Table of Contents

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549



Form 8-K

CURRENT REPORT
Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): November 5, 2010

Commission file number 1-8787



American International Group, Inc.
(Exact name of registrant as specified in its charter)

Delaware
(State or other jurisdiction of
incorporation or organization)

  13-2592361
(I.R.S. Employer
Identification No.)

180 Maiden Lane, New York, New York
(Address of principal executive offices)

 

10038
(Zip Code)

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



Former name, former address and former fiscal year, if changed since last report:

70 Pine Street, New York, NY 10270



    Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

o
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o
Pre-commencement communications pursuant to Rule 13e4(c) under the Exchange Act (17 CFR 240.13e-4(c))



American International Group, Inc., and Subsidiaries

Table of Contents

 

Item 8.01

 

Other Events

  3

Item 9.01

 

Financial Statements and Exhibits

  5


SIGNATURE


 

6

EX-99.1

       

EX-99.2

       

EX-99.3

       

EX-99.4

       

EX-99.5

       

EX-101*

       
 


*
As provided in Rule 406T of Regulation S-T, this information is furnished and not filed or part of a registration statement or prospectus for purposes of Sections 11 and 12 of the Securities Act of 1933 and Section 18 of the Securities Exchange Act of 1934, and otherwise is not subject to liability under these sections.

2


Table of Contents


American International Group, Inc., and Subsidiaries

Item 8.01    Other Events

    American International Group, Inc. (AIG) is filing this Current Report on Form 8-K (Form 8-K) to update AIG's Annual Report on Form 10-K for the year ended December 31, 2009, as amended by Amendment No. 1 on Form 10-K/A filed on March 31, 2010 (2009 Annual Report on Form 10-K) for the following:

    This update is consistent with the presentation of continuing and discontinued operations as well as segment reporting included in AIG's Form 10-Q for the quarter ended September 30, 2010 (the Third Quarter Form 10-Q), which included ALICO, Nan Shan, AGF, AIG Star and AIG Edison as discontinued operations. ALICO and Nan Shan were initially presented as held for sale on the Consolidated Balance Sheet at March 31, 2010 and December 31, 2009, respectively. The assets and liabilities of AGF, AIG Star and AIG Edison were presented as held for sale commencing with the Third Quarter Form 10-Q. In August 2010, regulatory authorities declined to approve the sale of Nan Shan. However, AIG is pursuing other opportunities to divest Nan Shan and believes it will complete a sale within twelve months. Therefore, AIG continues to classify Nan Shan as held for sale and as a discontinued operation.

    In accordance with the terms of a credit facility (FRBNY Credit Facility) provided by The Federal Reserve Bank of New York (FRBNY) under the Credit Agreement dated as of September 22, 2008 (as amended, the Credit Agreement) between AIG and the FRBNY, net proceeds from dispositions, after taking into account taxes and transaction expenses, to the extent such proceeds do not represent capital of AIG's insurance subsidiaries required for regulatory or ratings purposes, are contractually required to be applied toward the repayment of the FRBNY Credit Facility as mandatory prepayments unless otherwise agreed with the FRBNY. As a result of restructuring activities with respect to Nan Shan's immediate parent in the second quarter of 2010, the net proceeds from the anticipated sale of Nan Shan will no longer be required for ratings or regulatory purposes with respect to AIG's insurance company subsidiaries. Therefore, it is anticipated that a mandatory prepayment from net proceeds from the sale of Nan Shan will be required upon closing.

    The mandatory prepayments on the FRBNY Credit Facility will reduce the amount available to be borrowed by the same amount as the prepayments. In conjunction with anticipated prepayments from net proceeds from the sales of AGF, AIG Star, AIG Edison and Nan Shan, interest expense allocations, including periodic amortization of the prepaid commitment fee asset, are included in Income (loss) from discontinued operations in the Consolidated Statement of Income for the years ended December 31, 2009 and 2008 in this Form 8-K.

    On September 30, 2010, AIG entered into an agreement in principle with the United States Department of the Treasury, the Federal Reserve Bank of New York and the AIG Credit Facility Trust, a trust established for the sole benefit of the United States Treasury for a recapitalization transaction, including the repayment of all amounts owed under the FRBNY Credit Facility. See Note 24 to the Consolidated Financial Statements included herein in this Form 8-K for further discussion.

    Exhibits filed with this Form 8-K and incorporated in this Item 8.01 by reference revise the following sections in the 2009 Annual Report on Form 10-K for all applicable periods presented:

3


Table of Contents


American International Group, Inc., and Subsidiaries

    With respect to the recast of historical financial statements in this Form 8-K, the changes noted above affect only the manner in which certain financial information was previously reported and do not restate or revise AIG's net income (loss) attributable to AIG in any previously reported financial statements. Except for matters noted above affecting changes in presentation, no other information in the 2009 Annual Report on Form 10-K is being updated for events or developments that occurred subsequent to the filing of the 2009 Annual Report on Form 10-K on February 26, 2010.

    This document supersedes the information included in the Form 8-K filed on August 6, 2010. Information contained in Exhibits 99.1 and 99.2 should be read in conjunction with and as a supplement to information contained in the 2009 Annual Report on Form 10-K. For significant developments since the filing of the 2009 Annual Report on Form 10-K, please see AIG's subsequent 2010 Quarterly Reports on Form 10-Q and other Securities and Exchange Commission filings.

4


Table of Contents


American International Group, Inc., and Subsidiaries

Item 9.01    Financial Statements and Exhibits.

(d)
Exhibits.

 
Exhibit Number
   
 
  99.1   Selected Financial Data updated to present ALICO, AGF, AIG Star and AIG Edison as discontinued operations and interest expense allocations to discontinued operations related to anticipated mandatory prepayments from net proceeds from the expected sales of AGF, AIG Star, AIG Edison and Nan Shan.

 

99.2

 

Management's Discussion and Analysis of Financial Condition and Results of Operations updated to present ALICO, AGF, AIG Star and AIG Edison as discontinued operations, interest expense allocations to discontinued operations related to anticipated mandatory prepayments from net proceeds on the expected sales of AGF, AIG Star, AIG Edison and Nan Shan and the realignment of AIG's financial reporting structure to reflect the change in segment presentation consistent with how management currently views and manages its businesses.

 

99.3

 

Financial Statements and Supplementary Data updated to reflect ALICO, AGF, AIG Star and AIG Edison as discontinued operations, interest expense allocations to discontinued operations related to anticipated mandatory prepayments from net proceeds from the expected sales of AGF, AIG Star, AIG Edison and Nan Shan, realignment of AIG's financial reporting structure to reflect the change in segment presentation consistent with how management currently views and manages its businesses and the related Report of Independent Registered Public Accounting Firm. Financial Statement Schedules updated to reflect ALICO, AGF, AIG Star and AIG Edison as discontinued operations, as applicable.

 

99.4

 

Ratio of Earnings to Fixed Charges updated to present ALICO, AGF, AIG Star and AIG Edison as discontinued operations.

 

99.5

 

Consent of PricewaterhouseCoopers LLP.

 

101

 

Interactive data files pursuant to Rule 405 of Regulation S-T: (i) the Consolidated Balance Sheet as of December 31, 2009 and December 31, 2008, (ii) the Consolidated Statement of Income (Loss) for the three years ended December 31, 2009, (iii) the Consolidated Statement of Shareholders' Equity for the three years ended December 31, 2009, (iv) the Consolidated Statement of Cash Flows for the three years ended December 31, 2009, (v) the Consolidated Statement of Comprehensive Income (Loss) for the three years ended December 31, 2009 and (vi) the Notes to the Consolidated Financial Statements, tagged as blocks of text.*

 


*
As provided in Rule 406T of Regulation S-T, this information is furnished and not filed or part of a registration statement or prospectus for purposes of Sections 11 and 12 of the Securities Act of 1933 and Section 18 of the Securities Exchange Act of 1934, and otherwise is not subject to liability under these sections.

5


Table of Contents


American International Group, Inc., and Subsidiaries

SIGNATURE

    Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

    AMERICAN INTERNATIONAL GROUP, INC.
(Registrant)

 

 

/s/ KATHLEEN E. SHANNON

Kathleen E. Shannon
Senior Vice President
and Deputy General Counsel

Dated: November 5, 2010

6




QuickLinks -- Click here to rapidly navigate through this document


American International Group, Inc., and Subsidiaries

Exhibit 99.1

Item 6.    Selected Financial Data

The following selected financial data reflects changes described in Item 8.01 of this Current Report on Form 8-K, and 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.

   
Years Ended December 31,
   
   
   
   
   
 
(in millions, except per share data)
  2009(a)
  2008(a)
  2007(a)
  2006(a)
  2005(a)
 
   

Revenues(b):

                               
 

Premiums and other considerations

  $ 51,239   $ 63,137   $ 61,581   $ 57,861   $ 54,538  
 

Net investment income

    18,987     10,453     23,933     22,303     19,020  
 

Net realized capital gains (losses)

    (5,210 )   (46,794 )   (3,248 )   (324 )   245  
 

Unrealized market valuation gains (losses) on Capital Markets super senior credit default swap portfolio

    1,418     (28,602 )   (11,472 )   -     -  
 

Other income

    9,214     (4,769 )   11,013     6,580     9,239  

Total revenues

    75,648     (6,575 )   81,807     86,420     83,042  

Benefits, claims and expenses:

                               
 

Policyholder benefits and claims incurred

    50,015     51,036     50,928     47,220     50,622  
 

Policy acquisition and other insurance expenses(c)

    15,864     20,833     15,644     15,404     14,226  
 

Interest expense(d)

    13,701     15,379     3,483     2,476     1,678  
 

Restructuring expenses and related asset impairment and other expenses

    1,149     771     -     -     -  
 

Net loss on sale of divested businesses

    1,271     -     -     -     -  
 

Other expenses(c)

    7,418     8,101     7,018     5,011     5,799  

Total benefits, claims and expenses

    89,418     96,120     77,073     70,111     72,325  

Income (loss) from continuing operations before income tax expense (benefit) and cumulative effect of change in accounting principles(b)(e)(f)

    (13,770 )   (102,695 )   4,734     16,309     10,717  

Income tax expense (benefit)(g)

    (1,489 )   (9,683 )   125     4,708     2,799  

Income (loss) from continuing operations before cumulative effect of change in accounting principles

    (12,281 )   (93,012 )   4,609     11,601     7,918  

Income (loss) from discontinued operations, net of tax

    (32 )   (7,375 )   2,879     3,549     3,037  

Net income (loss)

    (12,313 )   (100,387 )   7,488     15,150     10,955  

Net income (loss) attributable to AIG

    (10,949 )   (99,289 )   6,200     14,048     10,477  
   

Earnings per common share attributable to AIG:

                               

Basic

                               
 

Income (loss) from continuing operations before cumulative effect of change in accounting principles

    (89.72 )   (701.73 )   26.32     81.16     57.93  
 

Income (loss) from discontinued operations

    (0.76 )   (55.12 )   21.66     26.31     22.76  
 

Cumulative effect of change in accounting principles, net of tax

    -     -     -     0.26     -  
 

Net income (loss) attributable to AIG

    (90.48 )   (756.85 )   47.98     107.73     80.69  

Diluted

                               
 

Income (loss) before cumulative effect of change in accounting principles

    (89.72 )   (701.73 )   26.18     80.76     57.36  
 

Income (loss) from discontinued operations

    (0.76 )   (55.12 )   21.55     26.16     22.50  
 

Cumulative effect of change in accounting principles, net of tax

    -     -     -     0.26     -  
 

Net income (loss) attributable to AIG

    (90.48 )   (756.85 )   47.73     107.18     79.86  

Dividends declared per common share

    -     8.40     15.40     13.00     12.60  
   

Year-end balance sheet data:

                               
 

Total investments

    601,165     636,912     829,468     767,812     665,166  
 

Total assets

    847,585     860,418     1,048,361     979,414     851,847  
 

Commercial paper and other short-term debt(h)

    4,739     15,718     13,114     13,028     9,208  
 

Long-term debt(i)

    136,733     177,485     162,935     135,650     100,641  
 

Total AIG shareholders' equity

    69,824     52,710     95,801     101,677     86,317  
 

Total equity

  $ 98,076   $ 60,805   $ 104,273   $ 107,037   $ 90,076  
   


American International Group, Inc., and Subsidiaries

(a)
Certain reclassifications have been made to prior period amounts to conform to the current period presentation. See Note 1 to the Consolidated Financial Statements.

(b)
In 2009, 2008, 2007, 2006 and 2005, includes other-than-temporary impairment charges on investments of $6.7 billion, $41.9 billion, $4.2 billion, $885 million, and $557 million, respectively. Also 2009, 2008, 2007, 2006 and 2005 results include gains (losses) from hedging activities that did not qualify for hedge accounting treatment, including the related foreign exchange gains and losses, of $1.2 billion, $(3.6) billion, $(1.4) billion, $(1.9) billion, and $2.4 billion, respectively, in revenues and in income from continuing operations before income tax expense. These amounts result primarily from interest rate and foreign currency derivatives that are effective economic hedges of investments and borrowings.

(c)
Includes goodwill impairment charges of $81 million and $3.3 billion, respectively, in Policy acquisition and other insurance expenses and $612 million and $450 million, respectively, in Other expenses for 2009 and 2008.

(d)
In 2009 and 2008, includes $9.8 billion and $11.0 billion, respectively, of interest expense on the FRBNY Credit Facility which was comprised of $8.0 billion and $9.1 billion, respectively, of amortization on the prepaid commitment fee asset associated with the FRBNY Credit Facility and $1.7 billion and $1.9 billion, respectively, of accrued compounding interest.

(e)
Includes catastrophe-related losses of $53 million in 2009, $1.8 billion in 2008, $276 million in 2007 and $3.28 billion in 2005.

(f)
Reduced by fourth quarter charges of $2.3 billion in 2009 and $1.8 billion in 2005 related to the annual review of General Insurance loss and loss adjustment reserves. In 2006 and 2005, includes charges related to changes in estimates for asbestos and environmental reserves of $198 million and $873 million, respectively.

(g)
In 2008, includes a $19.9 billion valuation allowance to reduce AIG's deferred tax asset to an amount AIG believes is more likely than not to be realized, and a $3.7 billion deferred tax expense attributable to the potential sales of foreign businesses. In 2009, includes a $2.9 billion valuation allowance to reduce AIG's deferred tax asset to an amount AIG believes is more likely than not to be realized.

(h)
Includes borrowings of $2.7 billion and $2.0 billion for AIGFP (through Curzon Funding LLC, for AIGFP asset-backed commercial paper conduit) and AIG Funding, Inc. (AIG Funding) respectively, under the CPFF at December 31, 2009 and $6.8 billion, $6.6 billion and $1.7 billion (through Curzon Funding LLC), AIG Funding and ILFC, respectively, at December 31, 2008.

(i)
Includes that portion of long-term debt maturing in less than one year. See Note 14 to the Consolidated Financial Statements.

    See Note 1(y) to the Consolidated Financial Statements for effects of adopting new accounting standards.

2




QuickLinks


QuickLinks -- Click here to rapidly navigate through this document


American International Group, Inc., and Subsidiaries

Exhibit 99.2

Item 7.    Management's Discussion and Analysis of Financial Condition and Results of Operations

    The information contained herein updates selected sections of Management's Discussion and Analysis of Financial Condition and Results of Operations as previously presented in Item 7 of Part II of AIG's Annual Report on Form 10-K for the year ended December 31, 2009, as amended by Amendment No. 1 on Form 10-K/A filed on March 31, 2010 (2009 Annual Report on Form 10-K). As more fully described in Item 8.01 of this Current Report on Form 8-K, sections of the 2009 Annual Report on Form 10-K are being updated to reflect:

    The sections of Management's Discussion and Analysis of Financial Condition and Results of Operations as previously presented in Item 7 of Part II of the 2009 Annual Report on Form 10-K that are being updated are as follows:

    Sections of the 2009 Annual Report on Form 10-K that are unchanged or not materially affected by the reclassification of AGF's, AIG Star's, AIG Edison's and ALICO's historical results to discontinued operations, interest expense allocations to discontinued operations or the realignment of AIG's segment financial reporting structure are not included herein.

2009 Financial Overview

    Global financial markets continued their recovery in the second half of 2009, as investors returned to equity and bond markets. This optimism, not yet accompanied by a robust economic recovery, produced a strong rally in bond, equity and commodity markets. Cash accumulated by investors in 2008 and early 2009 continued to flow out of short-term money market accounts and into higher yielding assets, creating investment demand in excess of available new supply in many sectors. While securitized mortgage products participated to a degree in the rally, particularly in desirable tranches of well-collateralized transactions, the commercial mortgage and equity real estate sectors continue to lag.

    The improved market environment noted above contributed to the substantial reduction in the loss from continuing operations before income taxes, which declined to $13.8 billion in 2009 compared to $102.7 billion in 2008. The following significant drivers also contributed to this improvement:



American International Group, Inc., and Subsidiaries

    Additionally, the net loss in 2009 decreased due to $23.6 billion of deferred tax expense recorded in 2008 associated with the potential sales of foreign businesses and valuation allowances.

Fourth Quarter 2009 Net Loss

    AIG incurred a net loss attributable to AIG of $8.9 billion during the fourth quarter of 2009. This loss resulted primarily from the following:

Results of Operations

    AIG reports the results of its operations through four reportable segments: General Insurance, Domestic Life Insurance & Retirement Services, Foreign Life Insurance & Retirement Services and Financial Services. AIG evaluates performance based on pre-tax income (loss), excluding results from discontinued operations and net gains (losses) on sales of divested businesses because AIG believes that this provides more meaningful information on how its operations are performing. Through these reportable segments, AIG provides insurance, financial and investment products and services to both businesses and individuals in more than 130 countries and jurisdictions. AIG's Other operations category consists of business and items not allocated to AIG's reportable segments.

    AIG's subsidiaries serve commercial, institutional and individual customers through an extensive property-casualty and life insurance and retirement services network. AIG's Financial Services businesses include commercial aircraft and equipment leasing and capital markets operations, both in the United States and abroad. AIG also provides asset management services to institutions and individuals.

Discontinued Operations

2010 Divestiture Agreements

    In the third quarter of 2010, AIG entered into definitive agreements to sell 80 percent of AGF for $125 million and AIG Star and AIG Edison, AIG's Japan-based insurance subsidiaries, for total consideration of $4.8 billion, less the principal balance of certain outstanding debt owed by AIG Star and AIG Edison as of the closing date. As of September 30, 2010, the outstanding principal balance of the debt approximated $0.6 billion. AIG Star and AIG Edison were reclassified to discontinued operations. AIG will retain economic interests of 20 percent in the remaining AGF business and 16 percent of the voting rights. Based on other provisions of the sale, including lack of voting board representation, AIG will not have significant influence and therefore will carry AGF as a cost method investment. AGF has been reclassified as a discontinued operation as AIG is expected to have limited continuing involvement with

2



American International Group, Inc., and Subsidiaries


AGF's operations. These transactions are expected to close by the end of the first quarter of 2011, subject to regulatory approvals and customary closing conditions.

    In the first quarter of 2010, AIG and ALICO Holdings LLC (ALICO SPV), a special purpose vehicle formed by AIG, entered into a definitive agreement with MetLife, Inc. (MetLife) for the sale of ALICO by ALICO SPV to MetLife, and the sale of Delaware American Life Insurance Company by AIG to MetLife, for consideration then-valued at approximately $15.5 billion, consisting of $6.8 billion in cash and the remainder in equity securities of MetLife, subject to closing adjustments. The ALICO sale closed on November 1, 2010.

    On the closing date, as consideration for the ALICO Sale, ALICO SPV received net cash consideration of $7.2 billion (which included an upward price adjustment of approximately $400 million pursuant to the terms of the ALICO stock purchase agreement), 78,239,712 shares of MetLife common stock, 6,857,000 shares of newly issued participating preferred stock convertible into 68,570,000 shares of MetLife common stock upon the approval of MetLife shareholders, and 40,000,000 equity units of MetLife with an aggregate stated value of $3.0 billion. AIG intends to monetize these MetLife securities over time, subject to market conditions, following the lapse of agreed-upon minimum holding periods which is expected to be utilized to repay the FRBNY or the United States Department of the Treasury (Department of the Treasury) as part of the Recapitalization Plan discussed in Note 24 to the Consolidated Financial Statements included in this Form 8-K.

    AIG Star, AIG Edison and ALICO were part of the Foreign Life Insurance & Retirement Services segment. AIG Star and AIG Edison are based in Japan, while ALICO is principally based in Japan, as well as in other international locations outside of Asia. AGF was part of the Financial Services segment and based principally in the United States. In accordance with the accounting standard addressing the accounting for the impairment or disposal of long-lived assets, the consolidated results that follow have been updated to present the results of AIG Star, AIG Edison, ALICO and AGF as discontinued operations.

2009 Divestiture Agreement

    In the fourth quarter of 2009, AIG entered into an agreement to sell its 97.57 percent share of Nan Shan for approximately $2.15 billion. On August 31, 2010, the Taiwan Financial Supervisory Commission blocked the sale of Nan Shan to the purchasers. Although the sale was blocked by regulatory authorities in Taiwan due to concerns about the potential buyers, AIG is pursuing other opportunities to divest Nan Shan and believes it will complete the sale of Nan Shan within twelve months. Therefore, AIG continues to classify Nan Shan as held for sale and a discontinued operation. This is based on management's expressed intent to exit the life insurance market in Taiwan.

Interest Allocations

    In accordance with the terms of the FRBNY Credit Facility, net proceeds from dispositions, after taking into account taxes and transaction expenses, to the extent such proceeds do not represent capital of AIG's insurance subsidiaries required for regulatory or ratings purposes, are contractually required to be applied toward the repayment of the FRBNY Credit Facility as mandatory prepayments unless otherwise agreed with the FRBNY. Mandatory prepayments will reduce the amount available to be borrowed under the FRBNY Credit Facility by the same amount as the prepayment. In conjunction with anticipated prepayments, allocations of interest expense, including periodic amortization of the prepaid commitment fee asset, are included in Income (loss) from discontinued operations, net of income tax expense (benefit), in the table below.

    The interest expense allocated to discontinued operations is based on the anticipated net proceeds from the sales of AGF, AIG Star, AIG Edison and Nan Shan multiplied by the daily interest rate on the FRBNY Credit Facility for each respective period. The periodic amortization of the prepaid commitment fee allocated to discontinued operations was determined based on the ratio of funds committed to repay the FRBNY Credit Facility to the total available amount under the FRBNY Credit Facility.

    Proceeds from the sale of ALICO will be used to reduce the liquidation preference of a portion of the preferred interests owned by the FRBNY in the special purpose vehicle holding ALICO. Hence, no interest allocation to discontinued operations was required.

3



American International Group, Inc., and Subsidiaries

    See Note 4 to the Consolidated Financial Statements included in this Form 8-K for further discussion on the use of proceeds from the sale of ALICO.

Consolidated Results

The following table presents AIG's consolidated results of operations:

   
 
   
   
   
  Percentage Increase/(Decrease)  
Years Ended December 31,
(in millions)
  2009
  2008
  2007
  2009 vs. 2008
  2008 vs. 2007
 
   

Revenues:

                               
 

Premiums and other considerations

  $ 51,239   $ 63,137   $ 61,581     (19 )%   3 %
 

Net investment income

    18,987     10,453     23,933     82     (56 )
 

Net realized capital losses

    (5,210 )   (46,794 )   (3,248 )   -     -  
 

Unrealized market valuation gains (losses) on Capital Markets super senior credit default swap portfolio

    1,418     (28,602 )   (11,472 )   -     -  
 

Other income (loss)

    9,214     (4,769 )   11,013     -     -  
   
 

Total revenues

    75,648     (6,575 )   81,807     -     -  
   

Benefits, claims and expenses:

                               
 

Policyholder benefits and claims incurred

    50,015     51,036     50,928     (2 )   -  
 

Policy acquisition and other insurance expenses

    15,864     20,833     15,644     (24 )   33  
 

Interest expense

    13,701     15,379     3,483     (11 )   342  
 

Restructuring expenses and related asset impairment and other expenses

    1,149     771     -     49     -  
 

Net loss on sale of divested businesses

    1,271     -     -     -     -  
 

Other expenses

    7,418     8,101     7,018     (8 )   15  
   
 

Total benefits, claims and expenses

    89,418     96,120     77,073     (7 )   25  
   

Income (loss) from continuing operations before income tax expense (benefit)

    (13,770 )   (102,695 )   4,734     -     -  

Income tax expense (benefit)

    (1,489 )   (9,683 )   125     -     -  
   

Income (loss) from continuing operations

    (12,281 )   (93,012 )   4,609     -     -  

Income (loss) from discontinued operations, net of income tax expense (benefit)

    (32 )   (7,375 )   2,879              
   

Net income (loss)

    (12,313 )   (100,387 )   7,488     -     -  

Less:

                               
 

Income (loss) from continuing operations attributable to noncontrolling interests:

                               
   

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

    140     -     -     -     -  
   

Other

    (1,576 )   (984 )   1,209     -     -  
   
 

Total Income (loss) from continuing operations attributable to noncontrolling interests

    (1,436 )   (984 )   1,209     -     -  
 

Income (loss) from discontinued operations attributable to noncontrolling interests

    72     (114 )   79     -     -  
   
 

Total net income (loss) attributable to non-controlling interests

    (1,364 )   (1,098 )   1,288     -     -  
   

Net income (loss) attributable to AIG

  $ (10,949 ) $ (99,289 ) $ 6,200     - %   - %
   

4



American International Group, Inc., and Subsidiaries

Premiums and Other Considerations

2009 and 2008 Comparison

    Premiums and other considerations decreased in 2009 compared to 2008 primarily due to:

2008 and 2007 Comparison

    Premiums and other considerations increased in 2008 compared to 2007 primarily due to:

    These increases were partially offset by a decline in Commercial Insurance premiums primarily from lower U.S. workers' compensation premiums attributable to declining rates, lower employment levels and increased competition, as well as a decline in other casualty lines of business.

5



American International Group, Inc., and Subsidiaries

Net Investment Income

The following table summarizes the components of consolidated Net investment income:

   
 
  Years Ended December 31,   Percentage Increase/
(Decrease)
 
(in millions)
  2009
  2008
  2007
  2009 vs. 2008
  2008 vs. 2007
 
   

Fixed maturities, including short-term investments

  $ 14,539   $ 16,326   $ 17,177     (11 )%   (5 )%

Maiden Lane interests

    391     (1,112 )   -     -     -  

Equity securities

    372     361     378     3     (4 )

Interest on mortgage and other loans

    454     505     561     (10 )   (10 )

Partnerships

    4     (2,084 )   3,320     -     -  

Mutual funds

    315     (799 )   452     -     -  

Real estate

    1,032     1,031     961     -     7  

Other investments

    392     522     573     (25 )   (9 )
   

Total investment income before policyholder income and trading gains (losses)

    17,499     14,750     23,422     19     -
(37

)

Policyholder investment income and trading gains (losses)

    2,305     (3,504 )   1,381     -     -  
   

Total investment income

    19,804     11,246     24,803     76     (55 )

Investment expenses

    817     793     870     3     (9 )
   

Net investment income

  $ 18,987   $ 10,453   $ 23,933     82 %   (56 )%
   

2009 and 2008 Comparison

    Net investment income increased in 2009 compared to 2008 primarily due to:

    These increases were partially offset by:

2008 and 2007 Comparison

    Net investment income decreased in 2008 compared to 2007 due to:

6



American International Group, Inc., and Subsidiaries

Net Realized Capital Gains (Losses)

   
 
  Years Ended December 31,  
(in millions)
  2009
  2008
  2007
 
   

Sales of fixed maturity securities

  $ 849   $ (4,906 ) $ (278 )

Sales of equity securities

    303     158     883  

Sales of real estate and loans

    (18 )   136     138  

Other-than-temporary impairments:

                   
 

Severity

    (1,510 )   (23,213 )   (1,431 )
 

Change in intent

    (958 )   (10,806 )   (825 )
 

Foreign currency declines

    (112 )   (1,356 )   (399 )
 

Issuer-specific credit events

    (3,979 )   (4,874 )   (471 )
 

Adverse projected cash flows on structured securities

    (137 )   (1,618 )   (443 )

Provision for loan losses

    (614 )   -     -  

Foreign exchange transactions

    (616 )   2,028     (911 )

Derivative instruments

    1,724     (3,313 )   26  

Other

    (142 )   970     463  
   

Total

  $ (5,210 ) $ (46,794 ) $ (3,248 )
   

2009 and 2008 Comparison

    Net realized capital losses decreased in 2009 compared to 2008 primarily due to the following:

    Partially offsetting the above items were losses on sales of real estate and other assets in 2009. Additionally, Net realized capital losses includes foreign exchange translation losses in 2009 compared to gains in 2008 primarily resulting from the weakening of the U.S. dollar.

2008 and 2007 Comparison

    Net realized capital losses increased in 2008 compared to 2007 primarily due to an increase in other-than-temporary impairment charges. The increase in other-than-temporary impairment charges included the following significant items:

7



American International Group, Inc., and Subsidiaries

    These other-than-temporary impairment charges were partially offset by the favorable effect of foreign exchange translation due to strengthening of the U.S. dollar. See Investments — Other-Than-Temporary Impairments.

    During the fourth quarter of 2008, certain AIG securities lending transactions met the requirements of sale accounting because collateral received was insufficient to fund substantially all of the cost of purchasing replacement assets for the securities lent to various counterparties. Accordingly, AIG recognized a loss of $2.4 billion on deemed sales of these securities. Also, Net realized capital losses in 2008 included a loss of $2.3 billion, incurred in the fourth quarter of 2008, on RMBS prior to their purchase by ML II. See Note 6 to the Consolidated Financial Statements.

Unrealized Market Valuation Gains (Losses) on Capital Market's Super Senior Credit Default Swap Portfolio

2009 and 2008 Comparison

    Capital Markets reported unrealized market valuation gains related to its super senior credit default swap portfolio of $1.4 billion in 2009 and unrealized market valuation losses of $28.6 billion in 2008. The change in the unrealized market valuation gains (losses) related to Capital Markets' super senior credit default swap portfolio was due to the substantial decline in outstanding net notional amount resulting from the termination of contracts in the fourth quarter of 2008 associated with the ML III transaction and the improvement in market conditions in 2009, as well as the narrowing of corporate credit spreads.

2008 and 2007 Comparison

    The unrealized market valuation losses on Capital Markets' super senior credit default swap portfolio increased in 2008 compared to 2007 due to significant widening in credit spreads and the downgrades of RMBS and CDO securities by rating agencies in 2008 driven by the credit concerns resulting from U.S. residential mortgages and the severe liquidity crisis affecting the markets. In connection with the termination of $62.1 billion net notional amount of CDS transactions related to multi-sector CDOs purchased in the ML III transaction, Capital Markets paid $32.5 billion through the surrender of collateral previously posted (net of $2.5 billion received pursuant to the shortfall agreement), of which $2.5 billion (included in Other income (loss)) was related to certain 2a-7 Put transactions written on multi-sector CDOs purchased by ML III. These losses did not affect income, as unrealized market valuation losses were already recorded in income.

    See Note 6 to the Consolidated Financial Statements.

Other Income (Loss)

2009 and 2008 Comparison

    Other income increased in 2009 compared to 2008 due to:

8



American International Group, Inc., and Subsidiaries

    These increases were partially offset by:

2008 and 2007 Comparison

    Other Income (loss) decreased in 2008 compared to 2007 primarily due to higher credit valuation losses on Capital Markets and Direct Investment Business assets and liabilities which are measured at fair value.

Policyholder Benefits and Claims Incurred

2009 and 2008 Comparison

    Policyholder benefits and claims incurred decreased in 2009 compared to 2008 due to:

    These decreases were partially offset by:

2008 and 2007 Comparison

    Policyholder benefits and claims incurred increased slightly in 2008 compared to 2007 due to higher claims and claims adjustment expenses of $5.6 billion in AIG's General Insurance operations and Noncore insurance businesses, which reflected increased catastrophe losses of $1.5 billion principally from hurricanes Ike and Gustav. Results for 2008 also included a $1.8 billion increase in Mortgage Guaranty claims incurred, reflecting the deterioration of the U.S. housing market. These increases were offset by a $4.9 billion reduction in incurred policy losses and benefits expense for Foreign Life Insurance & Retirement Services related to policyholder trading gains (losses) as discussed above in Net Investment Income.

Policy Acquisition and Other Insurance Expenses

2009 and 2008 Comparison

    Policy acquisition and other insurance expenses decreased in 2009 compared to 2008 primarily due to:

9



American International Group, Inc., and Subsidiaries

2008 and 2007 Comparison

    Policy acquisition and other insurance expenses increased in 2008 compared to 2007 due to:

Interest Expense

2009 and 2008 Comparison

    Interest expense decreased in 2009 compared to 2008 primarily due to lower interest expense on the FRBNY Credit Facility. Interest expense on the FRBNY Credit Facility was $9.8 billion in 2009 compared to $11.0 billion in 2008. Interest expense in 2009 included $8.0 billion of amortization of the prepaid commitment fee asset, including accelerated amortization of $5.2 billion in connection with the $25 billion reduction in the outstanding balance and maximum lending commitment under the FRBNY Credit Facility. See Note 1 to the Consolidated Financial Statements. Interest expense in 2008 included $9.1 billion of amortization of the prepaid commitment fee asset associated with the FRBNY Credit Facility, including accelerated amortization of $6.6 billion in connection with the November 25, 2008 restructuring of the FRBNY Credit Facility. During 2009, interest expense benefited from a reduced interest rate on the FRBNY Credit Facility (weighted average rate of 4.5 percent in 2009 compared to 10.6 percent in 2008); however, because the facility was outstanding for the full year in 2009 compared to only 107 days in 2008, the favorable impact was largely offset.

2008 and 2007 Comparison

    Interest expense increased in 2008 compared to 2007 on higher levels of borrowings primarily due to the interest expense on the FRBNY Credit Facility, inclusive of the amortization of the prepaid commitment fee asset. Interest expense in 2008 also included interest on the junior subordinated debt and Equity Units from the dates of issuance in May 2008.

Restructuring Expenses and Related Asset Impairment and Other Expenses

    In the fourth quarter of 2008, following receipt of federal government assistance, AIG commenced an organization-wide restructuring plan, which AIG continued to develop and modify throughout 2009. In connection with activities under this plan, AIG recorded restructuring and separation expenses of $1.1 billion in 2009, consisting of severance expenses of $159 million, contract termination expenses of $42 million, asset write-downs of $34 million, other exit expenses of $421 million, and separation expenses of $493 million.

    Other exit expenses primarily include professional fees related to (i) disposition activities, (ii) AIG's capital restructuring program with the FRBNY and the Department of the Treasury and (iii) unwinding of Capital Markets' businesses and portfolios.

10



American International Group, Inc., and Subsidiaries

    Severance and separation expenses for 2009 described above include retention awards of $434 million to key employees to maintain ongoing business operations and facilitate the successful execution of the restructuring and asset disposition plan. The awards under these retention plans were granted in 2008 and are accrued ratably over the future service periods, which range from 2008 to 2011. The total amount expected to be incurred related to these 2008 retention plans, including amounts expensed in 2009 and 2008, is approximately $972 million. AIG made payments to the employees under these plans in 2008 and 2009 and expects to make further payments through 2011. The ultimate amount paid could be less primarily due to the effect of forfeitures.

The following table presents amounts charged to expense, and expected to be charged to expense, and the total amounts expected to be incurred under the 2008 retention plans, by reportable segment:

   
(In millions)
  General
Insurance

  Domestic Life
Insurance &
Retirement
Services

  Foreign Life
Insurance &
Retirement
Services

  Financial
Services

  Other
  Total
 
   

Amounts charged to expense:

                                     
 

Year Ended December 31, 2009

  $ 122   $ 56   $ 26   $ 162   $ 68   $ 434  
 

Year Ended December 31, 2008

    83     52     7     279     101     522  
 

Cumulative incurred since inception of restructuring plan(a)

    205     108     33     441     169     956  

Amounts expected to be incurred in future periods:

                                     
   

2010

    2     -     11     -     2     15  
   

2011

    -     -     1     -     -     1  
   
 

Total amounts expected to be incurred in future periods

    2     -     12     -     2     16  
   

Total amounts expected to be incurred(b)

  $ 207   $ 108   $ 45   $ 441   $ 171   $ 972  
   
(a)
Includes an adjustment of $51 million in Financial Services to increase the cumulative amount incurred since inception for retention amounts paid in 2008.

(b)
At December 31, 2009, remaining amounts payable totaled $393 million.

    Total restructuring and separation expenses could have a material effect on future consolidated results of operations and cash flows for an individual reporting period.

    See Note 3 to the Consolidated Financial Statements for additional discussion regarding restructuring and separation expenses.

Net loss on Sale of Divested Businesses

    Includes the net loss on sales of divested businesses during 2009 that did not qualify as discontinued operations.

Other Expenses

2009 and 2008 Comparison

    Other expenses for 2009 decreased compared to 2008 primarily due to lower compensation-related costs for Parent and Other operations and the Institutional Asset Management business, including the effect of deconsolidation of certain portfolio investments and the sale of Private Bank, a Swiss bank. Additionally, goodwill impairment charges of $612 million in 2009 are reflected in the Other operations category primarily related to the Institutional Asset Management business, compared to goodwill impairment charges of $450 million recorded in 2008 discussed below.

2008 and 2007 Comparison

    Other expenses increased in 2008 compared to 2007 primarily due to goodwill impairment charges of $450 million recognized in 2008, which resulted from the downturn in the housing markets, the credit crisis and the cost associated with the wind-down of certain business and portfolios in Direct Investment Business and Capital Markets.

11



American International Group, Inc., and Subsidiaries

Income Tax Expense (Benefit)

2009, 2008 and 2007 Effective Tax Rate Analysis

    The effective tax rate on the pre-tax loss from continuing operations for the year ended December 31, 2009 was lower than the statutory rate of 35 percent due primarily to increases in the valuation allowance and reserve for uncertain tax positions, partially offset by tax exempt interest and the change in investment in subsidiaries which was principally related to changes in the estimated U.S. tax liability with respect to the potential sales of subsidiaries.

    At December 31, 2009, AIG reported a net deferred tax asset after valuation allowance of $5.9 billion. Included in this net deferred tax asset is a valuation allowance of $23.7 billion and deferred tax liabilities of $18.5 billion. Management determined, from pending dispositions and tax planning strategies that would be implemented, if necessary, to protect against the loss of the deferred tax assets and excluding projected future operating income, that it is more likely than not that the remaining $5.9 billion net deferred tax asset is realizable.

    The effective tax rate on the pre-tax loss from continuing operations for the year ended December 31, 2008 was lower than the statutory rate of 35 percent due primarily to the change in investment in subsidiaries, nondeductible goodwill impairment and a valuation allowance to reduce deferred tax assets to the amount that AIG believes is more likely than not to be realized.

    The effective tax rate on the pre-tax income from continuing operations for the year ended December 31, 2007 was lower than the statutory rate of 35 percent due primarily to increases in tax exempt interest and the effect of foreign operations, partially offset by an increase in uncertain tax positions.

    See Note 21 to the Consolidated Financial Statements included in this Form 8-K for further discussion on income tax on continuing operations as well as discussion of the impact on discontinued operations.

Discontinued Operations

Total revenues and pre-tax income (loss) for entities reported as discontinued operations were as follows:

   
 
   
   
   
  Percentage
Increase/(Decrease)
   
   
   
  Percentage
Increase/(Decrease)
 
 
  Total Revenues   Pre-tax Income (Loss)  
Years Ended December 31,
(in millions)
  2009 vs.
2008

  2008 vs.
2007

  2009 vs.
2008

  2008 vs.
2007

 
  2009
  2008
  2007
  2009
  2008
  2007
 
   

ALICO

  $ 13,881   $ 8,742   $ 14,578     59 %   (40 )% $ 1,399   $ (1,111)   $ 2,205     - %   - %

Nan Shan

    7,185     4,208     6,432     71     (35 )   983     (2,233)     809     -     -  

Loss on sale of Nan Shan

    -     -     -     -     -     (2,758)     -     -     -     -  

AIG Star and AIG Edison

    4,180     1,836     4,503     128     (59 )   199     (1,597)     1,160     -     -  

AGF

    2,199     3,165     2,533     (31 )   25     (904)     (434)     (179 )   -     -  

Interest expense allocations*

    -     -     -     -     -     (626)     (389)     -     -     -  

Consolidation adjustments

    96     (272 )   211     -     -     54     (302)     214     -     -  
   

Total

  $ 27,541   $ 17,679   $ 28,257     56 %   (37 )% $ (1,653)   $ (6,066)   $ 4,209     - %   - %
   
*
Represents interest expense, including periodic amortization of the prepaid commitment fee asset, on anticipated mandatory prepayments on the FRBNY Credit Facility related to estimated net proceeds from the expected sales of AGF, AIG Star, AIG Edison and Nan Shan.

American Life Insurance Company

2009 and 2008 Comparison

    ALICO's total revenues increased primarily due to higher net investment income and lower net realized capital losses partially offset by lower premiums and other considerations. Net investment income increased significantly due to higher policyholder trading gains, which were offset by a change in policyholder benefits and claims incurred, and higher partnership and mutual fund returns. Policyholder trading gains increased by $4.9 billion in 2009 compared to 2008. Partnership and mutual fund income was $41 million in 2009 compared to losses of $158 million in 2008. Net realized capital losses declined principally due to significantly lower other-than-temporary impairments.

12



American International Group, Inc., and Subsidiaries

    ALICO reported pre-tax income in 2009 compared to a loss in 2008 primarily due to the following:

    These increases were partially offset by a charge of $58 million in 2009 related to a security breach with respect to policyholder data in Japan.

2008 and 2007 Comparison

    Total revenues declined in 2008 compared to 2007 primarily due to significantly higher net realized capital losses and lower net investment income, partially offset by higher premiums and other considerations. Net realized capital losses increased due to significantly higher other-than-temporary impairments. Net investment income declined primarily due to policyholder trading losses of $3.3 billion in 2008 compared to gains of $1.4 billion in 2007.

    ALICO reported a pre-tax loss in 2008 compared to pre-tax income in 2007 primarily due to the following:

    Partially offsetting these declines were charges in 2007 related to the project to increase standardization of AIG's actuarial systems of $152 million, the positive effect of foreign exchange and additional claims expense in 2007 of $30 million related to an industry-wide regulatory claims review in Japan.

Nan Shan Life Insurance Company

2009 and 2008 Comparison

    Total revenues increased primarily due to net realized capital gains of $724 million in 2009 compared to net realized capital losses of $2.8 billion in 2008. The net realized capital gains more than offset lower premiums and other considerations, which declined due to lower sales and a change in product mix, and lower net investment income, which declined due to de-risking of the investment portfolio.

    Nan Shan reported pre-tax income in 2009 compared to a pre-tax loss in 2008 due to the same factors.

2008 and 2007 Comparison

    Total revenues declined in 2008 compared to 2007 due to an increase in net realized capital losses of $2.7 billion. The higher net realized capital losses were driven primarily by other-than-temporary impairments of invested assets and losses on derivative instruments hedging foreign currency risk.

    Pre-tax income declined in 2008 compared to 2007 primarily due to higher net realized capital losses and the positive effect in 2007 of $222 million related to a project to increase standardization of actuarial systems and processes.

13



American International Group, Inc., and Subsidiaries

AIG Star and AIG Edison

2009 and 2008 Comparison

    Total revenues increased in 2009 compared to 2008, primarily due to a decline in net realized capital losses compared to 2008, principally attributable to a significant decline in other-than temporary impairments.

    Pre-tax losses decreased in 2009 compared to 2008 from a decline in other-than temporary impairments offset by higher restructuring charges.

2008 and 2007 Comparison

    Total revenues decreased in 2008 compared to 2007, primarily due to an increase in net realized capital losses compared to 2007, principally as a result of a significant increase in other-than temporary impairments. Pre-tax losses in 2008 were higher than 2007 driven by the increase in other-than temporary impairments.

AGF

2009 and 2008 Comparison

    AGF's revenues decreased in 2009 compared to 2008 primarily due to lower finance and other revenues reflecting the 2009 sales of real estate portfolios as part of AGF's liquidity efforts.

    AGF's pre-tax loss increased in 2009 compared to 2008, primarily due to lower finance and other revenues reflecting losses in 2009 on the sales of real estate portfolios as part of AGF's liquidity management efforts and higher provision for finance receivable losses resulting from higher levels of delinquencies on AGF's finance receivable portfolio and higher net charge-offs. The increase in pre-tax loss was partially offset by AGF's lower operating expenses and interest expense. AGF's operating expenses declined in 2009 compared to 2008 primarily due to the write-down of AGF's goodwill in 2008, the decision to cease its wholesale originations in 2008 and the closing of 442 AGF branch offices in 2008 and 2009 combined.

2008 and 2007 Comparison

    AGF's revenues increased in 2008 compared to 2007 primarily due to higher finance charge revenues resulting from a $1.0 billion purchase of finance receivables in first quarter of 2008.

    AGF's pre-tax loss increased in 2008 compared to 2007 primarily due to increases in the provision for finance receivable losses of $674 million from a higher allowance for finance receivable losses in response to an increased level of delinquencies on AGF's finance receivable portfolio, higher net charge-offs, and a goodwill impairment charge of $341 million in 2008.

    See Note 2 to the Consolidated Financial Statements for further discussion on discontinued operations.

14



American International Group, Inc., and Subsidiaries

Segment Results

The following table summarizes the operations of each reportable segment. (See also Note 4 to Consolidated Financial Statements.)

   
 
   
   
   
  Percentage Increase/(Decrease)  
Years Ended December 31,
(in millions)
  2009
  2008
  2007
  2009 vs. 2008
  2008 vs. 2007
 
   

Total revenues:

                               
 

General Insurance

  $ 35,023   $ 33,793   $ 40,278     4 %   (16 )%
 

Domestic Life Insurance & Retirement Services

    11,366     (19,634 )   18,189     -     -  
 

Foreign Life Insurance & Retirement Services

    15,001     6,945     13,676     116     (49 )
 

Financial Services

    7,026     (25,161 )   (4,964 )   -     -  
 

Other

    9,341     (275 )   14,958     -     -  
 

Consolidation and eliminations

    (2,109 )   (2,243 )   (330 )   -     -  
   

Total

    75,648     (6,575 )   81,807     -     -  
   

Net realized capital gains (losses):

                               
 

General Insurance

    (530 )   (4,284 )   (244 )   -     -  
 

Domestic Life Insurance & Retirement Services

    (3,514 )   (36,412 )   (2,735 )   -     -  
 

Foreign Life Insurance & Retirement Services

    419     (2,498 )   142     -     -  
 

Financial Services

    96     (285 )   (66 )   -     -  
 

Other

    (1,681 )   (3,315 )   (345 )   -     -  
   

Total

    (5,210 )   (46,794 )   (3,248 )   -     -  
   

Pre-tax income (loss):

                               
 

General Insurance

    164     (2,488 )   10,083     -     -  
 

Domestic Life Insurance & Retirement Services

    (1,179 )   (34,948 )   3,070     -     -  
 

Foreign Life Insurance & Retirement Services

    1,920     (662 )   2,252     -     -  
 

Financial Services

    2,006     (29,786 )   (9,686 )   -     -  
 

Other

    (16,374 )   (33,830 )   (1,666 )   -     -  
 

Consolidation and eliminations

    (307 )   (981 )   681     -     -  
   

Total

  $ (13,770 ) $ (102,695 ) $ 4,734     - %   - %
   

General Insurance Operations

    The General Insurance results included in this Form 8-K were recast as compared to the amounts originally included in the Form 10-K because the segment included certain general insurance operations of ALICO, including a Brazilian joint venture, Unibanco. Unibanco was sold in the latter part of 2008.

    AIG's General Insurance subsidiaries are multiple line companies writing substantially all lines of property and casualty insurance both domestically and abroad.

    As previously noted, AIG believes it should present and discuss its financial information in a manner most meaningful to its financial statement users. Accordingly, in its General Insurance business, AIG uses underwriting profit (loss) to assess performance of the General Insurance business rather than statutory underwriting profit (loss).

    In order to better align financial reporting with the manner in which AIG's chief operating decision makers review the businesses to make decisions about resources to be allocated and to assess performance, beginning in 2009, the results for Transatlantic, 21st Century, Mortgage Guaranty and the equity income (loss) from certain equity method investments, which were previously reported as part of the General Insurance operating segment, are now included in AIG's Other operations category. In addition, the historical results of HSB (which was sold on March 31, 2009), which were previously included in Commercial Insurance, are also now included in AIG's Other operations category. Prior period amounts have been revised to conform to the current presentation.

15



American International Group, Inc., and Subsidiaries

General Insurance Results

The following table presents General Insurance results:

   
 
   
   
   
  Percentage Increase/(Decrease)  
Years Ended December 31,
(in millions)
  2009
  2008
  2007
  2009 vs. 2008
  2008 vs. 2007
 
   

Underwriting results:

                               
 

Net premiums written

  $ 30,653   $ 34,531   $ 36,154     (11 )%   (4 )%
 

Decrease (increase) in unearned premiums

    1,608     979     (951 )   64     -  
   
 

Net premiums earned

    32,261     35,510     35,203     (9 )   1  
 

Claims and claims adjustment expenses incurred

    25,362     25,524     21,871     (1 )   17  
 

Change in deferred acquisition costs

    241     64     (306 )   277     -  
 

Other underwriting expenses

    9,256     10,693     8,630     (13 )   24  
   
 

Underwriting profit (loss)

    (2,598 )   (771 )   5,008     -     -  
   

Net investment income

    3,292     2,567     5,319     28     (52 )

Net realized capital losses

    (530 )   (4,284 )   (244 )   -     -  
   

Pre-tax income (loss)

  $ 164   $ (2,488 ) $ 10,083     - %   - %
   

General Insurance Underwriting Results

    In managing its general insurance businesses, AIG analyzes the operating performance of its businesses using underwriting profit. Underwriting profit is derived by reducing net premiums earned by claims and claims adjustment expenses incurred and underwriting expenses, including the change in deferred acquisition costs.

    AIG, along with most property and casualty insurance companies, uses the loss ratio, the expense ratio and the combined ratio as measures of underwriting performance. The loss ratio is the sum of claims and claims adjustment expenses divided by net premiums earned. The expense ratio is underwriting expenses divided by net premiums earned. These ratios are relative measurements that describe, for every $100 of net premiums earned, the cost of losses and expenses, respectively. A combined ratio of less than 100 indicates an underwriting profit and over 100 indicates an underwriting loss.

    Net premiums written are initially deferred and earned based upon the terms of the underlying policies. The net unearned premium reserve constitutes deferred revenues which are generally earned ratably over the policy period.

    The underwriting environment varies from country to country, as does the degree of litigation activity. Regulation, product type and competition have a direct effect on pricing and consequently on profitability as reflected in underwriting profit and general insurance ratios.

General Insurance Net Premiums Written

    General Insurance net premiums written decreased in 2009 compared to 2008 as Commercial Insurance net premiums written reflected reductions in insurable exposures primarily driven by the effect of the adverse economic conditions on workers' compensation, construction, real estate and transportation lines of business. The decline in Foreign General Insurance net premiums written was primarily due to the negative impact from changes in foreign exchange rates and general economic conditions which continued to negatively affect the generation of new business.

    General Insurance net premiums written decreased in 2008 compared to 2007, as Commercial Insurance net premiums written reflected a decline in workers' compensation and other casualty lines of business. These declines were largely offset by growth in Foreign General Insurance from both established and new distribution channels and the positive effect of changes in foreign exchange rates.

16



American International Group, Inc., and Subsidiaries

AIG transacts business in most major foreign currencies. The following table summarizes the effect of changes in foreign currency exchange rates on the growth of General Insurance net premiums written:

   
Years Ended December 31,
  2009 vs. 2008
  2008 vs. 2007
 
   

Decrease in original currency*

    (9.7 )%   (6.2 )%

Foreign exchange effect

    (1.5 )   1.7  
   

Decrease as reported in U.S. dollars

    (11.2 )%   (4.5 )%
   
*
Computed using a constant exchange rate for each period.

General Insurance Underwriting Ratios

The following table summarizes General Insurance GAAP combined ratios:

   
Years Ended December 31,
  2009
  2008
  2007
 
   

Loss ratio

    78.6     71.9     62.1  

Expense ratio

    29.4     30.3     23.6  
   

Combined ratio

    108.0     102.2     85.7  
   

    The increase in the General Insurance combined ratio for 2009 compared to 2008 primarily resulted from the following:

    These increases were partially offset by the following:

    The General Insurance combined ratio for 2008 increased compared to 2007, primarily due to an increase in the loss ratio. The loss ratio for accident year 2008 recorded in 2008 was 7.4 points higher than the loss ratio for accident year 2007 recorded in 2007. Catastrophe-related losses were $1.6 billion and $266 million in 2008 and 2007, respectively, accounting for 4.2 points of the increase in the accident year loss ratio. The loss ratio also increased for other property and casualty lines due to premium rate decreases and changes in loss trends. Development from prior years decreased incurred losses by $39 million in 2008 and decreased incurred losses by $657 million in 2007. The expense ratio for 2008 increased 3.3 points due to $1.2 billion of goodwill impairment charges primarily related to HSB.

17



American International Group, Inc., and Subsidiaries

General Insurance Investing Results

    Net investment income for General Insurance increased in 2009 compared to 2008 primarily due to improvement in returns from partnership investments of $561 million. Net investment income in 2008 declined substantially from 2007 due primarily to losses incurred on partnership investments, which resulted in a year over year decline in returns from partnerships of $2.0 billion.

    Net realized capital losses for General Insurance declined in 2009 compared to 2008 due to lower other-than-temporary impairments on investments as 2008 results reflected significant other-than-temporary impairment charges related to the deterioration in the fixed income markets.

    See Consolidated Results for further discussion on Net investment income and Net realized capital gains (losses).

Commercial Insurance Results

The following table presents Commercial Insurance results:

   
 
   
   
   
  Percentage Increase/(Decrease)  
Years Ended December 31,
(in millions)
  2009
  2008
  2007
  2009 vs. 2008
  2008 vs. 2007
 
   

Underwriting results:

                               
 

Net premiums written

  $ 18,373   $ 21,243   $ 24,056     (14 )%   (12 )%
 

Decrease (increase) in unearned premiums

    1,405     1,169     (349 )   20     -  
   
 

Net premiums earned

    19,778     22,412     23,707     (12 )   (5 )
 

Claims and claims adjustment expenses incurred

    17,943     18,255     16,148     (2 )   13  
 

Change in deferred acquisition costs

    230     68     (112 )   238     -  
 

Other underwriting expenses

    4,171     5,819     4,373     (28 )   33  
   
 

Underwriting profit (loss)

    (2,566 )   (1,730 )   3,298     -     -  
   

Net investment income

    2,790     1,981     3,883     41     (49 )

Net realized capital losses

    (679 )   (3,294 )   (76 )   -     -  
   

Pre-tax income (loss)

  $ (455 ) $ (3,043 ) $ 7,105     - %   - %
   

Commercial Insurance Underwriting Results

Commercial Insurance Net Premiums Written

The following table presents Commercial Insurance net premiums written by line of business:

   
 
   
   
   
  Percentage Increase/(Decrease)  
Years Ended December 31,
(in millions)
  2009
  2008
  2007
  2009 vs. 2008
  2008 vs. 2007
 
   

General liability/auto liability

  $ 3,266   $ 3,687   $ 4,241     (11 )%   (13 )%

Workers' compensation

    2,710     3,491     4,670     (22 )   (25 )

Property

    2,345     2,269     2,130     3     7  

Management/professional liability

    1,856     2,166     2,469     (14 )   (12 )

Commercial umbrella/excess

    1,738     2,251     2,671     (23 )   (16 )

A&H products

    1,261     1,325     1,216     (5 )   9  

Multinational P&C

    978     950     951     3     -  

Private client group

    926     964     747     (4 )   29  

Programs

    741     900     906     (18 )   (1 )

Healthcare

    564     646     720     (13 )   (10 )

Environmental

    525     768     863     (32 )   (11 )

Aviation

    219     276     320     (21 )   (14 )

Other

    1,244     1,550     2,152     (20 )   (28 )
   

Total

  $ 18,373   $ 21,243   $ 24,056     (14 )%   (12 )%
   

18



American International Group, Inc., and Subsidiaries

    Commercial Insurance net premiums written decreased in 2009 compared to 2008 primarily due to:

    Commercial Insurance net premiums written decreased in 2008 compared to 2007 primarily due to declines in premiums from workers' compensation as well as other casualty lines. Declines in other casualty lines resulted from declining rates and reduced activity in the construction and transportation industries. Management and professional liability lines also declined compared to 2007 due to increased competition, particularly in the fourth quarter of 2008.

Commercial Insurance Underwriting Ratios

The following table presents Commercial Insurance GAAP combined ratios:

   
Years Ended December 31,
  2009
  2008
  2007
 
   

Loss ratio

    90.7     81.4     68.1  

Expense ratio

    22.3     26.3     18.0  
   

Combined ratio

    113.0     107.7     86.1  
   

    The increase in the Commercial Insurance combined ratio for 2009 compared to 2008 primarily resulted from the following:

    These increases were partially offset by the following:

    The Commercial Insurance combined ratio increased in 2008 compared to 2007. The loss ratio for accident year 2008 recorded in 2008 included a 6.6 point effect related to catastrophe losses, and was 10.8 points higher than the loss ratio for accident year 2007 recorded in 2007. Prior year development increased incurred losses by $23 million in 2008 and reduced incurred losses by $371 million in 2007. Commercial Insurance expense ratio increased in 2008 compared to 2007 primarily due to the write-off of goodwill noted above. The remaining increase is due to the decline in net premiums earned and mix of business.

19



American International Group, Inc., and Subsidiaries

Commercial Insurance Investing Results

    Net investment income for Commercial Insurance increased in 2009 compared to 2008 primarily due to improvement in returns from partnership investments of $691 million. Net investment income in 2008 declined substantially from 2007 due primarily to losses incurred on partnership investments, which resulted in a year over year decline in returns from partnerships of $1.8 billion.

    Net realized capital losses for Commercial Insurance declined in 2009 compared to 2008 due to lower other-than-temporary impairments on investments as 2008 results reflected significant other-than-temporary impairment charges related to the deterioration in the fixed income markets.

    See Consolidated Results for further discussion on Net investment income and Net realized capital gains (losses).

Foreign General Insurance Results

The following table presents Foreign General Insurance results:

   
 
   
   
   
  Percentage Increase/(Decrease)  
Years Ended December 31,
(in millions)
  2009
  2008
  2007
  2009 vs. 2008
  2008 vs. 2007
 
   

Underwriting results:

                               
 

Net premiums written

  $ 12,280   $ 13,288   $ 12,098     (8 )%   10 %
 

Decrease (increase) in unearned premiums

    203     (190 )   (602 )   -     -  
   
 

Net premiums earned

    12,483     13,098     11,496     (5 )   14  
 

Claims and claims adjustment expenses incurred

    7,419     7,269     5,723     2     27  
 

Change in deferred acquisition costs

    11     (4 )   (194 )   -     -  
 

Other underwriting expenses

    5,085     4,874     4,257     4     14  
   
 

Underwriting profit (loss)

    (32 )   959     1,710     -     (44 )
   

Net investment income

    502     586     1,436     (14 )   (59 )

Net realized capital gains (losses)

    149     (990 )   (168 )   -     -  
   

Pre-tax income

  $ 619   $ 555   $ 2,978     12 %   (81 )%
   

Foreign General Insurance Underwriting Results

Foreign General Insurance Net Premiums Written

The following table presents Foreign General Insurance net premiums written by line of business:

   
 
   
   
   
  Percentage Increase/(Decrease)  
Years Ended December 31,
(in millions)
   
   
   
 
  2009
  2008
  2007
  2009 vs. 2008
  2008 vs. 2007
 
   

A&H products

  $ 3,722   $ 3,828   $ 3,440     (3 )%   11 %

Specialty lines

    2,326     2,361     2,081     (1 )   13  

Personal lines

    2,232     2,399     2,250     (7 )   7  

Casualty

    1,678     1,957     1,716     (14 )   14  

Marine & Energy

    700     654     585     7     12  

Lloyds

    635     623     830     2     (25 )

Property

    530     556     447     (5 )   24  

Aviation

    261     304     293     (14 )   4  

Other

    196     606     456     (68 )   33  
   

Total

  $ 12,280   $ 13,288   $ 12,098     (8 )%   10 %
   

20



American International Group, Inc., and Subsidiaries

    Foreign General Insurance net premiums written decreased in 2009 compared to 2008 primarily due to:

    Net premiums written increased in 2008 compared to 2007 due to growth in commercial and consumer lines driven by new business from established and new distribution channels, including the late 2007 acquisition of Württembergische und Badische Versicherungs — AG (WüBa) in Germany. New business in the commercial lines in the U.K. and Europe and decreases in the use of reinsurance increased net premiums earned, but were partially offset by declines in premium rates. Growth in personal accident business in Latin America, South East Asia and Europe also contributed to the increase. However, premiums from the Lloyd's Syndicate Ascot continued to decline.

AIG transacts business in most major foreign currencies. The following table summarizes the effect of changes in foreign currency exchange rates on the growth of Foreign General Insurance net premiums written:

   
Years Ended December 31,
  2009
  2008
 
   

Increase (decrease) in original currency*

    (3.8 )%   4.6 %

Foreign exchange effect

    (3.8 )   5.2  
   

Increase (decrease) as reported in U.S. dollars

    (7.6 )%   9.8 %
   
*
Computed using a constant exchange rate for each period.

Foreign General Insurance Underwriting Ratios

The following table presents Foreign General Insurance combined ratios:

   
Years Ended December 31,
  2009
  2008
  2007
 
   

Loss ratio

    59.4     55.5     49.8  

Expense ratio

    40.8     37.2     35.3  
   

Combined ratio

    100.2     92.7     85.1  
   

    The increase in the Foreign General Insurance combined ratio for 2009 compared to 2008 primarily resulted from the following:

    The loss ratio in 2008 increased compared to 2007. The loss ratio for accident year 2008 recorded in 2008 was 3.7 points higher than the loss ratio recorded in 2007 for accident year 2007 primarily due to continued rate erosion and increased lower level claims frequency. Loss development on prior accident years increased the loss ratio by 0.5 points.

Foreign General Insurance Investing Results

    Foreign General Insurance Net investment income decreased in 2009 compared to 2008 primarily due to losses from an equity method investment, and lower yields on the fixed income portfolios, partially offset by improving mutual fund income due to improved market conditions. Net investment income decreased in 2008 compared to 2007 reflecting lower mutual fund and partnership income related to poor performance in the equity markets.

21



American International Group, Inc., and Subsidiaries

    Foreign General Insurance recorded Net realized capital gains in 2009 compared to net realized capital losses in 2008 due to the adoption of the new other-than-temporary impairment accounting standard commencing in the second quarter of 2009. Net realized capital losses in 2008 increased compared to 2007 due to higher other-than-temporary impairments on investments as 2008 results reflected significant charges related to the deterioration in the fixed income markets (see Consolidated Results — Net Realized Capital Gains (Losses) for further discussion). In 2007, realized capital gains and losses included $150 million of other-than-temporary impairments relating to an equity method investment.

Domestic Life Insurance & Retirement Services Operations

    AIG's Domestic Life Insurance & Retirement Services segment, operating as SunAmerica Financial Group, is comprised of several life insurance and retirement services businesses that market their products and services under the brands of American General, AGLA, VALIC, Western National, SunAmerica Retirement Markets, SunAmerica Mutual Funds, SunAmerica Affordable Housing Partners, FSC Securities, Royal Alliance and SagePoint Financial. The businesses offer a comprehensive suite of life insurance, retirement savings products and guaranteed income solutions through an established multi-channel distribution network that includes banks, national, regional and independent broker-dealers, career financial advisors, wholesale life brokers, insurance agents and a direct-to-consumer platform.

    AIG's Domestic Life Insurance businesses offer a broad range of protection products, including individual term and universal life insurance, and group life and health products. In addition, Domestic Life Insurance offers a variety of payout annuities, which include single premium immediate annuities, structured settlements and terminal funding annuities. Domestic Retirement Services businesses offer group retirement products and individual fixed and variable annuities. Certain previously acquired closed blocks and other fixed and variable annuity blocks that have been discontinued are reported as "runoff" annuities. Domestic Retirement Services also maintains a runoff block of Guaranteed Investment Contracts (GICs) that were written in (or issued to) the institutional market place prior to 2006.

    In managing its Domestic Life Insurance & Retirement Services businesses, AIG analyzes the operating performance of each business using pre-tax income (loss) before net realized capital gains (losses). Pre-tax income (loss) before net realized capital gains (losses) is not a substitute for pre-tax income determined in accordance with U.S. GAAP. However, AIG believes that the presentation of pre-tax income (loss) before net realized capital gains (losses) enhances the understanding of the underlying profitability of the ongoing operations of the Domestic Life Insurance & Retirement Services businesses. The reconciliations to pre-tax income are provided in the tables that follow.

    In order to align financial reporting with changes to the manner in which AIG's chief operating decision makers review the businesses to make decisions about resources to be allocated and to assess performance, beginning in 2009, results for certain brokerage service, mutual fund, GIC and other asset management activities previously reported in the Asset Management segment are now included in Domestic Life Insurance & Retirement Services. The remaining Asset Management operations are now included in AIG's Other operations category. Prior period amounts have been revised to conform to the current presentation.

22



American International Group, Inc., and Subsidiaries

Domestic Life Insurance & Retirement Services Results

The following table presents Domestic Life Insurance & Retirement Services results:

   
 
   
   
   
  Percentage Increase/
(Decrease)
 
Years Ended December 31,
(in millions)
   
   
   
 
  2009
  2008
  2007
  2009 vs. 2008
  2008 vs. 2007
 
   
 

Premiums and other considerations

  $ 5,327   $ 7,644   $ 7,342     (30 )%   4 %
 

Net investment income

    9,553     9,134     13,582     5     (33 )
 

Policyholder benefits and claims incurred

    9,097     11,535     11,572     (21 )   -  
 

Policy acquisition and other expenses

    3,448     3,779     3,547     (9 )   7  
   

Pre-tax income before net realized capital losses

    2,335     1,464     5,805     59     (75 )

Net realized capital losses

    (3,514 )   (36,412 )   (2,735 )   -     -  
   

Pre-tax income (loss)

  $ (1,179 ) $ (34,948 ) $ 3,070     - %   - %
   

2009 and 2008 Comparison

    Domestic Life Insurance & Retirement Services reported an increase in pre-tax income before net realized capital losses in 2009 compared to 2008 primarily due to the following:

    These improvements were partially offset by DAC and sale inducement assets (SIA) benefits related to net realized capital losses of $108 million in 2009 compared to $2.5 billion in 2008.

    The reduction in the pre-tax loss for Domestic Life Insurance & Retirement Services in 2009 compared to 2008 reflected a decline in net realized capital losses due principally to significant decline in other-than-temporary impairments in 2009. See Results of Operations — Consolidated Results — Premiums and Other Considerations; — Net Investment Income; and — Net Realized Capital Gains (Losses).

2008 and 2007 Comparison

    Domestic Life Insurance & Retirement Services reported a significant decrease in pre-tax income (loss) before net realized capital losses in 2008 compared to 2007 primarily due to the following:

    These declines were partially offset by DAC and SIA benefits related to net realized capital losses of $2.5 billion in 2008 compared to $215 million in 2007.

    The pre-tax loss for Domestic Life Insurance & Retirement Services in 2008 reflected higher net realized capital losses compared to 2007 due principally to significant other-than-temporary impairments in 2008.

23



American International Group, Inc., and Subsidiaries

Domestic Life Insurance Results

The following table presents Domestic Life Insurance results:

   
 
   
   
   
  Percentage Increase/
(Decrease)
 
Years Ended December 31,
(in millions)
   
   
   
 
  2009
  2008
  2007
  2009 vs. 2008
  2008 vs. 2007
 
   
 

Premiums and other considerations

  $ 4,252   $ 6,248   $ 5,836     (32 )%   7 %
 

Net investment income

    3,819     3,823     4,019     -     (5 )
 

Policyholder benefits and claims incurred

    5,026     6,862     6,599     (27 )   4  
 

Policy acquisition and other expenses

    1,714     1,885     1,816     (9 )   4  
   

Pre-tax income before net realized capital losses

    1,331     1,324     1,440     1     (8 )

Net realized capital losses

    (712 )   (11,554 )   (796 )   -     -  
   

Pre-tax income (loss)

  $ 619   $ (10,230 ) $ 644     - %   - %
   

2009 and 2008 Comparison

    Domestic Life Insurance premiums and other considerations declined $2.0 billion in 2009 compared to 2008 primarily due to lower sales of payout annuity products and the sale of AIG Life Canada effective April 1, 2009, which similarly resulted in a decline in policyholder benefits and claims incurred of $1.8 billion. Policy acquisition and other insurance expenses declined due to expense reductions, partially offset by higher restructuring costs.

    Domestic Life Insurance pre-tax income before net realized capital losses increased slightly in 2009 compared to 2008 primarily due to the following:

    Partially offsetting the increase were:

    Pre-tax income for Domestic Life Insurance in 2009 compared to the pre-tax loss in 2008 reflected lower levels of net realized capital losses in 2009, due principally to an $8.6 billion decline in other-than-temporary impairment charges. Other-than-temporary impairment charges in 2008 included $5.5 billion of charges related to AIG's U.S. securities lending program which was terminated in December 2008.

2008 and 2007 Comparison

    Domestic Life Insurance premiums and other considerations increased in 2008 primarily due to higher sales of payout annuity products, which had a corresponding effect on policyholder benefits and claims incurred. Policy acquisition and other expenses increased from 2007 as goodwill impairment charges and restructuring costs were only partially offset by the DAC benefit related to realized capital losses.

    Domestic Life Insurance pre-tax income before net realized capital losses decreased slightly in 2008 compared to 2007 primarily due to the following:

24



American International Group, Inc., and Subsidiaries

    Partially offsetting these declines were:

    The pre-tax loss for Domestic Life Insurance in 2008 reflected higher levels of net realized capital losses compared to 2007, due principally to an $8.7 billion increase in other-than-temporary impairment charges. Other-than-temporary impairment charges in 2008 included $5.5 billion of charges related to the termination of AIG's U.S. securities lending program discussed above.

Domestic Life Insurance Sales and Deposits

The following table summarizes Life Insurance sales and deposits by product*:

   
 
   
   
   
  Percentage Increase/
(Decrease)
 
Years Ended December 31,
(in millions)
   
   
   
 
  2009
  2008
  2007
  2009 vs. 2008
  2008 vs. 2007
 
   

Life insurance

                               

Periodic premium by product:

                               
 

Universal life

  $ 53   $ 167   $ 230     (68 )%   (27 )%
 

Variable universal life

    19     63     55     (70 )   15  
 

Term life

    73     210     219     (65 )   (4 )
 

Whole life/other

    4     11     9     (64 )   22  
   
   

Total periodic premiums by product

    149     451     513     (67 )   (12 )

Group life/health

    89     121     118     (26 )   3  

Unscheduled and single deposits

    63     267     426     (76 )   (37 )
   
   

Total life insurance

    301     839     1,057     (64 )   (21 )
   

Career distribution

                               
 

By product:

                               
   

Periodic life insurance premiums

    75     76     80     (1 )   (5 )
   

Unscheduled and single deposits

    18     21     18     (14 )   17  
   

Accident and health insurance

    8     11     16     (27 )   (31 )
   

Fixed annuities

    143     199     116     (28 )   72  
   
     

Total career distribution

    244     307     230     (21 )   33  
   
 

Payout annuities

    963     2,893     2,612     (67 )   11  
 

Individual fixed and runoff annuities

    760     930     420     (18 )   121  
   

Total sales and deposits

  $ 2,268   $ 4,969   $ 4,319     (54 )%   15 %
   
*
Includes divested operations. Life insurance sales include periodic premium from new business expected to be collected over a one-year period and unscheduled and single premiums from new and existing policyholders. Sales of group accident and health insurance represent annualized first year premium from new policies. Annuity sales represent deposits from new and existing customers.

25



American International Group, Inc., and Subsidiaries

2009 and 2008 Comparison

    Total Domestic Life Insurance sales and deposits decreased significantly in 2009 compared to 2008 primarily due to lower payout annuities, life insurance premiums and the sale of AIG Life Canada. Payout annuities sales and life insurance premiums decreased primarily due to lower financial strength ratings and the lingering effects of negative AIG publicity.

2008 and 2007 Comparison

    Total Domestic Life Insurance sales and deposits increased in 2008 compared to 2007 primarily due to strong payout and individual fixed annuities sales, partially offset by a decline in total life insurance premiums. Payout annuities sales increased due to strong terminal funding and structured settlement sales in both the U.S. and Canada. Individual fixed annuities sales increased as a result of the interest rate environment as credited rates offered were more competitive with the rates offered by banks on certificates of deposit. The ratings downgrades and negative publicity related to AIG resulted in lower sales and deposits for the fourth quarter of 2008.

Domestic Retirement Services Results

The following table presents Domestic Retirement Services results:

   
 
   
   
   
  Percentage Increase/
(Decrease)
 
Years Ended December 31,
(in millions)
   
   
   
 
  2009
  2008
  2007
  2009 vs. 2008
  2008 vs. 2007
 
   
 

Premiums and other considerations

  $ 1,075   $ 1,396   $ 1,506     (23 )%   (7 )%
 

Net investment income

    5,734     5,311     9,563     8     (44 )
 

Policyholder benefits and claims incurred

    4,071     4,673     4,973     (13 )   (6 )
 

Policy acquisition and other expenses

    1,734     1,894     1,731     (8 )   9  
   

Pre-tax income before net realized capital gains (losses)

    1,004     140     4,365     -     (97 )

Net realized capital losses

    (2,802 )   (24,858 )   (1,939 )   -     -  
   

Pre-tax income (loss)

  $ (1,798 ) $ (24,718 ) $ 2,426     - %   - %
   

2009 and 2008 Comparison

    Domestic Retirement Services reported an increase in pre-tax income before net realized capital gains (losses) in 2009 compared to 2008 primarily due to the following:

    Partially offsetting these benefits were:

26



American International Group, Inc., and Subsidiaries

    The reduced pre-tax loss for Domestic Retirement Services in 2009 reflected lower levels of net realized capital losses compared to 2008 principally from lower other-than-temporary impairment charges of $18.1 billion, a $2.9 billion decline in trading losses related to AIG's U.S. securities lending program and a $1.2 billion increase in earnings from the change in fair value of embedded policy derivative liabilities, net of related economic hedges, driven by improved bond and equity market conditions. Other-than-temporary impairment charges in 2008 included $11.2 billion of charges related to AIG's U.S. securities lending program which was terminated in December 2008.

2008 and 2007 Comparison

    Domestic Retirement Services reported a significant decline in pre-tax income before net realized capital gains (losses) in 2008 compared to 2007 primarily due to the following:

    These charges were partially offset by DAC and SIA benefits of $2.2 billion in 2008 related to the net realized capital losses as compared to benefits of $202 million in 2007.

    The pre-tax loss for Domestic Retirement Services in 2008 reflected higher levels of net realized capital losses compared to 2007 due to a $19.6 billion increase in other-than-temporary impairment charges, a $2.8 billion increase in trading losses related to AIG's U.S. securities lending program and an $850 million increase in losses from the change in fair value of embedded policy derivative liabilities, net of related economic hedges, driven by poor equity market conditions. Other-than-temporary impairment charges in 2008 included $11.2 billion of charges related to AIG's U.S. securities lending program which was terminated in December 2008.

27



American International Group, Inc., and Subsidiaries

Domestic Retirement Services Sales and Deposits

The following table presents the account value rollforward for Domestic Retirement Services:

   
Years Ended December 31,
(in millions)
  2009
  2008
  2007
 
   

Group retirement products

                   

Balance, beginning of year

  $ 56,861   $ 68,109   $ 64,357  
 

Deposits – annuities

    4,856     5,661     5,898  
 

Deposits – mutual funds

    1,345     1,520     1,633  
   
 

Total Deposits

    6,201     7,181     7,531  
 

Surrenders and other withdrawals

    (7,233 )   (6,693 )   (6,551 )
 

Death benefits

    (275 )   (246 )   (262 )
   
 

Net inflows (outflows)

    (1,307 )   242     718  
 

Change in fair value of underlying investments, interest credited, net of fees

    7,865     (11,490 )   3,034  
   

Balance, end of year

  $ 63,419   $ 56,861   $ 68,109  
   

Individual fixed annuities

                   

Balance, beginning of year

  $ 48,394   $ 50,508   $ 52,685  
 

Deposits

    5,348     7,276     5,085  
 

Surrenders and other withdrawals

    (6,715 )   (9,571 )   (7,565 )
 

Death benefits

    (1,700 )   (1,721 )   (1,667 )
   
 

Net inflows (outflows)

    (3,067 )   (4,016 )   (4,147 )
 

Change in fair value of underlying investments, interest credited, net of fees

    1,875     1,902     1,970  
   

Balance, end of year

  $ 47,202   $ 48,394   $ 50,508  
   

Individual variable annuities

                   

Balance, beginning of year

  $ 23,593   $ 33,108   $ 31,093  
 

Deposits

    891     3,455     4,472  
 

Surrenders and other withdrawals

    (2,667 )   (4,240 )   (4,158 )
 

Death benefits

    (404 )   (480 )   (497 )
   
 

Net inflows (outflows)

    (2,180 )   (1,265 )   (183 )
 

Change in fair value of underlying investments, interest credited, net of fees

    3,224     (8,250 )   2,198  
   

Balance, end of year

  $ 24,637   $ 23,593   $ 33,108  
   

Total Domestic Retirement Services

                   

Balance, beginning of year

  $ 128,848   $ 151,725   $ 148,135  
 

Deposits

    12,440     17,912     17,088  
 

Surrenders and other withdrawals

    (16,615 )   (20,504 )   (18,274 )
 

Death benefits

    (2,379 )   (2,447 )   (2,426 )
   
 

Net inflows (outflows)

    (6,554 )   (5,039 )   (3,612 )
 

Change in fair value of underlying investments, interest credited, net of fees

    12,964     (17,838 )   7,202  
   
 

Balance, end of year, excluding runoff

    135,258     128,848     151,725  
 

Individual annuities runoff

    4,637     5,079     5,690  
 

GICs runoff

    8,536     14,608     24,890  
   

Balance at end of year

  $ 148,431   $ 148,535   $ 182,305  
   

General and separate account reserves and mutual funds

                   
 

General account reserve

  $ 94,912   $ 103,748   $ 113,691  
 

Separate account reserve

    45,444     38,499     60,461  
   

Total general and separate account reserves

    140,356     142,247     174,152  
 

Group retirement mutual funds

    8,075     6,288     8,153  
   

Total reserves and mutual funds

  $ 148,431   $ 148,535   $ 182,305  
   

28



American International Group, Inc., and Subsidiaries

2009 and 2008 Comparison

    Deposits have been negatively affected by lower AIG ratings and the lingering effects of negative AIG publicity. For individual variable annuities, the decrease in 2009 compared to 2008 is also attributable to a general decline in industry sales volumes. Individual fixed and variable annuity sales have decreased due to the temporary suspension of product sales at certain selling organizations due to the effect of the AIG events. However, deposits for individual fixed annuities increased in the second half of 2009 primarily due to increased demand for guaranteed products as well as reinstatement of sales at certain financial institutions that had previously suspended sales.

    Surrenders and other withdrawals increased in 2009 for group retirement products primarily due to higher large group surrenders. However, surrender rates and withdrawals have improved for individual fixed annuities and individual variable annuities.

2008 and 2007 Comparison

    Deposits were negatively affected by the AIG ratings downgrades and AIG's liquidity issues commencing in September 2008. The decrease in group retirement products deposits was due to a decline in both group annuity deposits and group mutual fund deposits. The improvement in individual fixed annuity deposits was due to a steepened yield curve, providing the opportunity to offer higher interest crediting rates than certificates of deposits and mutual fund money market rates available at the time. Both group retirement products and individual fixed annuities deposits decreased after the AIG ratings downgrades. Individual variable annuity product sales declined due to the AIG ratings downgrades and continued weakness in the equity markets.

    Group retirement products and individual annuities surrenders and other withdrawals increased in all three product lines in 2008 compared to 2007 primarily due to the AIG ratings downgrades and AIG's liquidity issues.

The following table presents reserves by surrender charge category and surrender rates:

   
At December 31,

(in millions)
  Group
Retirement
Products*

  Individual
Fixed
Annuities

  Individual
Variable
Annuities

 
   

2009

                   
 

No surrender charge

  $ 47,854   $ 11,444   $ 11,161  
 

0% – 2%

    1,509     3,054     4,094  
 

Greater than 2% – 4%

    1,918     5,635     2,066  
 

Greater than 4%

    3,213     23,885     6,758  
 

Non-Surrenderable

    850     3,184     558  
   
 

Total Reserves

  $ 55,344   $ 47,202   $ 24,637  
   

Surrender rates

    12.3 %   14.4 %   12.1 %
   

2008

                   
 

No surrender charge

  $ 43,797   $ 10,287   $ 8,594  
 

0% – 2%

    1,320     3,043     3,097  
 

Greater than 2% – 4%

    1,714     6,711     2,187  
 

Greater than 4%

    2,710     25,110     7,663  
 

Non-Surrenderable

    1,032     3,243     2,052  
   
 

Total Reserves

  $ 50,573   $ 48,394   $ 23,593  
   

Surrender rates

    10.5 %   18.8 %   14.9 %
   
*
Excludes mutual funds of $8.1 billion and $6.3 billion in 2009 and 2008, respectively.

Foreign Life Insurance & Retirement Services Operations

    AIG's Foreign Life Insurance & Retirement Services operations include life insurance, retirement planning, accident and health insurance, as well as savings and investment products for consumers and businesses. The Foreign Life Insurance & Retirement Services products are sold through independent producers, career agents, financial institutions and direct marketing channels.

29



American International Group, Inc., and Subsidiaries

    In managing its Foreign Life Insurance & Retirement Services businesses, AIG analyzes the operating performance of each business using pre-tax income (loss) before net realized capital gains (losses). Pre-tax income (loss) before net realized capital gains (losses) is not a substitute for pre-tax income determined in accordance with U.S. GAAP. However, AIG believes that the presentation of pre-tax income (loss) before net realized capital gains (losses) enhances the understanding of the operating performance of the Foreign Life Insurance & Retirement Services businesses by highlighting the results from ongoing operations and the underlying profitability of its businesses. The reconciliations to pre-tax income are provided in the table that follows.

    In order to better align financial reporting with the manner in which AIG's chief operating decision makers review the businesses to make decisions about resources to be allocated and to assess performance, beginning in 2009, the Foreign Life Insurance & Retirement Services results include the equity income (loss) from certain equity method investments, which were previously included as part of AIG's Other operations category. Prior period amounts have been revised to conform to the current presentation.

    Following the classification of ALICO, AIG Star and AIG Edison as discontinued operations (see Note 2 to the Consolidated Financial Statements), AIG's remaining Foreign Life Insurance & Retirement Services operations are conducted through AIA Group Limited (AIA) and American International Reinsurance Company Limited (AIRCO).

Foreign Life Insurance & Retirement Services Results

The following table presents Foreign Life Insurance & Retirement Services results, which consist of a single reporting unit:

   
 
   
   
   
  Percentage Increase/
(Decrease)
 
Years Ended December 31,

(in millions)
   
   
   
 
  2009
  2008
  2007
  2009 vs. 2008
  2008 vs. 2007
 
   
 

Premiums and other considerations

  $ 9,324   $ 10,272   $ 9,417     (9 )%   9 %
 

Net investment income

    5,258     (829 )   4,117     -     -  
 

Policyholder benefits and claims incurred

    10,465     4,553     9,949     130     (54 )
 

Policy acquisition and other expenses

    2,616     3,054     1,475     (14 )   107  
   

Pre-tax income before net realized capital gains (losses)

    1,501     1,836     2,110     (18 )   (13 )

Net realized capital gains (losses)

    419     (2,498 )   142     -     -  
   

Pre-tax income (loss)

  $ 1,920   $ (662 ) $ 2,252     - %   - %
   

    AIG transacts business in most major foreign currencies and therefore Premiums and other considerations reported in U.S. dollars vary by volume and from changes in foreign currency to U.S. dollar translation exchange rates.

The following table summarizes the effect of changes in foreign currency exchange rates on Foreign Life Insurance & Retirement Services Premiums and other considerations:

   
Years Ended December 31,
  2009
  2008
 
   

Increase (decrease) in original currency*

    (4.0 )%   8.4 %

Foreign exchange effect

    (5.2 )   0.7  
   

Increase (decrease) growth as reported in U.S. dollars

    (9.2 )%   9.1 %
   
*
Computed using a constant exchange rate each period.

2009 and 2008 Comparison

    Premiums and other considerations declined due to generally weak economic conditions and lower fee income related to investment-linked products. Net investment income increased significantly in 2009 compared to 2008 due to policyholder trading gains which increased $5.7 billion and higher partnership and mutual fund income. Policyholder trading gains (losses) are offset by a change in policyholder benefits and claims incurred. The decrease in policy acquisition and other expenses resulted from lower new business sales.

30



American International Group, Inc., and Subsidiaries

    Pre-tax income before net realized capital losses for Foreign Life Insurance & Retirement Services declined in 2009 compared to 2008 primarily due to the following:

    These declines were partially offset by higher partnership and mutual fund income, net of policyholder trading gains and policyholder participating share, which amounted to $17 million of income in 2009 compared to losses of $260 million in 2008.

    Pre-tax income for Foreign Life Insurance & Retirement Services in 2009 reflected a decline in net realized capital losses compared to 2008 due principally to a significant decline in other-than-temporary impairments.

2008 and 2007 Comparison

    Premiums and other considerations increased primarily due to strong renewal premium growth in Asia and surrender related revenues in Korea. Net investment income declined in 2008 compared to 2007 largely due to policyholder trading losses of $3.4 billion in 2008 compared to gains of $1.4 billion in 2007. The increase in policy acquisition and other expenses was primarily due to higher DAC amortization related to higher surrender benefits as a result of the implementation of the new fair value accounting standard in 2008, benefits related to actuarial adjustments in 2007 and the effect of foreign exchange.

    Pre-tax income before net realized capital gains (losses) for Foreign Life Insurance & Retirement Services decreased in 2008 compared to 2007 primarily due to lower partnership and mutual fund income.

    Partially offsetting this decline was the following:

    The pre-tax loss for Foreign Life Insurance & Retirement Services in 2008 reflected higher net realized capital losses compared to 2007 due principally to significant other-than-temporary impairments in 2008.

Foreign Life Insurance & Retirement Services Sales and Deposits*

The following table summarizes first year premium, single premium and annuity deposits for Foreign Life Insurance & Retirement Services:

   
 
   
   
   
  Percentage Increase (Decrease)  
 
   
   
   
  2009 vs 2008   2008 vs 2007  
Years Ended December 31,

(in millions)
   
   
   
 
  2009
  2008
  2007
  U.S. $
  Original
Currency

  U.S. $
  Original
Currency

 
   

First year premium

  $ 1,727   $ 2,128   $ 2,097     (19 )%   (13 )%   1 %   7 %

Single premium

    999     2,157     3,096     (54 )   (53 )   (30 )   (32 )

Annuity deposits

    66     715     1,040     (91 )   (90 )   (31 )   (28 )
   
*
Excludes divested operations.

31



American International Group, Inc., and Subsidiaries

2009 and 2008 Comparison

    First year premium sales in 2009 decreased compared to 2008 primarily due to lower life insurance and personal accident sales, which were partially offset by higher group products sales in Australia. In Asia, life insurance sales of investment-linked products were adversely affected by equity market performance and the negative effect of foreign exchange translation.

    Single premium sales in 2009 declined primarily due to lower sales of investment-linked products in Asia reflecting customer concerns about equity markets performance earlier in the year.

2008 and 2007 Comparison

    First year premium sales in 2008 increased slightly compared to 2007 primarily due to the positive effect of foreign exchange. Single premium sales declined in 2008 from the impact of adverse equity markets.

Financial Services Operations

    AIG's Financial Services subsidiaries engage in diversified activities including commercial aircraft and equipment leasing and capital markets transactions which are conducted through ILFC and Capital Markets. Following the classification of AGF as discontinued operations in the third quarter of 2010, AIG's remaining consumer finance businesses are now reported in AIG's Other operations category as part of Noncore businesses.

    During the third quarter of 2010, AIG's Asset Management group undertook the management responsibilities for non-derivative assets and liabilities of the Capital Markets businesses of the Financial Services segment. Accordingly, gains and losses related to these assets and liabilities, primarily consisting of credit valuation adjustment gains and losses are reported in AIG's Other operations category as part of Asset Management — Direct Investment Business. The remaining capital markets derivatives business continues to be reported in the Financial Services segment as part of Capital Markets results.

    Intercompany interest expense related to loans from AIG Funding to Capital Markets is no longer being allocated to Capital Markets from Other Operations.

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

Aircraft Leasing

    AIG's Aircraft Leasing operations are the operations of ILFC, which generates its revenues primarily from leasing new and used commercial jet aircraft to foreign and domestic airlines. Revenues also result from the remarketing of commercial jet aircraft for ILFC's own account, and remarketing and fleet management services for airlines and other aircraft fleet owners.

Capital Markets

    Capital Markets engaged as a principal in a wide variety of financial transactions, including standard and customized financial products involving commodities, credit, currencies, energy, equities and interest rates. Given the extreme market conditions experienced in 2008, downgrades of AIG's credit ratings by the rating agencies and AIG's intent to refocus on its core businesses, in late 2008, Capital Markets began to unwind its businesses and portfolios, including those associated with credit protection written through credit default swaps on super senior risk tranches of diversified pools of loans and debt securities.

    Historically, AIG's Capital Markets operations derived a significant portion of their revenues from hedged financial positions entered into in connection with counterparty transactions. Capital Markets has also participated as a dealer in a wide variety of financial derivatives transactions.

32



American International Group, Inc., and Subsidiaries

Financial Services Results

Financial Services results were as follows:

   
 
   
   
   
  Percentage Increase/
(Decrease)
 
Years Ended December 31,

(in millions)
   
   
   
 
  2009
  2008
  2007
  2009 vs. 2008
  2008 vs. 2007
 
   

Revenues:

                               
 

Aircraft Leasing

  $ 5,288   $ 5,075   $ 4,694     4 %   8 %
 

Capital Markets

    1,166     (30,559 )   (9,979 )   -     -  
 

Other, including intercompany adjustments

    572     323     321     77     1  
   

Total

  $ 7,026   $ (25,161 ) $ (4,964 )   - %   - %
   

Pre-tax income (loss):

                               
 

Aircraft Leasing

  $ 1,385   $ 1,116   $ 873     24 %   28 %
 

Capital Markets

    684     (30,697 )   (10,557 )   -     -  
 

Other, including intercompany adjustments

    (63 )   (205 )   (2 )   -     -  
   

Total

  $ 2,006   $ (29,786 ) $ (9,686 )   - %   - %
   

2009 and 2008 Comparison

    Financial Services reported pre-tax income in 2009 compared to a very significant pre-tax loss in 2008 primarily due to the following:

2008 and 2007 Comparison

    Financial Services reported increased pre-tax losses in 2008 and 2007 primarily due to the following:

Capital Markets Results

2009 and 2008 Comparison

    Capital Markets reported a pre-tax gain in 2009 compared to a very significant pre-tax loss in 2008 primarily due to a market valuation gain in 2009 compared to a loss in 2008 on its super senior credit default swap portfolio. Capital Markets' results also reflect the effects of its wind-down activities. The net pre-tax results were also affected by efforts initiated during the first half of 2008 to preserve liquidity. As a result of AIG's intention to refocus on its core business, Capital Markets began unwinding its businesses and portfolios.

33



American International Group, Inc., and Subsidiaries

    Capital Markets recognized an unrealized market valuation gain of $1.4 billion in 2009 compared to an unrealized market valuation loss of $28.6 billion in 2008, representing the change in fair value of its super senior credit default swap portfolio. The principal components of the valuation gains and losses recognized were as follows:

    During 2009, Capital Markets:

    Historically, the most significant component of Capital Markets operating expenses was compensation. For 2009, compensation expense was approximately $98 million, or 19 percent of operating expenses. In addition, Capital Markets recognized $153 million in expenses related to pre-existing retention plans and related asset impairment and other expenses. Due to the significant losses recognized by Capital Markets during 2008, the entire amount of $563 million accrued under Capital Markets' various deferred compensation plans and special incentive plan was reversed in 2008. Total compensation expense in 2008 was $426 million including retention awards.

2008 and 2007 Comparison

    Capital Markets' pre-tax loss increased significantly in 2008 compared to 2007 primarily related to its super senior multi-sector CDO credit default swap portfolio. The 2008 net pre-tax loss was driven by the extreme market conditions experienced during 2008 and the effects of downgrades of AIG's credit ratings by the rating agencies.

    AIG recognized an unrealized market valuation loss of $28.6 billion in 2008 compared to $11.5 billion in 2007, representing the change in fair value of its super senior credit default swap portfolio. The principal components of the loss recognized in 2008 were as follows:

34



American International Group, Inc., and Subsidiaries

    During 2008, Capital Markets recognized a loss of $888 million on credit default swap contracts referencing single-name exposures written on corporate, index and asset backed credits, which are not included in the super senior credit default swap portfolio, compared to a net gain of $370 million in 2007. In addition, Capital Markets incurred a net loss of $807 million (including $185 million of losses reflected in the unrealized market valuation loss on super senior credit default swaps) in 2008, representing the impact of credit valuation adjustments on Capital Markets' derivative assets and liabilities.

Other Operations

    AIG's Other operations includes results from Parent & Other operations, after allocations to AIG's business segments, Mortgage Guaranty operations, Asset Management operations, non-core businesses and fair value changes in ML III.

Parent & Other

    AIG's Parent & Other operations consist primarily of interest expense, restructuring costs, expenses of corporate staff not attributable to specific reportable segments, expenses related to efforts to improve internal controls, corporate initiatives, certain compensation plan expenses, corporate level net realized capital gains and losses, certain litigation related charges and net gains and losses on sales of divested businesses.

Other Businesses

    Other businesses include results of Mortgage Guaranty, Asset Management operations, non-core businesses and fair value changes in ML III. Certain businesses that have been divested or are being wound down or repositioned.

    The following changes were made to AIG's segment information to align financial reporting with changes made during third quarter of 2010 to the manner in which AIG's chief operating decision makers review the businesses to make decisions about allocation of resources and to assess performance of these operations:

35



American International Group, Inc., and Subsidiaries

    In order to better align financial reporting with the manner in which AIG's chief operating decision makers review the businesses to make decision about allocation of resources and to assess performance of these operations, the following changes were made during 2009:

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

36



American International Group, Inc., and Subsidiaries

Other Results

The pre-tax income (loss) of AIG's Other operations was as follows:

   
 
   
   
   
  Percentage Increase/
(Decrease)
 
Years Ended December 31,

(in millions)
   
   
   
 
  2009
  2008
  2007
  2009 vs. 2008
  2008 vs. 2007
 
   

Parent & Other:

                               
 

Intercompany interest income, net

  $ 647   $ 214   $ 104     202 %   106 %
 

Interest expense on FRBNY Credit Facility:

                               
   

Accrued and compounding interest

    (2,022 )   (2,116 )   -     -     -  
   

Amortization of prepaid commitment asset

    (8,359 )   (9,279 )   -     -     -  
   
 

Total interest expense on FRBNY Credit Facility(a)

    (10,381 )   (11,395 )   -     -     -  
 

Other interest expense

    (2,035 )   (1,919 )   (1,315 )   -     -  
 

Unallocated corporate expenses

    (1,149 )   (967 )   (649 )   -     -  
 

Restructuring expenses

    (422 )   (195 )   -     -     -  
 

Change in fair value of ML III(b)

    (1,401 )   (900 )   -     -     -  
 

Net realized capital gains (losses)

    900     (1,218 )   (265 )   -     -  
 

Net loss on sale of divested businesses

    (1,271 )   -     -     -     -  
 

Other miscellaneous, net

    111     73     63     52 %   16 %
   

Total Parent & Other

  $ (15,001 ) $ (16,307 ) $ (2,062 )   - %   - %
   

Other businesses:

                               
 

Mortgage Guaranty

  $ (1,688 ) $ (2,488 ) $ (641 )   - %   - %
 

Asset Management:

                               
   

Direct Investment Business

    (322 )   (13,548 )   (570 )   -     -  
   

Institutional Asset Management

    (1,303 )   (255 )   653     -     -  
 

Noncore businesses

    120     (1,232 )   954     -     -  
 

Change in fair value of ML III(b)

    1,820     -     -     -     -  
   

Total Other businesses

  $ (1,373 ) $ (17,523 ) $ 396     - %   - %
   

Total Other operations

  $ (16,374 ) $ (33,830 ) $ (1,666 )   - %   - %
   
(a)
Includes interest expense of $626 million and $389 million for 2009 and 2008, respectively, allocated to discontinued operations in consolidation.

(b)
Parent & Other contributed its equity interest in ML III to an AIG subsidiary, reported above in Other businesses, during the second quarter of 2009.

Parent & Other

    Parent & Other pre-tax loss decreased in 2009 compared to 2008 primarily due to net realized capital gains in 2009 compared to losses in 2008 and a decline in interest expense on the FRBNY Credit Facility. See Consolidated Results — Interest Expense herein for further discussion of the decline in interest expense. Additionally, Parent & Other pre-tax loss in 2009 includes a decline in fair value of AIG's equity interest in ML III, restructuring expenses, and net losses on sales of divested businesses. The increased pre-tax loss in 2008 compared to 2007 largely resulted from interest expense on the FRBNY Credit Facility.

37



American International Group, Inc., and Subsidiaries

The following table summarizes the net loss on sale of divested businesses:

   
Year Ended December 31, 2009

(in millions)
  Gain/(loss)
 
   
 

Transatlantic

  $ (497 )
 

21st Century

    (416 )
 

Consumer Finance businesses

    (375 )
 

A.I. Credit

    (287 )
 

AIG Private Bank

    111  
 

AIG Life Canada

    111  
 

HSB

    177  
 

Other businesses

    (95 )
   

Total

  $ (1,271 )
   

Other Businesses

Mortgage Guaranty

    The main business of the subsidiaries of UGC is the issuance of residential mortgage guaranty insurance, both domestically and internationally, that covers the first loss for credit defaults on high loan-to-value conventional first-lien mortgages for the purchase or refinance of one- to four-family residences.

    Mortgage Guaranty's pre-tax loss for 2009 decreased compared to 2008. The decreased pre-tax loss reflects a decline in loss and loss expenses incurred of $394 million combined with a $483 million reduction in operating expenses as a result of the recognition of a premium deficiency reserve of $222 million in 2008 and the release of the entire $222 million premium deficiency reserve in 2009. Domestic first-lien and second-lien businesses reported pre-tax losses of $1.06 billion and $283 million, respectively, for 2009 which were $72 million and $902 million, respectively, lower than 2008. These reductions in pre-tax losses reflect the declines in loss and loss expenses of $154 million for first liens and $443 million for second liens in addition to the release of the second-lien premium deficiency reserve in 2009. The improved operating results correspond with the relative slowing of declines in domestic housing values and, primarily in the case of second liens, the recognition of stop loss limits on certain policies. Domestic private student loans and international businesses pre-tax losses of $70 million and $261 million, respectively, for 2009 were $71 million and $104 million higher, respectively, than during 2008.

    Mortgage Guaranty pre-tax loss increased in 2008 compared to 2007 due to sharply declining housing values, increased mortgage foreclosures and the recognition of a premium deficiency reserve on the second-lien business. The domestic first-lien pre-tax loss increased by $1.0 billion in 2008 to $1.1 billion compared to 2007 while the second-lien pre-tax loss of $1.2 billion in 2008, which includes the recognition of a $222 million premium deficiency reserve, increased $656 million compared to 2007.

    During 2008, UGC tightened underwriting guidelines and increased premium rates for its first-lien business, ceased insuring new second-lien loans as of September 30, 2008 and during the fourth quarter of 2008 ceased insuring new private student loan business and suspended insuring new business throughout its European operations. All of these actions were in response to the worsening conditions in the global housing markets and resulted in a significant decline in new business written during the second half of 2008 and throughout 2009. This is reflected in 2009 new insurance written of $14 billion which was 61 percent below 2008 levels. Earned premiums during 2009 of $1.0 billion were 1 percent below 2008 earned premiums, reflecting the high level of persistency in the older books of business resulting from relatively consistent mortgage interest rates, tightening of refinancing requirements throughout the mortgage market and a weak domestic residential resale market.

38



American International Group, Inc., and Subsidiaries

    UGC, like other participants in the mortgage insurance industry, has made claims against various counterparties in relation to alleged underwriting failures, and received similar claims from counterparties. These claims and counterclaims allege breach of contract, breach of good faith and fraud among other allegations.

    In December 2009, UGC entered into two stock purchase agreements for the sales of its Canadian and Israel operations. The Israel transaction closed on January 21, 2010 and the Canadian transaction is expected to close during the first half of 2010.

    UGC's domestic first-lien mortgage risk in force totaled $26.4 billion as of December 31, 2009 and the 60+ day delinquency ratio was 17.8 percent (based on number of policies, consistent with mortgage industry practice) compared to domestic first-lien mortgage risk in force of $27.1 billion and a delinquency ratio of 10.7 percent at December 31, 2008.

    The second-lien risk in force at December 31, 2009 totaled $2.5 billion compared to $2.9 billion of risk in force at December 31, 2008. Risk in force represents the full amount of second-lien loans insured reduced for contractual aggregate loss limits on certain pools of loans, usually 10 percent of the full amount of loans insured in each pool. Certain second-lien pools have reinstatement provisions.

Asset Management Operations

    AIG's Asset Management operations include the results of Direct Investment Business and Institutional Asset Management business. Direct Investment Business includes results for the Matched Investment Program, AIG Global Real Estate and changes in value due to credit spread movements on non-derivative assets and liabilities of Capital Markets now managed by the Asset Management Group. The Institutional Asset Management businesses include AIG's internal asset management business and AIG Markets, which acts as a derivative intermediary transacting with AIG and its subsidiaries and third parties.

    On March 26, 2010, AIG completed the sale of its third party asset management business. The results of operations from January 1 through the closing of the sale are included in the Institutional Asset Management results. Subsequent to the sale of AIG's third party asset management business, the revenues of the Institutional Asset Management business are derived from providing asset management services to AIG and its subsidiaries. Direct Investment Business' operating results are impacted by performance in the credit, equity and real estate markets.

Direct Investment Business Results

    The revenues and pre-tax income (loss) for these operations are affected by the general conditions in the equity and credit markets. In addition, net realized gains are contingent upon investment maturity levels and market conditions.

2009 and 2008 Comparison

    Direct Investment Business reported a lower pre-tax loss in 2009 compared to 2008 due to significantly lower other-than-temporary impairments on fixed maturity investments driven by improved credit environment and the adoption of the new accounting standard on other-than-temporary impairments. Also contributing to the improvement were fair value gains on single name credit default swap investments offset by increased net fair value losses on foreign exchange and interest rate derivatives not qualifying for hedge accounting treatment.

    AIG enters into derivative arrangements to hedge the effect of changes in currency and interest rates associated with the fixed and floating rate and foreign currency denominated obligations issued under these programs. Some of these hedging relationships do not qualify for hedge accounting treatment and therefore create volatility in operating results despite being effective economic hedges. Further, Direct Investment Business invests in short single name credit default swaps in order to obtain unfunded credit exposure.

39



American International Group, Inc., and Subsidiaries

The following table presents credit valuation adjustment gains (losses) included in Direct Investment Business (excluding intercompany transactions):

   
(in millions)
   
   
   
   
 
   
 
  Counterparty Credit
Valuation Adjustment
on Assets

   
   
  AIG's Own Credit
Valuation Adjustment
on Liabilities

 
     
     
Year Ended December 31, 2009                      
Bond trading securities   $ 2,095       Notes and bonds payable   $ (163 )
Loans and other assets     (48 )     Hybrid financial instrument liabilities     (83 )
              GIAs     172  
              Other liabilities     (12 )
           
Increase in assets   $ 2,047       Increase in liabilities   $ (86 )
           
Net pre-tax increase to Other income   $ 1,961                
   
Year Ended December 31, 2008                      
Bond trading securities   $ (8,928 )     Notes and bonds payable   $ 248  
Loans and other assets     (61 )     Hybrid financial instrument liabilities     646  
              GIAs     (415 )
              Other liabilities     55  
           
Decrease in assets   $ (8,989 )     Decrease in liabilities   $ 534  
           
Net pre-tax decrease to Other income   $ (8,455 )              
   

    In 2009, Direct Investment Business recognized a net gain of $2.0 billion representing the effect of changes in credit spreads on the valuation of non-derivative assets and liabilities for which the fair value option was elected. The gain in 2009 was primarily the result of tightening of spreads on asset-backed securities and CDOs, which represent a significant segment of Direct Investment Business' investment portfolio.

    In 2008, Direct Investment Business recognized a loss of $8.5 billion representing the effect of changes in credit spreads on the valuation of non-derivative assets and liabilities. Historically, AIG's credit spreads and those on Direct Investment Business assets moved in a similar fashion. This relationship began to diverge during second quarter of 2008 and continued to diverge through the end of the year. While AIG's credit spreads widened significantly during 2008, the credit spreads on the Asset-backed securities (ABS) and CDO products, which represent a significant portion of Direct Investment Business' investment portfolio, widened even more. The losses on Direct Investment Business assets more than offset the net gain on its liabilities that were driven by the significant widening in AIG's credit spreads. The net gain on Direct Investment Business liabilities was reduced by the effect of posting collateral and the early terminations of GIAs, term notes and hybrid term notes. Included in the 2008 pre-tax loss is the transition amount of $291 million related to the adoption of new accounting standards on fair value measurements and fair value option for financial assets and financial liabilities.

2008 and 2007 Comparison

    Direct Investment Business reported increased pre-tax losses in 2008 compared to 2007 due to significant net mark-to-market losses on the non-derivative assets and liabilities along with other-than-temporary impairments on fixed income securities and impairments on real estate investments. Also contributing to the increase loss were net mark-to-market losses on interest rate and foreign hedges not qualified for hedge accounting treatment; and higher net mark-to-market losses on credit default swap investments held by Direct Investment Business due to the widening of corporate credit spreads.

    Due to global real estate market conditions, several of AIG Global Real Estate's investments were deemed to be impaired, and several equity investments were written off during 2008. Partially offsetting these declines were increased net foreign exchange gains on foreign denominated Direct Investment Business liabilities.

40



American International Group, Inc., and Subsidiaries

Institutional Asset Management Results

2009 and 2008 Comparison

    Institutional Asset Management recognized an increased pre-tax loss in 2009 compared to 2008, primarily resulting from:

2008 and 2007 Comparison

    Institutional Asset Management recognized a pre-tax loss in 2008 compared to pre-tax income in 2007, primarily resulting from:

    Included in the 2007 results was a $398 million gain related to the sale of a portion of AIG's investment in The Blackstone Group, LP.

Noncore businesses

41



American International Group, Inc., and Subsidiaries

    Following the classification of AGF as discontinued operations in the third quarter of 2010 (see Note 2 to the Consolidated Financial Statements), AIG's remaining Consumer Finance businesses are now reported in AIG's Other operations category as part of Noncore businesses.

Change in Fair Value of ML III

    Gains in 2009 resulted from improvements in valuation, primarily resulting from the shortening of weighted average life from 10.9 years to 9.6 years, and the narrowing of credit spreads by approximately 100 basis points. Adversely affecting the fair value was the decrease in cash flows primarily due to an increase in projected credit losses in the underlying collateral securities.

Investments

Other-Than-Temporary Impairments

    As a result of AIG's periodic evaluation of its securities for other-than-temporary impairments in value, AIG recorded impairment charges in earnings of $6.7 billion, $41.9 billion and $4.2 billion (including $643 million related to Direct Investment Business recorded in other income) in 2009, 2008, and 2007 respectively. To better align financial reporting with the manner in which AIG's chief operating decision makers review the businesses to make decisions about allocation of resources and to assess performance of these operations, management responsibilities for non-derivative assets and liabilities of the Capital Markets businesses were moved to AIG's Asset Management Group. According, the results related to these assets and liabilities are reported in AIG's Other operations category as part of Asset Management — Direct Investment Business. Prior amounts have been have been revised to conform to the current presentation. Refer to Note 6 to the Consolidated Financial Statements for a discussion of AIG's other-than-temporary impairment accounting policy.

42



American International Group, Inc., and Subsidiaries

The following table presents other-than-temporary impairment charges in earnings by segment:

   
(in millions)
  General
Insurance

  Domestic Life
Insurance &
Retirement
Services

  Foreign Life
Insurance &
Retirement
Services

  Other
  Total
 
   

December 31, 2009

                               

Impairment Type:

                               
 

Severity

  $ 118   $ 829   $ 48   $ 515   $ 1,510  
 

Change in intent

    186     656     68     48     958  
 

Foreign currency declines

    9     -     103     -     112  
 

Issuer-specific credit events

    589     2,260     124     1,006     3,979  
 

Adverse projected cash flows on structured securities

    1     76     33     27     137  
   

Total

  $ 903   $ 3,821   $ 376   $ 1,596   $ 6,696  
   

December 31, 2008

                               

Impairment Type:

                               
 

Severity

  $ 2,367   $ 17,799   $ 9   $ 3,038   $ 23,213  
 

Change in intent

    372     9,043     1,258     133     10,806  
 

Foreign currency declines

    -     -     1,356     -     1,356  
 

Issuer-specific credit events

    1,305     2,160     421     988     4,874  
 

Adverse projected cash flows on structured securities

    7     1,462     -     149     1,618  
   

Total

  $ 4,051   $ 30,464   $ 3,044   $ 4,308   $ 41,867  
   

December 31, 2007

                               

Impairment Type:

                               
 

Severity

  $ 69   $ 1,063   $ 29   $ 913   $ 2,074  
 

Change in intent

    83     652     61     29     825  
 

Foreign currency declines

    -     -     399     -     399  
 

Issuer-specific credit events

    229     158     34     50     471  
 

Adverse projected cash flows on structured securities

    1     336     -     106     443  
   

Total

  $ 382   $ 2,209   $ 523   $ 1,098   $ 4,212  
   

43



American International Group, Inc., and Subsidiaries

The following table presents other-than-temporary impairment charges in earnings by type of security and type of impairment:

   
(in millions)
  RMBS
  CDO/ABS
  CMBS
  Other Fixed Income
  Equities/Other Invested Assets*
  Total
 
   

December 31, 2009

                                     

Impairment Type:

                                     
 

Severity

  $ 816   $ 471   $ 21   $ 26   $ 176   $ 1,510  
 

Change in intent

    19     8     44     715     172     958  
 

Foreign currency declines

    -     21     -     91     -     112  
 

Issuer-specific credit events

    1,929     306     451     301     992     3,979  
 

Adverse projected cash flows on structured securities

    102     35     -     -     -     137  
   

Total

  $ 2,866   $ 841   $ 516   $ 1,133   $ 1,340   $ 6,696  
   

December 31, 2008

                                     

Impairment Type:

                                     
 

Severity

  $ 14,125   $ 2,697   $ 3,831   $ 1,767   $ 793   $ 23,213  
 

Change in intent

    5,064     435     441     4,031     835     10,806  
 

Foreign currency declines

    -     64     -     960     332     1,356  
 

Issuer-specific credit events

    1,916     92     238     1,257     1,371     4,874  
 

Adverse projected cash flows on structured securities

    1,595     23     -     -     -     1,618  
   

Total

  $ 22,700   $ 3,311   $ 4,510   $ 8,015   $ 3,331   $ 41,867  
   

December 31, 2007

                                     

Impairment Type:

                                     
 

Severity

  $ 1,110   $ 703   $ 135   $ 23   $ 103   $ 2,074  
 

Change in intent

    120     -     -     653     52     825  
 

Foreign currency declines

    -     19     -     379     1     399  
 

Issuer-specific credit events

    15     1     1     122     332     471  
 

Adverse projected cash flows on structured securities

    298     137     8     -     -     443  
   

Total

  $ 1,543   $ 860   $ 144   $ 1,177   $ 488   $ 4,212  
   
*
Includes other-than-temporary impairment charges on partnership investments and direct private equity investments.

44



American International Group, Inc., and Subsidiaries

The following table presents other-than-temporary impairment charges in earnings by type of security and credit rating:

   
(in millions)
  RMBS
  CDO/ABS
  CMBS
  Other Fixed Income
  Equities/Other Invested Assets*
  Total
 
   

December 31, 2009

                                     

Rating:

                                     
 

AAA

  $ 781   $ 20   $ 43   $ -   $ -   $ 844  
 

AA

    358     16     56     21     -     451  
 

A

    230     338     60     242     -     870  
 

BBB

    258     108     116     254     -     736  
 

Below investment grade

    1,239     328     241     595     -     2,403  
 

Non-rated

    -     31     -     21     -     52  
 

Equities/Other invested assets

    -     -     -     -     1,340     1,340  
   

Total

  $ 2,866   $ 841   $ 516   $ 1,133   $ 1,340   $ 6,696  
   

December 31, 2008

                                     

Rating:

                                     
 

AAA

  $ 13,834   $ 586   $ 2,489   $ 137   $ -   $ 17,046  
 

AA

    4,048     686     633     545     -     5,912  
 

A

    1,789     1,446     1,042     1,907     -     6,184  
 

BBB

    974     415     252     1,398     -     3,039  
 

Below investment grade

    1,995     107     94     3,760     -     5,956  
 

Non-rated

    60     71     -     268     -     399  
 

Equities/Other invested assets

    -     -     -     -     3,331     3,331  
   

Total

  $ 22,700   $ 3,311   $ 4,510   $ 8,015   $ 3,331   $ 41,867  
   

December 31, 2007

                                     

Rating:

                                     
 

AAA

  $ 273   $ 632   $ -   $ 72   $ -   $ 977  
 

AA

    894     87     6     85     -     1,072  
 

A

    270     73     84     236     -     663  
 

BBB

    74     67     41     195     -     377  
 

Below investment grade

    24     -     11     531     -     566  
 

Non-rated

    8     1     2     58     -     69  
 

Equities/Other invested assets

    -     -     -     -     488     488  
   

Total

  $ 1,543   $ 860   $ 144   $ 1,177   $ 488   $ 4,212  
   
*
Includes other-than-temporary impairment charges on partnership investments and direct private equity investments.

    AIG has recognized the other-than-temporary impairment charges (severity losses) shown above in 2009, 2008 and 2007, respectively. With the adoption of the new other-than-temporary impairments accounting standard on April 1, 2009, such severity loss charges subsequent to that date exclusively related to equity securities and other invested assets. In all prior periods, such charges primarily related to mortgage-backed, asset-backed and collateralized securities, corporate debt securities of financial institutions and other equity securities. Notwithstanding AIG's intent and ability to hold such securities until they had recovered their cost or amortized cost basis, and despite structures that indicated, at the time, that a substantial amount of the securities should have continued to perform in accordance with original terms, AIG concluded, at the time, that it could not reasonably assert that the impairment would be temporary.

    Determinations of other-than-temporary impairments are based on fundamental credit analyses of individual securities without regard to rating agency ratings. Based on this analysis, AIG expects to receive cash flows sufficient to cover the amortized cost of all below investment grade securities for which credit losses were not recognized.

    Pricing of CMBS had been adversely affected by concerns that underlying mortgage defaults will increase. As a result, in the first quarter of 2009 prior to adopting the new other-than-temporary impairments accounting standard,

45



American International Group, Inc., and Subsidiaries


AIG recognized $21 million of other-than-temporary impairment severity charges on CMBS valued at a severe discount to cost, despite the absence of any meaningful deterioration in performance of the underlying credits, because AIG concluded that it could not reasonably assert that the impairment period was temporary.

    In addition to the above severity losses, AIG recorded other-than-temporary impairment charges in 2009 and 2008 related to:

    AIG recognized $958 million, $10.8 billion and $825 million in other-than-temporary impairment charges in 2009, 2008, and 2007, respectively, due to changes in intent.

    With respect to the issuer-specific credit events shown above, no other-than-temporary impairment charge with respect to any one single credit was significant to AIG's consolidated financial condition or results of operations, and no individual other-than-temporary impairment charge exceeded 0.1 percent, 1.0 percent and 0.2 percent of Total equity in 2009, 2008 and 2007, respectively.

    AIG holds approximately $500 million of affordable housing tax credits as of December 31, 2009, which are carried at fair value. AIG will continue to evaluate its ability to market such credits and their appropriate fair value.

    In periods subsequent to the recognition of an other-than-temporary impairment charge for available for sale fixed maturity securities that is not foreign exchange related, AIG generally prospectively accretes into earnings the difference between the new amortized cost and the expected undiscounted recovery value over the remaining expected holding period of the security. The amounts of accretion recognized in earnings for 2009 and 2008 were $735 million and $634 million, respectively. Prior to 2008 there were no material amounts of accretion recorded. For a discussion of recent accounting standards affecting fair values and other-than-temporary impairments, see Notes 1 and 6 to the Consolidated Financial Statements.

46




QuickLinks



American International Group, Inc., and Subsidiaries


Exhibit 99.3

Item 8.    Financial Statements and Supplementary Data

American International Group, Inc. and Subsidiaries Index to Financial Statements and Schedules

 
 
  Page
 
Report of Independent Registered Public Accounting Firm   2
Consolidated Balance Sheet at December 31, 2009 and 2008   4
Consolidated Statement of Income (Loss) for the years ended December 31, 2009, 2008 and 2007   6
Consolidated Statement of Comprehensive Income (Loss) for the years ended December 31, 2009, 2008 and 2007   7
Consolidated Statement of Shareholders' Equity for the years ended December 31, 2009, 2008 and 2007   8
Consolidated Statement of Cash Flows for the years ended December 31, 2009, 2008 and 2007   10
Notes to Consolidated Financial Statements   13
Schedules:    
I – Summary of Investments — Other Than Investments in Related Parties at December 31, 2009   160
II – Condensed Financial Information of Registrant at December 31, 2009 and 2008 and for the years ended
        December 31, 2009, 2008 and 2007
  161
III – Supplementary Insurance Information at December 31, 2009, 2008 and 2007 and for the years then ended   166
IV – Reinsurance at December 31, 2009, 2008 and 2007 and for the years then ended   167
V – Valuation and Qualifying Accounts at December 31, 2009, 2008 and 2007 and for the years then ended   168
 

Table of Contents


American International Group, Inc., and Subsidiaries

Report of Independent Registered Public Accounting Firm

To the Board of Directors and Shareholders of American International Group, Inc.:

    In our opinion, the consolidated financial statements listed in the accompanying index present fairly, in all material respects, the financial position of American International Group, Inc. and its subsidiaries (AIG) at December 31, 2009 and 2008, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2009 in conformity with accounting principles generally accepted in the United States of America. In addition, in our opinion, the financial statement schedules listed in the accompanying index present fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated financial statements. Also in our opinion, AIG maintained, in all material respects, effective internal control over financial reporting as of December 31, 2009, based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). AIG's management is responsible for these financial statements and financial statement schedules, for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in Management's Report on Internal Control Over Financial Reporting appearing under Item 9A in the 2009 Form 10-K. Our responsibility is to express opinions on these financial statements, on the financial statement schedules, and on AIG's internal control over financial reporting based on our integrated audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement and whether effective internal control over financial reporting was maintained in all material respects. Our audits of the financial statements included examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.

    As described in Note 1 to the consolidated financial statements, AIG changed the manner in which it accounts for other-than-temporary impairments of fixed maturity securities as of April 1, 2009, as well as the classification of non-controlling interests in partially owned consolidated subsidiaries as of January 1, 2009. Also, as of January 1, 2008, AIG adopted a new framework for measuring fair value and elected an option to report selected financial assets and liabilities at fair value. Also, on January 1, 2007 AIG changed the manner in which it accounts for internal replacements of certain insurance and investment contracts, uncertainty in income taxes, and changes or projected changes in the timing of cash flows relating to income taxes generated by leveraged lease transactions.

    As discussed in Note 1 to the consolidated financial statements, AIG has received substantial financial support from the Federal Reserve Bank of New York and the United States Department of the Treasury. AIG is dependent upon the continued financial support of the U.S. government.

    A company's internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company's internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company's assets that could have a material effect on the financial statements.

2


Table of Contents


American International Group, Inc., and Subsidiaries

    Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/ PricewaterhouseCoopers LLP
New York, New York
February 26, 2010, except with respect to our opinion on the consolidated financial statements insofar as it relates to the change in presentation of discontinued operations and segments discussed in Note 1, as to which the date is November 5, 2010.

3


Table of Contents


American International Group, Inc., and Subsidiaries

Consolidated Balance Sheet

   
(in millions)
  December 31,
2009

  December 31,
2008

 
   

Assets:

             
 

Investments:

             
   

Fixed maturity securities:

             
     

Bonds available for sale, at fair value (amortized cost: 2009 – $364,358;
2008 – $373,600)

  $ 365,462   $ 363,042  
     

Bond trading securities, at fair value

    31,243     37,248  
     

Securities lending invested collateral, at fair value (cost: 2009 – $320; 2008 – $3,905)

    277     3,844  
   

Equity securities:

             
     

Common and preferred stock available for sale, at fair value (cost: 2009 – $6,464; 2008 – $8,381)

    9,522     8,808  
     

Common and preferred stock trading, at fair value

    8,318     6,674  
   

Mortgage and other loans receivable, net of allowance (portion measured at fair value: 2009 – $119; 2008 – $131)

    27,461     34,687