Edgar Filing: AMERICAN INTERNATIONAL GROUP INC

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Table of Contents
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

Table of Contents

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

Form 10-Q


(Mark One)
þ		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
		For the quarterly period ended June 30, 2010
or
o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
		For the transition period from to

Commission File Number 1-8787

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.)
70 Pine Street, New York, New York (Address of principal executive offices)		10270 (Zip Code)

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

Former name, former address and former fiscal year, if changed since last report: Not applicable

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

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes þ No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act.


Large accelerated filer þ		Accelerated filer o		Non-accelerated filer o (Do not check if a smaller reporting company)		Smaller reporting company o

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

As of July 30, 2010, there were 135,126,343 shares outstanding of the registrant's common stock.

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American International Group, Inc., and Subsidiaries

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Description			Page Number



PART I – FINANCIAL INFORMATION
	Item 1.	Financial Statements (unaudited)	4
	Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	98
	Item 3.	Quantitative and Qualitative Disclosures About Market Risk	205
	Item 4.	Controls and Procedures	205
PART II – OTHER INFORMATION
	Item 1.	Legal Proceedings	206
	Item 1A.	Risk Factors	206
	Item 6.	Exhibits	207
Signatures			208

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American International Group, Inc. and Subsidiaries

Part I – FINANCIAL INFORMATION

ITEM 1. Financial Statements (unaudited)

Consolidated Balance Sheet

(in millions)				June 30, 2010		December 31, 2009



Assets:
	Investments:
		Fixed maturity securities:
			Bonds available for sale, at fair value (amortized cost: 2010 – $305,236; 2009 – $364,491)	$	315,489	$	365,551
			Bond trading securities, at fair value		27,486		31,243
		Equity securities:
			Common and preferred stock available for sale, at fair value (cost: 2010 – $8,179; 2009 – $6,464)		11,016		9,522
			Common and preferred stock trading, at fair value		5,276		8,318
		Mortgage and other loans receivable, net of allowance (portion measured at fair value: 2010 – $153; 2009 – $119)			24,817		27,461
		Finance receivables, net of allowance			17,862		20,327
		Flight equipment primarily under operating leases, net of accumulated depreciation			40,973		44,091
		Other invested assets (portion measured at fair value: 2010 – $12,093; 2009 – $18,888)			37,009		45,235
		Securities purchased under agreements to resell, at fair value			965		2,154
		Short-term investments (portion measured at fair value: 2010 – $24,095; 2009 – $23,975)			39,109		47,263

			Total investments		520,002		601,165
	Cash				2,840		4,400
	Accrued investment income				4,223		5,152
	Premiums and other receivables, net of allowance				18,329		16,549
	Reinsurance assets, net of allowance				24,414		22,425
	Current and deferred income taxes				3,999		4,108
	Deferred policy acquisition costs				28,970		40,814
	Real estate and other fixed assets, net of accumulated depreciation				3,608		4,142
	Unrealized gain on swaps, options and forward transactions, at fair value				7,338		9,130
	Goodwill				2,640		6,195
	Other assets, including prepaid commitment asset of $5,916 in 2010 and $7,099 in 2009 (portion measured at fair value: 2010 – $14; 2009 – $288)				18,309		18,976
	Separate account assets, at fair value				53,803		58,150
	Assets held for sale				162,056		56,379

Total assets				$	850,531	$	847,585

See Accompanying Notes to Consolidated Financial Statements.

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American International Group, Inc. and Subsidiaries

Consolidated Balance Sheet (Continued)

(in millions, except share data)			June 30, 2010			December 31, 2009



Liabilities:
	Liability for unpaid claims and claims adjustment expense		$	85,604		$	85,386
	Unearned premiums			24,831			21,363
	Future policy benefits for life and accident and health insurance contracts			92,949			116,001
	Policyholder contract deposits (portion measured at fair value: 2010 – $4,510; 2009 – $5,214)			156,758			220,128
	Other policyholder funds			13,975			13,252
	Commissions, expenses and taxes payable			3,704			4,950
	Insurance balances payable			4,015			4,393
	Funds held by companies under reinsurance treaties			705			774
	Securities sold under agreements to repurchase (portion measured at fair value: 2010 – $3,385; 2009 – $3,221)			4,056			3,505
	Securities and spot commodities sold but not yet purchased, at fair value			226			1,030
	Unrealized loss on swaps, options and forward transactions, at fair value			5,716			5,403
	Trust deposits and deposits due to banks and other depositors (portion measured at fair value: 2010 – $14; 2009 – $15)			950			1,641
	Other liabilities			21,745			22,503
	Federal Reserve Bank of New York Commercial Paper Funding Facility (portion measured at fair value: 2009 – $2,742)			-			4,739
	Federal Reserve Bank of New York credit facility			26,457			23,435
	Other long-term debt (portion measured at fair value: 2010 – $12,638; 2009 – $13,195)			108,286			113,298
	Separate account liabilities			53,803			58,150
	Liabilities held for sale			142,104			48,599

Total liabilities				745,884			748,550

	Commitments, contingencies and guarantees (see Note 9)
	Redeemable noncontrolling interests in partially owned consolidated subsidiaries (including $129 and $211 associated with businesses held for sale in 2010 and 2009, respectively)			1,923			959
AIG shareholders' equity:
	Preferred stock
		Series E; $5.00 par value; shares issued: 2010 and 2009 – 400,000, at aggregate liquidation value		41,605			41,605
		Series F; $5.00 par value; shares issued: 2010 and 2009 – 300,000, aggregate liquidation value: 2010 – 7,543; 2009 – 5,344		7,378			5,179
		Series C; $5.00 par value; shares issued: 2010 and 2009 – 100,000, aggregate liquidation value: 2010 and 2009 – $0.5		23,000			23,000
	Common stock, $2.50 par value; 5,000,000,000 shares authorized; shares issued:
		2010 – 141,777,208; 2009 – 141,732,263		354			354
	Treasury stock, at cost; 2010 – 6,660,908; 2009 – 6,661,356 shares of common stock			(873	)		(874	)
	Additional paid-in capital			6,297			6,358
	Accumulated deficit			(12,120	)		(11,491	)
	Accumulated other comprehensive income			9,829			5,693

Total AIG shareholders' equity				75,470			69,824

Noncontrolling interests:
	Noncontrolling nonvoting, callable, junior and senior preferred interests held by Federal Reserve Bank of New York			25,567			24,540
	Other (including $320 and $2,234 associated with businesses held for sale in 2010 and 2009, respectively)			1,687			3,712

Total noncontrolling interests				27,254			28,252

Total equity				102,724			98,076

Total liabilities and equity			$	850,531		$	847,585

See Accompanying Notes to Consolidated Financial Statements.

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American International Group, Inc. and Subsidiaries

Consolidated Statement of Income (Loss)

				Three Months Ended June 30,						Six Months Ended June 30,


(dollars in millions, except per share data)				2010			2009			2010			2009

Revenues:
	Premiums and other considerations			$	12,649		$	14,074		$	25,075		$	29,118
	Net investment income				5,386			6,858			10,931			8,332
	Net realized capital losses:
		Total other-than-temporary impairments on available for sale securities			(847	)		(1,084	)		(1,164	)		(4,702	)
		Portion of other-than-temporary impairments on available for sale fixed maturity securities recognized in Accumulated other comprehensive loss			251			369			(270	)		369

		Net other-than-temporary impairments on available for sale securities recognized in net income (loss)			(596	)		(715	)		(1,434	)		(4,333	)
		Other realized capital gains (losses)			(22	)		(416	)		375			453

			Total net realized capital losses		(618	)		(1,131	)		(1,059	)		(3,880	)
	Unrealized market valuation gains (losses) on AIGFP super senior credit default swap portfolio				161			636			280			184
	Other income				2,404			3,485			4,666			6,269

Total revenues					19,982			23,922			39,893			40,023

Benefits, claims and expenses:
	Policyholder benefits and claims incurred				10,607			13,570			21,035			26,713
	Policy acquisition and other insurance expenses				3,968			4,484			7,829			8,646
	Interest expense				2,009			2,553			3,885			5,343
	Restructuring expenses and related asset impairment and other expenses				70			326			190			678
	Net loss (gain) on sale of divested businesses				(198	)		566			(122	)		307
	Other expenses				1,923			2,252			3,716			4,495

Total benefits, claims and expenses					18,379			23,751			36,533			46,182

Income (loss) from continuing operations before income tax expense (benefit)					1,603			171			3,360			(6,159	)
Income tax expense (benefit)					311			(415	)		(112	)		(1,284	)

Income (loss) from continuing operations					1,292			586			3,472			(4,875	)
Income (loss) from discontinued operations, net of income tax expense (benefit) (See Note 3)					(3,407	)		1,259			(3,082	)		1,587

Net income (loss)					(2,115	)		1,845			390			(3,288	)

Less:
Net income (loss) from continuing operations attributable to noncontrolling interests:
		Noncontrolling nonvoting, callable, junior and senior preferred interests held by Federal Reserve Bank of New York			508			-			1,027			-
		Other			20			(7	)		139			(775	)

Total net income (loss) from continuing operations attributable to noncontrolling interests					528			(7	)		1,166			(775	)
Net income from discontinued operations attributable to noncontrolling interests					13			30			23			18

Total net income (loss) attributable to noncontrolling interests					541			23			1,189			(757	)

Net income (loss) attributable to AIG				$	(2,656	)	$	1,822		$	(799	)	$	(2,531	)

Net income (loss) attributable to AIG common shareholders				$	(538	)	$	311		$	(161	)	$	(3,826	)

Income (loss) per common share attributable to AIG:
	Basic:
		Income (loss) from continuing operations		$	1.14		$	0.47		$	3.44		$	(39.89	)
		Income (loss) from discontinued operations		$	(5.10	)	$	1.83		$	(4.63	)	$	11.60
	Diluted:
		Income (loss) from continuing operations		$	1.14		$	0.47		$	3.44		$	(39.89	)
		Income (loss) from discontinued operations		$	(5.10	)	$	1.83		$	(4.63	)	$	11.60

Weighted average shares outstanding:
	Basic				135,813,034			135,281,740			135,745,903			135,267,735
	Diluted				135,869,594			135,336,440			135,807,313			135,267,735

See Accompanying Notes to Consolidated Financial Statements.

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American International Group, Inc. and Subsidiaries

Consolidated Statement of Comprehensive Income (Loss)

			Three Months Ended June 30,						Six Months Ended June 30,


(in millions)			2010			2009			2010			2009

Net income (loss)			$	(2,115	)	$	1,845		$	390		$	(3,288	)

Other comprehensive income (loss):
	Unrealized appreciation (depreciation) of fixed maturity investments on which other-than-temporary credit impairments were taken			237			1,112			1,230			1,112
		Income tax benefit (expense) on above changes		(208	)		(450	)		(428	)		(450	)
	Unrealized appreciation (depreciation) of all other investments – net of reclassification adjustments			4,789			8,957			7,320			5,585
		Income tax benefit (expense) on above changes		(1,621	)		(3,863	)		(2,995	)		(2,471	)
	Foreign currency translation adjustments			(822	)		1,936			(1,780	)		995
		Income tax benefit (expense) on above changes		325			(618	)		754			(409	)
	Net derivative gains (losses) arising from cash flow hedging activities – net of reclassification adjustments			13			45			37			71
		Income tax benefit (expense) on above changes		26			(48	)		24			(21	)
	Change in retirement plan liabilities adjustment			26			33			103			91
		Income tax benefit (expense) on above changes		15			(12	)		(9	)		(30	)

Other comprehensive income (loss)				2,780			7,092			4,256			4,473

Comprehensive income (loss)				665			8,937			4,646			1,185
Comprehensive income (loss) attributable to noncontrolling interests				37			193			6			(674	)
Comprehensive income (loss) attributable to noncontrolling nonvoting, callable, junior and senior preferred interests held by Federal Reserve Bank of New York				508			-			1,027			-

Comprehensive income (loss) attributable to AIG			$	120		$	8,744		$	3,613		$	1,859

See Accompanying Notes to Consolidated Financial Statements.

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American International Group, Inc. and Subsidiaries

Consolidated Statement of Cash Flows

			Six Months Ended June 30,


(in millions)			2010			2009

Summary:
	Net cash provided by (used in) operating activities		$	9,771		$	8,036
	Net cash provided by (used in) investing activities			(6,067	)		7,534
	Net cash provided by (used in) financing activities			(4,527	)		(18,441	)
	Effect of exchange rate changes on cash			(92	)		31

	Change in cash			(915	)		(2,840	)
	Cash at beginning of period			4,400			8,642
	Reclassification of assets held for sale			(645	)		-

	Cash at end of period			2,840			5,802

Cash flows from operating activities:
	Net income (loss)		$	390		$	(3,288	)
	(Income) loss from discontinued operations			3,082			(1,587	)

	Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
	Noncash revenues, expenses, gains and losses included in income (loss):
		Net (gains) losses on sales of securities available for sale and other assets		(901	)		(403	)
		Net (gains) losses on sales of divested businesses		106			307
		Unrealized (gains) losses in earnings – net		255			(2,319	)
		Equity in (income) loss from equity method investments, net of dividends or distributions		(528	)		1,953
		Depreciation and other amortization		5,449			6,772
		Provision for mortgage, other loans and finance receivables		533			1,526
		Impairments of assets		2,769			5,470
		Amortization of costs and accrued interest and fees related to FRBNY Credit Facility		1,545			2,727
	Changes in operating assets and liabilities:
		General and life insurance reserves		2,780			(99	)
		Premiums and other receivables and payables – net		(1,307	)		1,120
		Reinsurance assets and funds held under reinsurance treaties		(1,980	)		1,166
		Capitalization of deferred policy acquisition costs		(4,644	)		(4,958	)
		Other policyholder funds		120			60
		Current and deferred income taxes – net		(1,002	)		(1,240	)
		Trading securities		321			647
		Securities sold under agreements to repurchase, net of securities purchased under agreements to resell		1,312			(2,627	)
		Securities and spot commodities sold but not yet purchased		(804	)		(1,451	)
		Finance receivables and other loans held for sale – originations and purchases		(9	)		(52	)
		Sales of finance receivables and other loans – held for sale		58			47
		Other, net		(1,275	)		2,220

		Total adjustments		2,798			10,866

Net cash provided by (used in) operating activities – continuing operations				6,270			5,991
Net cash provided by (used in) operating activities – discontinued operations				3,501			2,045

Net cash provided by (used in) operating activities			$	9,771		$	8,036

See Accompanying Notes to Consolidated Financial Statements.

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American International Group, Inc. and Subsidiaries

Consolidated Statement of Cash Flows (Continued)

		Six Months Ended June 30,


(in millions)		2010			2009

Cash flows from investing activities:
Proceeds from (payments for)
	Sales of available for sale investments	$	19,131		$	26,855
	Maturities of fixed maturity securities available for sale and hybrid investments		7,183			9,437
	Sales of trading securities		4,303			8,004
	Sales or distributions of other invested assets (including flight equipment)		4,356			4,993
	Sales of divested businesses, net		1,673			2,855
	Principal payments received on mortgage and other loans receivable		2,145			2,297
	Principal payments received on and sales of finance receivables held for investment		2,725			6,903
	Purchases of available for sale investments		(36,552	)		(24,816	)
	Purchases of trading securities		(1,874	)		(4,231	)
	Purchases of other invested assets (including flight equipment)		(4,261	)		(5,452	)
	Acquisition, net of cash acquired		(139	)		-
	Mortgage and other loans receivable issued		(1,212	)		(1,764	)
	Finance receivables held for investment – originations and purchases		(1,346	)		(3,344	)
	Net additions to real estate, fixed assets, and other assets		(173	)		(215	)
	Net change in short-term investments		1,669			(12,238	)
	Net change in non-AIGFP derivative assets and liabilities		(208	)		46
	Other, net		(126	)		(29	)

Net cash provided by (used in) investing activities – continuing operations			(2,706	)		9,301
Net cash provided by (used in) investing activities – discontinued operations			(3,361	)		(1,767	)

Net cash provided by (used in) investing activities		$	(6,067	)	$	7,534

Cash flows from financing activities:
Proceeds from (payments for)
	Policyholder contract deposits	$	10,806		$	11,210
	Policyholder contract withdrawals		(8,816	)		(17,094	)
	Change in commercial paper and other short-term debt		-			(414	)
	Change in Federal Reserve Bank of New York Commercial Paper Funding Facility borrowings		(5,855	)		(4,118	)
	Federal Reserve Bank of New York credit facility borrowings		12,700			15,700
	Federal Reserve Bank of New York credit facility repayments		(10,123	)		(12,500	)
	Issuance of other long-term debt		8,383			2,558
	Repayments on other long-term debt		(12,753	)		(10,970	)
	Drawdown on the Department of the Treasury Commitment		2,199			1,150
	Other, net		(1,158	)		(274	)

Net cash provided by (used in) financing activities – continuing operations			(4,617	)		(14,752	)
Net cash provided by (used in) financing activities – discontinued operations			90			(3,689	)

Net cash provided by (used in) financing activities		$	(4,527	)	$	(18,441	)

Supplementary disclosure of cash flow information:
Cash (paid) received during the period for:
	Interest	$	(2,735	)	$	(3,265	)
	Taxes	$	(859	)	$	746
Non-cash financing/investing activities:
	Interest credited to policyholder contract deposits included in financing activities	$	4,061		$	7,244
	Long-term debt reduction due to deconsolidations	$	1,092		$	1,102
	Debt assumed on consolidation of variable interest entities	$	2,591		$	-
	Debt assumed on acquisition	$	164		$	-

See Accompanying Notes to Consolidated Financial Statements.

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American International Group, Inc. and Subsidiaries

Consolidated Statement of Equity

Six Months Ended June 30, 2010 (in millions)	Preferred Stock			Common Stock		Treasury Stock			Additional Paid-in Capital			Accumulated Deficit			Accumulated Other Comprehensive Income (Loss)			Total AIG Share- holders' Equity			Non- controlling Interests			Total Equity



Balance, beginning of year	$	69,784		$	354	$	(874	)	$	6,358		$	(11,491	)	$	5,693		$	69,824		$	28,252		$	98,076

Series F drawdowns		2,199			-		-			-			-			-			2,199			-			2,199
Common stock issued under stock plans		-			-		-			(5	)		-			-			(5	)		-			(5	)
Cumulative effect of change in accounting principle, net of tax		-			-		-			-			170			(276	)		(106	)		-			(106	)
Net income (loss) attributable to AIG or Other noncontrolling interests^(a)		-			-		-			-			(799	)		-			(799	)		146			(653	)
Net income (loss) attributable to noncontrolling nonvoting, callable, junior and senior preferred interests held by the Federal Reserve Bank of New York		-			-		-			-			-			-			-			1,027			1,027
Other comprehensive income (loss)^(b)		-			-		-			-			-			4,412			4,412			(157	)		4,255
Net decrease due to deconsolidation		-			-		-			-			-			-			-			(2,148	)		(2,148	)
Contributions from noncontrolling interests		-			-		-			-			-			-			-			114			114
Distributions to noncontrolling interests		-			-		-			-			-			-			-			(94	)		(94	)
Other		-			-		1			(56	)		-			-			(55	)		114			59

Balance, end of period	$	71,983		$	354	$	(873	)	$	6,297		$	(12,120	)	$	9,829		$	75,470		$	27,254		$	102,724

Six Months Ended June 30, 2009

Balance, beginning of year	$	40,000		$	368	$	(8,450	)	$	39,488		$	(12,368	)	$	(6,328	)	$	52,710		$	8,095		$	60,805

Series C issuance		23,000			-		-			(23,000	)		-			-			-			-			-
Series D exchange for Series E		1,605			-		-			(1,605	)		-			-			-			-			-
Series F drawdowns		1,150			-		-			-			-			-			1,150			-			1,150
Series F commitment fee		(165	)		-		-			-			-			-			(165	)		-			(165	)
Common stock issued under stock plans		-			-		136			(136	)		-			-			-			-			-
Cumulative effect of change in accounting principle, net of tax		-			-		-			-			11,826			(9,348	)		2,478			-			2,478
Net loss attributable to AIG or other noncontrolling interests^(a)		-			-		-			-			(2,531	)		-			(2,531	)		(935	)		(3,466	)
Other comprehensive income (loss)		-			-		-			-			-			4,390			4,390			83			4,473
Net decrease due to deconsolidation		-			-		-			-			-			-			-			(3,306	)		(3,306	)
Contributions from noncontrolling interests		-			-		-			-			-			-			-			475			475
Distributions to noncontrolling interests		-			-		-			-			-			-			-			(264	)		(264	)
Other		-			-		-			(74	)		-			-			(74	)		27			(47	)

Balance, end of period	$	65,590		$	368	$	(8,314	)	$	14,673		$	(3,073	)	$	(11,286	)	$	57,958		$	4,175		$	62,133

(a): Excludes $16 million and $178 million for the six-month periods ended June 30, 2010 and 2009, respectively attributable to redeemable noncontrolling interests. For the six months ended June 30, 2010 excludes Net income attributable to noncontrolling nonvoting, callable, junior and senior preferred interests held by the Federal Reserve Bank of New York of $1.0 billion.
(b): Excludes $1 million attributable to redeemable noncontrolling interests.

See Accompanying Notes to Consolidated Financial Statements.

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American International Group, Inc. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

1. Summary of Significant Accounting Policies

Basis of Presentation

These unaudited condensed consolidated financial statements do not include all disclosures required by accounting principles generally accepted in the United States (GAAP) for complete consolidated financial statements and should be read in conjunction with the audited consolidated financial statements and the related notes included in the Annual Report on Form 10-K of American International Group, Inc. (AIG) for the year ended December 31, 2009 (2009 Annual Report on Form 10-K).

In the opinion of management, these consolidated financial statements contain the normal recurring adjustments necessary for a fair statement of the results presented herein. AIG evaluated the need to disclose events that occurred subsequent to the balance sheet date. All material intercompany accounts and transactions have been eliminated.

Use of Estimates

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

•: insurance liabilities, including general insurance unpaid claims and claims adjustment expenses and future policy benefits for life and accident and health contracts;
•: recoverability of assets, including deferred policy acquisition costs (DAC) and flight equipment;
•: estimated gross profits for investment-oriented products;
•: the allowance for finance receivable losses;
•: impairment charges, including other-than-temporary impairments and goodwill impairment;
•: liabilities for legal contingencies;
•: estimates with respect to income taxes, including recoverability of deferred tax assets;
•: fair value measurements of certain financial assets and liabilities, including credit default swaps (CDS) and AIG's economic interest in Maiden Lane II LLC (ML II) and equity interest in Maiden Lane III LLC (ML III) (together, the Maiden Lane Interests);
•: classification of entities as held for sale or as discontinued operations;
•: fair value of the assets and liabilities, including non-controlling interests, related to acquisitions; and
•: AIG's ability to continue as a going concern.

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

Out of Period Adjustments

For the three- and six-month periods ended June 30, 2010, AIG recorded out of period adjustments relating to prior periods that increased Net loss attributable to AIG by $151 million and $279 million, respectively, primarily related to the effect of recording impairments on certain consolidated investments held in the Institutional Asset Management operations, which affected the calculation of income taxes, and a foreign currency adjustment. While these adjustments were noteworthy for the periods, after evaluating the quantitative and qualitative aspects of

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American International Group, Inc. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

these corrections, AIG concluded that its prior period financial statements were not materially misstated and, therefore, no restatement was required.

Had these and all previously reported out of period adjustments been recorded in their appropriate periods, Net loss attributable to AIG for the year ended December 31, 2009 would have increased by $644 million, from $10.9 billion to $11.6 billion.

Going Concern Considerations

In the audited financial statements included in the 2009 Annual Report on Form 10-K, management disclosed the conditions and events that led management to conclude that AIG would have adequate liquidity to finance and operate AIG's businesses, execute its asset disposition plan and repay its obligations for at least the next twelve months.

Liquidity of Parent and Subsidiaries

AIG manages liquidity at both the parent and subsidiary levels. AIG Parent has not had access to its traditional sources of financing through the public debt markets since September 2008. AIG is currently evaluating its ability to re-access the capital markets.

Historically, AIG depended on dividends, distributions, and other payments from subsidiaries to fund payments on its obligations. In light of AIG's current financial situation, certain of its regulated subsidiaries are restricted from making dividend payments, or advancing funds, to AIG. As a result, AIG has also been dependent on the Federal Reserve Bank of New York (FRBNY) Credit Facility (the FRBNY Credit Facility) provided by the FRBNY under the Credit Agreement, dated as of September 22, 2008 (as amended, the FRBNY Credit Agreement), between AIG and the FRBNY, and the FRBNY's Commercial Paper Funding Facility (CPFF), through April 26, 2010, as its primary sources of liquidity; and on the agreement by the United States Department of the Treasury (the Department of the Treasury) to provide up to $29.835 billion (Department of Treasury Commitment) in exchange for increases in the liquidation preference of the AIG Series F Fixed Rate Non-Cumulative Perpetual Preferred Stock, par value $5.00 per share (AIG Series F Preferred Stock), to support the capital needs of its insurance company subsidiaries. Primary uses of cash flow are debt service and subsidiary funding.

During the first six months of 2010, International Lease Finance Corporation (ILFC) and American General Finance, Inc. (AGF) made substantial progress in addressing their liquidity needs.

During the first six months of 2010, ILFC significantly increased its liquidity position through a combination of new secured and unsecured debt issuances of approximately $4.0 billion and an extension of the maturity date of $2.16 billion of its $2.5 billion revolving credit facility from October 2011 to October 2012. Availability of $501 million of the approximately $4.0 billion of debt issuances and the extension of $2.16 billion of the revolving credit facility are subject to the satisfaction of certain collateralization milestones. In addition, during the six-month period ended June 30, 2010, ILFC agreed to sell 61 aircraft to third parties, of which 56 aircraft, with an aggregate book value of approximately $2.6 billion, met the criteria to be classified as held for sale. The aircraft classified as held for sale are expected to generate approximately $2.2 billion in gross proceeds during 2010. During the second quarter of 2010, three of the 61 aircraft were sold, of which one had been classified as held for sale. At June 30, 2010, 55 aircraft were recorded in Assets held for sale on the Consolidated Balance Sheet.

During the first six months of 2010, AGF significantly enhanced its liquidity position through the following actions: AGF received cash proceeds of more than $500 million from a $1.0 billion asset securitization and executed and drew down fully a $3.0 billion five-year secured term loan. AGF used a portion of the proceeds from these transactions, cash on hand and proceeds from AIG's repayment of two demand promissory notes to repay all of its outstanding obligations under its $2.45 billion one-year term loans and its $2.125 billion five-year revolving credit facility (both of which were due in July 2010).

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

Certain subsidiaries also have been dependent on the FRBNY and the Department of the Treasury to meet collateral posting requirements, to make debt repayments as amounts come due, and to meet capital or liquidity requirements. AIG expects that collateral posting requirements for AIGFP will continue to be reduced through the wind-down period.

Progress on Management's Plans for Stabilization of AIG and Repayment of AIG's Obligations as They Come Due

Since September 2008, AIG has been working to protect and enhance the value of its key businesses, execute an orderly asset disposition plan, and position itself for the future. AIG continually reassesses this plan to maximize value while maintaining flexibility in managing its liquidity and capital. In accordance with its longstanding commitment to repay its obligations to the U.S. Government, AIG has commenced discussions with the FRBNY, the Department of the Treasury and the trustees of the AIG Credit Facility Trust, a trust established for the sole benefit of the United States Treasury (together with its trustees, the Trust), with respect to a proposed strategy to repay the FRBNY Credit Facility and allow the government to exit its ownership relationship with AIG.

Sales of Businesses and Specific Asset Dispositions

ALICO Sale

On March 7, 2010, AIG and ALICO Holdings LLC, a special purpose vehicle formed by AIG (ALICO Holdings), entered into a definitive agreement (the ALICO Stock Purchase Agreement) with MetLife, Inc. (MetLife) for the sale of American Life Insurance Company (ALICO) by ALICO Holdings to MetLife, and the sale of Delaware American Life Insurance Company by AIG to MetLife, for approximately $15.5 billion, consisting of $6.8 billion in cash and the remainder in equity securities of MetLife, subject to closing adjustments.

The cash portion of the proceeds from this sale will be paid to the FRBNY to reduce the liquidation preference of a portion of the preferred interests owned by the FRBNY in ALICO Holdings (together with the preferred interests owned by the FRBNY in AIA Holdings, the Preferred Interests). Upon the closing of this sale to MetLife, ALICO Holdings will receive and pay to the FRBNY the cash consideration and will hold the remainder of the transaction consideration, consisting of 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 common stock upon the approval of MetLife shareholders, and 40,000,000 equity units of MetLife with an aggregate stated value of $3 billion. AIG intends to monetize these MetLife securities over time, subject to market conditions, following the lapse of agreed-upon minimum holding periods. Approximately $3 billion in MetLife securities will be held in escrow to support indemnity claims, if any, which will wind down over a 30-month period. Unless otherwise agreed with the FRBNY, net cash proceeds from the monetization of these securities will be used to reduce the liquidation preference of the preferred interests owned by the FRBNY in ALICO Holdings and thereafter to repay any outstanding debt under the FRBNY Credit Facility.

Other Sales

In the fourth quarter of 2009, AIG entered into an agreement to sell its 97.57 percent share of Nan Shan Life Insurance Company, Ltd. (Nan Shan) for approximately $2.15 billion. In the second quarter of 2010, AIG entered into an agreement with the Nan Shan purchasers, whereby on the closing of the sale of Nan Shan, the purchasers will deposit $325 million of the $2.15 billion purchase price into an escrow account for possible use by Nan Shan if its risk-based capital ratio falls below 200 percent during the four-year period after the closing of the sale. Any amount left in escrow at the end of the four-year period will be released to AIG.

Dispositions of certain businesses will be subject to regulatory approval. Unless a waiver is obtained from the FRBNY, net proceeds from these 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 or are not to be utilized to redeem the Preferred Interests, are contractually required to be applied toward the repayment of the FRBNY Credit Facility as mandatory prepayments.

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American International Group, Inc. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

From September 2008 through July 28, 2010, AIG entered into agreements to sell or completed the sale of operations and assets that generated or are expected to generate approximately $23.1 billion in aggregate net proceeds, including the MetLife securities discussed above. Of this amount, $17.3 billion in aggregate net proceeds represents amounts not yet collected on various transactions, the largest of which are the ALICO and Nan Shan transactions referred to above. Unless a waiver is obtained from the FRBNY, net proceeds collected (or monetized, in the case of the MetLife securities) by AIG are generally required to be applied toward the repayment of the FRBNY Credit Facility as mandatory prepayments, except for net cash proceeds on the ALICO sale which would first be used to reduce the liquidation preference of the preferred interests owned by the FRBNY in ALICO holdings, which was approximately $9.2 billion, including accrued return, as of June 30, 2010, and thereafter to repay any outstanding debt under the FRBNY Credit Facility. Through July 28, 2010, $1.4 billion has been paid to the FRBNY under the FRBNY Credit Facility as mandatory prepayments. AIG has also made payments of approximately $3.6 billion to the FRBNY that could be determined to be mandatory prepayments in the future. Proceeds from sales of assets of AIG Financial Products Corp. and AIG Trading Group, Inc. (collectively, AIGFP) are excluded from these amounts because the FRBNY waived the requirement that the proceeds from these specific sales be applied as mandatory prepayments. Gains and losses recorded in connection with the dispositions of businesses include estimates that are subject to subsequent adjustment. Based on the transactions closed to date, AIG does not believe that such adjustments will be material to future consolidated results of operations or cash flows.

AIA Transaction

As of March 1, 2010, AIG and AIA Aurora LLC, a special purpose vehicle formed by AIG (AIA Holdings), entered into a definitive agreement (the AIA Share Purchase Agreement) with Prudential plc (Prudential) and Prudential Group Limited (formerly known as Petrohue (UK) Investments Limited), for the sale of AIA Group Limited (AIA) to Prudential Group Limited for approximately $35.5 billion.

On June 1, 2010, Prudential proposed revised terms to acquire AIA. AIG's Board of Directors declined the proposal. On June 2, 2010, AIG and Prudential terminated the transaction. As a result, AIG concluded that it is no longer probable that it will close a sale of AIA within twelve months. Accordingly, AIA is no longer being presented as held for sale or as a discontinued operation in the Consolidated Financial Statements. See Note 2 herein for discussion of segment reporting presentation.

In accordance with the terms of the purchase agreement, Prudential paid AIG a termination fee of $228 million, which was included in Net loss (gain) on sale of divested businesses in the Consolidated Statement of Income (Loss).

In July 2010, AIG announced plans to conduct an initial public offering of AIA by seeking a listing of AIA on the Hong Kong Stock Exchange, subject to regulatory approvals and market conditions.

Management's Assessment and Conclusion

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

•: the commitment of the FRBNY and the Department of the Treasury to the orderly restructuring of AIG and their commitment to continuing to work with AIG to maintain its ability to meet its obligations as they come due;
•: the potential adverse effects on AIG's businesses that could result if there are further downgrades by rating agencies, including in particular, the uncertainty of estimates relating to the derivative transactions of AIGFP, such as estimates of both the number of counterparties who may elect to terminate under

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

contractual termination provisions and the amount that would be required to be paid in the event of a downgrade;

•: the potential for declines in bond and equity markets;
•: pending sales of significant subsidiaries or the potential for delays in asset dispositions and reduction in the anticipated proceeds therefrom;
•: the potential effect on AIG if the capital levels of its regulated and unregulated subsidiaries prove inadequate to support current business plans;
•: the effect on AIG's businesses of continued compliance with the covenants of the FRBNY Credit Agreement and other agreements with the FRBNY and the Department of the Treasury;
•: AIG's highly leveraged capital structure;
•: the effect of the provisions of the Troubled Asset Relief Program (TARP) Standards for Compensation and Corporate Governance and the Determination Memoranda issued by the Office of the Special Master for TARP Executive Compensation with respect to AIG's compensation practices and structures on AIG's ability to retain and motivate key employees or hire new employees;
•: the potential that loss of key personnel could reduce the value of AIG's business and impair its ability to stabilize businesses and effect a successful asset disposition plan; and
•: the potential for regulatory actions in one or more countries, including possible actions resulting from the execution of management's plans for stabilization of AIG and repayment of AIG's obligations as they come due.

Based on the U.S. government's continuing commitment, the already completed transactions with the FRBNY, management's plans and progress made to stabilize AIG's businesses and dispose of certain assets, and after consideration of the risks and uncertainties of such plans, management believes that it will have adequate liquidity to finance and operate AIG's businesses, execute its asset disposition plan and repay its obligations for at least the next twelve months.

It is possible that the actual outcome of one or more of management's plans could be materially different, or that one or more of management's significant judgments or estimates about the potential effects of these risks and uncertainties could prove to be materially incorrect or that the transactions with the FRBNY discussed above fail to achieve the desired objectives. If one or more of these possible outcomes is realized and third party financing is not available, AIG may need additional U.S. government support to meet its obligations as they come due. Under these adverse assumptions, without additional support from the U.S. government in the future there could exist substantial doubt about AIG's ability to continue as a going concern.

In connection with making the going concern assessment and conclusion, management and the Board of Directors of AIG confirmed in connection with the filing in February 2010 of the 2009 Annual Report on Form 10-K that "As first stated by the U.S. Treasury and the Federal Reserve in connection with the announcement of the AIG Restructuring Plan on March 2, 2009, the U.S. Government remains committed to continuing to work with AIG to maintain its ability to meet its obligations as they come due."

AIG's consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. These consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded assets or relating to the amounts and classification of liabilities that may be necessary should AIG be unable to continue as a going concern.

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American International Group, Inc. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

Accounting Policies

Transfers of Financial Assets

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

When AIG does not obtain cash collateral sufficient to fund substantially all of the cost of purchasing identical replacement securities during the term of the contract (generally less than 90 percent of the security value), AIG accounts for the transaction as a sale of the security and reports the obligation to repurchase the security as a derivative contract. Where securities are carried in the available for sale category, AIG records a gain or loss in income. Where changes in fair value of securities are recognized through income, no additional gain or loss is recognized. The fair value of securities transferred under repurchase agreements accounted for as sales was $2.6 billion and $2.3 billion at June 30, 2010 and December 31, 2009, respectively, and the related cash collateral obtained was $1.9 billion and $1.5 billion at June 30, 2010 and December 31, 2009, respectively.

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

Securities lending invested collateral, at fair value and Securities lending payable: In 2008, AIG exited the domestic securities lending program, and during the first quarter of 2010, AIG exited its foreign securities lending activities.

Recent Accounting Standards

Accounting Changes

AIG adopted the following accounting standards during the first six months of 2010:

Accounting for Transfers of Financial Assets

In June 2009, the Financial Accounting Standards Board (FASB) issued an accounting standard addressing transfers of financial assets that removes the concept of a qualifying special-purpose entity (QSPE) from the FASB Accounting Standards Codification and removes the exception that exempted transferors from applying the consolidation rules to QSPEs.

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

Consolidation of Variable Interest Entities

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

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

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

		Transition Methods


(in millions)		Fair Value Option		Carrying Value		Total

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

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

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

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

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

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

(in billions)



Assets		$	8.2

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

Total liabilities and equity		$	8.2

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American International Group, Inc. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

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

Future Application of Accounting Standards

Accounting for Embedded Credit Derivatives

In March 2010, the FASB issued an accounting standard that amends the accounting for embedded credit derivative features in structured securities that redistribute credit risk in the form of subordination of one financial instrument to another. The new standard clarifies how to determine whether embedded credit derivative features, including those in collateralized debt obligations (CDOs), credit-linked notes (CLNs), synthetic CDOs and CLNs and other synthetic securities (e.g., commercial and residential mortgage-backed securities issued by securitization entities that wrote credit derivatives), are considered to be embedded derivatives that require bifurcation and separate accounting. The new standard is effective for interim and annual periods beginning on July 1, 2010 for AIG. Upon adoption, AIG will account for its investments in synthetic securities otherwise requiring bifurcation at fair value, with changes in fair value recognized in earnings. AIG expects that adoption of this standard will result in a reclassification of $306 million of synthetic securities from Bonds available for sale to Bond trading securities and will also result in a reclassification of $64 million from Accumulated other comprehensive income to Accumulated deficit as of July 1, 2010. AIG does not expect the adoption of this new standard to be material to its consolidated financial condition, results of operations or cash flows.

Consolidation of Investments in Separate Accounts

In April 2010, the FASB issued an accounting standard that clarifies that an insurance company should not combine any investments held in separate account interests with its interest in the same investment held in its general account when assessing the investment for consolidation. Separate accounts represent funds for which investment income and investment gains and losses accrue directly to the policyholders who bear the investment risk. The standard also provides guidance on how an insurer should consolidate an investment fund in situations in which the insurer concludes that consolidation of an investment is required and the insurer's interest is through its general account in addition to any separate accounts. The new standard is effective for interim and annual periods beginning on January 1, 2011 for AIG. Earlier application is permitted. AIG does not expect the adoption of this new standard to be material to its consolidated financial condition, results of operations or cash flows.

2. Segment Information

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 this provides more meaningful information on how its operations are performing.

AIA is no longer being presented as held for sale or as a discontinued operation in the Consolidated Financial Statements. AIA was presented as a discontinued operation in AIG's Form 10-Q for the quarter ended March 31, 2010. Accordingly, AIA's results of operations are included in the Asia operating segment within the Foreign Life Insurance & Retirement Services reportable segment and comprise the majority of that operating segment. See Note 1 herein for further discussion of the AIA transaction.

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American International Group, Inc. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

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

		Three Months Ended June 30,						Six Months Ended June 30,


(in millions)		2010			2009			2010			2009

Total revenues:
	General Insurance	$	8,904		$	8,849		$	18,159		$	16,954
	Domestic Life Insurance & Retirement Services		2,977			3,498			6,203			5,201
	Foreign Life Insurance & Retirement Services		4,636			5,198			8,876			8,736
	Financial Services		1,885			2,368			3,393			3,633
	Other		1,656			4,303			3,734			6,482
	Consolidation and eliminations		(76	)		(294	)		(472	)		(983	)

Total revenues			19,982			23,922			39,893			40,023

Income (loss) from continuing operations before income tax benefit:
	General Insurance		1,013			977			2,435			1,081
	Domestic Life Insurance & Retirement Services		88			200			415			(1,627	)
	Foreign Life Insurance & Retirement Services		840			223			1,561			483
	Financial Services		31			124			(408	)		(1,006	)
	Other		(525	)		(1,500	)		(789	)		(4,950	)
	Consolidation and eliminations		156			147			146			(140	)

Total income (loss) from continuing operations before income tax benefit		$	1,603		$	171		$	3,360		$	(6,159	)

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American International Group, Inc. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

As discussed in Note 1 herein, during the first quarter of 2010, AIG entered into an agreement to sell ALICO for approximately $15.5 billion. Also, 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. In the second quarter of 2010, AIG entered into a $325 million escrow agreement with the Nan Shan purchasers, whereby on the closing of the sale of Nan Shan, the purchasers will deposit $325 million of the $2.15 billion purchase price into an escrow account for possible use by Nan Shan if its risk-based capital ratio falls below 200 percent during the four-year period after the closing of the sale. Any amount left in escrow at the end of the four-year period will be released to AIG. Accordingly, AIG is accounting for the escrow agreement as contingent sales consideration, which will be recorded in income upon the release of such amount to AIG, if any. This agreement contributed to an additional loss accrual related to the sale of Nan Shan of $294 million in the second quarter of 2010, which is reflected in Loss on Sale in the table below. On June 21, 2010, AIG and the buyers agreed to extend the agreement to sell deadline to purchase Nan Shan to October 12, 2010 to allow more time for regulatory approval.

AIG expects the ALICO and Nan Shan sales to close during the fourth quarter of 2010 and, accordingly, the results of operations for these companies are presented as discontinued operations in AIG's Consolidated Statement of Income (Loss) for all periods presented and the aggregated assets and liabilities are presented separately as single line items in the asset and liability sections of the Consolidated Balance Sheet at June 30, 2010 for ALICO and Nan Shan and at June 30, 2010 and December 31, 2009 for Nan Shan. Each of these companies previously had been a component of the Foreign Life Insurance & Retirement Services reportable segment.

In the first quarter of 2010, AIG entered into an agreement to sell AIA and, at March 31, 2010 and for the three months then ended, AIG presented AIA as held for sale and as a discontinued operation. As a result of AIG's agreement with the buyer to terminate the agreement, AIG has concluded that it is no longer probable that it will close a sale of AIA within 12 months. Accordingly, AIA is no longer being presented as held for sale or as a discontinued operation in the Consolidated Financial Statements. See Notes 1 and 2 herein for further discussion.

In the 2009 Annual Report on Form 10-K, Nan Shan was presented as a discontinued operation. 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. 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 expected sale of Nan Shan will no longer be required for rating or regulatory purposes with respect to AIG's insurance company subsidiaries. Therefore, it is now anticipated that a mandatory prepayment from net proceeds will be required upon closing. The mandatory prepayment will reduce the amount available to be borrowed under the FRBNY Credit Facility by approximately the same amount as the prepayment. In conjunction with this anticipated prepayment, an allocation to interest expense of $82 million for the six-month period ended June 30, 2010, including periodic amortization of the prepaid commitment fee asset, was included in Income (loss) from discontinued operations. The interest expense allocation to discontinued operations shown in the table below was based on the estimated funds of $1.825 billion committed to repay the FRBNY Credit Facility multiplied by the daily interest rate for each respective period. The periodic amortization of the prepaid commitment fee asset allocated to discontinued operations was determined based on the ratio of funds committed to repay the FRBNY Credit Facility to the total outstanding available amount under the FRBNY Credit Facility.

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

In the third quarter of 2009, AIG entered into an agreement to sell its investment advisory and third party asset management business for a $277 million cash payment at closing plus contingent consideration to be received over time. Prior to the closing of this transaction in the first quarter of 2010, this business was a component of the Noncore Asset Management business included within Other operations. This transaction met the criteria for held-

for-sale accounting, and its assets and liabilities were included as single line items in the asset and liability sections of the Consolidated Balance Sheet at December 31, 2009. As discussed above, this transaction did not meet the criteria for discontinued operations accounting because of a significant continuation of activities between AIG and the business sold.

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

On March 31, 2010, AIG, through a Chartis International subsidiary, purchased additional voting shares in Fuji Fire & Marine Insurance Company Limited (Fuji), a publicly traded Japanese insurance company with property/casualty insurance and some life insurance operations. The acquisition of the additional voting shares for $145 million increased Chartis' total voting ownership interest in Fuji from 41.7 percent to 54.8 percent, which resulted in Chartis International obtaining control of Fuji. This acquisition was made to increase Chartis International's share in the substantial Japanese insurance market, which is undergoing significant consolidation, and to achieve cost savings from synergies.

The purchase was accounted for under the acquisition method. Because the acquisition was completed on March 31, 2010, the initial accounting for the acquisition was incomplete when AIG issued its unaudited

condensed consolidated financial statements as of and for the three months ended March 31, 2010. The initial purchase price allocation was based on financial information that was available at the time to identify and estimate certain of the fair values of assets acquired, liabilities assumed, and noncontrolling interests of Fuji as of the acquisition date. During the quarter ended June 30, 2010, Chartis obtained additional information and revised the purchase price allocation, which included obtaining final appraisals of Fuji's insurance contracts, loans, certain real estate and intangible assets, and retrospectively adjusted the provisional amounts initially recorded.

The following table summarizes the estimated provisional fair values of major classes of identifiable assets acquired and liabilities assumed before revision as of March 31, 2010 and the revised amounts:

Adjustments to the revised purchase price allocation as of March 31, 2010 may occur if new information becomes known about facts and circumstances that existed as of the acquisition date that, if known, would have affected the amounts recognized as of that date.

In accordance with the acquisition method of accounting, Chartis remeasured its equity interest in Fuji held prior to the acquisition of the additional shares to fair value, which resulted in a $25 million loss. The loss was recorded in Other realized capital gains (losses) in the Consolidated Statement of Income (Loss). The fair values of AIG's previously-held equity interest and the noncontrolling interest were based on Fuji's publicly-traded share price on the Tokyo Stock Exchange as of the acquisition date.

An insignificant amount of acquisition-related costs, consisting primarily of legal and transaction fees, was recorded in Other expenses in the Consolidated Statement of Income (Loss).

The acquisition resulted in a bargain purchase gain of approximately $406 million, which is included in Other income in the Consolidated Statement of Income (Loss). AIG will retrospectively revise its results of operations for the three months ended March 31, 2010 when presenting comparative financial information containing that period. Consequently, the bargain purchase gain is included in the Consolidated Statement of Income (Loss) for the six months ended June 30, 2010, but is excluded from the three months ended June 30, 2010.

The bargain purchase gain is primarily attributable to the depressed market value of Fuji's common stock, which AIG believes is the result of macro-economic, capital market and regulatory factors in Japan coupled with Fuji's financial condition and results of operations. AIG anticipates that the bargain purchase gain will not be subject to U.S. or foreign income tax because the gain would only be recognized for tax purposes upon the sale of the Fuji shares.

The following table summarizes selected amounts from the Consolidated Statement of Income (Loss) for the three months ended March 31, 2010 (recast to present AIA as a continuing operation) revised to present the bargain purchase gain in that period:

Fuji's financial information is reported to Chartis on a quarter lag. Because the acquisition occurred on March 31, 2010, no revenue or earnings of Fuji are included in the Consolidated Statement of Income (Loss) for the three months ended June 30, 2010.

The following unaudited summarized pro forma consolidated income statement information assumes that the acquisition of Fuji occurred as of January 1, 2009. The pro forma amounts are for comparative purposes only and may not necessarily reflect the results of operations that would have resulted had the acquisition been completed at the beginning of the applicable period and may not be indicative of the results that will be attained in the future.

AIG measures the following financial instruments at fair value on a recurring basis:

The fair value of a financial instrument is the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between willing, able and knowledgeable market participants at the measurement date.

The degree of judgment used in measuring the fair value of financial instruments generally correlates with the level of pricing observability. Financial instruments with quoted prices in active markets generally have more pricing observability and less judgment is used in measuring fair value. Conversely, financial instruments traded in other-than-active markets or those that do not have quoted prices have less observability and are measured at fair value using valuation models or other pricing techniques that require more judgment. An active market is one in which transactions for the asset or liability being valued occur with sufficient frequency and volume to provide pricing information on an ongoing basis. An other-than-active market is one in which there are few transactions, the prices are not current, price quotations vary substantially either over time or among market makers, or in which little information is released publicly for the asset or liability being valued. Pricing observability is affected by a number of factors, including the type of financial instrument, whether the financial instrument is new to the market and not yet established, the characteristics specific to the transaction and general market conditions.

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

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

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

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

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

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

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

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

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

AIG has processes designed to ensure that the values received or internally estimated are accurately recorded and that the data inputs and the valuation techniques utilized are appropriate, consistently applied, and that the assumptions are reasonable and consistent with the objective of determining fair value. AIG assesses the reasonableness of individual security values received from valuation service providers through various analytical techniques. In addition, AIG may validate the reasonableness of fair values by comparing information obtained

from AIG's valuation service providers to other third-party valuation sources for selected securities. AIG also validates prices for selected securities obtained from brokers through reviews by members of management who have relevant expertise and who are independent of those charged with executing investing transactions.

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

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

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

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

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

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

Adjustments to the fair value of AIG's interest in ML II are recorded on the Consolidated Statement of Income (Loss) in Net investment income for AIG's Domestic Life Insurance companies. Adjustments to the fair value of

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

As of June 30, 2010, AIG expected to receive cash flows (undiscounted) in excess of AIG's initial investment, and any accrued interest, in the Maiden Lane Interests over the remaining life of the investments after repayment of the first priority obligations owed to the FRBNY. AIG's cash flow methodology considers the capital structure of the collateral securities and their expected credit losses from the underlying asset pools. The fair values of the Maiden Lane Interests are most affected by changes in the discount rates and changes in the underlying estimated future collateral cash flow assumptions used in the valuation model.

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

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

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

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

Equity Securities Traded in Active Markets — Trading and Available for Sale

AIG maximizes the use of observable inputs and minimizes the use of unobservable inputs when measuring fair value. Whenever available, AIG obtains quoted prices in active markets for identical assets at the balance sheet date to measure at fair value marketable equity securities in its trading and available for sale portfolios. Market price data is generally obtained from exchange or dealer markets.

AIG initially estimates the fair value of equity instruments not traded in active markets, which includes direct private equity investments, by reference to the transaction price. This valuation is adjusted for changes in inputs and assumptions which are corroborated by evidence such as transactions in similar instruments, completed or pending third-party transactions in the underlying investment or comparable entities, subsequent rounds of financing, recapitalizations and other transactions across the capital structure, offerings in the equity capital markets, and/or changes in financial ratios or cash flows. For equity securities that are not traded in active markets or that are subject to transfer restrictions, valuations are adjusted to reflect illiquidity and/or non-transferability and such adjustments generally are based on available market evidence. In the absence of such evidence, management's best estimate is used.

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

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

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

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

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

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

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

OTC derivatives are valued using market transactions and other market evidence whenever possible, including market-based inputs to models, model calibration to market clearing transactions, broker or dealer quotations or alternative pricing sources with reasonable levels of price transparency. When models are used, the selection of a particular model to value an OTC derivative depends on the contractual terms of, and specific risks inherent in the instrument, as well as the availability of pricing information in the market. AIG generally uses similar models

to value similar instruments. Valuation models require a variety of inputs, including contractual terms, market prices and rates, yield curves, credit curves, measures of volatility, prepayment rates and correlations of such inputs. For OTC derivatives that trade in liquid markets, such as generic forwards, swaps and options, model inputs can generally be corroborated by observable market data by correlation or other means, and model selection does not involve significant management judgment.

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

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

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

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

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

Regulatory capital portfolio: In the case of credit default swaps written to facilitate regulatory capital relief, AIGFP estimates the fair value of these derivatives by considering observable market transactions. The transactions with the most observability are the early terminations of these transactions by counterparties. AIGFP continues to reassess the expected maturity of the portfolio. AIGFP has not been required to make any payments as part of terminations initiated by counterparties. The regulatory benefit of these transactions for AIGFP's financial institution counterparties is generally derived from the terms of the Capital Accord of the Basel Committee on Banking Supervision (Basel I) that existed through the end of 2007 and which is in the process of being replaced by the Revised Framework for the International Convergence of Capital Measurement and Capital Standards issued by the Basel Committee on Banking Supervision (Basel II). It was expected that financial institution counterparties would have transitioned from Basel I to Basel II by the end of the two-year adoption period on December 31, 2009, after which they would have received little or no additional regulatory benefit from these CDS transactions, except in a small number of specific instances. However, the Basel Committee announced that it had agreed to keep in place the Basel I capital floors beyond the end of 2009, although it remains to be seen how this extension will be implemented by the various European Central Banking districts. Should certain counterparties continue to receive favorable regulatory capital benefits from these transactions, those counterparties may not exercise their options to terminate the transactions in the expected time frame. In assessing the fair value of the regulatory capital CDS transactions, AIGFP also considers other market data, to the extent relevant and available. For further discussion, see Note 8 herein.

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

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

Prices for the individual securities held by a CDO are obtained in most cases from the CDO collateral managers, to the extent available. CDO collateral managers provided market prices for 63.2 percent of the underlying securities used in the valuation at June 30, 2010. When a price for an individual security is not provided by a CDO collateral manager, AIGFP derives the price through a pricing matrix using prices from CDO collateral managers for similar securities. Matrix pricing is a mathematical technique used principally to value debt securities without relying exclusively on quoted prices for the specific securities, but rather by relying on the relationship of the security to other benchmark quoted securities. Substantially all of the CDO collateral managers who provided prices used dealer prices for all or part of the underlying securities, in some cases supplemented by third-party pricing services.

The BET model also uses diversity scores, weighted average lives, recovery rates and discount rates. AIGFP employs a Monte Carlo simulation to assist in quantifying the effect on the valuation of the CDO of the unique aspects of the CDO's structure such as triggers that divert cash flows to the most senior part of the capital

structure. The Monte Carlo simulation is used to determine whether an underlying security defaults in a given simulation scenario and, if it does, the security's implied random default time and expected loss. This information is used to project cash flow streams and to determine the expected losses of the portfolio.

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

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

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

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

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

Fair values for securities sold but not yet purchased are based on current market prices. Fair values of spot commodities sold but not yet purchased are based on current market prices of reference spot futures contracts traded on exchanges.

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

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

AIG had no significant transfers between Level 1 and Level 2 during the three- and six-month periods ended June 30, 2010.

The following tables present changes during the three- and six-month periods ended June 30, 2010 and 2009 in Level 3 assets and liabilities measured at fair value on a recurring basis, and the realized and unrealized gains (losses) recorded in the Consolidated Statement of Income (Loss) during those periods related to the Level 3 assets and liabilities that remained on the Consolidated Balance Sheet at June 30, 2010 and 2009:

		Three Months Ended June 30,						Six Months Ended June 30,


(in millions)		2010			2009			2010			2009

General Insurance
Total revenues:
	Commercial Insurance	$	5,409		$	5,511		$	10,812		$	10,535
	Foreign General Insurance		3,495			3,338			7,347			6,419

Total revenues		$	8,904		$	8,849		$	18,159		$	16,954

Pre-tax income (loss):
	Commercial Insurance	$	531		$	572		$	1,261		$	348
	Foreign General Insurance		482			405			1,174			733

Total pre-tax income (loss)		$	1,013		$	977		$	2,435		$	1,081

Domestic Life Insurance & Retirement Services
Total revenues:
	Domestic Life Insurance	$	1,978		$	1,916		$	3,912		$	3,442
	Domestic Retirement Services		999			1,582			2,291			1,759

Total revenues		$	2,977		$	3,498		$	6,203		$	5,201

Pre-tax income (loss):
	Domestic Life Insurance	$	284		$	270		$	511		$	(28	)
	Domestic Retirement Services		(196	)		(70	)		(96	)		(1,599	)

Total pre-tax income (loss)		$	88		$	200		$	415		$	(1,627	)

Foreign Life Insurance & Retirement Services
Total revenues:
	Asia	$	3,510		$	4,376		$	6,675		$	7,137
	Japan		1,126			822			2,201			1,599

Total revenues		$	4,636		$	5,198		$	8,876		$	8,736

Pre-tax income (loss):
	Asia	$	764		$	421		$	1,400		$	785
	Japan		76			(198	)		161			(302	)

Total pre-tax income (loss)		$	840		$	223		$	1,561		$	483

Financial Services
Total revenues:
	Aircraft Leasing	$	1,232		$	1,384		$	2,114		$	2,665
	Capital Markets		(50	)		(8	)		(284	)		(977	)
	Consumer Finance		622			778			1,401			1,591
	Other, including intercompany adjustments		81			214			162			354

Total revenues		$	1,885		$	2,368		$	3,393		$	3,633

Pre-tax income (loss):
	Aircraft Leasing	$	173		$	410		$	92		$	726
	Capital Markets		(132	)		(128	)		(430	)		(1,249	)
	Consumer Finance		(6	)		(191	)		(31	)		(497	)
	Other, including intercompany adjustments		(4	)		33			(39	)		14

Total pre-tax income (loss)		$	31		$	124		$	(408	)	$	(1,006	)

		Three Months Ended June 30,						Six Months Ended June 30,


(in millions)		2010			2009			2010			2009

Other
Total revenues:
	Parent & Other	$	1,245		$	1,901		$	2,364		$	2,005
	Mortgage Guaranty		282			296			580			613
	Change in fair value of ML III		358			462			1,109			462
	Noncore Asset Management		(170	)		186			(189	)		(53	)
	Other noncore insurance		12			1,458			11			3,455
	Consolidation and eliminations		(71	)		-			(141	)		-

Total revenues		$	1,656		$	4,303		$	3,734		$	6,482

Pre-tax income (loss):
	Parent & Other	$	(769	)	$	(1,264	)	$	(1,413	)	$	(3,326	)
	Mortgage Guaranty		245			(488	)		341			(968	)
	Change in fair value of ML III		358			462			1,109			462
	Noncore Asset Management		(365	)		(325	)		(828	)		(1,338	)
	Other noncore insurance		6			115			2			220

Total pre-tax income (loss)		$	(525	)	$	(1,500	)	$	(789	)	$	(4,950	)

		Three Months Ended June 30,						Six Months Ended June 30,


(in millions)		2010			2009			2010			2009

Revenues:
	Premiums and other considerations	$	3,973		$	3,744		$	8,139		$	7,565
	Net investment income		1,412			2,027			2,955			2,917
	Net realized capital gains (losses)		(145	)		398			(189	)		(214	)
	Other income		(40	)		(1	)		(40	)		(1	)

Total revenues			5,200			6,168			10,865			10,267

Benefits, claims and expenses*			8,093			4,973			13,090			9,055
Interest expense allocation			41			47			82			102

Income (loss) from discontinued operations			(2,934	)		1,148			(2,307	)		1,110

Loss on sale			(294	)		-			(401	)		-

Income (loss) from discontinued operations, before income tax expense (benefit)			(3,228	)		1,148			(2,708	)		1,110

Income tax expense (benefit)			179			(111	)		374			(477	)

Income (loss) from discontinued operations, net of tax		$	(3,407	)	$	1,259		$	(3,082	)	$	1,587

				At March 31, 2010


(in millions)				Before Revision*			As Revised

Identifiable net assets:
	Investments			$	10,121		$	10,355
	Cash				6			14
	Premiums and other receivables				889			752
	Reinsurance assets				517			533
	Real estate and other fixed assets				428			365
	Other assets, including value of business acquired				108			262
	Liability for unpaid claims and claims adjustment expense				(1,561	)		(1,526	)
	Unearned premiums				(3,139	)		(3,128	)
	Future policy benefits for life and accident and health insurance contracts				(1,934	)		(1,968	)
	Policyholder contract deposits				-			(24	)
	Other policyholder funds				(3,536	)		(3,483	)
	Other liabilities				(460	)		(811	)

Total preliminary identifiable net assets acquired					1,439			1,341
	Less:
		Cash consideration transferred			145			145
		Fair value of the noncontrolling interest			421			498
		Fair value of AIG's previous equity interest in Fuji			292			292

			Unallocated purchase price	$	581			-

Bargain purchase gain					-		$	406

			Three Months Ended March 31, 2010


(dollars in millions, except per share data)			Before Revision^*		As Revised

Total revenues			$	19,505	$	19,911
Income from continuing operations				1,774		2,180
Net income				2,099		2,505
Net income attributable to AIG				1,451		1,857
Net income attributable to AIG common shareholders				294		376
Income per common share attributable to AIG:
	Basic:
		Income from continuing operations	$	1.70	$	2.30
	Diluted:
		Income from continuing operations	$	1.70	$	2.30

(in millions)		June 30, 2010		December 31, 2009



Assets:
	Fixed maturity securities	$	111,591	$	34,495
	Deferred policy acquisition costs		13,670		3,322
	Equity securities		6,339		2,947
	Other invested assets		8,977		4,256
	Short-term investments		8,909		3,501
	Separate account assets		3,623		3,467
	Mortgage and other loans receivable, net		6,324		3,997
	Goodwill		9		25
	Other assets		469		369

Total assets of businesses held for sale			159,911		56,379

Flight equipment^*			2,145		-

Assets held for sale		$	162,056	$	56,379

Liabilities:
	Future policy benefits for life and accident and health insurance contracts	$	64,583	$	38,023
	Policyholder contract deposits		65,782		3,133
	Separate account liabilities		3,623		3,467
	Other liabilities		8,116		3,976

Total Liabilities of businesses held for sale		$	142,104	$	48,599

		Fair Value Change


Six Months Ended June 30, 2010 (in millions)		Fair Value Change
Six Months Ended June 30, 2010 (in millions)		Maiden Lane II			Maiden Lane III

Discount Rates:
	200 basis point increase	$	(110	)	$	(639	)
	200 basis point decrease		125			735
	400 basis point increase		(207	)		(1,197	)
	400 basis point decrease		268			1,584

Estimated Future Cash Flows:
	10% increase		297			839
	10% decrease		(304	)		(853	)
	20% increase		589			1,666
	20% decrease		(608	)		(1,702	)

At June 30, 2010 (in millions)			Level 1		Level 2		Level 3		Counterparty Netting^(a)			Cash Collateral^(b)			Total



Assets:
	Bonds available for sale:
		U.S. government and government sponsored entities	$	112	$	5,450	$	-	$	-		$	-		$	5,562
		Obligations of states, municipalities and Political subdivisions		-		50,119		1,086		-			-			51,205
		Non-U.S. governments		46		52,220		42		-			-			52,308
		Corporate debt		-		159,282		3,167		-			-			162,449
		Residential mortgage-backed securities (RMBS)		-		21,924		7,114		-			-			29,038
		Commercial mortgage-backed securities (CMBS)		-		3,467		4,576		-			-			8,043
		Collateralized Debt Obligations/Asset-Backed Securities (CDO/ABS)		-		2,047		4,837		-			-			6,884

Total bonds available for sale				158		294,509		20,822		-			-			315,489

	Bond trading securities:
		U.S. government and government sponsored entities		276		6,770		-		-			-			7,046
		Obligations of states, municipalities and Political subdivisions		-		322		-		-			-			322
		Non-U.S. governments		3		974		7		-			-			984
		Corporate debt		-		2,621		103		-			-			2,724
		RMBS		-		2,043		5		-			-			2,048
		CMBS		-		2,300		226		-			-			2,526
		CDO/ABS		-		3,313		8,523		-			-			11,836

Total bond trading securities				279		18,343		8,864		-			-			27,486

	Equity securities available for sale:
		Common stock		8,038		54		32		-			-			8,124
		Preferred stock		-		695		53		-			-			748
		Mutual funds		2,097		27		20		-			-			2,144

Total equity securities available for sale				10,135		776		105		-			-			11,016

	Equity securities trading:
		Common stock		1,018		97		1		-			-			1,116
		Preferred stocks		-		1		-		-			-			1
		Mutual funds		4,024		135		-		-			-			4,159

Total equity securities trading				5,042		233		1		-			-			5,276

	Mortgage and other loans receivable			-		153		-		-			-			153
	Other invested assets^(c)			2,352		2,932		6,809		-			-			12,093
	Unrealized gain on swaps, options and forward transactions:
		Interest rate contracts		2		26,116		1,129		-			-			27,247
		Foreign exchange contracts		-		402		30		-			-			432
		Equity contracts		71		495		62		-			-			628
		Commodity contracts		-		42		17		-			-			59
		Credit contracts		-		2		439		-			-			441
		Other contracts		7		783		75		-			-			865
		Counterparty netting and cash collateral		-		-		-		(17,884	)		(4,450	)		(22,334	)

Total unrealized gain on swaps, options and forward transactions				80		27,840		1,752		(17,884	)		(4,450	)		7,338

	Securities purchased under agreements to resell			-		965		-		-			-			965
	Short-term investments			4,031		20,064		-		-			-			24,095
	Separate account assets			51,369		2,433		1		-			-			53,803
	Other assets			-		14		-		-			-			14

Total			$	73,446	$	368,262	$	38,354	$	(17,884	)	$	(4,450	)	$	457,728

Liabilities:
	Policyholder contract deposits		$	-	$	-	$	4,510	$	-		$	-		$	4,510
	Securities sold under agreements to repurchase			-		3,385		-		-			-			3,385
	Securities and spot commodities sold but not yet purchased			143		83		-		-			-			226
	Unrealized loss on swaps, options and forward transactions:
		Interest rate contracts		-		21,163		978		-			-			22,141
		Foreign exchange contracts		-		582		6		-			-			588
		Equity contracts		7		470		62		-			-			539
		Commodity contracts		-		47		-		-			-			47
		Credit contracts^(d)		-		59		5,022		-			-			5,081
		Other contracts		-		128		182		-			-			310
		Counterparty netting and cash collateral		-		-		-		(17,884	)		(5,106	)		(22,990	)

Total unrealized loss on swaps, options and forward transactions				7		22,449		6,250		(17,884	)		(5,106	)		5,716

	Trust deposits and deposits due to banks and other depositors			-		14		-		-			-			14
	Other long-term debt			-		11,684		954		-			-			12,638

Total			$	150	$	37,615	$	11,714	$	(17,884	)	$	(5,106	)	$	26,489

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



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

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

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

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

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

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

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

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

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

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

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

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

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



Three Months Ended June 30, 2010
Assets:
	Bonds available for sale:
		Obligations of states, municipalities and political subdivisions		$	948		$	(7	)	$	(6	)	$	49		$	101		$	-	$	1		$	1,086		$	-
			Non-U.S. governments		5			-			-			24			5			-		8			42			-
			Corporate debt		3,917			9			17			(126	)		(786	)		-		136			3,167			-
			RMBS		6,832			(122	)		550			(165	)		19			-		-			7,114			-
			CMBS		4,396			(283	)		468			(132	)		69			-		58			4,576			-
			CDO/ABS		4,576			54			9			(155	)		77			-		276			4,837			-

Total bonds available for sale					20,674			(349	)		1,038			(505	)		(515	)		-		479			20,822			-

	Bond trading securities:
		U.S. government and government sponsored entities			-			-			-			-			-			-		-			-			-
		Non-U.S. governments			2			-			-			(1	)		6			-		-			7			-
		Corporate debt			7			(11	)		-			(2	)		-			-		109			103			(9	)
		RMBS			5			-			-			-			-			-		-			5			-
		CMBS			294			20			-			(88	)		-			-		-			226			29
		CDO/ABS			7,895			674			-			(49	)		3			-		-			8,523			350

Total bond trading securities					8,203			683			-			(140	)		9			-		109			8,864			370

	Equity securities available for sale:
		Common stock			36			1			(4	)		(6	)		2			-		3			32			-
		Preferred stock			52			-			2			(1	)		-			-		-			53			-
		Mutual funds			-			-			(1	)		8			7			-		6			20			-

Total equity securities available for sale					88			1			(3	)		1			9			-		9			105			-

	Equity securities trading:
		Common stock			1			-			-			-			-			-		-			1			-
		Mutual funds			-			-			-			-			-			-		-			-			-

Total equity securities trading					1			-			-			-			-			-		-			1			-

	Other invested assets				5,853			118			95			(27	)		620			-		150			6,809			(78	)
	Other assets				-			-			-			-			-			-		-			-			-
	Separate account assets				-			-			-			-			1			-		-			1			-

Total				$	34,819		$	453		$	1,130		$	(671	)	$	124		$	-	$	747		$	36,602		$	292

Liabilities:
	Policyholder contract deposits			$	(641	)	$	(820	)	$	-		$	(129	)	$	-		$	-	$	(2,920	)	$	(4,510	)	$	868
	Unrealized loss on swaps, options and forward transactions, net:
		Interest rate contracts			(1,286	)		435			(1	)		99			904			-		-			151			(156	)
		Foreign exchange contracts			29			(2	)		-			(3	)		-			-		-			24			(4	)
		Equity contracts			55			(53	)		-			(31	)		29			-		-			-			(1	)
		Commodity contracts			20			(3	)		-			-			-			-		-			17			3
		Credit contracts			(4,910	)		162			-			166			(1	)		-		-			(4,583	)		(332	)
		Other contracts			(130	)		(7	)		-			16			15			-		(1	)		(107	)		10

Total unrealized loss on swaps, options and forward transactions, net					(6,222	)		532			(1	)		247			947			-		(1	)		(4,498	)		(480	)

	Other long-term debt				(1,123	)		73			-			67			29			-		-			(954	)		(72	)

Total				$	(7,986	)	$	(215	)	$	(1	)	$	185		$	976		$	-	$	(2,921	)	$	(9,962	)	$	316

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



Six Months Ended June 30, 2010
Assets:
	Bonds available for sale:
		Obligations of states, municipalities and political subdivisions	$	613		$	(21	)	$	(13	)	$	158		$	349		$	3		$	(3	)	$	1,086		$	-
		Non-U.S. governments		753			-			-			24			5			44			(784	)		42			-
		Corporate debt		4,791			(10	)		103			(238	)		(1,446	)		19			(52	)		3,167			-
		RMBS		6,654			(241	)		992			(307	)		50			29			(63	)		7,114			-
		CMBS		4,939			(763	)		1,284			(265	)		636			552			(1,807	)		4,576			-
		CDO/ABS		4,724			76			267			(171	)		108			(3	)		(164	)		4,837			-

Total bonds available for sale				22,474			(959	)		2,633			(799	)		(298	)		644			(2,873	)		20,822			-

	Bond trading securities:
		U.S. government and government sponsored entities		16			-			-			-			-			(16	)		-			-			-
		Non-U.S. governments		56			-			-			(51	)		8			(6	)		-			7			-
		Corporate debt		121			(16	)		2			(2	)		-			(2	)		-			103			(10	)
		RMBS		4			1			-			-			-			19			(19	)		5			2
		CMBS		325			60			-			(95	)		34			3			(101	)		226			130
		CDO/ABS		6,865			1,791			-			(136	)		3			22			(22	)		8,523			899

Total bond trading securities				7,387			1,836			2			(284	)		45			20			(142	)		8,864			1,021

	Equity securities available for sale:
		Common stock		35			(1	)		1			(5	)		2			-			-			32			-
		Preferred stock		54			(5	)		4			(1	)		1			-			-			53			-
		Mutual funds		6			-			(1	)		8			7			-			-			20			-

Total equity securities available for sale				95			(6	)		4			2			10			-			-			105			-

	Equity securities trading:
		Common stock		1			-			-			-			-			-			-			1			-
		Mutual funds		7			-			-			-			-			10			(17	)		-			-

Total equity securities trading				8			-			-			-			-			10			(17	)		1			-

	Other invested assets			6,910			(13	)		380			(953	)		523			12			(50	)		6,809			(149	)
	Other assets			270			-			-			(270	)		-			-			-			-			-
	Separate account assets			1			-			-			-			1			-			(1	)		1			-

Total			$	37,145		$	858		$	3,019		$	(2,304	)	$	281		$	686		$	(3,083	)	$	36,602		$	872

Liabilities:
	Policyholder contract deposits		$	(5,214	)	$	(624	)	$	-		$	(268	)	$	-		$	93		$	1,503		$	(4,510	)	$	684
	Unrealized loss on swaps, options and forward transactions, net:
		Interest rate contracts		(1,469	)		533			(1	)		195			893			-			-			151			6
		Foreign exchange contracts		29			(2	)		-			(3	)		-			-			-			24			(7	)
		Equity contracts		74			(63	)		-			(31	)		20			-			-			-			(1	)
		Commodity contracts		22			(5	)		-			-			-			-			-			17			4
		Credit contracts		(4,545	)		326			-			(363	)		(1	)		-			-			(4,583	)		(485	)
		Other contracts		(176	)		34			-			13			15			1			6			(107	)		(29	)

Total unrealized loss on swaps, options and forward transactions, net				(6,065	)		823		<