. If risk transfer requirements are not met, an insurance contract is accounted for as a deposit, resulting in the recognition of cash flows under the contract as deposit assets or liabilities and not as revenues or expense. AIG has concluded, based upon its internal review, that there was insufficient risk transfer to qualify for insurance accounting for certain transactions where AIG subsidiaries either wrote direct insurance or assumed or ceded reinsurance. These transactions are now recorded using deposit accounting. The changes resulting from the change to deposit accounting affect both the consolidated balance sheet and statement of income. Detailed discussions of the principal accounts affected are provided below for each of the categories included.
–	Union Excess: AIG has concluded, based on documents and information identified during the course of the internal review, that reinsurance ceded to Union Excess Reinsurance Company, Ltd., a Barbados-domiciled reinsurer (Union Excess), did not result in risk transfer because of AIG’s control over certain transactions undertaken directly or indirectly with Union Excess, including the timing and nature of certain commutations. Eliminating the cessions reduces reinsurance assets, effectively eliminates the inherent discount related to the loss reserves ceded under the contracts, and increases net premiums and losses. It should be noted that any income earned on the deposit assets in future periods would increase net investment income in those periods.
	In addition, as a result of certain facts and circumstances related to the formation of Union Excess, as well as certain relationships with Starr International Company, Inc. (SICO), Union Excess is now included in AIG’s consolidated financial statements. The facts and circumstances surrounding SICO’s involvement with Union Excess were not properly reflected in AIG’s books and records, were not known to all relevant AIG financial reporting personnel and, AIG now believes, were not known to AIG’s independent auditors. For example, a significant portion of the ownership interests of Union Excess shareholders are protected against loss under financial arrangements with SICO. Additionally, from its formation in 1991, Union Excess has reinsured risks emanating primarily or solely from AIG subsidiaries, both directly and indirectly. Further, it appears that the employees responsible for the reinsurance related to Union Excess managed that relationship to prevent significant losses or gains to Union Excess so that substantially all of the risks and rewards of the underlying reinsurance inured to AIG. This relationship allowed AIG to absorb substantially all the economic returns, which in turn caused Union Excess to be deemed a variable interest entity (VIE). The effect of the adjustments and restatement relating to Union Excess on certain of AIG’s consolidated statement of income and balance sheet accounts is as follows:

Increase (Decrease) For Years Ended and at December 31,
(in millions)			2004				2003				2002				2001				2000
Consolidated Statement of Income:
	Premiums and other considerations		$	386			$	439			$	673			$	726			$	251
	Net investment income			259				304				233				179				140
	Realized capital gains (losses)			(48	)			(17	)			105				39				61
	Incurred policy losses and benefits			671				433				683				638				955
	Insurance acquisition and other operating expenses			48				48				52				111				63
	Net income			(78	)			160				180				127				(368	)
Consolidated Balance Sheet:
	Premiums and insurance balances receivable, net of allowance			2,417				1,923				1,477				956				119
	Reinsurance assets			(5,511	)			(5,815	)			(5,856	)			(5,382	)			(4,763	)
	Other assets			1,607				2,549				2,760				2,561				2,327
	Total shareholders’ equity			(951	)			(873	)			(1,033	)			(1,213	)			(1,340	)

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Gen Re: In December 2000 and March 2001, an AIG subsidiary entered into an assumed reinsurance transaction with a subsidiary of General Re Corporation (Gen Re) involving two tranches of $250 million each. In connection with each tranche, consolidated net premiums written and consolidated incurred policy losses and benefits increased by $250 million in the fourth quarter of 2000 (with respect to the first tranche) and the first quarter of 2001 (with respect to the second tranche). The first tranche of the transaction was commuted in November 2004, reducing premiums and reserves for losses and loss expenses by approximately $250 million in the fourth quarter 2004. AIG has concluded that the transaction was done to accomplish a desired accounting result and did not entail sufficient qualifying risk transfer. As a result, AIG has determined that the transaction should not have been recorded as insurance. AIG’s restated financial statements recharacterize the transaction as a deposit rather than as insurance. This adjustment also includes the effects of a related commutation in 2001. Such recharacterization had virtually no effect on net income or consolidated shareholders’ equity but had the

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	following effects on certain of AIG’s consolidated statement of income and balance sheet accounts:

Increase (Decrease) For Years Ended and at December 31,
(in millions)			2004				2003				2002				2001				2000
Consolidated Statement of Income:
	Premiums and other considerations		$	245			$	–			$	–			$	(258	)		$	(250	)
	Incurred policy losses and benefits			250				–				–				(258	)			(250	)
Consolidated Balance Sheet:
	Reserve for losses and loss expenses			(250	)			(500	)			(500	)			(500	)			(250	)
	Other liabilities			250				500				500				500				250

–	Other Risk Transfer: AIG has concluded that Richmond Insurance Company, Ltd., a Bermuda-based reinsurance holding company (Richmond) in which AIG currently holds a 19.9 percent ownership interest, should be treated as a consolidated entity in AIG’s financial statements due to AIG’s ability to exert control over that entity. Such determination was based, in part, on arrangements and documents, including put agreements requiring an AIG subsidiary to purchase the Richmond shares, that appear not to have been previously disclosed to appropriate AIG financial personnel or AIG’s independent auditors. Although AIG currently owns only a minority ownership interest in Richmond, a review of the operations of Richmond and its subsidiaries has shown significant previously undisclosed evidence of AIG control causing Richmond to be deemed a VIE. The consolidation of Richmond had virtually no effect on net income or consolidated shareholders’ equity. AIG has received notice of exercise of a put with respect to 49.9 percent of the Richmond shares and expects to acquire the shares by June 30, 2005.
	As a result of its internal review of AIG Re, AIG Risk Finance and AIG Risk Management and certain transactions, AIG determined that adjustments were required because certain transactions lacked sufficient risk transfer to qualify for insurance accounting under GAAP.
	The effect of the adjustments and restatement for Richmond, AIG Re, AIG Risk Finance, AIG Risk Management and certain other transactions on certain of AIG’s consolidated statement of income and balance sheet accounts is as follows:

Increase (Decrease) For Years Ended and at December 31,
(in millions)			2004				2003				2002				2001				2000
Consolidated Statement of Income:
	Premiums and other considerations		$	(287	)		$	33			$	(856	)		$	(924	)		$	(815	)
	Incurred policy losses and benefits			(159	)			53				(862	)			(561	)			(739	)
	Insurance acquisition and other operating expenses			(112	)			(62	)			(35	)			(242	)			(65	)
	Net income			(26	)			–				22				(66	)			(4	)
Consolidated Balance Sheet:
	Premiums and insurance balances receivable, net of allowance			(362	)			(389	)			(537	)			(752	)			(932	)
	Reinsurance assets			(529	)			(1,185	)			(912	)			(937	)			(1,032	)
	Other assets			947				1,126				634				807				989
	Reserve for losses and loss expenses			(1,154	)			(1,609	)			(1,609	)			(995	)			(748	)
	Reserve for unearned premiums			82				112				(31	)			(131	)			(347	)
	Funds held by companies under reinsurance treaties			(740	)			(1,019	)			(1,021	)			(1,103	)			(1,040	)
	Other liabilities			1,910				2,114				1,850				1,392				1,120
	Total shareholders’ equity			(77	)			(51	)			(52	)			(73	)			(7	)

•

Loss Reserves: Estimation of ultimate net losses and loss expenses is a complex process requiring the use of assumptions which may be highly uncertain at the time of estimation. As a result of its internal review, AIG has determined that the IBNR included in the General Insurance reserve for losses and loss expenses was adjusted on a regular basis without appropriate support for the changes requested to be made. Although AIG does not believe that any change materially affected the integrity of AIG’s loss reserve position because in each instance IBNR as adjusted was determined to be within an appropriate tolerance of the applicable actuarial point estimate, AIG has determined that the unsupported decreases in reserves generated independently from the actuarial process constituted errors which should be corrected

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and has restated the amounts of carried reserves accordingly. As a result, the fourth quarter 2002 charge relating to the increase in the General Insurance reserve for losses and loss expenses, previously reported as $2.8 billion, has been restated to $2.1 billion to reduce the original charge by the cumulative effect of the correction of the unsupported adjustments to reserves through that date (approximately $700 million). Therefore, the charge to pretax earnings is approximately $700 million less than previously reported, reflecting the removal of the unsupported adjustments to reserves in periods prior to and including the fourth quarter of 2002. The effect of the adjustments and restatement of the loss reserves on certain of AIG’s consolidated statement of income and balance sheet accounts is set forth as follows:

Increase (Decrease) For Years Ended and at December 31,
(in millions)			2004				2003				2002				2001				2000
Consolidated Statement of Income:
	Incurred policy losses and benefits		$	302			$	342			$	(351	)		$	137			$	223
	Net income			(196	)			(222	)			228				(89	)			(145	)
Consolidated Balance Sheet:
	Reserve for losses and loss expenses			880				578				236				587				450
	Total shareholders’ equity			(572	)			(375	)			(153	)			(381	)			(292	)

•	Net Investment Income. As a result of the internal review, AIG determined that the accounting for certain transactions had the effect of improperly converting capital gains into net investment income and was not consistent with GAAP. The most significant of these transactions are:
–	Covered Calls: From 2001 through 2003, certain AIG subsidiaries entered into a series of transactions with third parties whereby these subsidiaries sold in-the-money calls, principally on municipal bonds in their investment portfolios that had unrealized appreciation associated with them. Upon exercise of a call, the related bonds were delivered to the purchaser of the call and subsequently reacquired by the subsidiaries pursuant to contingent forward agreements which permitted the AIG subsidiaries to repurchase the bonds at the prevailing market value. In connection with selling the calls, the AIG subsidiaries also entered into interest rate swaps to protect them against the effects of changes in value of the applicable bonds as a result of movements in interest rates during the transaction period. These transactions were accounted for as sales and subsequent purchases and appear to have been initiated to increase net investment income. AIG has determined that, because AIG was able to cause the bonds to be returned from the third parties even after the third parties exercised the call options, AIG did not cede control over the bonds and therefore the transactions should not have been accounted for as sales and subsequent purchases but rather as financings. The adjustments required to correct this error reduce previously reported amounts of net investment income and correspondingly increase realized capital gains from these transactions over the three-year period. The adjustments and restatement had no net effect on consolidated shareholders’ equity for any period and the following effects on certain of AIG’s consolidated statement of income accounts:

Increase (Decrease) For Years Ended and at December 31,
(in millions)			2004				2003				2002				2001				2000
Consolidated Statement of Income:
	Net investment income		$	35			$	(179	)		$	(7	)		$	(146	)		$	–
	Realized capital gains (losses)			57				118				61				55				–
	Net income			59				(40	)			35				(59	)			–

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Synthetic Fuel Investment: AIG subsidiaries invest in certain limited liability companies that invest in synthetic fuel production facilities as a means of generating income tax credits. As a result of a misapplication of GAAP, AIG recorded net investment income or, in some cases, other revenues, on a pretax basis rather than reflecting the tax credit as a reduction of income tax expense, thereby increasing net investment income for AIG’s life insurance and retirement services segment and other revenues for the financial services segment. Certain of these entries were previously identified but not corrected as the amounts were viewed as not sufficiently material to require correction. In the fourth quarter of 2004, AIG changed its accounting to present these tax credits as a component of income taxes. AIG has now determined that it is necessary to record these adjustments for the periods prior to the fourth quarter of 2004. These adjustments had no effect on consolidated net income or shareholders’ equity but had the following effects on certain of AIG’s consolidated statement of income accounts:

Increase (Decrease) For Years Ended and at December 31,
(in millions)			2004				2003				2002				2001				2000
Consolidated Statement of Income:
	Net investment income		$	(203	)		$	(238	)		$	(259	)		$	(31	)		$	–
	Other revenues			(143	)			(200	)			(165	)			(212	)			(79	)
	Income taxes			(346	)			(438	)			(424	)			(243	)			(79	)

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Hedge Fund Accounting: AIG subsidiaries invest in a variety of alternative asset classes, including hedge fund limited partnerships, that are accounted for as available for sale securities. As part of the underlying partnership agreements, such AIG subsidiaries have the right to redeem their interests at defined times. A redemption allows AIG to record net investment income to the extent there are gains in the underlying funds at the time. However, as a result of its internal review, AIG has determined that, in certain cases, the redemption resulted in inappropriate gain recognition because the proceeds were required to be immediately reinvested in the funds. In addition, the cost bases of certain funds were misallocated in determining gains. The restated consolidated financial statements correct these errors. These corrections had virtually no effect on consolidated shareholders’ equity but had the following effects on certain of AIG’s consolidated statement of income accounts.

Increase (Decrease) For Years Ended and at December 31,
(in millions)			2004				2003				2002				2001				2000
Consolidated Statement of Income: