10-Q

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

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 March 31, 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 April 30, 2010, there were 135,070,621 shares outstanding of the registrant's common stock.

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American International Group, Inc., and Subsidiaries

Table of Contents

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	87
	Item 3.	Quantitative and Qualitative Disclosures About Market Risk	177
	Item 4.	Controls and Procedures	177
PART II – OTHER INFORMATION
	Item 1.	Legal Proceedings	178
	Item 1A.	Risk Factors	178
	Item 6.	Exhibits	178
Signatures			179

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American International Group, Inc., and Subsidiaries

Part I – FINANCIAL INFORMATION

ITEM 1.    Financial Statements (unaudited)

Consolidated Balance Sheet

(in millions)				March 31, 2010		December 31, 2009
Assets:
	Investments:
		Fixed maturity securities:
			Bonds available for sale, at fair value (amortized cost: 2010 – $254,416; 2009 – $364,491)	$	256,870	$	365,551
			Bond trading securities, at fair value		26,365		31,243
		Equity securities:
			Common and preferred stock available for sale, at fair value (cost: 2010 – $4,882; 2009 – $6,464)		6,831		9,522
			Common and preferred stock trading, at fair value		613		8,318
		Mortgage and other loans receivable, net of allowance (portion measured at fair value: 2010 – $157; 2009 – $119)			22,533		27,461
		Finance receivables, net of allowance			18,912		20,327
		Flight equipment primarily under operating leases, net of accumulated depreciation			43,258		44,091
		Other invested assets (portion measured at fair value: 2010 – $10,154; 2009 – $18,888)			33,250		45,235
		Securities purchased under agreements to resell, at fair value			1,615		2,154
		Short-term investments (portion measured at fair value: 2010 – $22,184; 2009 – $23,975)			38,800		47,263
			Total investments		449,047		601,165
	Cash				2,133		4,400
	Accrued investment income				3,467		5,152
	Premiums and other receivables, net of allowance				18,718		16,549
	Reinsurance assets, net of allowance				25,791		22,425
	Current and deferred income taxes				6,805		4,108
	Deferred policy acquisition costs				19,064		40,814
	Real estate and other fixed assets, net of accumulated depreciation				3,259		4,142
	Unrealized gain on swaps, options and forward transactions, at fair value				7,383		9,130
	Goodwill				2,565		6,195
	Other assets, including prepaid commitment asset of $6,460 in 2010 and $7,099 in 2009 (portion measured at fair value: 2010 – $13; 2009 – $288)				17,072		18,976
	Separate account assets, at fair value				51,953		58,150
	Assets of businesses held for sale				256,440		56,379
Total assets				$	863,697	$	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)			March 31, 2010			December 31, 2009
Liabilities:
	Liability for unpaid claims and claims adjustment expense		$	86,489		$	85,386
	Unearned premiums			26,350			21,363
	Future policy benefits for life and accident and health insurance contracts			47,752			116,001
	Policyholder contract deposits (portion measured at fair value: 2010 – $641; 2009 – $5,214)			142,932			220,128
	Other policyholder funds			7,493			13,252
	Commissions, expenses and taxes payable			2,874			4,950
	Insurance balances payable			4,004			4,393
	Funds held by companies under reinsurance treaties			708			774
	Securities sold under agreements to repurchase (portion measured at fair value: 2010 – $3,418; 2009 – $3,221)			3,418			3,505
	Securities and spot commodities sold but not yet purchased, at fair value			458			1,030
	Unrealized loss on swaps, options and forward transactions, at fair value			6,296			5,403
	Trust deposits and deposits due to banks and other depositors (portion measured at fair value: 2010 – $16; 2009 – $15)			1,030			1,641
	Other liabilities			21,015			22,503
	Federal Reserve Bank of New York Commercial Paper Funding Facility (portion measured at fair value: 2010 – $2,285; 2009 – $2,742)			2,285			4,739
	Federal Reserve Bank of New York credit facility			27,400			23,435
	Other long-term debt (portion measured at fair value: 2010 – $12,800; 2009 – $13,195)			109,744			113,298
	Separate account liabilities			51,953			58,150
	Liabilities of businesses held for sale			217,837			48,599
Total liabilities				760,038			748,550
	Commitments, contingencies and guarantees (see Note 9)
	Redeemable noncontrolling interests in partially owned consolidated subsidiaries (including $1,270 and $211 associated with businesses held for sale in 2010 and 2009, respectively)			1,940			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 – 141,605,834; 2009 – 141,732,263			354			354
	Treasury stock, at cost; 2010 – 6,661,350; 2009 – 6,661,356 shares of common stock			(874	)		(874	)
	Additional paid-in capital			6,356			6,358
	Accumulated deficit			(9,871	)		(11,491	)
	Accumulated other comprehensive income			7,053			5,693
Total AIG shareholders' equity				75,001			69,824
Noncontrolling interests:
	Noncontrolling nonvoting, callable, junior and senior preferred interests held by Federal Reserve Bank of New York			25,059			24,540
	Other (including $374 and $2,234 associated with businesses held for sale in 2010 and 2009, respectively)			1,659			3,712
Total noncontrolling interests				26,718			28,252
Total equity				101,719			98,076
Total liabilities and equity			$	863,697		$	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 March 31,
(dollars in millions, except per share data)				2010			2009
Revenues:
	Premiums and other considerations			$	10,067		$	12,841
	Net investment income				4,836			915
	Net realized capital losses:
		Total other-than-temporary impairments on available for sale securities			(309	)		(3,672	)
		Portion of other-than-temporary impairments on available for sale fixed maturity securities recognized in Accumulated other comprehensive loss			(521	)		-
		Net other-than-temporary impairments on available for sale securities recognized in net income (loss)			(830	)		(3,672	)
		Other realized capital gains			282			898
			Total net realized capital losses		(548	)		(2,774	)
	Unrealized market valuation gains (losses) on AIGFP super senior credit default swap portfolio				119			(452	)
	Other income				1,856			2,785
Total revenues					16,330			13,315
Benefits, claims and expenses:
	Policyholder benefits and claims incurred				8,519			11,353
	Policy acquisition and other insurance expenses				3,262			3,576
	Interest expense				1,734			2,587
	Restructuring expenses and related asset impairment and other expenses				110			338
	Net loss (gain) on sale of divested businesses				77			(262	)
	Other expenses				1,793			2,239
Total benefits, claims and expenses					15,495			19,831
Income (loss) from continuing operations before income tax benefit					835			(6,516	)
Income tax benefit					(91	)		(1,303	)
Income (loss) from continuing operations					926			(5,213	)
Income (loss) from discontinued operations, net of income tax expense (benefit) (See Note 3)					1,173			80
Net income (loss)					2,099			(5,133	)
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				519			-
	Other				129			(774	)
Total net income (loss) from continuing operations attributable to noncontrolling interests					648			(774	)
Net loss from discontinued operations attributable to noncontrolling interests					-			(6	)
Total net income (loss) attributable to noncontrolling interests					648			(780	)
Net income (loss) attributable to AIG				$	1,451		$	(4,353	)
Net income (loss) attributable to AIG common shareholders				$	294		$	(5,365	)
Income (loss) per common share attributable to AIG:
	Basic:
		Income (loss) from continuing operations		$	0.41		$	(40.29	)
		Income (loss) from discontinued operations		$	1.75		$	0.62
	Diluted:
		Income (loss) from continuing operations		$	0.41		$	(40.29	)
		Income (loss) from discontinued operations		$	1.75		$	0.62
Weighted average shares outstanding:
	Basic				135,658,680			135,252,869
	Diluted				135,724,939			135,252,869

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 March 31,
(in millions)			2010			2009
Net income (loss)			$	2,099		$	(5,133	)
Other comprehensive income (loss):
	Unrealized appreciation (depreciation) of fixed maturity investments on which other-than-temporary credit impairments were taken			993			-
		Income tax benefit (expense) on above changes		(220	)		-
	Unrealized appreciation (depreciation) of all other investments – net of reclassification adjustments			2,531			(3,372	)
		Income tax benefit (expense) on above changes		(1,374	)		1,392
	Foreign currency translation adjustments			(958	)		(941	)
		Income tax benefit (expense) on above changes		429			209
	Net derivative gains (losses) arising from cash flow hedging activities – net of reclassification adjustments			24			26
		Income tax benefit (expense) on above changes		(2	)		27
	Change in retirement plan liabilities adjustment			77			58
		Income tax benefit (expense) on above changes		(24	)		(18	)
Other comprehensive income (loss)				1,476			(2,619	)
Comprehensive income (loss)				3,575			(7,752	)
Comprehensive income (loss) attributable to noncontrolling interests				(31	)		(867	)
Comprehensive income (loss) attributable to noncontrolling nonvoting, callable, junior and senior preferred interests held by Federal Reserve Bank of New York				519			-
Comprehensive income (loss) attributable to AIG			$	3,087		$	(6,885	)

See Accompanying Notes to Consolidated Financial Statements.

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American International Group, Inc., and Subsidiaries

Consolidated Statement of Cash Flows

			Three Months Ended March 31,
(in millions)			2010			2009
Summary:
	Net cash provided by (used in) operating activities		$	3,195		$	3,770
	Net cash provided by (used in) investing activities			(4,516	)		1,432
	Net cash provided by (used in) financing activities			(266	)		(9,644	)
	Effect of exchange rate changes on cash			(42	)		(171	)
	Change in cash			(1,629	)		(4,613	)
	Cash at beginning of period			4,400			8,642
	Reclassification of assets held for sale			(638	)		-
	Cash at end of period			2,133			4,029
Cash flows from operating activities:
	Net income (loss)		$	2,099		$	(5,133	)
	(Income) loss from discontinued operations			(1,173	)		(80	)
	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		(422	)		57
		Net (gains) losses on sales of divested businesses		77			(262	)
		Unrealized (gains) losses in earnings – net		591			(373	)
		Equity in (income) loss from equity method investments, net of dividends or distributions		(336	)		2,084
		Depreciation and other amortization		2,529			3,050
		Provision for mortgage, other loans and finance receivables		344			1,019
		Impairments of assets		1,753			4,193
		Amortization of costs and accrued interest and fees related to FRBNY Credit Facility		856			1,495
	Changes in operating assets and liabilities:
		General and life insurance reserves		2,323			(1,988	)
		Premiums and other receivables and payables – net		(1,002	)		(482	)
		Reinsurance assets and funds held under reinsurance treaties		(3,637	)		1,772
		Capitalization of deferred policy acquisition costs		(1,914	)		(2,313	)
		Other policyholder funds		(63	)		(1	)
		Current and deferred income taxes – net		(954	)		(1,761	)
		Other assets and liabilities – net		(791	)		49
		Trading securities		21			1,027
		Securities sold under agreements to repurchase, net of securities purchased under agreements to resell		306			390
		Securities and spot commodities sold but not yet purchased		(572	)		(1,528	)
		Finance receivables and other loans held for sale – originations and purchases		(5	)		(22	)
		Sales of finance receivables and other loans – held for sale		48			32
		Other, net		267			371
		Total adjustments		(581	)		6,809
Net cash provided by (used in) operating activities – continuing operations				345			1,596
Net cash provided by (used in) operating activities – discontinued operations				2,850			2,174
Net cash provided by (used in) operating activities			$	3,195		$	3,770

See Accompanying Notes to Consolidated Financial Statements.

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American International Group, Inc., and Subsidiaries

Consolidated Statement of Cash Flows (Continued)

		Three Months Ended March 31,
(in millions)		2010			2009
Cash flows from investing activities:
Proceeds from (payments for)
	Sales of available for sale investments	$	7,893		$	12,263
	Maturities of fixed maturity securities available for sale and hybrid investments		3,340			3,592
	Sales of trading securities		1,746			3,635
	Sales or distributions of other invested assets (including flight equipment)		2,157			2,711
	Sales of divested businesses, net		1,471			704
	Principal payments received on mortgage and other loans receivable		938			1,010
	Principal payments received on and sales of finance receivables held for investment		1,590			4,006
	Purchases of available for sale investments		(15,847	)		(9,974	)
	Purchases of trading securities		(356	)		(2,829	)
	Purchases of other invested assets (including flight equipment)		(1,915	)		(2,228	)
	Acquisition, net of cash acquired		(139	)		-
	Mortgage and other loans receivable issued		(303	)		(778	)
	Finance receivables held for investment – originations and purchases		(746	)		(1,855	)
	Change in securities lending invested collateral		-			969
	Net additions to real estate, fixed assets, and other assets		(64	)		(101	)
	Net change in short-term investments		(1,043	)		(7,778	)
	Net change in non-AIGFP derivative assets and liabilities		(129	)		(48	)
	Other, net		(49	)		(63	)
Net cash provided by (used in) investing activities – continuing operations			(1,456	)		3,236
Net cash provided by (used in) investing activities – discontinued operations			(3,060	)		(1,804	)
Net cash provided by (used in) investing activities		$	(4,516	)	$	1,432
Cash flows from financing activities:
Proceeds from (payments for)
	Policyholder contract deposits	$	4,394		$	4,738
	Policyholder contract withdrawals		(3,639	)		(8,316	)
	Change in other deposits		(122	)		49
	Change in commercial paper and other short-term debt		-			(421	)
	Change in Federal Reserve Bank of New York Commercial Paper Funding Facility borrowings		(3,565	)		(2,945	)
	Federal Reserve Bank of New York credit facility borrowings		8,300			10,900
	Federal Reserve Bank of New York credit facility repayments		(4,551	)		(4,600	)
	Issuance of other long-term debt		4,170			1,209
	Repayments on other long-term debt		(7,143	)		(5,953	)
	Change in securities lending payable		-			(490	)
	Drawdown on the Department of the Treasury Commitment		2,199			-
	Other, net		(462	)		(653	)
Net cash provided by (used in) financing activities – continuing operations			(419	)		(6,482	)
Net cash provided by (used in) financing activities – discontinued operations			153			(3,162	)
Net cash provided by (used in) financing activities		$	(266	)	$	(9,644	)
Supplementary disclosure of cash flow information:
Cash (paid) received during the period for:
	Interest	$	(1,047	)	$	(1,466	)
	Taxes	$	(604	)	$	(179	)
Non-cash financing/investing activities:
	Interest credited to policyholder contract deposits included in financing activities	$	2,086		$	1,598
	Long-term debt reduction due to deconsolidations	$	829		$	-
	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

Three Months Ended March 31, 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		-		-		-			-			169			(276	)		(107	)		-			(107	)
Net income(a)		-		-		-			-			1,451			-			1,451			133			1,584
Other comprehensive income (loss)(b)		-		-		-			-			-			1,636			1,636			(165	)		1,471
Net decrease due to deconsolidation		-		-		-			-			-			-			-			(2,161	)		(2,161	)
Contributions from noncontrolling interest		-		-		-			-			-			-			-			210			210
Distributions to noncontrolling interests		-		-		-			-			-			-			-			(87	)		(87	)
Net income (loss) attributable to noncontrolling nonvoting, callable, junior and senior preferred interests held by the Federal Reserve Bank of New York		-		-		-			-			-			-			-			519			519
Other		-		-		-			3			-			-			3			17			20
Balance, end of period	$	71,983	$	354	$	(874	)	$	6,356		$	(9,871	)	$	7,053		$	75,001		$	26,718		$	101,719

(a)

Excludes $(4) million attributable to redeemable noncontrolling interests and Net income attributable to noncontrolling nonvoting, callable, junior and senior preferred interests held by the Federal Reserve Bank of New York of $519 million.

(b)

Excludes $5 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, are those relating to items considered by management in the determination of:

•

AIG's ability to continue as a going concern;

•

liability for general insurance unpaid claims and claims adjustment expenses;

•

future policy benefits for life and accident and health contracts;

•

recoverability of deferred policy acquisition costs (DAC);

•

estimated gross profits for investment-oriented products;

•

the allowance for finance receivable losses;

•

flight equipment recoverability;

•

other-than-temporary impairments;

•

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; and

•

fair value of the assets and liabilities, including non-controlling interests, related to acquisitions.

    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 months ended March 31, 2010, AIG recorded out of period adjustments relating to prior years that decreased Net income attributable to AIG by $158 million, primarily related to the effect of recording

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American International Group, Inc., and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

impairments on certain consolidated investments held in the Institutional Asset Management operations, which affected the calculation of income taxes. While these adjustments were noteworthy for the quarter, after evaluating the quantitative and qualitative aspects of these corrections, AIG concluded that its prior period financial statements were not materially misstated and, therefore, no restatement was required.

    Had these and all previously reported out of period adjustments been recorded in their appropriate periods, the net loss attributable to AIG for the year ended December 31, 2009 would have increased by $604 million, from $10.9 billion to $11.5 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. While no assurance can be given that AIG will be able to access its traditional sources of long-term or short-term financing through the public markets again, AIG periodically evaluates its ability to 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 four months of 2010, International Lease Finance Corporation (ILFC) and American General Finance, Inc. (AGF) made substantial progress in addressing their liquidity needs. During March and April 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 $550 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, in April 2010, ILFC signed an agreement to sell 53 aircraft with an aggregate book value of approximately $2.3 billion, which is expected to generate approximately $2.0 billion in gross proceeds during 2010. As of March 31, 2010, none of these aircraft met the criteria to be recorded as held-for-sale. During March and April 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 in March 2010 and executed and drew down fully a $3.0 billion secured term loan transaction in April 2010. 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 in March 2010 and its $2.125 billion five-year revolving credit facility in April 2010 (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.

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, and expects to accomplish these objectives over a longer time frame than originally contemplated.

Sales of Businesses and Specific Asset Dispositions

AIA Sale

    As of March 1, 2010, AIG and AIA Aurora LLC, a special purpose vehicle formed by AIG and the FRBNY (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, consisting of $25 billion in cash, approximately $5.5 billion in face value of ordinary shares in the capital of Prudential Group Limited, $3 billion in face value of mandatory convertible securities of Prudential Group Limited, and $2 billion in face value of preferred stock of Prudential (or at Prudential's election, Prudential Group Limited), subject to closing adjustments. The obligations of Prudential Group Limited under the AIA Share Purchase Agreement are guaranteed by Prudential.

    The cash portion of the proceeds from the sale will be paid to the FRBNY to redeem preferred interests with a liquidation preference of approximately $16 billion plus accrued but unpaid preferred returns held by the FRBNY in AIA Holdings, and, unless otherwise agreed with the FRBNY, to repay approximately $9 billion under the FRBNY Credit Facility. AIG intends to monetize the $10.5 billion in face value of Prudential securities over time, subject to market conditions, following the lapse of agreed-upon minimum holding periods. Unless otherwise agreed with the FRBNY, net cash proceeds from the monetization of these securities will be used to repay any outstanding debt under the FRBNY Credit Facility.

ALICO Sale

    As of March 7, 2010, AIG and ALICO Holdings LLC, a special purpose vehicle formed by AIG and the FRBNY (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 the 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 and ALICO Holdings 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. 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.

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American International Group, Inc., and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

    Dispositions of certain businesses will be subject to regulatory approval. Unless a waiver is obtained from the FRBNY, net proceeds from these dispositions, to the extent they do not represent capital of AIG's insurance subsidiaries required for regulatory or ratings purposes or are not to be utilized to redeem the preferred interests held by the FRBNY in AIA Holdings and ALICO Holdings, are contractually required to be applied toward the repayment of the FRBNY Credit Facility as mandatory prepayments.

    Since September 2008 and through April 28, 2010, AIG entered into agreements to sell or completed the sale of other operations and assets, excluding AIA, ALICO and the assets held by AIG Financial Products Corp. and AIG Trading Group Inc. and their respective subsidiaries (collectively, AIGFP), that had aggregate assets and liabilities with carrying values of $95.5 billion and $77.5 billion, respectively, at March 31, 2010 or the date of sale. Of these amounts, pending transactions with aggregate assets and liabilities of $54.7 billion and $49.2 billion, respectively, at March 31, 2010 are expected to generate approximately $709 million of aggregate net cash proceeds that will be available to reduce the amount of the FRBNY Credit Facility, after taking into account taxes, transaction expenses, settlement of intercompany loan facilities, and capital required to be retained for regulatory or ratings purposes. Gains and losses recorded in connection with the dispositions of businesses include estimates that are subject to subsequent adjustment. Based on the transactions closed to date, AIG does not believe that such adjustments will be material to future consolidated results of operations or cash flows.

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

•

the potential for delays in asset dispositions and reduction in the anticipated proceeds therefrom;

•

the potential for declines in bond and equity markets;

•

pending sales of significant subsidiaries;

•

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

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American International Group, Inc., and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

•

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 and the other expected 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 have 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.

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, 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 $2.1 billion and $2.3 billion at March 31, 2010 and December 31, 2009, respectively, and the related cash collateral obtained was $1.7 billion and $1.5 billion at March 31, 2010 and December 31, 2009, respectively.

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

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American International Group, Inc., and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

Securities lending invested collateral, at fair value and Securities lending payable: In 2008, AIG exited the domestic securities lending program, and as of March 31, 2010, AIG had exited its foreign securities lending activities.

Recent Accounting Standards

Accounting Changes

    AIG adopted the following accounting standards during the first quarter 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 is effective for interim and annual periods beginning on January 1, 2010 for AIG. Earlier application is 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.

    AIG adopted the new standard on January 1, 2010. The adoption of this standard resulted in an increase in excess of amounts previously recorded for assets, liabilities, redeemable noncontrolling interest, other noncontrolling interest and accumulated deficit of approximately $8.2 billion, $7.1 billion, $1.1 billion, $0.1 billion and $0.2 billion, respectively, and a net decrease in accumulated other comprehensive income of approximately $0.3 billion, as a result of consolidating previously unconsolidated VIEs.

The following table describes 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:

		Transition Methods
(in millions)		Fair Value Option		Carrying Value
Assets:
	Bond trading securities, at fair value	$	1,239	$	1,262
	Other invested assets		-		480
	Mortgage and other loans receivable		-		1,980
	Other asset accounts		194		150
	Assets of businesses held for sale		4,630		-
Total Assets		$	6,063	$	3,872
Liabilities:
	FRBNY commercial paper funding facility	$	1,088	$	-
	Other long-term debt		-		1,533
	Other liability accounts		1		31
	Liabilities of businesses held for sale		4,525		-
Total Liabilities		$	5,614	$	1,564

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American International Group, Inc., and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

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

    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

    In March 2010, the FASB issued an accounting standard that amends the scope for embedded credit derivative features related to the redistribution of credit risk in the form of subordination of one financial instrument to another in a securitization vehicle. The new standard clarifies how to determine which embedded credit derivative features, including those in collateralized debt obligations (CDOs), credit linked notes (CLNs) and synthetic CDOs and CLNs, are considered to be embedded derivatives that should not be analyzed for potential bifurcation and separate accounting. The new standard is effective for interim and annual periods beginning on July 1, 2010 for AIG. AIG is assessing the effect adopting this new standard will have on its consolidated financial condition, results of operations, and 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 that this provides more meaningful information on how its operations are performing.

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

Three Months Ended March 31, (in millions)		2010			2009
Total revenues:
	General Insurance	$	8,849		$	8,099
	Domestic Life Insurance & Retirement Services		3,226			1,703
	Foreign Life Insurance & Retirement Services*		1,075			763
	Financial Services		1,508			1,265
	Other		2,062			2,180
	Consolidation and eliminations		(390	)		(695	)
Total revenues			16,330			13,315
Pre-tax income (loss) from continuing operations:
	General Insurance		1,016			102
	Domestic Life Insurance & Retirement Services		327			(1,827	)
	Foreign Life Insurance & Retirement Services*		85			(128	)
	Financial Services		(439	)		(1,130	)
	Other		(294	)		(3,444	)
	Consolidation and eliminations		140			(89	)
Total pre-tax income (loss) from continuing operations		$	835		$	(6,516	)

*

As a result of the announced AIA and ALICO transactions, and their treatment as discontinued operations, Foreign Life Insurance & Retirement Services operations consist of a single operating segment. See Note 3 herein for information on these transactions.

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American International Group, Inc., and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

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

Three Months Ended March 31, (in millions)		2010			2009
General Insurance
Total revenues:
	Commercial Insurance	$	5,403		$	5,024
	Foreign General Insurance		3,446			3,075
Total revenues		$	8,849		$	8,099
Pre-tax income (loss):
	Commercial Insurance	$	730		$	(224	)
	Foreign General Insurance		286			326
Total pre-tax income (loss)		$	1,016		$	102
Domestic Life Insurance & Retirement Services
Total revenues:
	Domestic Life Insurance	$	1,934		$	1,526
	Domestic Retirement Services		1,292			177
Total revenues		$	3,226		$	1,703
Pre-tax income (loss):
	Domestic Life Insurance	$	227		$	(298	)
	Domestic Retirement Services		100			(1,529	)
Total pre-tax income (loss)		$	327		$	(1,827	)
Financial Services
Total revenues:
	Aircraft Leasing	$	882		$	1,281
	Capital Markets		(234	)		(969	)
	Consumer Finance		779			813
	Other, including intercompany adjustments		81			140
Total revenues		$	1,508		$	1,265
Pre-tax income (loss):
	Aircraft Leasing	$	(81	)	$	316
	Capital Markets		(298	)		(1,121	)
	Consumer Finance		(25	)		(306	)
	Other, including intercompany adjustments		(35	)		(19	)
Total pre-tax income (loss)		$	(439	)	$	(1,130	)
Other
Total revenues:
	Parent & Other	$	1,119		$	105
	Mortgage Guaranty		298			317
	Change in fair value of ML III		751			—
	Noncore Asset Management		(19	)		(239	)
	Other noncore insurance		(17	)		1,997
	Consolidation and eliminations		(70	)		-
Total revenues		$	2,062		$	2,180
Pre-tax income (loss):
	Parent & Other	$	(645	)	$	(2,057	)
	Mortgage Guaranty		96			(480	)
	Change in fair value of ML III		751			—
	Noncore Asset Management		(463	)		(1,012	)
	Other noncore insurance		(33	)		105
Total pre-tax income (loss)		$	(294	)	$	(3,444	)

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American International Group, Inc., and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

3. Discontinued Operations and Held-for-Sale Classification

Discontinued Operations

    As discussed in Note 1 herein, during the first quarter of 2010, AIG entered into agreements to sell AIA and ALICO. Also, on October 12, 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. AIG expects each of these sales to close in 2010. These transactions met the criteria for held-for-sale and discontinued operations accounting.

    Accordingly, results of operations for these companies are included as discontinued operations in AIG's Consolidated Statement of Income (Loss) for all periods shown and their aggregated assets and liabilities are presented separately as single line items in the asset and liability sections of the Consolidated Balance Sheet at March 31, 2010 for AIA and ALICO and at March 31, 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.

    Income (loss) from discontinued operations includes interest expense, including periodic amortization of the prepaid commitment fee asset, on debt to be assumed by the buyers of AIA and ALICO and on debt required to be repaid as a result of the disposition transactions associated with the FRBNY Credit Facility totaling $183 million and $258 million in the three months ended March 31, 2010 and 2009, respectively. The interest expense allocated to discontinued operations for the three-month periods ended March 31, 2010 and 2009 was based on the estimated funds of $8.6 billion committed to repay the FRBNY Credit Facility multiplied by the daily interest rate. The periodic amortization of the prepaid commitment fee allocated to discontinued operations was determined based on the ratio of funds committed to repay the FRBNY Credit Facility to the total outstanding available amount under the FRBNY Credit Facility.

A summary of income (loss) from discontinued operations is as follows:

Three Months Ended March 31, (in millions)		2010			2009
Premiums and other considerations		$	6,525		$	6,024
Net investment income			2,252			1,449
Net realized capital gains (losses)			63			(587	)
	Total revenues		8,840			6,886
Income (loss) from discontinued operations			1,142			152
Loss on sale			(106	)		(3	)
Income (loss) from discontinued operations, before income tax expense (benefit)			1,036			149
Income tax expense (benefit)			(137	)		69
Income (loss) from discontinued operations, net of tax		$	1,173		$	80

    Certain other sales completed during 2010 and 2009 were not classified as discontinued operations due to AIG's continued involvement or because associated assets, liabilities and results of operations were not material to AIG's consolidated financial position or results of operations.

Held-for-Sale Classification

    On September 5, 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 on March 26, 2010, these businesses were 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. This transaction did not meet the criteria for

19

American International Group, Inc., and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

discontinued operations accounting because of a significant continuation of activities between AIG and the business sold.

    On July 28, 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). In exchange, AIG will receive an equity interest in SCB. The closing is expected to occur in the second quarter of 2010. 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 March 31, 2010 and December 31, 2009. AIG Bank Polska is a component of the Financial Services reportable segment. This transaction did not meet the criteria for discontinued operations accounting because of AIG's retained equity interest in SCB.

A summary of assets and liabilities held for sale at March 31, 2010 and December 31, 2009 is as follows:

(in millions)		March 31, 2010		December 31, 2009
Assets:
	Fixed maturity securities	$	163,336	$	34,495
	Deferred policy acquisition costs		24,204		3,322
	Equity securities		15,366		2,947
	Other invested assets		13,269		4,256
	Short-term investments		13,170		3,501
	Separate account assets		10,675		3,467
	Mortgage and other loans receivable, net		9,096		3,997
	Goodwill		3,457		25
	Other assets		3,867		369
Total Assets of businesses held for sale		$	256,440	$	56,379
Liabilities:
	Future policy benefits for life and accident and health insurance contracts	$	108,812	$	38,023
	Policyholder contract deposits		79,312		3,133
	Separate account liabilities		10,675		3,467
	Other liabilities		19,038		3,976
Total Liabilities of businesses held for sale		$	217,837	$	48,599

4. Business Combination

    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 general 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 maintain Chartis International's share in the substantial Japanese market, which is undergoing significant consolidation.

    The purchase was accounted for under the acquisition method. Chartis identified and estimated certain of the fair values of assets acquired, liabilities assumed, and noncontrolling interests of Fuji as of the acquisition date. Because the acquisition was completed on the last day of the quarter, Chartis has not obtained final appraisals of Fuji's insurance contracts, loans, certain real estate or intangible assets.

    Based on the estimated fair values assigned to the assets acquired, liabilities assumed and noncontrolling interests, Chartis recorded an unallocated purchase price of $581 million in Other liabilities in the Consolidated Balance Sheet. Chartis is in the process of reassessing the recognition and measurement of identifiable assets acquired, including the value of the business acquired and other intangibles, and liabilities assumed. Upon

20

American International Group, Inc., and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

completion of the reassessment process, Chartis will adjust the fair value of the assets acquired and liabilities assumed for any significant differences to the provisional fair values. An adjustment to the purchase price allocation may also occur if new information on Fuji becomes known or discovered within one year from the acquisition date. To the extent an unallocated purchase price credit remains, AIG will record a bargain purchase gain. It is anticipated that any gain recognized will not be subject to U.S. or foreign income tax, because such gain would only be recognized for tax purposes upon sale of the Fuji shares.

The following table summarizes the estimated preliminary fair values of major classes of assets acquired and liabilities assumed and the unallocated purchase price at the date of acquisition:

(in millions)				At March 31, 2010
Identifiable net assets:
	Investments			$	10,121
	Cash				6
	Premiums and other receivables				889
	Reinsurance assets				517
	Real estate and other fixed assets				428
	Other assets				108
	Liability for unpaid claims and claims adjustment expense				(1,561	)
	Unearned premiums				(3,139	)
	Future policy benefits for life and accident and health insurance contracts				(1,934	)
	Other policyholder funds				(3,536	)
	Other liabilities				(460	)
Total preliminary identifiable net assets acquired					1,439
	Less:
		Cash consideration transferred			145
		Fair value of the noncontrolling interest			421
		Fair value of AIG's previous equity interest in Fuji			292
			Unallocated purchase price	$	581

    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 gain of $47 million offset by a $72 million charge resulting from the reversal through income of Chartis' share of Fuji's accumulated other comprehensive income. The loss was recorded in Other realized capital gains (losses) in the Consolidated Statement of Income (Loss). The fair value of AIG's previous equity interest and the noncontrolling interest were based on the publicly-traded share price on the Tokyo Stock Exchange as of the acquisition date. The acquisition-related costs, consisting primarily of legal and transaction fees, were recorded in Other expenses in the Consolidated Statement of Income (Loss).

The following unaudited summarized pro forma consolidated income statement information assumes that the acquisition occurred as of January 1, 2009. The pro forma amounts are for comparative purposes only and may not necessarily reflect the results of operations which 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.

Three Months Ended March 31, (in millions)	2010		2009
Total revenues	$	17,327	$	13,863
Net income (loss)		2,181		(5,416	)
Net income (loss) attributable to AIG		1,471		(4,500	)

21

American International Group, Inc., and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

5. Fair Value Measurements

Fair Value Measurements on a Recurring Basis

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

•

trading and available for sale securities portfolios;

•

certain mortgage and other loans receivable;

•

derivative assets and liabilities;

•

securities purchased/sold under agreements to resell/repurchase;

•

non-traded equity investments and certain private limited partnerships and certain hedge funds included in other invested assets;

•

certain short-term investments;

•

separate and variable account assets;

•

certain policyholder contract deposits;

•

securities and spot commodities sold but not yet purchased;

•

certain trust deposits and deposits due to banks and other depositors;

•

certain CPFF;

•

certain long-term debt; and

•

certain hybrid financial instruments included in Other liabilities.

    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 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.

Fair Value Hierarchy

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

•

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

22

American International Group, Inc., and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

actively traded listed common stocks and derivative contracts, most separate account assets and most mutual funds.

•

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

•

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

    The following is a description of the valuation methodologies used for instruments carried at fair value:

Valuation Methodologies

Incorporation of Credit Risk in Fair Value Measurements

•

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



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

•

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

23

American International Group, Inc., and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

    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.

Fixed Maturity Securities — 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 fixed maturity securities in its trading and available for sale portfolios. Market price data is generally obtained from dealer markets.

    AIG estimates the fair value of fixed maturity securities not traded in active markets, including receivables (payables) arising from securities purchased (sold) under agreements to resell (repurchase), and mortgage and other loans receivable for which AIG elected the fair value option, by referring to traded securities with similar attributes, using dealer quotations, a matrix pricing methodology, discounted cash flow analyses and/or internal valuation models. This methodology considers such factors as the issuer's industry, the security's rating and tenor, its coupon rate, its position in the capital structure of the issuer, yield curves, credit curves, prepayment rates and other relevant factors. For certain fixed maturity 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.

Maiden Lane II and Maiden Lane III

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

    The fair value methodology used assumes that the underlying collateral in the Maiden Lane Interests will continue to be held and generate cash flows into the foreseeable future and does not assume a current liquidation of the assets underlying the Maiden Lane Interests. Other methodologies employed or assumptions made in

24

American International Group, Inc., and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

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

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

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

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

		Fair Value Change
March 31, 2010 (in millions)
		Maiden Lane II			Maiden Lane III
Discount Rates:
	200 basis point increase	$	(90	)	$	(659	)
	200 basis point decrease		101			769
	400 basis point increase		(170	)		(1,225	)
	400 basis point decrease		215			1,672
Estimated Future Cash Flows:
	10% increase		292			833
	10% decrease		(296	)		(831	)
	20% increase		579			1,661
	20% decrease		(588	)		(1,653	)

    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

25

American International Group, Inc., and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

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.

Direct Private Equity Investments — Other Invested Assets

    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

    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.

Freestanding Derivatives

    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

26

American International Group, Inc., and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

transactions, third party pricing services and/or broker or dealer quotations, or other empirical market data. When appropriate, valuations are adjusted for various factors such as liquidity, bid/offer spreads and credit considerations. Such adjustments are generally based on available market evidence. In the absence of such evidence, management's best estimate is used.

Embedded Policy Derivatives

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

AIGFP's Super Senior Credit Default Swap Portfolio

    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

27

American International Group, Inc., and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

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 63.4 percent of the underlying securities used in the valuation at March 31, 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.

28

American International Group, Inc., and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

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

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

•

Current policyholder account values and related surrender charges;

•

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

•

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

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

Securities and spot commodities sold but not yet purchased

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

Other long-term debt

    When fair value accounting has been elected, the fair value of non-structured liabilities is generally determined by using market prices from exchange or dealer markets, when available, or discounting expected cash flows using the appropriate discount rate for the applicable maturity. The discount rate is based on an implicit rate determined with the use of observable CDS market spreads to determine the risk of non-performance for AIG. 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 (where performance is linked to structured interest rates, inflation or currency risks) and hybrid financial instruments (performance linked to risks other than 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.

29

American International Group, Inc., and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

Assets and Liabilities Measured at Fair Value on a Recurring Basis

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

At March 31, 2010 (in millions)			Level 1		Level 2		Level 3		Counterparty Netting(a)			Cash Collateral(b)			Total
Assets:
	Bonds available for sale:
		U.S. government and government sponsored entities	$	100	$	4,756	$	-	$	-		$	-		$	4,856
		Obligations of states, municipalities and Political subdivisions		320		50,885		948		-			-			52,153
		Non-U.S. governments		197		23,615		5		-			-			23,817
		Corporate debt		-		130,435		3,917		-			-			134,352
		Residential mortgage-backed securities (RMBS)		-		20,387		6,832		-			-			27,219
		Commercial mortgage-backed securities (CMBS)		-		3,549		4,396		-			-			7,945
		Collateralized Debt Obligations/Asset Backed Securities (CDO/ABS)		-		1,952		4,576		-			-			6,528
Total bonds available for sale				617		235,579		20,674		-			-			256,870
	Bond trading securities:
		U.S. government and government sponsored entities		433		6,313		-		-			-			6,746
		Obligations of states, municipalities and Political subdivisions		-		348		-		-			-			348
		Non-U.S. governments		1		395		2		-			-			398
		Corporate debt		-		1,658		7		-			-			1,665
		RMBS		-		2,534		5		-			-			2,539
		CMBS		-		2,282		294		-			-			2,576
		CDO/ABS		-		4,198		7,895		-			-			12,093
Total bond trading securities				434		17,728		8,203		-			-			26,365
	Equity securities available for sale:
		Common stock		4,219		7		36		-			-			4,262
		Preferred stock		-		685		52		-			-			737
		Mutual funds		1,800		32		-		-			-			1,832
Total equity securities available for sale				6,019		724		88		-			-			6,831
	Equity securities trading:
		Common stock		416		95		1		-			-			512
		Mutual funds		101		-		-		-			-			101
Total equity securities trading				517		95		1		-			-			613
	Mortgage and other loans receivable			-		157		-		-			-			157
	Other invested assets(c)			1,432		2,869		5,853		-			-			10,154
	Unrealized gain on swaps, options and forward transactions:
		Interest rate contracts		-		26,308		207		-			-			26,515
		Foreign exchange contracts		-		393		32		-			-			425
		Equity contracts		59		567		202		-			-			828
		Commodity contracts		-		46		20		-			-			66
		Credit contracts		-		3		556		-			-			559
		Other contracts		4		562		72		-			-			638
		Counterparty netting and cash collateral		-		-		-		(16,816	)		(4,832	)		(21,648	)
Total unrealized gain on swaps, options and forward transactions				63		27,879		1,089		(16,816	)		(4,832	)		7,383
	Securities purchased under agreements to resell			-		1,615		-		-			-			1,615
	Short-term investments			3,986		18,198		-		-			-			22,184
	Separate account assets			49,740		2,213		-		-			-			51,953
	Other assets			-		13		-		-			-			13
Total			$	62,808	$	307,070	$	35,908	$	(16,816	)	$	(4,832	)	$	384,138
Liabilities:
	Policyholder contract deposits		$	-	$	-	$	641	$	-		$	-		$	641
	Securities sold under agreements to repurchase			-		3,418		-		-			-			3,418
	Securities and spot commodities sold but not yet purchased			303		155		-		-			-			458
	Unrealized loss on swaps, options and forward transactions:
		Interest rate contracts		-		20,214		1,493		-			-			21,707
		Foreign exchange contracts		-		702		3		-			-			705
		Equity contracts		3		631		147		-			-			781
		Commodity contracts		-		53		-		-			-			53
		Credit contracts(d)		-		41		5,466		-			-			5,507
		Other contracts		-		218		202		-			-			420
		Counterparty netting and cash collateral		-		-		-		(16,816	)		(6,061	)		(22,877	)
Total unrealized loss on swaps, options and forward transactions				3		21,859		7,311		(16,816	)		(6,061	)		6,296
	Trust deposits and deposits due to banks and other depositors			-		16		-		-			-			16
	Federal Reserve Bank of New York Commercial Paper Funding Facility			-		2,285		-		-			-			2,285
	Other long-term debt			-		11,677		1,123		-			-			12,800
Total			$	306	$	39,410	$	9,075	$	(16,816	)	$	(6,061	)	$	25,914

30

American International Group, Inc., and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

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

(a)

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

(b)

Represents cash collateral posted and received. Securities collateral posted for derivative transactions that is reflected in Fixed maturity securities in the Consolidated Balance Sheet, and collateral received, not reflected in the Consolidated Balance Sheet, were $1.4 billion and $125 million, respectively, at March 31, 2010 and $1.6 billion and $289 million, respectively, at December 31, 2009.

(c)

Approximately 5 percent and 6 percent of the fair value of the assets recorded as Level 3 relates to various private equity, real estate, hedge fund and fund-of-funds investments that are consolidated by AIG at March 31, 2010 and December 31, 2009, respectively. AIG's ownership in these funds represented 51.7 percent, or $0.8 billion, of Level 3 assets at March 31, 2010 and 71.1 percent, or $1.6 billion, of Level 3 assets at December 31, 2009.

(d)

Included in Level 3 is the fair value derivative liability of $4.6 billion and $4.8 billion at March 31, 2010 and December 31, 2009, respectively, on the AIGFP super senior credit default swap portfolio.

Transfers of Level 1 and Level 2 Assets and Liabilities

    AIG had no significant transfers between Level 1 and Level 2 during the three-month period ended March 31, 2010.

31

American International Group, Inc., and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

Changes in Level 3 Recurring Fair Value Measurements

The following tables present changes during the three-month periods ended March 31, 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 March 31, 2010 and 2009:

(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 to 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 March 31, 2010
Assets:
	Bonds available for sale:
		Obligations of states, municipalities and political subdivisions	$	613		$	(14	)	$	(7	)	$	109		$	257		$	(10	)	$	-		$	948		$	-
		Non-U.S. governments		753			-			-			-			-			35			(783	)		5			-
		Corporate debt		4,791			(19	)		86			(67	)		(660	)		(47	)		(167	)		3,917			-
		RMBS		6,654			(119	)		442			(142	)		31			(3	)		(31	)		6,832			-
		CMBS		4,939			(480	)		816			(133	)		509			306			(1,561	)		4,396			-
		CDO/ABS		4,724			21			234			(16	)		31			27			(445	)		4,576			-
Total bonds available for sale				22,474			(611	)		1,571			(249	)		168			308			(2,987	)		20,674			-
	Bond trading securities:
		U.S. government and government sponsored entities		16			-			-			-			-			(16	)		-			-			-
		Non-U.S. governments		56			-			-			(50	)		2			-			(6	)		2			-
		Corporate debt		121			1			-			-			-			(5	)		(110	)		7			1
		RMBS		4			1			-			-			-			-			-			5			1
		CMBS		325			40			-			(7	)		34			2			(100	)		294			101
		CDO/ABS		6,865			1,117			-			(87	)		-			20			(20	)		7,895			549
Total bond trading securities				7,387			1,159			-			(144	)		36			1			(236	)		8,203			652
	Equity securities available for sale:
		Common stock		35			(2	)		5			1			-			-			(3	)		36			-
		Preferred stock		54			(5	)		2			-			1			-			-			52			-
		Mutual funds		6			-			-			-			-			-			(6	)		-			-
Total equity securities available for sale				95			(7	)		7			1			1			-			(9	)		88			-
	Equity securities trading:
		Common stock		1			-			-			-			-			-			-			1			-
		Mutual funds		7			-			-			-			-			(1	)		(6	)		-			-
Total equity securities trading				8			-			-			-			-			(1	)		(6	)		1			-
	Other invested assets			6,910			(131	)		283			(926	)		(98	)		(3	)		(182	)		5,853			(28	)
	Other assets			270			-			-			(270	)		-			-			-			-			-
	Separate account assets			1			-			-			-			-			-			(1	)		-			-
Total			$	37,145		$	410		$	1,861		$	(1,588	)	$	107		$	305		$	(3,421	)	$	34,819		$	624
Liabilities:
	Policyholder contract deposits		$	(5,214	)	$	152		$	-		$	(38	)	$	-		$	32		$	4,427		$	(641	)	$	(141	)
	Unrealized loss on swaps, options and forward transactions, net:
		Interest rate contracts		(1,469	)		98			-			96			(11	)		-			-			(1,286	)		(167	)
		Foreign exchange contracts		29			-			-			-			-			-			-			29			3
		Equity contracts		74			(10	)		-			-			(9	)		-			-			55			(6	)
		Commodity contracts		22			(2	)		-			-			-			-			-			20			(2	)
		Credit contracts		(4,545	)		164			-			(529	)		-			-			-			(4,910	)		165
		Other contracts		(176	)		41			-			(3	)		-			1			7			(130	)		(3	)
Total unrealized loss on swaps, options and forward transactions, net				(6,065	)		291			-			(436	)		(20	)		1			7			(6,222	)		(10	)
	Other long-term debt			(881	)		(135	)		-			555			(662	)		-			-			(1,123	)		136
Total			$	(12,160	)	$	308		$	-		$	81		$	(682	)	$	33		$	4,434		$	(7,986	)	$	(15	)

32

American International Group, Inc., and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

(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			Balance End of Period			Changes in Unrealized Gains (Losses) on Instruments Held at End of Period
Three Months Ended March 31, 2009
Assets:
	Bonds available for sale	$	18,826		$	(1,019	)	$	614		$	(898	)	$	272		$	58		$	17,853		$	-
	Bond trading securities		6,987			(2,544	)		-			(197	)		49			(15	)		4,280			(1,586	)
	Common and preferred stock available for sale		111			(3	)		-			(3	)		7			(12	)		100			-
	Common and preferred stock trading		3			-			-			-			-			3			6			-
	Other invested assets		11,168			(936	)		(687	)		252			(109	)		-			9,688			(980	)
	Other assets		325			6			-			(20	)		-			-			311			6
	Separate account assets		830			-			-			1			-			(34	)		797			-
Total		$	38,250		$	(4,496	)	$	(73	)	$	(865	)	$	219		$	-		$	33,035		$	(2,560	)
Liabilities:
	Policyholder contract deposits	$	(5,458	)	$	217		$	-		$	(19	)	$	-		$	(297	)	$	(5,557	)	$	2,094
	Securities sold under agreements to repurchase		(85	)		2			-			36			-			-			(47	)		(12	)
	Unrealized loss on swaps, options and forward transactions, net		(10,570	)		(1,312	)		-			277			(252	)		1			(11,856	)		(1,069	)
	Other long-term debt		(1,147	)		442			-			122			52			-			(531	)		(420	)
Total		$	(17,260	)	$	(651	)	$	-		$	416		$	(200	)	$	(296	)	$	(17,991	)	$	593

(a)

Total Level 3 derivative exposures have been netted in these tables for presentation purposes only.

(b)

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

Major Category of Assets/Liabilities	Consolidated Statement of Income (Loss) Line Items
Bonds available for sale	•       Net realized capital gains (losses)
Bond trading securities	•       Net investment income
	•       Other income
Other invested assets	•       Net realized capital gains (losses)
	•       Other income
Policyholder contract deposits	•       Policyholder benefits and claims incurred
	•       Net realized capital gains (losses)
Unrealized loss on swaps, options and forward transactions, net	•       Unrealized market valuation gains (losses) on AIGFP super senior credit default swap portfolio
	•       Net realized capital gains (losses)
	•       Other income

(c)

Transfers for the three months ended March 31, 2010 are comprised of gross transfers into Level 3 assets and liabilities of $2.0 billion and gross transfers out of Level 3 assets and liabilities of $1.2 billion. AIG's policy is to record transfers of assets and liabilities into or out of Level 3 at their fair values as of the end of each reporting period, consistent with the date of the determination of fair value. As a result, the Net realized and unrealized gains (losses) included in income or other comprehensive income and as shown in the table above exclude $6.6 million of net losses related to assets and liabilities transferred into Level 3 during the period, and include $33 million of net gains related to assets and liabilities transferred out of Level 3 during the period.

33

American International Group, Inc., and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

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

Transfers of Level 3 Assets and Liabilities

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

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

    During the three-month period ended March 31, 2010, AIG transferred into Level 3 approximately $1.2 billion of assets, consisting of certain ABS, CMBS and RMBS, as well as private placement corporate debt and certain municipal bonds related to SunAmerica Affordable Housing partnerships. A majority of the transfers into Level 3 related to investments in ABS, RMBS and CMBS and was due to a decrease in market transparency and downward credit migration in these securities. Transfers into Level 3 for private placement corporate debt are primarily the result of AIG overriding third party matrix pricing information downward to better reflect the additional risk premium associated with those securities that AIG believes was not captured in the matrix. Certain municipal bonds were transferred into Level 3 based on limited market activity for the particular issuances and related limitations on observable inputs for their valuation.

    Assets are transferred out of Level 3 when circumstances change such that significant inputs can be corroborated with market observable data. This may be due to a significant increase in market activity for the asset, a specific event, one or more significant input(s) becoming observable, or when a long-term interest rate significant to a valuation becomes short-term and thus observable. During the three-month period ended March 31, 2010, AIG transferred approximately $1.1 billion of assets out of Level 3. These transfers out of Level 3 are primarily related to investments in private placement corporate debt, as well as investments in certain ABS and RMBS. Transfers out of Level 3 for private placement corporate debt and for ABS were primarily the result of AIG using observable pricing information or a third party pricing quote that appropriately reflects the fair value of those securities, without the need for adjustment based on AIG's own assumptions regarding the characteristics of a specific security or the current liquidity in the market. Transfers out of Level 3 for RMBS investments were primarily due to increased usage of pricing from valuation service providers that were reflective of market activity, where previously an internally adjusted price had been used.

    During the three-month period ended March 31, 2010, AIG transferred into Level 3 approximately $710 million of liabilities related to term notes and hybrid term notes, primarily due to an unobservable credit linked component comprising a significant amount of the valuations. The remaining $64 million transfer in was due to movement in market variables. A majority of the transfers out of Level 3 liabilities, which totaled $92 million, were due to recognition of the cash flow variability on interest rate and cross currency swaps with securitization vehicles. Other transfers out of Level 3 liabilities were due to movement in market variables.

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

34

American International Group, Inc., and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

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

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

			March 31, 2010(a)					December 31, 2009
(in millions)		Investment Category Includes	Fair Value Using Net Asset Value			Unfunded Commitments		Fair Value Using Net Asset Value			Unfunded Commitments
Investment Category
Private equity funds:
	Leveraged buyout	Debt and/or equity investments made as part of a transaction in which assets of mature companies are acquired from the current shareholders, typically with the use of financial leverage.	$	2,538		$	1,532	$	3,166		$	1,553
	Non-U.S.	Investments that focus primarily on Asian and European based buyouts, expansion capital, special situations, turnarounds, venture capital, mezzanine and distressed opportunities strategies.		360			105		543			103
	Venture capital	Early-stage, high-potential, growth companies expected to generate a return through an eventual realization event, such as an initial public offering or sale of the company.		281			47		427			48
	Fund of funds	Funds that invest in other funds, which invest in various diversified strategies		794			166		616			40
	Distressed	Securities of companies that are already in default, under bankruptcy protection, or troubled.		215			94		238			91
	Other	Real estate, energy, multi-strategy, mezzanine, and industry-focused strategies.		230			130		223			117
Total private equity funds				4,418			2,074		5,213			1,952
Hedge funds:
	Event-driven	Securities of companies undergoing material structural changes, including. mergers, acquisitions, and other reorganizations.		718			-		1,373			-
	Long-short	Securities the manager believes are undervalued, with corresponding short positions to hedge market risk.		352			- -		825			- -
	Fund of funds	Funds that invest in other funds, which invest in various diversified strategies.		290			- -		304			- -
	Relative value	Simultaneous long and short positions in closely related markets.		9			- -		286			- -
	Distressed	Securities of companies that are already in default, under bankruptcy protection, or troubled.		297			- -		272			- -
	Other	Non-U.S. companies, futures and commodities, and multi-strategy and industry-focused strategies.		225			- -		394			- -
Total hedge funds				1,891			-		3,454			-
Global real estate funds		U.S. and Non-U.S. commercial real estate.		899			87		929			64
Total			$	7,208	(b)	$	2,161	$	9,596	(b)	$	2,016

(a)

Due to the sale of the investment advisory business, certain partnerships and hedge funds are no longer carried at net asset value per share.

(b)

Includes investments of entities classified as held for sale of approximately $0.1 billion and $1.1 billion at March 31, 2010 and December 31, 2009, respectively.

    At March 31, 2010, private equity fund investments included above are not redeemable during the lives of the funds, and have expected remaining lives that extend in some cases more than 10 years. At that date, 43 percent of the total above have expected remaining lives of less than three years, 35 percent between 3 and 7 years, and

35

American International Group, Inc., and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

22 percent between 7 and 10 years. Expected lives are based upon legal maturity, which can be extended at the general manager's discretion, typically in one year increments.

    At March 31, 2010, hedge fund investments included above are redeemable monthly (11 percent), quarterly (34 percent), semi-annually (11 percent) and annually (44 percent), with redemption notices ranging from 1 day to 180 days. More than 77 percent require redemption notices of less than 90 days. Investments representing approximately 14 percent of the value of the hedge fund investments cannot be redeemed because the investments include restrictions that do not allow for redemptions within a pre-defined timeframe. These restrictions expire no later than December 31, 2012. Funds that equate to 62 percent of the total value of hedge funds hold at least one investment that the general manager deems to be illiquid. In order to treat investors fairly and to accommodate subsequent subscription and redemption requests, the general manager isolates these illiquid assets from the rest of the fund until the assets become liquid.

    At March 31, 2010, global real estate fund investments included above are not redeemable during the lives of the funds, and have expected remaining lives that extend in some cases more than 10 years. Twelve percent of these funds have expected remaining lives of less than three years, 69 percent between 3 and 7 years, and 19 percent between 7 and 10 years. Expected lives are based upon legal maturity, which can be extended at the general manager's discretion, typically in one year increments.

Fair Value Measurements on a Non-Recurring Basis

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

•

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

•

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

•

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

•

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

36

American International Group, Inc., and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

•

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

•

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

•

Finance Receivables:

•

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

•

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

•

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

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

		Assets at Fair Value								Impairment Charges
		Non-Recurring Basis								Three Months Ended March 31,
(in millions)		Level 1		Level 2		Level 3		Total		2010		2009
At March 31, 2010
	Investment real estate	$	-	$	-	$	2,804	$	2,804	$	284	$	158
	Other investments		-		-		757		757		73		290
	Aircraft		-		-		1,881		1,881		347		-
	Other assets		-		-		173		173		18		72
Total		$	-	$	-	$	5,615	$	5,615	$	722	$	520
At December 31, 2009
	Investment real estate	$	-	$	-	$	3,148	$	3,148
	Finance receivables		-		-		694		694
	Other investments		99		-		1,005		1,104
	Aircraft		-		-		62		62
	Other assets		-		85		227		312
Total		$	99	$	85	$	5,136	$	5,320

    The fair value disclosed in the table above is unadjusted for transaction costs. The amounts recorded on the consolidated balance sheet are net of transaction costs.

37

American International Group, Inc., and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

Fair Value Option

    AIG may choose to measure at fair value many financial instruments and certain other assets and liabilities that are not required to be measured at fair value. Subsequent changes in fair value for designated items are required to be reported in earnings. Unrealized gains and losses on financial instruments in AIG's insurance businesses and in AIGFP for which the fair value option was elected are classified in Other income in the Consolidated Statement of Income (Loss).

The following table presents the gains or losses recorded during the three-month periods ended March 31, 2010 and 2009 related to the eligible instruments for which AIG elected the fair value option:

		Gain (Loss) Three Months Ended March 31,
(in millions)		2010			2009
Assets:
	Mortgage and other loans receivable	$	40		$	(47	)
	Trading securities		1,437			(1,671	)
	Trading – Maiden Lane Interests		911			(2,194	)
	Securities purchased under agreements to resell		(4	)		(16	)
	Other invested assets		(10	)		(22	)
	Short-term investments		-			(2	)
Liabilities:
	Securities sold under agreements to repurchase		52			121
	Securities and spot commodities sold but not yet purchased		(18	)		(34	)
	Trust deposits and deposits due to banks and other depositors		-			11
	Debt		(485	)		2,587
	Other liabilities		-			138
Total gain (loss)(a)(b)		$	1,923		$	(1,129	)

(a)

Excludes businesses held for sale in the Consolidated Balance Sheet.

(b)

Not included in the table above were gains of $13 million and $1.4 billion for the three-month periods ended March 31, 2010 and 2009, respectively, that were primarily due to changes in the fair value of derivatives, trading securities and certain other invested assets for which the fair value option was not elected. Included in these amounts were unrealized market valuation gains of $119 million and unrealized market valuation losses of $452 million for the three-month periods ended March 31, 2010 and 2009, respectively, related to AIGFP's super senior credit default swap portfolio.

    Interest income and expense and dividend income on assets and liabilities elected under the fair value option are recognized and classified in the Consolidated Statement of Income (Loss) depending on the nature of the instrument and related market conventions. For AIGFP related activity, interest, dividend income, and interest expense are included in Other income. Otherwise, interest and dividend income are included in Net investment income in the Consolidated Statement of Income (Loss). See Note 1(a) to the Consolidated Financial Statements in the 2009 Annual Report on Form 10-K for additional information about AIG's policies for recognition, measurement, and disclosure of interest and dividend income and interest expense.

    During the three-month periods ended March 31, 2010 and 2009, AIG recognized a loss of $378 million and a gain of $1.2 billion, respectively, attributable to the observable effect of changes in credit spreads on AIG's own liabilities for which the fair value option was elected. AIG calculates the effect of these credit spread changes using discounted cash flow techniques that incorporate current market interest rates, AIG's observable credit spreads on these liabilities and other factors that mitigate the risk of nonperformance such as collateral posted.

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American International Group, Inc., and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

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

		At March 31, 2010							At December 31, 2009
(in millions)		Fair Value		Outstanding Principal Amount		Difference			Fair Value		Outstanding Principal Amount		Difference
Assets:
	Mortgage and other loans receivable	$	157	$	258	$	(101	)	$	119	$	253	$	(134	)
Liabilities:
	Long-term debt	$	11,094	$	9,755	$	1,339		$	11,308	$	10,111	$	1,197

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

Fair Value Information about Financial Instruments Not Measured at Fair Value

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

•

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

•

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

•

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

•

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

•

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

•

Long-term debt:  Fair values of these obligations were determined for disclosure purposes by reference to quoted market prices, where available and appropriate, or discounted cash flow calculations based upon

39

American International Group, Inc., and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

AIG's current market-observable implicit-credit-spread rates for similar types of borrowings with maturities consistent with those remaining for the debt being valued.

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

		March 31, 2010				December 31, 2009
(in millions)		Carrying Value		Fair Value		Carrying Value		Fair Value
Assets:
	Fixed maturities	$	283,235	$	283,235	$	396,794	$	396,794
	Equity securities		7,444		7,444		17,840		17,840
	Mortgage and other loans receivable		22,533		21,536		27,461		25,957
	Finance receivables, net of allowance		18,912		17,234		20,327		18,974
	Other invested assets*		31,784		30,776		43,737		42,474
	Securities purchased under agreements to resell		1,615		1,615		2,154		2,154
	Short-term investments		38,800		38,800		47,263		47,263
	Cash		2,133		2,133		4,400		4,400
	Unrealized gain on swaps, options and forward transactions		7,383		7,383		9,130		9,130
Liabilities:
	Policyholder contract deposits associated with investment-type contracts		108,096		115,581		168,846		175,612
	Securities sold under agreements to repurchase		3,418		3,418		3,505		3,505
	Securities and spot commodities sold but not yet purchased		458		458		1,030		1,030
	Unrealized loss on swaps, options and forward transactions		6,296		6,296		5,403		5,403
	Trust deposits and deposits due to banks and other depositors		1,030		1,030		1,641		1,641
	Federal Reserve Bank of New York Commercial Paper Funding Facility		2,285		2,285		4,739		4,739
	Federal Reserve Bank of New York credit facility		27,400		27,916		23,435		23,390
	Other long-term debt		109,744		108,707		113,298		94,458

*

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

40

American International Group, Inc., and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

6. Investments

Securities Available for Sale

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

(in millions)			Amortized Cost or Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value		Other-Than- Temporary Impairments in AOCI(a)
March 31, 2010
Bonds available for sale:
	U.S. government and government sponsored entities		$	4,777	$	106	$	(27	)	$	4,856	$	-
	Obligations of states, municipalities and political subdivisions			50,427		2,018		(292	)		52,153		-
	Non-U.S. governments			23,305		725		(213	)		23,817		(1	)
	Corporate debt			127,707		8,507		(1,862	)		134,352		14
	Mortgage-backed, asset-backed and collateralized:
		RMBS		30,089		1,027		(3,897	)		27,219		(1,595	)
		CMBS		10,869		256		(3,180	)		7,945		(451	)
		CDO/ABS		7,242		324		(1,038	)		6,528		64
	Total mortgage-backed, asset-backed and collateralized			48,200		1,607		(8,115	)		41,692		(1,982	)
Total bonds available for sale(b)				254,416		12,963		(10,509	)		256,870		(1,969	)
Equity securities available for sale:
	Common stock			2,511		1,770		(19	)		4,262		-
	Preferred stock			635		103		(1	)		737		-
	Mutual funds			1,736		102		(6	)		1,832		-
Total equity securities available for sale				4,882		1,975		(26	)		6,831		-
Total(c)			$	259,298	$	14,938	$	(10,535	)	$	263,701	$	(1,969	)
December 31, 2009
Bonds available for sale:
	U.S. government and government sponsored entities		$	5,098	$	174	$	(49	)	$	5,223	$	-
	Obligations of states, municipalities and political subdivisions			52,324		2,163		(385	)		54,102		-
	Non-U.S. governments			63,080		3,153		(649	)		65,584		(1	)
	Corporate debt			185,188		10,826		(3,876	)		192,138		119
	Mortgage-backed, asset-backed and collateralized:
		RMBS		32,173		991		(4,840	)		28,324		(2,121	)
		CMBS		18,717		195		(5,623	)		13,289		(739	)
		CDO/ABS		7,911		284		(1,304	)		6,891		(63	)
	Total mortgage-backed, asset-backed and collateralized			58,801		1,470		(11,767	)		48,504		(2,923	)
Total bonds available for sale(b)				364,491		17,786		(16,726	)		365,551		(2,805	)
Equity securities available for sale:
	Common stock			4,460		2,913		(75	)		7,298		-
	Preferred stock			740		94		(20	)		814		-
	Mutual funds			1,264		182		(36	)		1,410		-
Total equity securities available for sale				6,464		3,189		(131	)		9,522		-
Total(c)			$	370,955	$	20,975	$	(16,857	)	$	375,073	$	(2,805	)

(a)

Represents the amount of other-than-temporary impairment losses recognized in Accumulated other comprehensive income, which, starting on April 1, 2009, were not included in earnings. Amount includes unrealized gains and losses on impaired securities relating to changes in the value of such securities subsequent to the impairment measurement date.

(b)

At March 31, 2010 and December 31, 2009, bonds available for sale held by AIG that were below investment grade or not rated totaled $18.2 billion and $24.5 billion, respectively.

(c)

Excludes $163.0 billion and $36.1 billion of available for sale investments at fair value from businesses held for sale at March 31, 2010 and December 31, 2009, respectively. See Note 3 herein.

41

American International Group, Inc., and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

Unrealized losses on Securities Available for Sale

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

		12 Months or Less				More than 12 Months				Total
(in millions)		Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses
March 31, 2010*
Bonds available for sale:
	U.S. government and government sponsored entities	$	2,088	$	21	$	123	$	6	$	2,211	$	27
	Obligations of states, municipalities and political subdivisions		4,885		100		3,003		192		7,888		292
	Non-U.S. governments		3,851		110		824		103		4,675		213
	Corporate debt		16,165		640		13,341		1,222		29,506		1,862
	RMBS		4,876		1,609		7,572		2,288		12,448		3,897
	CMBS		1,854		1,224		3,428		1,956		5,282		3,180
	CDO/ABS		1,441		379		2,443		659		3,884		1,038
Total bonds available for sale			35,160		4,083		30,734		6,426		65,894		10,509
Equity securities available for sale:
	Common stock		152		19		-		-		152		19
	Preferred stock		7		1		-		-		7		1
	Mutual funds		109		6		-		-		109		6
Total equity securities available for sale			268		26		-		-		268		26
Total		$	35,428	$	4,109	$	30,734	$	6,426	$	66,162	$	10,535
December 31, 2009*
Bonds available for sale:
	U.S. government and government sponsored entities	$	1,414	$	35	$	105	$	14	$	1,519	$	49
	Obligations of states, municipalities and political subdivisions		5,405		132		3,349		253		8,754		385
	Non-U.S. governments		7,842		239		3,286		410		11,128		649
	Corporate debt		24,696		1,386		22,139		2,490		46,835		3,876
	RMBS		7,135		3,051		6,352		1,789		13,487		4,840
	CMBS		5,013		3,927		4,528		1,696		9,541		5,623
	CDO/ABS		2,809		1,119		1,693		185		4,502		1,304
Total bonds available for sale			54,314		9,889		41,452		6,837		95,766		16,726
Equity securities available for sale:
	Common stock		933		75		-		-		933		75
	Preferred stock		172		20		-		-		172		20
	Mutual funds		333		36		-		-		333		36
Total equity securities available for sale			1,438		131		-		-		1,438		131
Total		$	55,752	$	10,020	$	41,452	$	6,837	$	97,204	$	16,857

*

Excludes fixed maturity and equity securities of businesses held for sale. See Note 3 herein.

    At March 31, 2010, AIG held 8,229 and 392 of individual fixed maturity and equity securities, respectively, that were in an unrealized loss position, of which 3,945 individual securities were in a continuous unrealized loss position for longer than twelve months.

42

American International Group, Inc., and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

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

Contractual Maturities

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

	Total Fixed Maturity Available for Sale Securities				Fixed Maturity Securities in a Loss Position
March 31, 2010 (in millions)	Amortized Cost		Fair Value		Amortized Cost		Fair Value
Due in one year or less	$	10,516	$	10,766	$	1,698	$	1,666
Due after one year through five years		52,935		55,234		11,151		10,538
Due after five years through ten years		64,693		67,641		12,825		12,239
Due after ten years		78,072		81,537		21,000		19,837
Mortgage-backed, asset-backed and collateralized		48,200		41,692		29,729		21,614
Total	$	254,416	$	256,870	$	76,403	$	65,894

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

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

	Three Months Ended March 31,
	2010				2009
(in millions)	Gross Realized Gains		Gross Realized Losses		Gross Realized Gains		Gross Realized Losses
Fixed maturities	$	369	$	74	$	355	$	355
Equity securities		114		4		63		120
Total	$	483	$	78	$	418	$	475

    For the three-month period ended March 31, 2010, the aggregate fair value of available for sale securities sold at a loss was $883 million, which resulted in a net realized capital loss of $63 million. The average periods of time that securities sold at a loss during the three-month period ended March 31, 2010 were trading continuously at a price below cost or amortized cost was approximately four months.

Evaluating Investments for Other-Than-Temporary Impairments

    On April 1, 2009, AIG adopted a new accounting standard on a prospective basis addressing the evaluation of fixed maturity securities for other-than-temporary impairments. These requirements have significantly altered AIG's policies and procedures for determining impairment charges recognized through earnings. The new standard requires a company to recognize the credit component (a credit impairment) of an other-than-temporary

43

American International Group, Inc., and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

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

Impairment Policy — Effective April 1, 2009 and Thereafter

Fixed Maturity Securities

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

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

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

    AIG considers severe price declines and the duration of such price declines in its assessment of potential credit impairments. AIG also modifies its modeled outputs for certain securities when it determines that price declines are indicative of factors not accounted for in the cash flow models.

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

44

American International Group, Inc., and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

Credit Impairments

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

(in millions)
Three Months Ended March 31, 2010
	Balance, beginning of year		$	7,803
	Increases due to:
		Credit impairments on new securities subject to impairment losses		137
		Additional credit impairments on previously impaired securities		601
	Reductions due to:
		Credit impaired securities fully disposed for which there was no prior intent or requirement to sell		(381	)
		Credit impaired securities for which there is a current intent or anticipated requirement to sell		(2	)
		Accretion on securities previously impaired due to credit(b)		(95	)
	Foreign exchange translation adjustments			(5	)
	Activity of discontinued operations			(76	)
	Impairments on securities reclassified to Assets of businesses held for sale			(709	)
Balance, end of period			$	7,273

(a)

Includes structured, corporate, municipal and sovereign fixed maturity securities.

(b)

Represents accretion recognized due to changes in cash flows expected to be collected over the remaining expected term of the credit impaired securities as well as the accretion due to the passage of time.

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

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

•

Current delinquency rates;

•

Expected default rates and timing of such defaults;

•

Loss severity and timing of any such recovery;

•

Expected prepayment speeds; and

•

Ratings of securities underlying structured products.

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

45

American International Group, Inc., and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

Equity Securities

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

•

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

•

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

•

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

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

Other Invested Assets

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

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

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

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

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

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American International Group, Inc., and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

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

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

7. Variable Interest Entities

    The accounting standards related to the consolidation of variable interest entities (VIEs) provide guidance for determining when to consolidate certain entities in which equity investors do not have the characteristics of a controlling financial interest or do not have sufficient equity that is at risk to allow the entity to finance its activities without additional subordinated financial support. Consolidation of a VIE by its primary beneficiary is not based on majority voting interest, but rather is based on other criteria.

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

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

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

Exposure to Loss

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

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

		VIE Assets*				VIE Liabilities				Off-Balance Sheet Exposure
(in billions)		March 31, 2010		December 31, 2009		March 31, 2010		December 31, 2009		March 31, 2010		December 31, 2009
	Real estate and investment funds	$	7.5	$	4.6	$	3.4	$	2.9	$	0.2	$	0.6
	Commercial paper conduit		2.3		3.6		1.4		3.0		-		-
	CDOs		-		0.2		-		0.1		-		-
	Affordable housing partnerships		2.7		2.5		0.3		-		-		-
	Other		7.6		3.4		4.7		2.1		-		-
	VIEs of held-for-sale entities		8.7		-		2.5		-		-		-
Total		$	28.8	$	14.3	$	12.3	$	8.1	$	0.2	$	0.6

*

Each of the VIE's assets can be used only to settle specific obligations of that VIE.

47

American International Group, Inc., and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

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

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

				Maximum Exposure to Loss
				On-Balance Sheet				Off-Balance Sheet
(in billions)		Total VIE Assets		Purchased and Retained Interests		Other		Commitments and Guarantees		Total
March 31, 2010
	Real estate and investment funds	$	14.9	$	2.2	$	0.2	$	0.6	$	3.0
	Affordable housing partnerships		1.3		-		1.3		-		1.3
	Maiden Lane Interests		39.9		6.2		-		-		6.2
	Other		0.9		0.2		-		-		0.2
	VIEs of held-for-sale entities		11.5		2.6		0.6		0.2		3.4
Total		$	68.5	$	11.2	$	2.1	$	0.8	$	14.1
December 31, 2009
	Real estate and investment funds	$	23.3	$	3.2	$	0.4	$	1.6	$	5.2
	Affordable housing partnerships		1.3		-		1.3		-		1.3
	Maiden Lane Interests		38.7		5.3		-		-		5.3
	Other		7.6		1.2		0.5		-		1.7
Total		$	70.9	$	9.7	$	2.2	$	1.6	$	13.5

48

American International Group, Inc., and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

Balance Sheet Classification

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

		Consolidated VIEs				Unconsolidated VIEs
(in billions)		March 31, 2010		December 31, 2009		March 31, 2010		December 31, 2009
Assets:
	Available for sale securities	$	0.2	$	0.9	$	0.2	$	0.3
	Trading securities		3.6		3.9		6.2		6.4
	Other invested assets		7.0		3.6		4.4		3.6
	Other asset accounts		7.5		5.9		-		1.6
	Assets of businesses held for sale		10.5		-		2.5		-
Total		$	28.8	$	14.3	$	13.3	$	11.9
Liabilities:
	FRBNY commercial paper funding facility	$	2.3	$	2.7	$	-	$	-
	Other long-term debt		5.7		4.6		-		-
	Other liability accounts		1.3		0.8		-		-
	Liabilities of businesses held for sale		3.0		-		-		-
Total		$	12.3	$	8.1	$	-	$	-

    See Note 1 — Recent Accounting Standards herein for effect of consolidation under the amended accounting standard for the consolidation of variable interest entities.

RMBS, CMBS, Other ABS and CDOs

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

    AIG, via AIGFP, also invests in CDOs and similar structures, which can be cash-based or synthetic and are managed by third parties. AIGFP's role is generally limited to that of a passive investor. It does not manage such structures.

    AIG's maximum exposure in these types of structures is limited to its investment in securities issued by these entities. Based on the nature of AIG's investments and its passive involvement in these types of structures, AIG has determined that it is not the primary beneficiary of these entities. The fair values of AIG's investments in these structures are reported in Notes 5 and 6 herein.

    See Notes 5, 6 and 10 to the Consolidated Financial Statements in the 2009 Annual Report on Form 10-K for additional information on VIEs and asset-backed securities.

8. Derivatives and Hedge Accounting

    AIG uses derivatives and other financial instruments as part of its financial risk management programs and as part of its investment operations. AIGFP has also transacted in derivatives as a dealer.

    Derivatives are financial arrangements among two or more parties with returns linked to or "derived" from some underlying equity, debt, commodity or other asset, liability, or foreign exchange rate or other index or the occurrence of a specified payment event. Derivative payments may be based on interest rates, exchange rates, prices of certain securities, commodities, or financial or commodity indices or other variables. Derivatives, with the exception of bifurcated embedded derivatives, are reflected at fair value on the Consolidated Balance Sheet in

49

American International Group, Inc., and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

Unrealized gain on swaps, options and forward transactions, at fair value and Unrealized loss on swaps, options and forward contracts, at fair value. Bifurcated embedded derivatives are recorded with the host contract on the Consolidated Balance Sheet.

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

		March 31, 2010								December 31, 2009
		Derivative Assets				Derivative Liabilities				Derivative Assets				Derivative Liabilities
(in millions)		Notional Amount(a)		Fair Value(b)		Notional Amount(a)		Fair Value(b)		Notional Amount(a)		Fair Value(b)		Notional Amount(a)		Fair Value(b)
Derivatives designated as hedging instruments:
	Interest rate contracts(c)	$	5,743	$	752	$	1,578	$	125	$	10,612	$	2,129	$	3,884	$	375
Derivatives not designated as hedging instruments:
	Interest rate contracts(c)		291,191		25,763		266,816		21,582		345,614		27,451		300,847		23,718
	Foreign exchange contracts		6,492		425		10,607		705		16,662		720		9,719		939
	Equity contracts		7,577		828		5,851		781		8,175		1,184		7,713		1,064
	Commodity contracts		292		66		110		53		759		883		381		373
	Credit contracts		2,277		559		142,890		5,507		3,706		1,210		190,275		5,815
	Other contracts		28,633		638		15,355		1,062		34,605		928		23,310		1,101
Total derivatives not designated as hedging instruments			336,462		28,279		441,629		29,690		409,521		32,376		532,245		33,010
Total derivatives		$	342,205	$	29,031	$	443,207	$	29,815	$	420,133	$	34,505	$	536,129	$	33,385

(a)

Notional amount represents a standard of measurement of the volume of derivatives business of AIG. Notional amount is generally not a quantification of market risk or credit risk and is not recorded on the Consolidated Balance Sheet. Notional amounts generally represent those amounts used to calculate contractual cash flows to be exchanged and are not paid or received, except for certain contracts such as currency swaps and certain credit contracts.

(b)

Fair value amounts are shown before the effects of counterparty netting adjustments and offsetting cash collateral.

(c)

Includes cross currency swaps.

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

		March 31, 2010						December 31, 2009
(in millions)		Derivative Assets			Derivative Liabilities(a)			Derivative Assets(b)			Derivative Liabilities(c)
	AIGFP derivatives	$	26,152		$	26,713		$	31,951		$	30,930
	Non-AIGFP derivatives		2,879			3,102			2,554			2,455
Total derivatives, gross			29,031			29,815			34,505			33,385
	Counterparty netting(d)		(16,816	)		(16,816	)		(19,054	)		(19,054	)
	Cash collateral(e)		(4,832	)		(6,061	)		(6,317	)		(8,166	)
Total derivatives, net		$	7,383		$	6,938		$	9,134		$	6,165

(a)

Included in non-AIGFP derivatives are $642 million of bifurcated embedded derivatives, of which $641 million and $1 million, respectively, are recorded in Policyholder contract deposits and Other long-term debt.

(b)

Included in non-AIGFP derivatives are $4 million of bifurcated embedded derivatives, of which $3 million and $1 million, respectively, are recorded in Bonds available for sale, at fair value, and Policyholder contract deposits.

(c)

Included in non-AIGFP derivatives are $762 million of bifurcated embedded derivatives, of which $760 million and $2 million, respectively, are recorded in Policyholder contract deposits and Common and preferred stock.

(d)

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

(e)

Represents cash collateral posted and received.

50

American International Group, Inc., and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

Hedge Accounting

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

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

    AIG uses debt instruments in net investment hedge relationships to mitigate the foreign exchange risk associated with AIG's non-U.S. dollar functional currency foreign subsidiaries. AIG assesses the hedge effectiveness and measures the amount of ineffectiveness for these hedge relationships based on changes in spot exchange rates. AIG records the change in the carrying amount of these investments in the foreign currency translation adjustment within Accumulated other comprehensive loss. Simultaneously, the effective portion of the hedge of this exposure is also recorded in foreign currency translation adjustment and the ineffective portion, if any, is recorded in earnings. If (1) the notional amount of the hedging debt instrument matches the designated portion of the net investment and (2) the hedging debt instrument is denominated in the same currency as the functional currency of the hedged net investment, no ineffectiveness is recorded in earnings. For the three-month periods ended March 31, 2010 and 2009, AIG recognized gains of $48 million and $9 million, respectively, included in Foreign currency translation adjustment in Accumulated other comprehensive loss related to the net investment hedge relationships.

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

Three Months Ended March 31, (in millions)		2010			2009
Interest rate contracts(a)(b):
	Gain (Loss) Recognized in Earnings on Derivative	$	(16	)	$	(536	)
	Gain (Loss) Recognized in Earnings on Hedged Item(c)		44			661
	Gain (Loss) Recognized in Earnings for Ineffective Portion and Amount Excluded from Effectiveness Testing		9			125

(a)

Gains and losses recognized in earnings on derivatives for the effective portion and hedged items are recorded in Other income. Gains and losses recognized in earnings on derivatives for the ineffective portion and amounts excluded from effectiveness testing are recorded in Net realized capital losses and Other income, respectively.

(b)

Includes $4 million and $120 million, respectively, for the three-month periods ended March 31, 2010 and 2009 related to the ineffective portion and $5 million, for both the three-month periods ended March 31, 2010 and 2009 for amounts excluded from effectiveness testing.

(c)

The three months ended March 31, 2010 includes $19 million representing the amortization of debt basis adjustment following the discontinuation of hedge accounting on certain positions.

51

American International Group, Inc., and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

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

Three Months Ended March 31, (in millions)		2010			2009
Interest rate contracts(a):
	Gain (Loss) Recognized in OCI on Derivatives and Hedge Items	$	45		$	53
	Gain (Loss) Reclassified from Accumulated OCI into Earnings(b)		21			27
	Gain (Loss) Recognized in Earnings on Derivatives for Ineffective Portion		(7	)		(1	)

(a)

Gains and losses reclassified from Accumulated other comprehensive loss are recorded in Other income. Gains or losses recognized in earnings on derivatives for the ineffective portion are recorded in Net realized capital losses.

(b)

The effective portion of the change in fair value of a derivative qualifying as a cash flow hedge is recorded in Accumulated other comprehensive loss until earnings are affected by the variability of cash flows in the hedged item. At March 31, 2010, $106 million of the deferred net loss in Accumulated other comprehensive loss is expected to be recognized in earnings during the next 12 months.

Derivatives Not Designated as Hedging Instruments

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

Three Months Ended March 31,	Gains (Losses) Recognized in Earnings(a)(b)
(in millions)	2010			2009
Interest rate contracts(c)	$	(1,036	)	$	1,884
Foreign exchange contracts		257			(98	)
Equity contracts		126			147
Commodity contracts		(6	)		145
Credit contracts		144			(264	)
Other contracts		129			(13	)
Total	$	(386	)	$	1,801

(a)

Represents losses of $534 million and gains of $946 million, respectively, for the three-month periods ended March 31, 2010 and 2009, recorded in Net realized capital gains; gains of $119 million and losses of $452 million, respectively, for the three-month periods ended March 31, 2010 and 2009, recorded in Unrealized market valuation gains (losses) on AIGFP super senior credit default swap portfolio; and gains of $29 million and $1,307 million, respectively, for the three-month periods ended March 31, 2010 and 2009, recorded in Other income.

(b)

Certain cross-currency swaps previously reported in Foreign exchange contracts were reclassified to Interest rate contracts.

(c)

Includes cross currency swaps.

AIGFP Derivatives

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

    AIGFP's derivative transactions involving interest rate swap transactions generally involve the exchange of fixed and floating rate interest payment obligations without the exchange of the underlying notional amounts. AIGFP typically became a principal in the exchange of interest payments between the parties and, therefore, is exposed to counterparty credit risk and may be exposed to loss, if counterparties default. Currency, commodity, and equity swaps are similar to interest rate swaps, but involve the exchange of specific currencies or cash flows based on the

52

American International Group, Inc., and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

underlying commodity, equity securities or indices. Also, they may involve the exchange of notional amounts at the beginning and end of the transaction. Swaptions are options where the holder has the right but not the obligation to enter into a swap transaction or cancel an existing swap transaction.

    AIGFP follows a policy of minimizing interest rate, currency, commodity, and equity risks associated with investment securities by entering into offsetting positions, on a security by security basis within its derivatives portfolio, thereby offsetting a significant portion of the unrealized appreciation and depreciation. In addition, to reduce its credit risk, AIGFP has entered into credit derivative transactions with respect to $556 million of securities to economically hedge its credit risk.

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

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

AIGFP Super Senior Credit Default Swaps

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

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

53

American International Group, Inc., and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

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

						Fair Value of Derivative (Asset) Liability at
		Net Notional Amount										Unrealized Market Valuation Gain (Loss) Three Months Ended March 31,
		March 31, 2010(a)		December 31, 2009(a)		March 31, 2010(b)(c)			December 31, 2009(b)(c)
(in millions)												2010(c)			2009(c)
Regulatory Capital:
	Corporate loans	$	41,993	$	55,010	$	-		$	-		$	-		$	-
	Prime residential mortgages		65,844		93,276		(170	)		(137	)		33			-
	Other		1,552		1,760		15			21			6			(14	)
	Total		109,389		150,046		(155	)		(116	)		39			(14	)
Arbitrage:
	Multi-sector CDOs(d)(e)		7,574		7,926		4,250			4,418			158			(809	)
	Corporate debt/CLOs(d)(f)		16,367		22,076		308			309			(7	)		358
	Total		23,941		30,002		4,558			4,727			151			(451	)
Mezzanine tranches(g)			3,104		3,478		214			143			(71	)		13
Total		$	136,434	$	183,526	$	4,617		$	4,754		$	119		$	(452	)

(a)

Net notional amounts presented are net of all structural subordination below the covered tranches.

(b)

Fair value amounts are shown before the effects of counterparty netting adjustments and offsetting cash collateral.

(c)

Includes credit valuation adjustment losses of $113 million and credit valuation adjustment gains of $106 million in the three-month periods ended March 31, 2010 and 2009, respectively, representing the effect of changes in AIG's credit spreads on the valuation of the derivatives liabilities.

(d)

During the three-month period ended March 31, 2010, AIGFP terminated super senior CDS transactions with its counterparties with a net notional amount of $5.4 billion, included in Corporate debt/CLOs. These transactions were terminated at approximately their fair value at the time of the termination. As a result, an $8 million loss, which was previously included in the fair value derivative liability as an unrealized market valuation loss, was realized. During the three-month period ended March 31, 2010, AIGFP also made a payment of $10 million to its counterparty with respect to a Multi-sector CDO. Upon payment, a $10 million loss, which was previously included in the fair value derivative liability as an unrealized market valuation loss, was realized.

(e)

Includes $6.1 billion and $6.3 billion in net notional amount of credit default swaps written with cash settlement provisions at March 31, 2010 and December 31, 2009, respectively.

(f)

Includes $1.4 billion in net notional amount of credit default swaps written on the super senior tranches of CLOs at both March 31, 2010 and December 31, 2009.

(g)

Net of offsetting purchased CDS of $1.4 billion and $1.5 billion in net notional amount at March 31, 2010 and December 31, 2009, respectively.

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

    The expected weighted average maturity of AIGFP's super senior credit derivative portfolios as of March 31, 2010 was 1.0 years for the regulatory capital corporate loan portfolio, 2.5 years for the regulatory capital prime

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American International Group, Inc., and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

residential mortgage portfolio, 5.5 years for the regulatory capital other portfolio, 6.0 years for the multi-sector CDO arbitrage portfolio and 5.0 years for the corporate debt/CLO portfolio.

Regulatory Capital Portfolio

    The regulatory capital portfolio represents derivatives written for financial institutions in Europe, for the purpose of providing regulatory capital relief rather than for arbitrage purposes. In exchange for a periodic fee, the counterparties receive credit protection with respect to a portfolio of diversified loans they own, thus reducing their minimum capital requirements. These CDS transactions were structured with early termination rights for counterparties allowing them to terminate these transactions at no cost to AIGFP at a certain period of time or upon a regulatory event such as the implementation of Basel II. During the three-month period ended March 31, 2010, $25.6 billion in net notional amount was terminated or matured at no cost to AIGFP. Through April 30, 2010, AIGFP had also received a formal termination notice for an additional $11.6 billion in net notional amount with an effective termination date in 2010.

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

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

    The super senior tranches of these CDS transactions continue to be supported by high levels of subordination, which, in most instances, have increased since origination. The weighted average subordination supporting the prime residential mortgage and corporate loan referenced portfolios at March 31, 2010 was 10.74 percent and 27.19 percent, respectively. The highest level of realized losses to date in any single residential mortgage and corporate loan pool was 2.49 percent and 0.52 percent, respectively. The corporate loan transactions are each comprised of several hundred secured and unsecured loans diversified by industry and, in some instances, by country, and have per-issuer concentration limits. Both types of transactions generally allow some substitution and replenishment of loans, subject to defined constraints, as older loans mature or are prepaid. These replenishment rights generally expire within the first few years of the trade, after which the proceeds of any prepaid or maturing loans are applied first to the super senior tranche (sequentially), thereby increasing the relative level of subordination supporting the balance of AIGFP's super senior CDS exposure.

    Given the current performance of the underlying portfolios, the level of subordination and AIGFP's own assessment of the credit quality of the underlying portfolio, as well as the risk mitigants inherent in the transaction structures, AIGFP does not expect that it will be required to make payments pursuant to the contractual terms of those transactions providing regulatory relief. AIGFP continues to reassess the expected maturity of this portfolio. As of March 31, 2010, AIGFP estimated that the weighted average expected maturity of the portfolio was 1.89 years. AIGFP has not been required to make any payments as part of terminations initiated by counterparties. The regulatory benefit of these transactions for AIGFP's financial institution counterparties is generally derived from the terms of Basel I that existed through the end of 2007 and which is in the process of being replaced by Basel II. It was expected that financial institution counterparties would have transitioned from Basel I to Basel II by the end of the two-year adoption period on 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, in 2009, 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

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American International Group, Inc., and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

favorable regulatory capital benefits from these transactions, those counterparties may not exercise their options to terminate the transactions in the expected time frame.

Arbitrage Portfolio

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

    The outstanding multi-sector CDO portfolio at March 31, 2010 was written on CDO transactions (including synthetic CDOs) that generally held a concentration of RMBS, CMBS and inner CDO securities. At March 31, 2010, approximately $3.8 billion net notional amount (fair value liability of $2.4 billion) of this portfolio was written on super senior multi-sector CDOs that contain some level of sub-prime RMBS collateral, with a concentration in the 2005 and earlier vintages of sub-prime RMBS. AIGFP's portfolio also included both high grade and mezzanine CDOs.

    The majority of multi-sector CDO CDS transactions require cash settlement and, other than for collateral posting, AIGFP is required to make a payment in connection with such transactions only if realized credit losses in respect of the underlying portfolio exceed AIGFP's attachment point. In the remainder of the portfolio, AIGFP's payment obligations are triggered by the occurrence of a credit event under a single reference security, and performance is limited to a single payment by AIGFP in return for physical delivery by the counterparty of the reference security.

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

    ML III has agreed not to exercise its put option on multi-sector CDOs or simultaneously to exercise its put option with a corresponding par purchase of the multi-sector CDOs with respect to the $853 million notional amount of multi-sector CDOs held by ML III with 2a-7 Puts that may be exercised on or prior to December 31, 2010 and $530 million notional amount of multi-sector CDOs held by ML III with 2a-7 Puts that may be exercised on or prior to April 30, 2011. In addition, there are $182 million notional amount of multi-sector CDOs held by ML III with 2a-7 Puts that may not be exercised on or prior to December 31, 2010, for which ML III has only agreed not to exercise its put option on multi-sector CDOs or simultaneously to exercise its put option with a corresponding par purchase of the multi-sector CDOs through December 31, 2010. In exchange, AIGFP has agreed to pay to ML III the consideration that it receives for providing the put protection. Additionally, ML III has agreed that if it sells any such multi-sector CDO with a 2a-7 Put to a third-party purchaser, that such sale will be conditioned upon, among other things, such third-party purchaser agreeing that until the legal final maturity date of such multi-sector CDO it will not exercise its put option on such multi-sector CDO or it will make a corresponding par purchase of such multi-sector CDO simultaneously with the exercise of its put option. In exchange for such commitment from the third-party purchaser, AIGFP will agree to pay to such third-party purchaser the consideration that it receives for providing the put protection.

    ML III has agreed to assist AIGFP in efforts to mitigate or eliminate AIGFP's obligations under such 2a-7 Puts relating to multi-sector CDOs held by ML III prior to the expiration of ML III's obligations with respect to such multi-sector CDOs. There can be no assurances that such efforts will be successful. To the extent that such efforts are not successful with respect to a multi-sector CDO held by ML III with a 2a-7 Put and ML III has not sold such multi-sector CDO to a third-party who has committed not to exercise its put option on such multi-sector CDO or to make a corresponding par purchase of such multi-sector CDO simultaneously with the exercise of its put option then, upon the expiration of ML III's aforementioned obligations with respect to such multi-sector

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American International Group, Inc., and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

CDO, AIGFP will be obligated under the related 2a-7 Put to purchase such multi-sector CDO at par in the circumstances and subject to the limited conditions contained in the applicable agreements.

    The corporate arbitrage portfolio consists principally of CDS transactions written on portfolios of senior unsecured corporate obligations that were generally rated investment grade at inception of the CDS. These CDS transactions require cash settlement. Also, included in this portfolio are CDS transactions with a net notional amount of $1.4 billion written on the senior part of the capital structure of CLOs, which require physical settlement.

    Certain of the super senior credit default swaps provide the counterparties with an additional termination right if AIG's rating level falls to BBB or Baa2. At that level, counterparties to the CDS transactions with a net notional amount of $10.2 billion at March 31, 2010 have the right to terminate the transactions early. If counterparties exercise this right, the contracts provide for the counterparties to be compensated for the cost to replace the transactions, or an amount reasonably determined in good faith to estimate the losses the counterparties would incur as a result of the termination of the transactions.

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

Collateral

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

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

    At March 31, 2010 and December 31, 2009, the amount of collateral postings with respect to AIGFP's super senior credit default swap portfolio (prior to offsets for other transactions) was $4.5 billion and $4.6 billion, respectively.

AIGFP Written Single Name Credit Default Swaps

    AIGFP has also entered into credit default swap contracts referencing single-name exposures written on corporate, index, and asset-backed credits, with the intention of earning spread income on credit exposure. Some of these transactions were entered into as part of a long short strategy allowing AIGFP to earn the net spread between CDS they wrote and ones they purchased. At March 31, 2010, the net notional amount of these written CDS contracts was $1.9 billion. AIGFP has hedged these exposures by purchasing offsetting CDS contracts of $314 million in net notional amount. The net unhedged position of approximately $1.6 billion represents the maximum exposure to loss on these CDS contracts. The average maturity of the written CDS contracts is

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American International Group, Inc., and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

6.6 years. At March 31, 2010, the fair value of derivative liability (which represents the carrying value) of the portfolio of CDS was $264 million.

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

    AIGFP wrote these written CDS contracts under Master Agreements. The majority of these Master Agreements include CSA, which provide for collateral postings at various ratings and threshold levels. At March 31, 2010, AIGFP had posted $318 million of collateral under these contracts.

Non-AIGFP Derivatives

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

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

Matched Investment Program Written Credit Default Swaps

    The MIP, which is currently in run-off, has entered into CDS contracts as a writer of protection, with the intention of earning spread income on credit exposure in an unfunded form. The portfolio of CDS contracts were single-name exposures and, at inception, were predominantly high grade corporate credits.

    The MIP invested in written CDS contracts through an affiliate which then transacts directly with unaffiliated third parties under ISDA agreements. As of March 31, 2010, the notional amount of written CDS contracts was $3.9 billion with an average credit rating of BBB+. The average maturity of the written CDS contracts is 2.2 years as of March 31, 2010. As of March 31, 2010, the fair value of the derivative liability (which represents the carrying value) of the MIP's written CDS was $65.1 million.

    The majority of the ISDA agreements include CSA provisions, which provide for collateral postings at various ratings and threshold levels. At March 31, 2010, $26.7 million of collateral was posted for CDS contracts related to the MIP. The notional amount represents the maximum exposure to loss on the written CDS contracts. However, due to the average investment grade rating and expected default recovery rates, actual losses are expected to be less.

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

Credit Risk-Related Contingent Features

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

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American International Group, Inc., and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

    The aggregate fair value of AIG's derivative instruments, including those of AIGFP, that contain credit risk-related contingent features that are in a net liability position at March 31, 2010 was approximately $8.7 billion. The aggregate fair value of assets posted as collateral under these contracts at March 31, 2010, was $8.7 billion.

    It is estimated that as of the close of business on March 31, 2010, based on AIG's outstanding financial derivative transactions, including those of AIGFP at that date, a one-notch downgrade of AIG's long-term senior debt ratings to Baa1 by Moody's Investors Service (Moody's) and BBB+ by Standard & Poor's Financial Services LLC, a subsidiary of The McGraw-Hill Companies, Inc. (S&P), would permit counterparties to make additional collateral calls and permit the counterparties to elect early termination of contracts, resulting in up to approximately $1.6 billion of corresponding collateral postings and termination payments; a two-notch downgrade to Baa2 by Moody's and BBB by S&P would result in approximately $1.2 billion in additional collateral postings and termination payments above the one-notch downgrade amount; and a three-notch downgrade to Baa3 by Moody's and BBB- by S&P would result in approximately $0.4 billion in additional collateral postings and termination payments above the two-notch downgrade amount. Additional collateral postings upon downgrade are estimated based on the factors in the individual collateral posting provisions of the CSA with each counterparty and current exposure as of March 31, 2010. Factors considered in estimating the termination payments upon downgrade include current market conditions, the complexity of the derivative transactions, historical termination experience and other observable market events such as bankruptcy and downgrade events that have occurred at other companies. The actual termination payments could significantly differ from management's estimates given market conditions at the time of downgrade and the level of uncertainty in estimating both the number of counterparties who may elect to exercise their right to terminate and the payment that may be triggered in connection with any such exercise.

9. Commitments, Contingencies and Guarantees

    In the normal course of business, various commitments and contingent liabilities are entered into by AIG and certain of its subsidiaries. In addition, AIG guarantees various obligations of certain subsidiaries.

    Although AIG cannot currently quantify its ultimate liability for unresolved litigation and investigation matters including those referred to below, it is possible that such liability could have a material adverse effect on AIG's consolidated financial condition or its consolidated results of operations or consolidated cash flows for an individual reporting period.

(a) Litigation and Investigations

    Litigation Arising from Operations.    AIG and its subsidiaries, in common with the insurance and financial services industries in general, are subject to litigation, including claims for punitive damages, in the normal course of their business. In AIG's insurance operations (including United Guaranty Corporation (UGC)), litigation arising from claims settlement activities is generally considered in the establishment of AIG's Liability for unpaid claims and claims adjustment expense. However, the potential for increasing jury awards and settlements makes it difficult to assess the ultimate outcome of such litigation.

    Various federal, state and foreign regulatory and governmental agencies are reviewing certain public disclosures, transactions and practices of AIG and its subsidiaries in connection with, among other matters, AIG's liquidity problems, payments by AIG subsidiaries to non-U.S. persons and industry-wide and other inquiries including matters relating to compensation paid to AIGFP employees and payments made to AIGFP counterparties. These reviews include ongoing investigations by the U.S. Securities and Exchange Commission (SEC) and U.S. Department of Justice (DOJ) with respect to the valuation of AIGFP's multi- sector CDO super senior credit default swap portfolio under fair value accounting rules, and the adequacy of AIG's enterprise risk management processes with respect to AIG's exposure to the U.S. residential mortgage market, and disclosures relating thereto. There is also an investigation by the U.K. Serious Fraud Office and inquiries by the U.K. Financial Services

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American International Group, Inc., and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

Authority with respect to the U.K. operations of AIGFP. AIG has cooperated, and will continue to cooperate, in producing documents and other information in response to subpoenas and other requests.

    In connection with certain SEC investigations, AIG understands that some of its employees have received Wells notices and it is possible that additional current and former employees could receive similar notices in the future. Under SEC procedures, a Wells notice is an indication that the SEC staff has made a preliminary decision to recommend enforcement action that provides recipients with an opportunity to respond to the SEC staff before a formal recommendation is finalized.

Litigation Relating to AIG's Subprime Exposure and AIGFP's Employee Retention Plan

    Securities Actions — Southern District of New York.    Between May 21, 2008 and January 15, 2009, eight purported securities class action complaints were filed against AIG and certain directors and officers of AIG and AIGFP, AIG's outside auditors, and the underwriters of various securities offerings in the United States District Court for the Southern District of New York (the Southern District of New York), alleging claims under the Securities Exchange Act of 1934 (Exchange Act) or claims under the Securities Act of 1933 (the Securities Act). On March 20, 2009, the Court consolidated all eight of the purported securities class actions as In re American International Group, Inc. 2008 Securities Litigation (the Consolidated 2008 Securities Litigation) and appointed the State of Michigan Retirement Systems as lead plaintiff.

    On May 19, 2009, lead plaintiff in the Consolidated 2008 Securities Litigation filed a consolidated complaint on behalf of purchasers of AIG stock during the alleged class period of March 16, 2006 through September 16, 2008, and on behalf of purchasers of various AIG securities offered pursuant to three shelf registration statements filed on June 12, 2003, June 12, 2007, and May 12, 2008. The consolidated complaint alleges that defendants made statements during the class period in press releases, AIG's quarterly and year-end filings, during conference calls, and in various registration statements and prospectuses in connection with the various offerings that were materially false and misleading and that artificially inflated the price of AIG's stock. The alleged false and misleading statements relate to, among other things, unrealized market valuation losses on AIGFP's super senior credit default swap portfolio as a result of severe credit market disruption and AIG's securities lending program. The consolidated complaint alleges violations of Sections 10(b) and 20(a) of the Exchange Act and Sections 11, 12(a)(2), and 15 of the Securities Act. On August 5, 2009, defendants filed motions to dismiss the consolidated complaint, and those motions are pending.

    ERISA Actions — Southern District of New York.    Between June 25, 2008, and November 25, 2008, AIG, certain directors and officers of AIG, and members of AIG's Retirement Board and Investment Committee were named as defendants in eight purported class action complaints asserting claims on behalf of participants in certain pension plans sponsored by AIG or its subsidiaries. On March 19, 2009, the Court consolidated these eight actions as In re American International Group, Inc. ERISA Litigation II, and appointed interim lead plaintiffs' counsel. On June 26, 2009, lead plaintiffs' counsel filed a consolidated amended complaint. The action purports to be brought as a class action under the Employee Retirement Income Security Act of 1974, as amended (ERISA), on behalf of all participants in or beneficiaries of the AIG Incentive Savings Plan, American General Agents' and Managers' Thrift Plan, and the CommoLoCo Thrift Plan (the Plans) during the period June 15, 2007 through the present and whose participant accounts included shares of AIG's common stock. In the consolidated amended complaint, plaintiffs allege, among other things, that the defendants breached their fiduciary responsibilities to Plan participants and their beneficiaries under ERISA, by continuing to offer the AIG Stock Fund as an investment option in the Plans after it allegedly became imprudent to do so. The alleged ERISA violations relate to, among other things, the defendants' purported failure to monitor and/or disclose unrealized market valuation losses on AIGFP's super senior credit default swap portfolio as a result of severe credit market disruption. On September 18, 2009, defendants filed motions to dismiss the consolidated amended complaint, and those motions are pending.

60

American International Group, Inc., and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

    Derivative Action — Southern District of New York.    On November 20, 2007, two purported shareholder derivative actions were filed in the Southern District of New York naming as defendants directors and officers of AIG and its subsidiaries and asserting claims on behalf of nominal defendant AIG. The actions were consolidated as In re American International Group, Inc. 2007 Derivative Litigation (the Consolidated 2007 Derivative Litigation). The factual allegations involve AIG's exposure to the U.S. residential subprime mortgage market (Subprime Exposure) and are generally the same as those alleged in the Consolidated 2008 Securities Litigation. On August 6, 2008, a third purported shareholder derivative action was filed in the Southern District of New York asserting claims on behalf of AIG based generally on the same allegations as in the Consolidated 2007 Derivative Litigation. On February 11, 2009, the Court approved a stipulation consolidating the derivative action filed on August 6, 2008 with the Consolidated 2007 Derivative Litigation. On June 3, 2009, lead plaintiff filed a consolidated amended complaint naming additional directors and officers of AIG and its subsidiaries as defendants, adding allegations concerning AIGFP employee retention payments, and asserting claims on behalf of nominal defendant AIG for breach of fiduciary duty, waste of corporate assets, unjust enrichment, contribution and violations of Sections 10(b) and 20(a) of the Exchange Act. On August 5 and 26, 2009, AIG and defendants filed motions to dismiss the consolidated complaint. On September 30, 2009, plaintiff in the purported derivative action discussed below filed on April 1, 2009 in the Superior Court of the State of California, Los Angeles County moved to intervene in the Consolidated 2007 Derivative Litigation. On December 23, 2009, the Court denied the motion.

    On November 20, 2009, a stipulation was filed with the Court voluntarily dismissing the claims against two of the senior officers of AIG named as defendants, Brian T. Schreiber and Frank G. Wisner, without prejudice. The requested voluntary dismissal was not the product of a settlement between lead plaintiff and Mr. Schreiber and Mr. Wisner. Neither lead plaintiff nor lead plaintiff's counsel sought or received any consideration in return for this voluntary dismissal. By order of the Court on January 21, 2010, notice of this voluntary dismissal without prejudice of Mr. Schreiber and Mr. Wisner was given to AIG's shareholders in AIG's 2009 Annual Report on Form 10-K, and any shareholder objecting to the voluntary dismissal without prejudice of Mr. Schreiber and Mr. Wisner was required to file any objections to the proposed dismissal within 30 days of the filing of the 2009 Annual Report on Form 10-K, i.e., by March 28, 2010. No objections were received. On March 30, 2010, the Court dismissed the action due to plaintiff's failure to make a pre-suit demand on AIG's Board of Directors. On March 31, 2010, judgment was entered. As a result, no order was submitted to the Court regarding the dismissal without prejudice of Mr. Schreiber and Mr. Wisner. On April 29, 2010, plaintiff filed a notice of appeal to the United States Court of Appeals for the Second Circuit, seeking to reverse the Court's decision to dismiss the action.

    Derivative Action — Supreme Court of New York, Nassau County.    On February 29, 2008, a purported shareholder derivative complaint was filed in the Supreme Court of Nassau County naming as defendants certain directors and officers of AIG and its subsidiaries concerning AIG's Subprime Exposure. Plaintiff asserts claims on behalf of nominal defendant AIG for breach of fiduciary duty, waste of corporate assets, and unjust enrichment in connection with AIG's public disclosures regarding its Subprime Exposure. On May 19, 2008, defendants filed a motion to dismiss or to stay the proceedings in light of the pending Consolidated 2007 Derivative Litigation. On March 9, 2009, the Court granted defendants' motion to stay the action.

    Derivative Action — Supreme Court of New York, New York County.    On March 20, 2009, a purported shareholder derivative complaint was filed in the Supreme Court of New York County naming as defendants certain directors and officers of AIG and recipients of AIGFP retention payments. Plaintiffs assert claims on behalf of nominal defendant AIG concerning AIGFP retention payments. Plaintiff alleges claims for breach of fiduciary duty, waste of corporate assets and rescission and constructive trust.

    Derivative Actions — Delaware Court of Chancery.    On September 17, 2008, a purported shareholder derivative complaint was filed in the Delaware Court of Chancery naming as defendants certain directors and officers of AIG and its subsidiaries. Plaintiff asserts claims on behalf of nominal defendant AIG for breach of fiduciary duty,

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American International Group, Inc., and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

waste of corporate assets, and mismanagement in connection with AIG's public disclosures regarding its Subprime Exposure. On December 19, 2008, a motion to stay or dismiss the action in favor of the Consolidated 2007 Derivative Litigation was filed. On July 17, 2009, the Court granted defendants' motion to stay the action.

    On January 15, 2009, a purported shareholder derivative complaint was filed in the Delaware Court of Chancery naming as defendants certain directors of AIG and Joseph Cassano, the former Chief Executive Officer of AIGFP. Plaintiff asserts claims against Mr. Cassano on behalf of nominal defendant AIGFP and AIG as the sole shareholder of AIGFP concerning AIG's and AIGFP's Subprime Exposure alleging breach of fiduciary duty and unjust enrichment. On July 17, 2009, plaintiff filed an amended complaint that asserts the same claims as the original complaint. On August 5, 2009, the Court entered an order staying the action pending disposition of the motions to dismiss of the Consolidated 2007 Derivative Litigation.

    Derivative Actions — Superior Court for the State of California, Los Angeles County.    On April 1, 2009, a purported shareholder derivative complaint was filed in the Superior Court for the State of California, Los Angeles County, asserting claims on behalf of nominal defendant AIG against certain directors and officers of AIG. The complaint asserts claims for waste of corporate assets, breach of fiduciary duty, abuse of control, and unjust enrichment and constructive trust in connection with defendants' approval of bonuses and retention payments. On May 29, 2009, defendants moved to stay or dismiss the action in favor of the Consolidated 2007 Derivative Litigation and to quash service of summons due to lack of personal jurisdiction over certain individual defendants. On August 27, 2009, the Court granted defendants' motion to stay the action.

    On November 20, 2009, a purported shareholder derivative complaint was filed in the Superior Court for the State of California, Los Angeles County, naming as defendants certain former and present directors and officers of AIG and its subsidiaries. Plaintiff asserts claims on behalf of nominal defendant AIG concerning AIG's Subprime Exposure alleging breach of fiduciary duty, waste of corporate assets, and mismanagement. On November 24, 2009, an amended complaint was filed asserting the same claims. On February 4, 2010, the parties filed a stipulation staying the action in favor of the Consolidated 2007 Derivative Litigation. On February 9, 2010, the Court signed a stipulation staying the action pending resolution of the Consolidated 2007 Derivative Litigation.

    Canadian Securities Class Action — Ontario Superior Court of Justice.    On November 12, 2008, an application was filed in the Ontario Superior Court of Justice for leave to bring a purported securities fraud class action against AIG, AIGFP, certain directors and officers of AIG and the former Chief Executive Officer of AIGFP. If the Court grants the application, a class plaintiff will be permitted to file a statement of claim against defendants. The proposed statement of claim would assert a class period of November 10, 2006 through September 16, 2008 (later amended to March 16, 2006 through September 16, 2008), and would allege that during this period defendants made false and misleading statements and omissions in quarterly and annual reports and during oral presentations in violation of the Ontario Securities Act. On April 17, 2009, defendants filed a motion record in support of their motion to stay or dismiss for lack of jurisdiction and forum non conveniens. On May 29, 2009, the applicant filed responding affidavits and an amended draft statement of claim. The factual allegations are generally the same as those alleged in the Consolidated 2008 Securities Litigation. On November 20 and 30, and December 4, 2009, defendants filed briefs in support of their motions to dismiss, and those motions are pending.

    Panama Action — Tribunal del Circuito Civil, Panama City, Panama.    On February 26, 2009, SICO sought permission to file a complaint in Panamanian Court against AIG. In the complaint, SICO alleges that AIG intentionally concealed from its shareholders, including SICO, its unstable financial situation and risk of losses, which ultimately resulted in losses to the value of SICO's shares of AIG Common Stock. On August 12, 2009, AIG filed a motion to dismiss the complaint and a motion for correction of the complaint. On August 13, 2009, AIG filed a motion with the Panama Supreme Court challenging on constitutional grounds a motion by SICO to amend the complaint. Under the terms of the settlement agreement and memorandum of understanding signed by AIG, on the one hand, and Greenberg, Howard I. Smith, AIG's former Chief Financial Officer, C.V. Starr & Company, Inc. (C.V. Starr) and Starr International Company, Inc. (SICO), on the other hand (the Starr Parties) that was announced on November 25, 2009 (the AIG/Greenberg MOU), SICO agreed to undertake to dismiss this action with prejudice. On February 10, 2010, the parties filed a joint request to dismiss the case. On March 2, 2010, the Court posted its approval of the dismissal of claims and the action was terminated.

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American International Group, Inc., and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

    Litigation Matter Relating to AIGFP.    On September 30, 2009, Brookfield Asset Management, Inc. and Brysons International, Ltd. (together, "Brookfield") filed a complaint against AIG and AIGFP in the Southern District of New York. Brookfield seeks a declaration that a 1990 interest rate swap agreement between Brookfield and AIGFP (guaranteed by AIG) terminated upon the occurrence of certain alleged events that Brookfield contends constituted defaults under the swap agreement's standard "bankruptcy" default provision. Brookfield claims that it is excused from all future payment obligations under the swap agreement on the basis of the purported termination. At March 31, 2010, the estimated present value of expected future cash flows discounted at LIBOR was $1.3 billion. It is AIG's position that no termination event has occurred and that the swap agreement remains in effect. A determination that AIG triggered a "bankruptcy event of default" under the swap agreement could, depending on the Court's precise holding, affect other AIG or AIGFP agreements that contain the same or similar default provisions. Such a determination could also affect derivative agreements or other contracts between third parties, such as credit default swaps under which AIG is a reference credit, which could affect the trading price of AIG securities. On December 17, 2009 defendants filed a motion to dismiss, and that motion is pending.

2006 Regulatory Settlements and Related Matters

    2006 Regulatory Settlements.    In February 2006, AIG reached a resolution of claims and matters under investigation with the DOJ, the SEC, the Office of the New York Attorney General (NYAG) and the New York State Department of Insurance (DOI). AIG recorded an after-tax charge of $1.15 billion relating to these settlements in the fourth quarter of 2005. The settlements resolved investigations conducted by the SEC, NYAG and DOI in connection with the accounting, financial reporting and insurance brokerage practices of AIG and its subsidiaries, as well as claims relating to the underpayment of certain workers' compensation premium taxes and other assessments. These settlements did not, however, resolve investigations by regulators from other states into insurance brokerage practices related to contingent commissions and other broker-related conduct, such as alleged bid rigging. Nor did the settlements resolve any obligations that AIG may have to state guarantee funds in connection with any of these matters.

    As a result of these settlements, AIG made payments or placed amounts in escrow in 2006 totaling approximately $1.64 billion, $225 million of which represented fines and penalties. Amounts held in escrow totaling approximately $338 million, including interest thereon, are included in Other assets at March 31, 2010. At that date, all of the funds were escrowed for settlement of claims resulting from the underpayment by AIG of its residual market assessments for workers' compensation.

    In addition to the escrowed funds, $800 million was deposited into a fund under the supervision of the SEC as part of the settlements to be available to resolve claims asserted against AIG by investors, including the securities class action shareholder lawsuits described below. On April 14, 2008, the Court overseeing the Fair Fund approved a plan for distribution of monies in the fund, and on May 18, 2009 ordered that the Distribution Agent was authorized to commence distribution of Fair Fund monies to approved eligible claimants.

    Also, as part of the settlements, AIG agreed to retain, for a period of three years, an independent consultant to conduct a review that included, among other things, the adequacy of AIG's internal control over financial reporting, the policies, procedures and effectiveness of AIG's regulatory, compliance and legal functions and the remediation plan that AIG has implemented as a result of its own internal review.

    Other Regulatory Settlements.    AIG's 2006 regulatory settlements with the SEC, DOJ, NYAG and DOI did not resolve investigations by regulators from other states into insurance brokerage practices. AIG entered into agreements effective January 29, 2008 with the Attorneys General of the States of Florida, Hawaii, Maryland, Michigan, Oregon, Texas and West Virginia; the Commonwealths of Massachusetts and Pennsylvania; and the District of Columbia; as well as the Florida Department of Financial Services and the Florida Office of Insurance Regulation, relating to their respective industry-wide investigations into producer compensation and insurance placement practices. The settlements call for total payments of $12.5 million to be allocated among the ten jurisdictions representing restitution to state agencies and reimbursement of the costs of the investigation. During

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the term of the settlement agreements, which run through early 2018, AIG will continue to maintain certain producer compensation disclosure and ongoing compliance initiatives. AIG will also continue to cooperate with the industry-wide investigations. The agreement with the Texas Attorney General also settles allegations of anticompetitive conduct relating to AIG's relationship with Allied World Assurance Company and includes an additional settlement payment of $500,000 related thereto.

    AIG entered into an agreement effective March 13, 2008 with the Pennsylvania Insurance Department relating to the Department's investigation into the affairs of AIG and certain of its Pennsylvania-domiciled insurance company subsidiaries. The settlement calls for total payments of approximately $13.5 million, of which approximately $4.4 million was paid under previous settlement agreements. During the term of the settlement agreement, which runs for a period of three years from May 1, 2008, AIG will provide annual reinsurance reports, as well as maintain certain producer compensation disclosure and ongoing compliance initiatives.

    NAIC Examination of Workers' Compensation Premium Reporting.    During 2006, the Settlement Review Working Group of the National Association of Insurance Commissioners (NAIC), under the direction of the states of Indiana, Minnesota and Rhode Island, began an investigation into AIG's reporting of workers' compensation premiums. In late 2007, the Settlement Review Working Group recommended that a multi-state targeted market conduct examination focusing on workers' compensation insurance be commenced under the direction of the NAIC's Market Analysis Working Group. AIG was informed of the multi-state targeted market conduct examination in January 2008. The lead states in the multi-state examination are Delaware, Florida, Indiana, Massachusetts, Minnesota, New York, Pennsylvania, and Rhode Island. All other states (and the District of Columbia) have agreed to participate in the multi-state examination. To date, the examination has focused on legacy issues related to AIG's writing and reporting of workers' compensation insurance prior to 1996. AIG has also been advised that the examination will focus on current compliance with legal requirements applicable to such business. AIG has not been advised that any determinations have been made with respect to these issues, and cannot predict either the outcome of the investigation or provide any assurance regarding regulatory action that may result from the investigation.

    Securities Action — Southern District of New York.    Beginning in October 2004, a number of putative securities fraud class action suits were filed in the Southern District of New York against AIG and consolidated as In re American International Group, Inc. Securities Litigation. Subsequently, a separate, though similar, securities fraud action was also brought against AIG by certain Florida pension funds. The lead plaintiff in the class action is a group of public retirement systems and pension funds benefiting Ohio state employees, suing on behalf of themselves and all purchasers of AIG's publicly traded securities between October 28, 1999 and April 1, 2005. The named defendants are AIG and a number of present and former AIG officers and directors, as well as Starr, SICO, General Reinsurance Corporation (General Re), and PricewaterhouseCoopers LLP (PwC), among others. The lead plaintiff alleges, among other things, that AIG: (1) concealed that it engaged in anti-competitive conduct through alleged payment of contingent commissions to brokers and participation in illegal bid-rigging; (2) concealed that it used "income smoothing" products and other techniques to inflate its earnings; (3) concealed that it marketed and sold "income smoothing" insurance products to other companies; and (4) misled investors about the scope of government investigations. In addition, the lead plaintiff alleges that AIG's former Chief Executive Officer, Maurice R. Greenberg, manipulated AIG's stock price. The lead plaintiff asserts claims for violations of Sections 11 and 15 of the Securities Act, Section 10(b) of the Exchange Act and Rule 10b-5 promulgated thereunder, Section 20(a) of the Exchange Act, and Section 20A of the Exchange Act. In April 2006, the Court denied the defendants' motions to dismiss the second amended class action complaint and the Florida complaint. In December 2006, a third amended class action complaint was filed, which does not differ substantially from the prior complaint. Fact discovery is currently ongoing. On February 20, 2008, the lead plaintiff filed a motion for class certification. In October 2009, the lead plaintiff advised the Court that it had entered into a settlement agreement with Maurice R. Greenberg, Howard I. Smith, Christian M. Milton, Michael J. Castelli, SICO and Starr. At the lead plaintiff's request, the Court has entered an order dismissing all of the lead plaintiff's claims against these defendants "without prejudice" to any party. The lead plaintiff has also voluntarily dismissed

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American International Group, Inc., and Subsidiaries

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Frank Hoenemeyer, L. Michael Murphy, and Richmond Insurance Company, Ltd. On February 22, 2010, the Court issued an opinion granting, in part, lead plaintiffs' motion for class certification. The Court rejected lead plaintiffs' request to include in the class purchasers of certain AIG bonds on the grounds that (a) lead plaintiffs lack standing to pursue claims pursuant to the Securities Act with respect to such bonds, and (b) lead plaintiffs had failed to establish that common issues predominate over individual issues with regard to claims under the Exchange Act relating to AIG bonds. On that basis the Court declined to certify a class with respect to Counts I through IV of the Complaint and dismissed those claims for lack of standing. With respect the remaining claims under the Exchange Act on behalf of putative class members who had purchased AIG Common Stock, the Court declined to certify a class as to certain defendants other than AIG and rejected lead plaintiffs' claims that class members could establish injury based on disclosures on two of the six dates lead plaintiffs had proposed, but certified a class consisting of all shareholders who purchased or otherwise acquired AIG Common Stock during the class period of October 28, 1999 to April 1, 2005, and who possessed that stock over one or more of the dates October 14, 2004, October 15, 2004, March 17, 2005 or April 1, 2005, as well as persons who held AIG Common Stock in two companies at the time they were acquired by AIG in exchange for AIG Common Stock, and were allegedly damaged thereby. In light of the class certification decision, on March 5, 2010, the Court denied as moot Gen Re's and lead plaintiffs' motion to certify their proposed settlement, and on March 18, 2010, PwC withdrew its motion to approve its proposed settlement with lead plaintiffs. Lead plaintiffs and AIG have each filed petitions pursuant to Fed R. Civ. P. 23(f) requesting permission to appeal the class certification decision. AIG, Gen Re, Richard Napier and Ronald Ferguson have each filed opposition briefs to lead plaintiff's Rule 23(f) petition. Lead plaintiff also filed an opposition brief to AIG's Rule 23(f) petition. The Rule 23(f) petitions remain pending at this time.

    Derivative Action — Southern District of New York.    Between October 25, 2004 and July 14, 2005, seven separate derivative actions were filed in the Southern District of New York, five of which were consolidated into a single action (the New York 2004/2005 Derivative Litigation). The complaint in this action contains nearly the same types of allegations made in the securities fraud action described above. The named defendants include current and former officers and directors of AIG, as well as Marsh & McLennan Companies, Inc. (Marsh), SICO, Starr, ACE Limited and subsidiaries (Ace), General Re, PwC, and certain employees or officers of these entity defendants. Plaintiffs assert claims for breach of fiduciary duty, gross mismanagement, waste of corporate assets, unjust enrichment, insider selling, auditor breach of contract, auditor professional negligence and disgorgement from AIG's former Chief Executive Officer, Maurice R. Greenberg, and former Chief Financial Officer, Howard I. Smith, of incentive-based compensation and AIG share proceeds under Section 304 of the Sarbanes-Oxley Act, among others. Plaintiffs seek, among other things, compensatory damages, corporate governance reforms, and a voiding of the election of certain AIG directors. AIG's Board of Directors has appointed a special committee of independent directors (Special Committee) to review the matters asserted in the operative consolidated derivative complaint. The Court has entered an order staying this action pending resolution of the Delaware 2004/2005 Derivative Litigation discussed below. The Court also has entered an order that termination of certain named defendants from the Delaware action applies to this action without further order of the Court. On February 26, 2009, the Court dismissed those AIG officer and director defendants against whom the shareholder plaintiffs in the Delaware action had not pursued claims. It is AIG's position that the terms of the AIG/Greenberg MOU do not require dismissal of the derivative claims against Greenberg, Smith and SICO in the New York 2004/2005 Derivative Litigation. The Starr Parties have taken the opposite position.

    Derivative Actions — Delaware Chancery Court.    From October 2004 to April 2005, AIG shareholders filed five derivative complaints in the Delaware Chancery Court. All of these derivative lawsuits were consolidated into a single action as In re American International Group, Inc. Consolidated Derivative Litigation (the Delaware 2004/2005 Derivative Litigation). The amended consolidated complaint named 43 defendants (not including nominal defendant AIG) who, as in the New York 2004/2005 Derivative Litigation, were current and former officers and directors of AIG, as well as other entities and certain of their current and former employees and directors. The factual allegations, legal claims and relief sought in this action are similar to those alleged in the

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American International Group, Inc., and Subsidiaries

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New York 2004/2005 Derivative Litigation, except that the claims are only under state law. In early 2007, the Court approved an agreement that AIG be realigned as plaintiff, and, on June 13, 2007, acting on the direction of the Special Committee, AIG filed an amended complaint against former directors and officers Maurice R. Greenberg and Howard I. Smith, alleging breach of fiduciary duty and indemnification. Also on June 13, 2007, the Special Committee filed a motion to terminate the litigation as to certain defendants, while taking no action as to others. Defendants Greenberg and Smith filed answers to AIG's complaint and brought third-party complaints against certain current and former AIG directors and officers, PwC and INS Regulatory Insurance Services, Inc. On September 28, 2007, AIG and the shareholder plaintiffs filed a combined amended complaint in which AIG continued to assert claims against defendants Greenberg and Smith and took no position as to the claims asserted by the shareholder plaintiffs in the remainder of the combined amended complaint. In that pleading, the shareholder plaintiffs are no longer pursuing claims against certain AIG officers and directors. On February 12, 2008, the Court granted AIG's motion to stay discovery pending the resolution of claims against AIG in the New York consolidated securities action. On April 11, 2008, the shareholder plaintiffs filed the First Amended Combined Complaint, which added claims against former AIG directors and officers Maurice Greenberg, Edward Matthews, and Thomas Tizzio for breach of fiduciary duty based on alleged bid-rigging in the municipal derivatives market. On June 13, 2008, certain defendants filed motions to dismiss the shareholder plaintiffs' portions of the complaint. On February 10, 2009, the Court denied the motions to dismiss filed by Maurice Greenberg, Edward Matthews, and Thomas Tizzio; granted the motion to dismiss filed by PwC without prejudice; and granted the motion to dismiss filed by certain former employees of AIG without prejudice for lack of personal jurisdiction. On March 6, 2009, the Court granted an Order of Dismissal, Notice and Order of Voluntary Dismissal and Stipulation and Order of Dismissal to dismiss those individual defendants who were similarly situated to the individuals dismissed by the Court for lack of personal jurisdiction. On March 12, 2009, Defendant Greenberg filed his verified answer to AIG's complaint; cross-claims against Marsh, ACE, General Re, and Thomas Tizzio; and a third-party complaint against certain current and former AIG directors and officers, as well as INS Regulatory Insurance Services, Inc. Defendant Smith has also filed his answer to AIG's complaint, which was amended on July 9, 2009 to add cross-claims against Thomas Tizzio and third-party claims against certain current and former AIG directors and officers, as well as INS Regulatory Insurance Services, Inc. On June 17, 2009, the Court issued an opinion granting the motions to dismiss filed by General Re, Marsh, ACE, and Susan Rivera. On July 13, 2009 and July 17, 2009, the Court entered final judgments in favor of PwC, General Re, Marsh, ACE, and Susan Rivera. Shortly thereafter, the shareholder plaintiffs filed separate appeals: one addressing the dismissal of PwC, and the other addressing the dismissals of ACE, General Re, and Marsh. Their opening briefs were filed on September 24, 2009. By November 12, 2009, those appeals were fully briefed. Under the AIG/Greenberg MOU, AIG agreed to undertake to dismiss its direct claims against Greenberg and Smith in the Delaware 2004/2005 Derivative Litigation with prejudice. On November 27, 2009, counsel for the shareholder plaintiffs filed a motion for a temporary restraining order enjoining AIG from proceeding with its November 25, 2009 settlement with Greenberg. AIG opposed the motion on the ground, among other things, that the AIG/Greenberg MOU did not extinguish the shareholder plaintiffs' derivative claims. On November 30, 2009, counsel for the shareholder plaintiffs wrote to the Court and stated that "there appears to be nothing to enjoin" because the AIG/Greenberg MOU was the final, operative settlement agreement, and noted that the shareholder plaintiffs may request declaratory relief regarding the impact of the AIG/Greenberg MOU at a subsequent time. On February 5, 2010, AIG, Greenberg and Smith submitted a stipulation to the Court dismissing AIG's direct claims against Greenberg and Smith. The Starr Parties have taken the position that the AIG/Greenberg MOU also releases certain of the derivative claims being pursued by the shareholder plaintiffs. AIG has taken the opposite position.

    AIG was also named as a defendant in a derivative action in the Delaware Chancery Court brought by shareholders of Marsh. On July 10, 2008, shareholder plaintiffs filed a second consolidated amended complaint, which contains claims against AIG for aiding and abetting a breach of fiduciary duty and contribution and indemnification in connection with alleged bid-rigging and steering practices in the commercial insurance market that are the subject of the Policyholder Antitrust and Racketeering Influenced and Corrupt Organizations Act

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American International Group, Inc., and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

(RICO) Actions described below. On November 10, 2008, AIG and certain defendants filed motions to dismiss the shareholder plaintiffs' portions of the complaint. On June 17, 2009, the Court dismissed the claims against AIG, Maurice R. Greenberg, and Zachary Carter with prejudice and denied the motions to dismiss filed by the remaining defendants. Final judgment was entered on June 19, 2009. The Court granted a motion by AIG for entry of final judgment under Rule 54(b), and entered final judgment dismissing AIG and Maurice R. Greenberg on September 2, 2009. The shareholder plaintiffs filed their notice of appeal on October 1, 2009. AIG moved to consolidate the appeal with the appeal of the dismissal of ACE, General Re, and Marsh in the Delaware 2004/2005 Derivative Litigation. The shareholders of Marsh moved to stay this appeal pending the decision in the appeal of the dismissal of ACE, General Re, and Marsh in the Delaware 2004/2005 Derivative Litigation. On November 10, 2009, the Delaware Supreme Court granted AIG's motion to consolidate the appeals for the purposes of oral argument and denied the Marsh shareholders' motion to stay. The shareholders of Marsh filed their opening brief on November 16, 2009. The appeal has been fully briefed, and oral argument was held before a three-judge panel of the Delaware Supreme Court on February 17, 2010. On February 22, 2010, the Court issued an order notifying the parties that the appeal would be heard by the Court en banc. The argument before the en banc court has not been scheduled.

    Derivative Action — Supreme Court of New York.    On February 11, 2009, shareholder plaintiffs in the Delaware 2004/2005 Derivative Litigation filed a derivative complaint in the Supreme Court of New York against the individual defendants who moved to dismiss the complaint in the Delaware 2004/2005 Derivative Litigation on personal jurisdiction grounds. The defendants include current and former officers and employees of AIG, Marsh, and General Re; AIG is named as a nominal defendant. The complaint in this action contains similar allegations to those made in the Delaware 2004/2005 Derivative Litigation described above. Discovery in this action is stayed pending the resolution of the claims against AIG in the securities actions described above under Securities Actions — Southern District of New York. Defendants filed motions to dismiss the complaint on May 1, 2009 and have completed their briefing. The shareholder plaintiffs have reached an agreement staying discovery as well as any motions to dismiss with the General Re and Marsh defendants pending final adjudication of any claims against those parties in the Delaware 2004/2005 Derivative Litigation. Oral argument on the other motions to dismiss has been adjourned until June 24, 2010.

    Policyholder Antitrust and RICO Actions.    Commencing in 2004, policyholders brought multiple federal antitrust and RICO class actions in jurisdictions across the nation against insurers and brokers, including AIG and a number of its subsidiaries, alleging that the insurers and brokers engaged in a broad conspiracy to allocate customers, steer business, and rig bids. These actions, including 24 complaints filed in different federal Courts naming AIG or an AIG subsidiary as a defendant, were consolidated by the judicial panel on multi-district litigation and transferred to the United States District Court for the District of New Jersey (District of New Jersey) for coordinated pretrial proceedings. The consolidated actions have proceeded in that Court in two parallel actions, In re Insurance Brokerage Antitrust Litigation (the Commercial Complaint) and In re Employee Benefits Insurance Brokerage Antitrust Litigation (the Employee Benefits Complaint, and, together with the Commercial Complaint, the Multi-district Litigation).

    The plaintiffs in the Commercial Complaint are a group of corporations, individuals and public entities that contracted with the broker defendants for the provision of insurance brokerage services for a variety of insurance needs. The broker defendants are alleged to have placed insurance coverage on the plaintiffs' behalf with a number of insurance companies named as defendants, including AIG subsidiaries. The Commercial Complaint also named various brokers and other insurers as defendants (three of which have since settled). The Commercial Complaint alleges, among other things, that defendants engaged in a widespread conspiracy to allocate customers through bid-rigging and steering practices. Plaintiffs assert that the defendants violated the Sherman Antitrust Act, RICO, and the antitrust laws of 48 states and the District of Columbia, and are liable under common law breach of fiduciary duty and unjust enrichment theories. Plaintiffs seek treble damages plus interest and attorneys' fees as a result of the alleged RICO and Sherman Antitrust Act violations.

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American International Group, Inc., and Subsidiaries

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    The plaintiffs in the Employee Benefits Complaint are a group of individual employees and corporate and municipal employers alleging claims on behalf of two separate nationwide purported classes: an employee class and an employer class that acquired insurance products from the defendants from January 1, 1998 to December 31, 2004. The Employee Benefits Complaint names AIG, as well as various other brokers and insurers, as defendants. The activities alleged in the Employee Benefits Complaint, with certain exceptions, track the allegations made in the Commercial Complaint.

    The Court, in connection with the Commercial Complaint, granted (without leave to amend) defendants' motions to dismiss the federal antitrust and RICO claims on August 31, 2007 and September 28, 2007, respectively. The Court declined to exercise supplemental jurisdiction over the state law claims in the Commercial Complaint and therefore dismissed it in its entirety. On January 14, 2008, the Court granted defendants' motion for summary judgment on the ERISA claims in the Employee Benefits Complaint and subsequently dismissed the remaining state law claims without prejudice, thereby dismissing the Employee Benefits Complaint in its entirety. On February 12, 2008, plaintiffs filed a notice of appeal to the United States Court of Appeals for the Third Circuit with respect to the dismissal of the Employee Benefits Complaint. Plaintiffs previously appealed the dismissal of the Commercial Complaint to the United States Court of Appeals for the Third Circuit on October 10, 2007. Both appeals are fully briefed and oral argument in both appeals was held on April 21, 2009.

    A number of complaints making allegations similar to those in the Multi- district Litigation have been filed against AIG and other defendants in state and federal courts around the country. The defendants have thus far been successful in having the federal actions transferred to the District of New Jersey and consolidated into the Multi-district Litigation. These additional consolidated actions are still pending in the District of New Jersey, but are currently stayed. The AIG defendants have also sought to have state court actions making similar allegations stayed pending resolution of the Multi-district Litigation proceeding. These efforts have generally been successful, although discovery recently commenced in one case pending in Kansas state court. Discovery has been stayed in another case pending in Texas state court. In that case, the plaintiff filed an amended petition on July 13, 2009, and defendants filed special exceptions in connection with plaintiff's amended petition on August 14, 2009. A hearing on the special exceptions was held on November 11, 2009. AIG has settled several of the various federal and state actions alleging claims similar to those in the Multi-district Litigation, including state court actions pending in Florida and in New Jersey in which discovery had been allowed to proceed.

    Ohio Attorney General Action — Ohio Court of Common Pleas.    On August 24, 2007, the Ohio Attorney General filed a complaint in the Ohio Court of Common Pleas against AIG and a number of its subsidiaries, as well as several other broker and insurer defendants, asserting violation of Ohio's antitrust laws. The complaint, which is similar to the Commercial Complaint, alleges that AIG and the other broker and insurer defendants conspired to allocate customers, divide markets, and restrain competition in commercial lines of casualty insurance sold through the broker defendant. The complaint seeks treble damages on behalf of Ohio public purchasers of commercial casualty insurance, disgorgement on behalf of both public and private purchasers of commercial casualty insurance, and a $500-per-day penalty for each day of conspiratorial conduct. On April 7, 2010, it was announced that AIG and the Ohio Attorney General agreed to settle the Ohio Attorney General's claims. Under the settlement agreement, AIG agreed to make a payment of $9 million and to continue to maintain certain producer compensation disclosure and ongoing compliance initiatives.

    Actions Relating to Workers' Compensation Premium Reporting — Northern District of Illinois.    On May 24, 2007, the National Workers' Compensation Reinsurance Pool (the NWCRP), on behalf of its participant members, filed a lawsuit in the United States District Court for the Northern District of Illinois against AIG with respect to the underpayment by AIG of its residual market assessments for workers' compensation insurance. The complaint alleged claims for violations of RICO, breach of contract, fraud and related state law claims arising out of AIG's alleged underpayment of these assessments between 1970 and the present and sought damages purportedly in excess of $1 billion. On August 6, 2007, the Court denied AIG's motion seeking to dismiss or stay the complaint or, in the alternative, to transfer to the Southern District of New York. On December 26, 2007, the Court denied

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AIG's motion to dismiss the complaint. On March 17, 2008, AIG filed an amended answer, counterclaims and third-party claims against the National Council on Compensation Insurance (in its capacity as attorney-in-fact for the NWCRP), the NWCRP, its board members, and certain of the other insurance companies that are members of the NWCRP alleging violations of RICO, as well as claims for conspiracy, fraud, and other state law claims. The counterclaim-defendants and third-party defendants filed motions to dismiss on June 9, 2008. On January 26, 2009, AIG filed a motion to dismiss all claims in the complaint for lack of subject-matter jurisdiction. On February 23, 2009, the Court issued a decision and order sustaining AIG's counterclaims and sustaining, in part, AIG's third-party claims. The Court also dismissed certain of AIG's third-party claims without prejudice. On April 13, 2009, third-party defendant Liberty Mutual filed third-party counterclaims against AIG, certain of its subsidiaries, and former AIG executives. On August 23, 2009, the Court granted AIG's motion to dismiss the complaint for lack of standing. On September 25, 2009, AIG filed its First Amended Complaint, reasserting its RICO claims against certain insurance companies that both underreported their workers' compensation premium and served on the NWCRP Board, and repleading its fraud and other state law claims. Defendants filed a motion to dismiss the First Amended Complaint on October 30, 2009. On October 8, 2009, Liberty Mutual filed an amended counterclaim against AIG. The amended counterclaim is substantially similar to the complaint initially filed by the NWCRP, but also seeks damages related to non-NWCRP states, guaranty funds, and special assessments, in addition to asserting claims for other violations of state law. The amended counterclaim also removes as defendants the former AIG executives. On October 30, 2009, AIG filed a motion to dismiss the Liberty amended counterclaim. Discovery is proceeding and fact discovery is currently scheduled to be completed by March 15, 2011.

    On April 1, 2009, Safeco Insurance Company of America and Ohio Casualty Insurance Company filed a complaint in the United States District Court for the Northern District of Illinois, on behalf of a purported class of all NWCRP participant members, against AIG and certain of its subsidiaries with respect to the underpayment by AIG of its residual market assessments for workers' compensation insurance. The complaint was styled as an "alternative complaint," should the Court grant AIG's motion to dismiss the NWCRP lawsuit for lack of subject-matter jurisdiction. The allegations in the class action complaint are substantially similar to those filed by the NWCRP, but the complaint names former AIG executives as defendants and asserts a RICO claim against those executives. On August 28, 2009, the class action plaintiffs filed an amended complaint, removing the AIG executives as defendants. On October 30, 2009, AIG filed a motion to dismiss the amended complaint. Discovery related to class certification issues has begun and is scheduled to be completed by March 12, 2010. Discovery is proceeding and is currently scheduled to be completed by March 15, 2011.

Litigation Matters Relating to AIG's General Insurance Operations

    Caremark.    AIG and certain of its subsidiaries have been named defendants in two putative class actions in state court in Alabama that arise out of the 1999 settlement of class and derivative litigation involving Caremark Rx, Inc. (Caremark). The plaintiffs in the second-filed action have intervened in the first-filed action, and the second-filed action has been dismissed. An excess policy issued by a subsidiary of AIG with respect to the 1999 litigation was expressly stated to be without limit of liability. In the current actions, plaintiffs allege that the judge approving the 1999 settlement was misled as to the extent of available insurance coverage and would not have approved the settlement had he known of the existence and/or unlimited nature of the excess policy. They further allege that AIG, its subsidiaries, and Caremark are liable for fraud and suppression for misrepresenting and/or concealing the nature and extent of coverage. In addition, the intervenor- plaintiffs originally alleged that various lawyers and law firms who represented parties in the underlying class and derivative litigation (the Lawyer Defendants) were also liable for fraud and suppression, misrepresentation, and breach of fiduciary duty. The complaints filed by the plaintiffs and the intervenor-plaintiffs request compensatory damages for the 1999 class in the amount of $3.2 billion, plus punitive damages. AIG and its subsidiaries deny the allegations of fraud and suppression and have asserted that information concerning the excess policy was publicly disclosed months prior to the approval of the settlement. AIG and its subsidiaries further assert that the current claims are barred by the statute of limitations and that plaintiffs' assertions that the statute was tolled cannot stand against the public

69

American International Group, Inc., and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

disclosure of the excess coverage. The plaintiffs and intervenor-plaintiffs, in turn, have asserted that the disclosure was insufficient to inform them of the nature of the coverage and did not start the running of the statute of limitations. On November 26, 2007, the trial court issued an order that dismissed the intervenors' complaint against the Lawyer Defendants and entered a final judgment in favor of the Lawyer Defendants. The matter was stayed pending appeal to the Alabama Supreme Court. In September 2008, the Alabama Supreme Court affirmed the trial court's dismissal of the Lawyer Defendants. After the case was sent back down to the trial court, the intervenor-plaintiffs retained additional counsel — the law firm of Haskell Slaughter Young & Rediker, LLC (Haskell Slaughter) — and filed an Amended Complaint in Intervention on December 1, 2008. The Amended Complaint in Intervention names only Caremark and AIG and various subsidiaries as defendants and purports to bring claims against all defendants for deceit and conspiracy to deceive. In addition, the Amended Complaint in Intervention purports to bring a claim against AIG and its subsidiaries for aiding and abetting Caremark's alleged deception. The defendants have moved to dismiss the Amended Complaint, and, in the alternative, for a more definite statement. The intervenor-plaintiffs have yet to respond to defendants' motion but have indicated to the court that they intend to remedy any defects in their Amended Complaint by filing another amended complaint. After the appearance of the Haskell Slaughter firm on behalf of the intervenor-plaintiffs, the plaintiffs moved to disqualify all of the lawyers for the intervenor-plaintiffs because, among other things, the Haskell Slaughter firm previously represented Caremark. The intervenor-plaintiffs, in turn, moved to disqualify the lawyers for the plaintiffs in the first-filed action. The trial court heard oral argument on the motions to disqualify on February 6, 2009. On March 2, 2009, both sets of plaintiffs filed motions to withdraw their respective motions to disqualify each other after reaching an agreement among themselves that the Lauriello plaintiffs would act as lead counsel. The McArthur intervenors also moved to withdraw their Amended Complaint in Intervention. The trial court granted all motions to withdraw and ordered the parties to appear on March 26, 2009 for a status conference. Before the conference, the McArthur intervenors purported to dismiss their claims against Lauriello with prejudice pursuant to Ala. R. Civ. P. 41. The defendants argued that such dismissal was improper absent Court approval, but the Court approved the dismissal on April 2, 2009. At a class action scheduling conference held on April 14, 2009, the Court established a schedule for class action discovery that led to a hearing on class certification in March 2010. The Court then entered an order appointing a special master to resolve certain discovery disputes and requiring the parties to submit a new discovery schedule after those disputes are resolved. The parties are presently engaged in class discovery.

Litigation Matters Relating to AIG's Domestic Life Insurance & Retirement Services Operations

    Superior National.    On December 30, 2004, an arbitration panel issued its ruling in connection with a 1998 workers' compensation quota share reinsurance agreement under which Superior National Insurance Company, among others, was reinsured by USLIFE, a subsidiary of AGC. In its 2-1 ruling, the arbitration panel refused to rescind the contract as requested by USLIFE. Instead, the panel reformed the contract to reduce USLIFE's participation by ten percent. Further, the arbitration ruling established a second phase of arbitration for USLIFE to present its challenges to certain cessions to the contract. In the second phase the arbitration panel issued two awards resolving the challenges in favor of the cedents. On January 4, 2010, the Ninth Circuit Court of Appeals affirmed the arbitration awards. USLIFE is currently considering its legal options. AIG had reserves of $639 million as of March 31, 2010. AIG believes that the reserves should be adequate to fund unpaid claims.

(b) Commitments

Flight Equipment

    At March 31, 2010, ILFC had committed to purchase 120 new aircraft deliverable from 2010 through 2019, at an estimated aggregate purchase price of $13.7 billion, including $243 million for 2010. ILFC will be required to find lessees for any aircraft acquired and to arrange financing for a substantial portion of the purchase price.

    Included in the 120 new aircraft are 74 Boeing 787 aircraft (B787s), with the first aircraft currently scheduled to be delivered in July 2012. ILFC is in discussion with Boeing related to revisions to the delivery schedule and

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American International Group, Inc., and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

potential delay compensation and penalties for which ILFC may be eligible. ILFC has signed contracts for 29 of the 74 B787s on order. Under the terms of ILFC's B787 leases, the lessees may be entitled to share in any compensation which ILFC receives from Boeing for late delivery of the aircraft.

Other Commitments

    On March 29, 2010, AIG's Compensation and Management Resources Committee approved AIG's 2010 Long Term Incentive Plan (LTIP) and an additional component to AIG's 2009 LTIP for middle management employees throughout AIG. Under both plans, recipients were offered the opportunity to receive additional compensation in the form of cash and stock appreciation rights (SARs) if certain metrics are met. The ultimate value is contingent on the achievement of performance measures aligned to the participant's business unit over a two-year period and such value could range from zero to twice the target amount. Subsequent to the performance period, portions of the earned awards are subject to an additional time-vesting period of up to two years. The awards granted to participants based on their target amounts for the 2010 LTIP totaled approximately $380 million for the cash and SARs components, while the SARs component of the 2009 LTIP totaled approximately $90 million. AIG recognizes compensation expense over the vesting period for these plans.

    In the normal course of business, AIG enters into commitments to invest in limited partnerships, private equities, hedge funds and mutual funds and to purchase and develop real estate in the U.S. and abroad. These commitments totaled $6.2 billion at March 31, 2010.

    On June 27, 2005, AIG entered into an agreement pursuant to which AIG agreed, subject to certain conditions, to make any payment that is not promptly paid with respect to the benefits accrued by certain employees of AIG and its subsidiaries under the SICO Plans (as discussed in (c) below under "Benefits Provided by Starr International Company, Inc.").

(c) Contingencies

Liability for unpaid claims and claims adjustment expense

    Although AIG regularly reviews the adequacy of the established Liability for unpaid claims and claims adjustment expense, there can be no assurance that AIG's ultimate Liability for unpaid claims and claims adjustment expense will not develop adversely and materially exceed AIG's current Liability for unpaid claims and claims adjustment expense. Estimation of ultimate net claims, claims adjustment expenses and Liability for unpaid claims and claims adjustment expense is a complex process for long-tail casualty lines of business, which include excess and umbrella liability, directors and officers liability (D&O), professional liability, medical malpractice, workers' compensation, general liability, products liability and related classes, as well as for asbestos and environmental exposures. Generally, actual historical loss development factors are used to project future loss development. However, there can be no assurance that future loss development patterns will be the same as in the past. Moreover, any deviation in loss cost trends or in loss development factors might not be discernible for an extended period of time subsequent to the recording of the initial loss reserve estimates for any accident year. Thus, there is the potential for reserves with respect to a number of years to be significantly affected by changes in loss cost trends or loss development factors that were relied upon in setting the reserves. These changes in loss cost trends or loss development factors could be attributable to changes in inflation, in labor and material costs or in the judicial environment, or in other social or economic phenomena affecting claims.

Benefits Provided by Starr International Company, Inc.

    SICO has provided a series of two-year Deferred Compensation Profit Participation Plans (SICO Plans) to certain AIG employees. The SICO Plans were created in 1975 when the voting shareholders and Board of Directors of SICO, a private holding company whose principal asset is AIG Common Stock, decided that a portion of the capital value of SICO should be used to provide an incentive plan for the current and succeeding managements of all American International companies, including AIG.

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American International Group, Inc., and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

    None of the costs of the various benefits provided under the SICO Plans has been paid by AIG, although AIG has recorded a charge to reported earnings for the deferred compensation amounts paid to AIG employees by SICO, with an offsetting amount credited to Additional paid-in capital reflecting amounts considered to be contributed by SICO. The SICO Plans provide that shares currently owned by SICO are set aside by SICO for the benefit of the participant and distributed upon retirement. The SICO Board of Directors currently may permit an early payout of units under certain circumstances. Prior to payout, the participant is not entitled to vote, dispose of or receive dividends with respect to such shares, and shares are subject to forfeiture under certain conditions, including but not limited to the participant's voluntary termination of employment with AIG prior to normal retirement age. Under the SICO Plans, SICO's Board of Directors may elect to pay a participant cash in lieu of shares of AIG Common Stock. Following notification from SICO to participants in the SICO Plans that it will settle specific future awards under the SICO Plans with shares rather than cash, AIG modified its accounting for the SICO Plans from variable to fixed measurement accounting. AIG gave effect to this change in settlement method beginning on December 9, 2005, the date of SICO's notice to participants in the SICO Plans.

(d) Guarantees

•

See Note 7 herein for commitments and guarantees associated with VIEs.

•

See Note 8 herein for disclosures on derivatives, including AIGFP and MIP written credit default swaps and other derivatives with credit risk-related contingent features.

•

See Note 15 herein for additional disclosures on guarantees of outstanding debt.

Subsidiaries

    AIG has issued unconditional guarantees with respect to the prompt payment, when due, of all present and future payment obligations and liabilities of AIG Financial Products and certain of its subsidiaries arising from transactions entered into by such companies.

    In connection with AIGFP's leasing business, AIGFP has issued, in a limited number of transactions, standby letters of credit or similar facilities to equity investors in an amount equal to the termination value owing to the equity investor by the lessee in the event of a lessee default (the equity termination value). The total amount outstanding at March 31, 2010 was $1.3 billion. In those transactions, AIGFP has agreed to pay such amount if the lessee fails to pay. The amount payable by AIGFP is usually, but not always, partially offset by amounts payable under other instruments typically equal to the accreted value of a deposit held by AIGFP. In the event AIGFP is required to make a payment to the equity investor, the lessee is unconditionally obligated to reimburse AIGFP. To the extent the equity investor is paid the equity termination value from the standby letter of credit and/or other sources, including payments by the lessee, AIGFP takes an assignment of the equity investor's rights under the lease of the underlying property. Because the obligations of the lessee under the lease transactions are generally economically defeased, lessee bankruptcy is the most likely circumstance in which AIGFP would be required to pay. AIGFP selected transactions in which it agreed to provide this product only in circumstances where lessee bankruptcy is considered remote or, in the case of certain municipal lessees, not permitted under current law.

Asset Dispositions

    AIG is also subject to financial guarantees and indemnity arrangements in connection with the sales of businesses pursuant to its asset disposition plan, including the sales of AIA and ALICO. The various indemnities and guarantees may be triggered by, among other things, breaches of representations, warranties or covenants provided by AIG. These obligations are typically subject to various time limitations, defined by the contract or by operation of law, such as statutes of limitation. In some cases, the maximum potential obligation is subject to contractual limitations, while in other cases such limitations are not specified or applicable. AIG is unable to develop an estimate of the maximum payout under certain of these guarantees and indemnifications. However,

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American International Group, Inc., and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

AIG believes that it is unlikely it will have to make any material payments under these arrangements, and no significant liabilities related to these arrangements have been recorded in the Consolidated Balance Sheet. See Note 1 herein for additional information on sales of businesses and asset dispositions.

10. Total Equity and Earnings (Loss) Per Share

The following table provides a reconciliation of the beginning and ending balances of the components of total equity (excluding the effects of redeemable noncontrolling interests):

	2010									2009
Three Months Ended March 31, (In millions)	Total AIG Shareholders' Equity			Non- Controlling Interest			Total Equity			Total AIG Shareholders' Equity			Non- Controlling Interest			Total Equity
Balance, beginning of year	$	69,824		$	28,252		$	98,076		$	52,710		$	8,095		$	60,805
Series C issuance		-			-			-			1			-			1
Series F drawdowns		2,199			-			2,199			-			-			-
Common stock issued under stock plans		(5	)		-			(5	)		(1	)		-			(1	)
Cumulative effect of change in accounting principle, net of tax		(107	)		-			(107	)		15			-			15
Net income (loss)		1,451			133			1,584			(4,353	)		(792	)		(5,145	)
Other comprehensive income (loss)		1,636			(165	)		1,471			(2,532	)		(87	)		(2,619	)
Net decrease due to deconsolidation		-			(2,161	)		(2,161	)		-			476			476
Contributions from noncontrolling interest		-			210			210			-			391			391
Distributions to noncontrolling interests		-			(87	)		(87	)		-			(589	)		(589	)
Net income (loss) attributable to noncontrolling nonvoting, callable, junior and senior preferred interests held by the Federal Reserve Bank of New York		-			519			519			-			-			-
Other		3			17			20			(81	)		(44	)		(125	)
Balance, end of period	$	75,001		$	26,718		$	101,719		$	45,759		$	7,450		$	53,209

Preferred Stock

    During the first quarter of 2010, AIG drew approximately $2.2 billion under the Department of the Treasury Commitment and, as a result, the liquidation preference of the AIG Series F Preferred Stock increased to $7.543 billion in the aggregate.

    As a result of AIG's failure to declare and pay dividends on Series E Fixed Rate Non-Cumulative Perpetual Preferred Stock, par value $5.00 per share (AIG Series E Preferred Stock), and AIG Series F Preferred Stock for four quarterly dividend payment periods, the United States Department of the Treasury, as the sole holder of the AIG Series E Preferred Stock and AIG Series F Preferred Stock, exercised its right and elected Ronald A. Rittenmeyer and Donald H. Layton (the Preferred Directors) to the Board of Directors of AIG (the Board) by written consent effective April 1, 2010. The Preferred Directors are to hold office until the next annual meeting (or special meeting called for the purpose of electing directors) or until all the dividends payable on all outstanding shares of the AIG Series E Preferred Stock and the AIG Series F Preferred Stock have been declared and paid in full for four consecutive quarters.

    See Note 16 of Notes to Consolidated Financial Statements of AIG's 2009 Annual Report on Form 10-K for a discussion of the terms of AIG's outstanding Preferred Stock.

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American International Group, Inc., and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

Accumulated Other Comprehensive Income (Loss)

A rollforward of Accumulated other comprehensive income (loss) is as follows:

Three Months Ended March 31, 2010 (in millions)		Unrealized Appreciation (Depreciation) of Fixed Maturity Investments on Which Other-Than- Temporary Credit Impairments Were Taken			Unrealized Appreciation (Depreciation) of All Other Investments			Foreign Currency Translation Adjustments			Net Derivative Gains (losses) Arising from Cash Flow Hedging Activities			Retirement Plan Liabilities Adjustment			Total
Balance, beginning of year, net of tax		$	(1,810	)	$	7,145		$	1,630		$	(128	)	$	(1,144	)	$	5,693
	Unrealized appreciation (depreciation) of investments		993			2,531			-			-			-			3,524
	Net changes in foreign currency translation adjustments		-			-			(958	)		-			-			(958	)
	Net gains (losses) on cash flow hedges		-			-			-			24			-			24
	Net actuarial gain		-			-			-			-			78			78
	Prior service cost		-			-			-			-			(1	)		(1	)
	Deferred tax asset (liability)		(220	)		(1,374	)		429			(2	)		(24	)		(1,191	)
Total other comprehensive income			773			1,157			(529	)		22			53			1,476
Cumulative effect of change in accounting principle, net of tax			-			(276	)		-			-			-			(276	)
Noncontrolling interests			5			(60	)		(105	)		-			-			(160	)
Balance, end of period, net of tax		$	(1,042	)	$	8,086		$	1,206		$	(106	)	$	(1,091	)	$	7,053

Noncontrolling interests

    In connection with the ongoing execution of its orderly asset disposition plan, as well as plans to timely repay the FRBNY Credit Facility, on November 30, 2009, AIG transferred two of its wholly owned businesses, AIA and ALICO, to two newly-created special purpose vehicles (SPVs) in exchange for all the common and preferred interests of those SPVs. On December 1, 2009, AIG transferred the preferred interests in the SPVs to the FRBNY in consideration for a $25 billion reduction of the outstanding loan balance and of the maximum amount of credit available under the FRBNY Credit Facility and amended the terms of the Facility as discussed below.

    The common interests, which were retained by AIG, entitle AIG to 100 percent of the voting power of the SPVs. The voting power allows AIG to elect the boards of managers of the SPVs, who oversee the management and operation of the SPVs. Primarily due to the substantive participation rights of the preferred interests, the SPVs were determined to be variable interest entities. As the primary beneficiary of the SPVs, AIG consolidates the SPVs.

    The preferred interests are redeemable at the option of AIG and are transferable at the FRBNY's discretion. If the FRBNY obtains control of the SPVs, through a default by AIG under the FRBNY Credit Agreement or otherwise, the agreements governing the transactions explicitly prohibit redemption of the preferred interests. In the event the board of managers of either SPV initiates a public offering, liquidation or winding up or a voluntary sale of the SPV, the proceeds must be distributed to the preferred interests until the preferred interests' redemption value has been paid. The redemption value of the preferred interests is the liquidation preference, which includes any undistributed preferred returns through the redemption date, and the amount of distributions that the preferred interests would receive in the event of a 100 percent distribution to all the common and preferred interest holders at the redemption date as described below.

    See Note 16 of Notes to Consolidated Financial Statements of AIG's 2009 Annual Report on Form 10-K for further discussion of the terms of the junior and senior non-voting, callable preferred interests.

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American International Group, Inc., and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

Earnings (Loss) Per Share (EPS)

    Basic and diluted earnings (loss) per share are based on the weighted average number of common shares outstanding, adjusted to reflect all stock dividends and stock splits. Diluted earnings per share is based on those shares used in basic EPS plus shares that would have been outstanding assuming issuance of common shares for all dilutive potential common shares outstanding, adjusted to reflect all stock dividends and stock splits. Basic earnings (loss) per share is not affected by outstanding stock purchase contracts. Diluted earnings per share is determined considering the potential dilution from outstanding stock purchase contracts using the treasury stock method and will not be affected by outstanding stock purchase contracts until the applicable market value per share exceeds $912.

    In connection with the issuance of the AIG Series C Perpetual, Convertible, Participating Preferred Stock, par value $5.00 per share (AIG Series C Preferred Stock), AIG began applying the two-class method for calculating EPS. The two-class method is an earnings allocation method for computing EPS when a company's capital structure includes either two or more classes of common stock or common stock and participating securities. This method determines EPS based on dividends declared on common stock and participating securities (i.e., distributed earnings) as well as participation rights of participating securities in any undistributed earnings.

The following table presents computation of basic and diluted EPS:

Three Months Ended March 31, (dollars in millions, except per share data)			2010			2009
Numerator for EPS:
	Income (loss) from continuing operations		$	926		$	(5,213	)
	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		519			-
		Other		129			(774	)
	Total net income (loss) from continuing operations attributable to noncontrolling interests			648			(774	)
	Net income (loss) attributable to AIG from continuing operations			278			(4,439	)
	Income from discontinued operations		$	1,173		$	80
	Loss from discontinued operations attributable to noncontrolling interests			-			(6	)
	Net income attributable to AIG from discontinued operations			1,173			86
	Cumulative dividends on AIG Series D Fixed Rate Cumulative Perpetual Preferred Stock, par value $5.00 per share			-			(1,012	)
	Income allocated to AIG Series C Preferred Stock – continuing operations			(222	)		-
Net Income (loss) attributable to AIG from continuing operations, applicable to common stock for EPS				56			(5,451	)
	Income allocated to AIG Series C Preferred Stock – discontinued operations			(935	)		-
Net Income attributable to AIG from discontinued operations, applicable to common stock for EPS			$	238		$	86
Denominator for EPS:
	Weighted average shares outstanding – basic			135,658,680			135,252,869
	Dilutive shares*			66,259			-
	Weighted average shares outstanding – diluted			135,724,939			135,252,869
EPS attributable to AIG:
Basic:
	Income (loss) from continuing operations		$	0.41		$	(40.29	)
	Income from discontinued operations		$	1.75		$	0.62
Diluted:
	Income (loss) from continuing operations		$	0.41		$	(40.29	)
	Income from discontinued operations		$	1.75		$	0.62

*

Diluted shares are calculated using the treasury stock method and include dilutive shares from share-based employee compensation plans, and the AIG Series F Warrants. The number of shares excluded from diluted shares outstanding were 12 million for both the three-month periods ended March 31, 2010 and 2009, because the effect would have been anti-dilutive.

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American International Group, Inc., and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

11. Restructuring

    Since September 2008, AIG has been working to execute an orderly disposition plan of non-core businesses and assets, protect and enhance the value of its key businesses, and position itself for the future. AIG continually reassesses this plan to maximize value while maintaining flexibility in its liquidity and capital, and expects to accomplish this over a longer time frame than originally contemplated.

    Successful execution of the restructuring plan involves significant separation activities. Accordingly, in 2008 AIG established retention programs for its key employees to maintain ongoing business operations and to facilitate the successful execution of the restructuring plan. Additionally, given the market disruption in the first quarter of 2008, AIGFP established a retention plan for its employees to manage and unwind its complex businesses. Other major activities include the separation of shared services, corporate functions, infrastructure and assets among business units.

    In connection with its restructuring and separation activities, AIG expects to incur significant expenses, including legal, banking, accounting, consulting and other professional fees. In addition, AIG is contractually obligated to reimburse or advance certain professional fees and other expenses incurred by the FRBNY 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).

    Based on AIG's announced plans, AIG has made estimates of these expenses, although for some restructuring and separation activities estimates cannot be reasonably made due to the evolving nature of the plans and the uncertain timing of the transactions involved. Future reimbursement or advancement payments to the FRBNY and the trustees cannot reasonably be estimated by AIG. Even for those expenses that have been estimated, actual expenses will vary depending on the identity of the ultimate purchasers of the divested entities or counterparties to transactions, the transactions and activities that ultimately are consummated or undertaken, and the ultimate time period over which these activities occur.

    For those restructuring and separation expenses that have been cumulatively incurred or can be reasonably expected to be incurred, the total expenses are approximately $2.1 billion and $2.3 billion, respectively, at March 31, 2010, as set forth in the table below. These amounts exclude expenses that could not be reasonably estimated at March 31, 2010, as well as expenses (principally professional fees) that are expected to be capitalized. With respect to the FRBNY and the trustees of the Trust, these amounts include only actual reimbursement and advancement payments made through March 31, 2010.

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American International Group, Inc., and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

Restructuring expenses and related asset impairment and other expenses by reportable segment consisted of the following:

(in millions)			General Insurance		Domestic Life Insurance & Retirement Services		Foreign Life Insurance & Retirement Services		Financial Services(a)			Other(b)		Total
Three Months Ended March 31, 2010
	Restructuring expenses		$	-	$	-	$	8	$	-		$	104	$	112
	Separation expenses			3		3		-		(9	)		1		(2	)
		Total	$	3	$	3	$	8	$	(9	)	$	105	$	110
Three Months Ended March 31, 2009
	Restructuring expenses		$	-	$	2	$	-	$	58		$	136	$	196
	Separation expenses			31		24		6		51			30		142
		Total	$	31	$	26	$	6	$	109		$	166	$	338
Cumulative amounts incurred since inception of restructuring plan			$	270	$	154	$	110	$	627		$	915	$	2,076
Total amounts expected to be incurred(c)			$	270	$	171	$	110	$	688		$	1,090	$	2,329

(a)

Benefit in 2010 relates to returned AIGFP retention awards.

(b)

Primarily includes professional fees related to (i) disposition activities and (ii) AIG's capital restructuring program with the FRBNY and the Department of the Treasury.

(c)

Includes cumulative amounts incurred and future amounts to be incurred that can be reasonably estimated at March 31, 2010.

A rollforward of the restructuring liability, reported in Other liabilities on AIG's Consolidated Balance Sheet, for the three months ended March 31, 2010 and the cumulative amounts incurred since inception of the restructuring plan, and the total amounts expected to be incurred are summarized as follows:

Three Months Ended March 31, 2010 (in millions)		Severance Expenses			Contract Termination Expenses			Asset Write- Downs			Other Exit Expenses(a)			Subtotal Restructuring Expenses			Separation Expenses			Total Restructuring and Separation Expenses
Balance, beginning of year		$	125		$	20		$	-		$	81		$	226		$	360		$	586
	Additional charges		-			1			13			37			51			25			76
	Cash payments		(65	)		(5	)		-			(64	)		(134	)		(216	)		(350	)
	Non-cash items(b)		-			-			(13	)		(1	)		(14	)		(16	)		(30	)
	Changes in estimates		(6	)		1			-			69			64			(27	)		37
	Activity of discontinued operations		-			(1	)		-			-			(1	)		(43	)		(44	)
	Reclassified to Liabilities of businesses held for sale		(3	)		(1	)		-			(7	)		(11	)		(53	)		(64	)
Balance, end of period		$	51		$	15		$	-		$	115		$	181		$	30		$	211
Cumulative amounts incurred since inception of restructuring plan		$	225		$	79		$	192		$	668		$	1,164		$	915		$	2,079
Total amounts expected to be incurred(c)		$	225		$	112		$	192		$	865		$	1,394		$	935		$	2,329

(a)

Primarily includes professional fees related to (i) disposition activities, (ii) AIG's capital restructuring program with the FRBNY and the Department of the Treasury and (iii) unwinding most of AIGFP's businesses and portfolios.

(b)

Primarily represents asset impairment charges, foreign currency translation and reclassification adjustments.

(c)

Includes cumulative amounts incurred and future amounts to be incurred that can be reasonably estimated at March 31, 2010.

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American International Group, Inc., and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

12. Ownership

    (a)  According to the Schedule 13D as amended through March 17, 2010, filed by Maurice R. Greenberg, Edward E. Matthews, Starr International Company, Inc. (Starr International), C.V. Starr & Co. (CV Starr), Inc. and Universal Foundation, Inc. (Universal Foundation) (collectively, the Starr Group), the Starr Group could be deemed to beneficially own 14,105,606 shares of AIG Common Stock at that date. Each of the Maurice R. and Corinne P. Greenberg Family Foundation, Inc., the Maurice R. and Corinne P. Greenberg Joint Tenancy, LLC and C.V. Starr & Co., Inc. Trust no longer has the power to vote or direct the disposition of any shares of AIG Common Stock. Based on the shares of AIG Common Stock outstanding at April 30, 2010, this ownership would represent approximately 10.4 percent of the common stock of AIG. Although these reporting persons may have made filings under Section 16 of the Securities Exchange Act of 1934 (the Exchange Act), reporting sales of shares of common stock, no amendment to the Schedule 13D has been filed to report a change in ownership subsequent to March 17, 2010.

    (b)  For discussion of the AIG Series C Preferred Stock and the ownership by the Trust, see Note 16 of Notes to Consolidated Financial Statements of AIG's 2009 Annual Report on Form 10-K .

13. Employee Benefits

The following table presents the components of net periodic benefit cost with respect to pensions and other postretirement benefits:

		Pensions									Postretirement
(in millions)		Non U.S. Plans*			U.S. Plans			Total			Non U.S. Plans*		U.S. Plans			Total
Three Months Ended March 31, 2010
Components of net periodic benefit cost:
	Service cost	$	32		$	36		$	68		$	2	$	2		$	4
	Interest cost		15			54			69			1		4			5
	Expected return on assets		(7	)		(64	)		(71	)		-		-			-
	Amortization of prior service credit		(2	)		-			(2	)		-		-			-
	Amortization of net loss		11			12			23			-		-			-
	Other		(1	)		-			(1	)		-		-			-
Net periodic benefit cost		$	48		$	38		$	86		$	3	$	6		$	9
Three Months Ended March 31, 2009
Components of net periodic benefit cost:
	Service cost	$	31		$	41		$	72		$	3	$	3		$	6
	Interest cost		16			55			71			1		4			5
	Expected return on assets		(9	)		(55	)		(64	)		-		-			-
	Amortization of prior service credit		(3	)		-			(3	)		-		-			-
	Amortization of net loss		11			24			35			-		-			-
	Other		3			-			3			-		(3	)		(3	)
Net periodic benefit cost		$	49		$	65		$	114		$	4	$	4		$	8

*

Non U.S. pension and post-retirement costs shown above include $21 million and $2 million, respectively, for the three months ended March 31, 2010 and $19 million and $2 million respectively, for the three months ended March 31, 2009 associated with discontinued operations.

    At December 31, 2009, AIG's non-U.S. pension and post retirement plans were underfunded by $1.6 billion and $106 million, respectively. Those amounts included $548 million and $61 million, respectively, for pension and postretirement plans that are now classified as liabilities held for sale.

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American International Group, Inc., and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

    As a result of the Fuji acquisition, AIG assumed the obligations related to the Fuji plans. As of December 31, 2009, Fuji's aggregate projected benefit obligation and plan assets were $252 million and $292 million, respectively. See Note 4 herein for more information on the Fuji acquisition.

    For the three-month period ended March 31, 2010, AIG contributed $37 million to its U.S. and non-U.S. pension plans and expects to contribute an additional $97 million for the remainder of 2010. These estimates are subject to change since contribution decisions are affected by various factors, including AIG's liquidity, asset dispositions, market performance and management discretion.

14. Income Taxes

Interim Period Tax Assumptions and Effective Tax Rates

AIG's actual income tax (benefit) expense differs from the statutory U.S. federal amount computed by applying the federal income tax rate due to the following:

			2010
Three Months Ended March 31, (dollars in millions)
			Pre-Tax Income			Amount			Percent of Pre-tax Income
U.S. federal income tax at statutory rate			$	1,871		$	655			35.0	%
	Adjustments:
		Tax exempt interest					(155	)		(8.3	)
		Variable interest entity (income) loss					30			1.6
		State income taxes					(86	)		(4.6	)
		Other					(21	)		(1.1	)
		Effect of discontinued operations					166			8.9
		State tax valuation allowance – continuing operations					65			3.5
		Reduction of valuation allowance – continuing operations					(216	)		(11.6	)
		Reduction of valuation allowance – discontinued operations					(665	)		(35.5	)
Total income tax benefit							(227	)		(12.1	)
Amount included in discontinued operations				(1,036	)		(137	)		(13.2	)
Tax benefit from continuing operations			$	835		$	(91	)		(10.9	)%

AIG's income tax benefit from continuing operations for the three months ended March 31, 2010 and 2009 is comprised of the following:

(in millions)	2010			2009
Current tax provision (benefit)	$	849		$	301
Deferred tax provision (benefit)		(940	)		(1,604	)
Total tax provision (benefit) attributable to continuing operations	$	(91	)	$	(1,303	)

    AIG is unable to estimate the annual effective tax rate for 2010 due to the significant variations in the customary relationship between income tax expense and pre-tax accounting income or loss; consequently, the actual effective tax rate for the interim period is being utilized.

    For the three-month period ended March 31, 2010, the effective tax rate on the pre-tax income from continuing operations was (10.9) percent and the effective tax rate on the pre-tax income included in discontinued operations was (13.2) percent. The effective tax rate was negative because AIG recorded a tax benefit on pre-tax income. The tax benefit was primarily due to decreases in the deferred tax asset valuation allowance of $82 million related to certain subsidiaries that file separate income tax returns, $140 million which principally offsets the tax expense related to the pre-tax income from continuing operations earned during the quarter, and $665 million related to

79

American International Group, Inc., and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

changes in value of subsidiaries to be sold and included in discontinued operations. In making its determination of the fair values of the subsidiaries to be sold, AIG considered, among other information, valuations prepared for various purposes by third parties.

    The effective tax rate on the pre-tax loss from continuing operations for the three-month period ended March 31, 2009 was 20.0 percent. The effective tax rate was lower than the statutory rate due primarily to a $1.6 billion increase in the deferred tax asset valuation allowance against a portion of AIG's net deferred tax asset, partially offset by $632 million of deferred tax benefits mainly attributable to the book to tax basis differences of AIG Parent's investment in subsidiaries and other discrete period items.

The following table provides a roll forward of the net deferred tax asset from December 31, 2009 to March 31, 2010:

	Net Deferred Tax Asset Before Valuation Allowance			Valuation Allowance			Net Deferred Tax Asset
Net deferred tax asset at December 31, 2009	$	29,589		$	(23,705	)	$	5,884
Benefit (provision) – continuing operations		789			151			940
Benefit (provision) – discontinued operations		(570	)		665			95
Deferred taxes on components of shareholders' equity		(952	)		(183	)		(1,135	)
Deferred taxes of acquired entities		511			(509	)		2
Deferred taxes of deconsolidated entities		(158	)		-			(158	)
Less: Net deferred tax liabilities reclassified as held-for-sale		1,225			1,325			2,550
Net deferred tax asset at March 31, 2010	$	30,434		$	(22,256	)	$	8,178

Valuation Allowances on Deferred Tax Assets

    AIG evaluates the recoverability of the deferred tax asset and establishes a valuation allowance, if necessary, to reduce the deferred tax asset to an amount that is more likely than not to be realized (a likelihood of more than 50 percent). Significant judgment is required to determine whether a valuation allowance is necessary and the amount of such valuation allowance, if appropriate.

    When making its assessment about the realization of its deferred tax asset at March 31, 2010, AIG considered all available evidence, as required by income tax accounting guidance, including:

•

the nature, frequency, and severity of current and cumulative financial reporting losses;

•

certain transactions, including the recognition of the gain on the sale of the Otemachi building in Tokyo, and the sales of AIA and ALICO expected to be completed in 2010;

•

the carryforward periods for the net operating and capital loss and foreign tax credit carryforwards; and

•

tax planning strategies that would be implemented, if necessary, to protect the loss of the deferred tax asset.

    Estimates of future taxable income generated from specific transactions and tax planning strategies discussed above could change in the near term, perhaps materially, which may require AIG to adjust its valuation allowance. Such adjustment, either positive or negative, could be material to AIG's consolidated financial condition or its results of operations for an individual reporting period.

    At March 31, 2010 and December 31, 2009, AIG's U.S. consolidated income tax group had a net deferred tax asset after valuation allowance of $8.3 billion and $8.6 billion, respectively. Realization of AIG's net deferred tax asset depends upon its ability to generate sufficient earnings from transactions expected to be completed in the

80

American International Group, Inc., and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

near future and tax planning strategies that would be implemented, if necessary, to protect against the loss of the deferred tax asset, but does not depend on projected future operating income.

    At March 31, 2010 and December 31, 2009, AIG's U.S. consolidated income tax group had deferred tax asset valuation allowances of $19.6 billion and $20.4 billion, respectively. The change in the deferred tax asset valuation allowances is primarily due to an increase in estimated value to be realized on the expected sale of certain subsidiaries classified as discontinued operations.

    At March 31, 2010 and December 31, 2009, AIG had net deferred tax liabilities of $0.1 billion and $2.7 billion, respectively, related to foreign subsidiaries, state and local tax jurisdictions, and certain domestic subsidiaries that file separate tax returns. The change is primarily due to deferred tax liabilities of $2.6 billion reclassified as businesses held for sale.

    At March 31, 2010 and December 31, 2009, AIG had deferred tax asset valuation allowances of $2.7 billion and $3.3 billion, respectively, related to foreign subsidiaries, state and local tax jurisdictions, and certain domestic subsidiaries that file separate tax returns. The change is primarily due to deferred tax asset valuation allowances of $1.3 billion reclassified as businesses held for sale offset by an additional deferred tax asset valuation allowance of $0.5 billion associated with the purchase of additional shares of Fuji, recorded through purchase accounting.

    At both March 31, 2010 and December 31, 2009, AIG had a deferred tax asset related to stock compensation of $178 million. Due to AIG's current stock price, this deferred tax asset may not be realizable in the future. The accounting guidance for share based payments precludes AIG from recognizing an impairment charge on this asset until the related stock awards are exercised, vest or expire. Any charge associated with the deferred tax asset is reported in Additional paid-in capital until the pool of previously recognized tax benefits recorded in Additional paid-in capital is reduced to zero. Income tax expense would be recognized for any additional charge. At March 31, 2010 and December 31, 2009, the pool of previously recognized tax benefits recorded in Additional paid-in capital was $135.2 million and $142.6 million, respectively.

Accounting for Uncertainty in Income Taxes

    At March 31, 2010 and December 31, 2009, AIG's unrecognized tax benefits, excluding interest and penalties, were $4.6 billion and $4.8 billion, respectively. At March 31, 2010 and December 31, 2009, AIG's unrecognized tax benefits included $1.2 billion and $1.4 billion, respectively, related to tax positions the disallowance of which would not affect the effective tax rate as they relate to such factors as the timing, rather than the permissibility, of the deduction. Accordingly, at March 31, 2010 and December 31, 2009, the amounts of unrecognized tax benefits that, if recognized, would favorably affect the effective tax rate were $3.4 billion and $3.4 billion, respectively.

    Interest and penalties related to unrecognized tax benefits are recognized in income tax expense. At March 31, 2010 and December 31, 2009 AIG had accrued $762 million and $835 million, respectively, for the payment of interest (net of the federal benefit) and penalties. For the three-month periods ended March 31, 2010 and 2009, AIG recognized $11 million and $(10) million, respectively, of interest (net of the federal benefit) and penalties in the Consolidated Statement of Income (Loss).

    AIG regularly evaluates adjustments proposed by taxing authorities. At March 31, 2010, such proposed adjustments would not have resulted in a material change to AIG's consolidated financial condition, although it is possible that the effect could be material to AIG's consolidated results of operations for an individual reporting period. Although it is reasonably possible that a change in the balance of unrecognized tax benefits may occur within the next twelve months, at this time it is not possible to estimate the range of the change due to the uncertainty of the potential outcomes.

15. Information Provided in Connection With Outstanding Debt

    The following condensed consolidating financial statements reflect the results of AIG Life Holdings (US), Inc. (AIGLH), formerly known as American General Corporation, a holding company and a wholly owned subsidiary of AIG. AIG provides a full and unconditional guarantee of all outstanding debt of AIGLH.

81

American International Group, Inc., and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

Condensed Consolidating Balance Sheet

(in millions)		American International Group, Inc. (As Guarantor)		AIGLH(a)		Other Subsidiaries			Reclassifications and Eliminations			Consolidated AIG
March 31, 2010
Assets:
	Investments(a)	$	9,271	$	-	$	584,700		$	(144,924	)	$	449,047
	Cash		360		-		1,773			-			2,133
	Loans to subsidiaries(b)		74,191		-		(74,191	)		-			-
	Debt issuance costs, including prepaid commitment asset of $6,460		6,739		-		212			-			6,951
	Investment in consolidated subsidiaries(b)		76,020		29,941		(1,950	)		(104,011	)		-
	Other assets, including current and deferred income taxes		11,035		2,650		138,630			(3,189	)		149,126
	Assets of businesses held for sale		-		-		253,301			3,139			256,440
Total assets		$	177,616	$	32,591	$	902,475		$	(248,985	)	$	863,697
Liabilities:
	Insurance liabilities	$	-	$	-	$	316,096		$	(368	)	$	315,728
	Federal Reserve Bank of New York Commercial Paper Funding Facility		-		-		2,285			-			2,285
	Federal Reserve Bank of New York credit facility		27,400		-		-			-			27,400
	Other debt		43,378		2,137		208,608			(144,379	)		109,744
	Other liabilities, including intercompany balances(a)(c)		31,837		4,227		51,843			(863	)		87,044
	Liabilities of businesses held for sale		-		-		217,801			36			217,837
Total liabilities			102,615		6,364		796,633			(145,574	)		760,038
Redeemable noncontrolling interests in partially owned consolidated subsidiaries (including $1,270 associated with businesses held for sale in 2010)			-		-		1,282			658			1,940
Total AIG shareholders' equity			75,001		26,227		103,036			(129,263	)		75,001
Noncontrolling interests:
	Noncontrolling nonvoting, callable, junior and senior preferred interest held by Federal Reserve Bank of New York		-		-		-			25,059			25,059
	Other (including $374 million associated with businesses held for sale in 2010)		-		-		1,524			135			1,659
Total noncontrolling interests			-		-		1,524			25,194			26,718
Total equity			75,001		26,227		104,560			(104,069	)		101,719
Total liabilities and equity		$	177,616	$	32,591	$	902,475		$	(248,985	)	$	863,697
December 31, 2009
Assets:
	Investments(a)	$	10,702	$	-	$	736,977		$	(146,514	)	$	601,165
	Cash		57		2		4,341			-			4,400
	Loans to subsidiaries(b)		72,926		-		(72,926	)		-			-
	Debt issuance costs, including prepaid commitment asset of $7,099		7,383		-		159			-			7,542
	Investment in consolidated subsidiaries(b)		71,419		28,580		(980	)		(99,019	)		-
	Other assets, including current and deferred income taxes		10,986		2,618		164,670			(175	)		178,099
	Assets of businesses held for sale		-		-		56,379			-			56,379
Total assets		$	173,473	$	31,200	$	888,620		$	(245,708	)	$	847,585
Liabilities:
	Insurance liabilities	$	-	$	-	$	461,706		$	(409	)	$	461,297
	Federal Reserve Bank of New York Commercial Paper Funding Facility		-		-		4,739			-			4,739
	Federal Reserve Bank of New York credit facility		23,435		-		-			-			23,435
	Other debt		45,436		2,097		210,512			(144,747	)		113,298
	Other liabilities, including intercompany balances(a)(c)		34,778		4,209		60,135			(1,940	)		97,182
	Liabilities of businesses held for sale		-		-		48,599			-			48,599
Total liabilities			103,649		6,306		785,691			(147,096	)		748,550
Redeemable noncontrolling interests in partially owned consolidated subsidiaries			-		-		177			782			959
Total AIG shareholders' equity			69,824		24,894		83,303			(108,197	)		69,824
Noncontrolling interests:
	Noncontrolling nonvoting, callable, junior and senior preferred interest held by Federal Reserve Bank of New York		-		-		15,596			8,944			24,540
Other (including $2.2 billion associated with businesses held for sale in 2009)			-		-		3,853			(141	)		3,712
Total noncontrolling interests			-		-		19,449			8,803			28,252
Total equity			69,824		24,894		102,752			(99,394	)		98,076
Total liabilities and equity		$	173,473	$	31,200	$	888,620		$	(245,708	)	$	847,585

(a)

Includes intercompany derivative positions, which are reported at fair value before credit valuation adjustment.

(b)

Eliminated in consolidation.

(c)

For March 31, 2010 and December 31, 2009, includes intercompany tax payable of $28.7 billion and $28.7 billion, respectively, for American International Group, Inc. (As Guarantor) and intercompany tax receivable of $60 million and $45 million, respectively, for AIGLH.

82

American International Group, Inc., and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

Condensed Consolidating Statement of Income (Loss)

(in millions)			American International Group, Inc. (As Guarantor)			AIGLH			Other Subsidiaries			Reclassifications and Eliminations			Consolidated AIG
Three Months Ended March 31, 2010
Revenues:
	Equity in undistributed net income (loss) of consolidated subsidiaries(a)		$	910		$	255		$	-		$	(1,165	)	$	-
	Dividend income from consolidated subsidiaries(a)			290			-			-			(290	)		-
	Change in fair value of ML III			-			-			751			-			751
	Other revenue(b)			981			53			14,545			-			15,579
Total revenues				2,181			308			15,296			(1,455	)		16,330
Expenses:
	Accrued and compounding interest			194			-			-			(65	)		129
	Amortization of prepaid commitment asset			639			-			-			(118	)		521
	Total Interest expense on FRBNY Credit Facility			833			-			-			(183	)		650
	Other interest expense			607			92			385			-			1,084
	Restructuring expenses and related asset impairment and
		other expenses		97			-			13			-			110
	Other expense			58			-			13,593			-			13,651
Total expenses				1,595			92			13,991			(183	)		15,495
Income (loss) from continuing operations before income tax expense (benefit)				586			216			1,305			(1,272	)		835
Income tax expense (benefit)(c)				(865	)		(12	)		786			-			(91	)
Income (loss) from continuing operations				1,451			228			519			(1,272	)		926
Income (loss) from discontinued operations				-			-			1,356			(183	)		1,173
Net income (loss)				1,451			228			1,875			(1,455	)		2,099
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			-			-			-			519			519
		Other		-			-			129			-			129
Total income (loss) from continuing operations attributable to noncontrolling interests				-			-			129			519			648
Income (loss) from discontinued operations attributable to noncontrolling interests				-			-			-			-			-
Total net income (loss) attributable to noncontrolling interests				-			-			129			519			648
Net income (loss) attributable to AIG			$	1,451		$	228		$	1,746		$	(1,974	)	$	1,451
Three Months Ended March 31, 2009
Revenues:
	Equity in undistributed net income (loss) of consolidated subsidiaries(a)		$	(2,598	)	$	(1,022	)	$	-		$	3,620		$	-
	Dividend income from consolidated subsidiaries(a)			226			-			-			(226	)		-
	Change in fair value of ML III			(1,940	)		-			-			-			(1,940	)
	Other revenue(b)			1,436			53			13,766			-			15,255
Total revenues				(2,876	)		(969	)		13,766			3,394			13,315
Expenses:
	Accrued and compounding interest			708			-			-			(141	)		567
	Amortization of prepaid commitment asset			822			-			-			(117	)		705
	Total Interest expense on FRBNY Credit Facility			1,530			-			-			(258	)		1,272
	Other interest expense			644			82			589			-			1,315
	Restructuring expenses and related asset impairment and other expenses			120			-			218			-			338
	Other expenses			136			-			16,770			-			16,906
Total expenses				2,430			82			17,577			(258	)		19,831
Income (loss) from continuing operations before income tax expense (benefit)				(5,306	)		(1,051	)		(3,811	)		3,652			(6,516	)
Income tax expense (benefit)(c)				(953	)		(8	)		(342	)		-			(1,303	)
Income (loss) from continuing operations				(4,353	)		(1,043	)		(3,469	)		3,652			(5,213	)
Income (loss) from discontinued operations				-			-			338			(258	)		80
Net income (loss)				(4,353	)		(1,043	)		(3,131	)		3,394			(5,133	)
Less:
Net income (loss) from continuing operations attributable to noncontrolling interests				-			-			(774	)		-			(774	)
Income (loss) from discontinued operations attributable to noncontrolling interests				-			-			(6	)		-			(6	)
Total net income (loss) attributable to noncontrolling interests				-			-			(780	)		-			(780	)
Net loss attributable to AIG			$	(4,353	)	$	(1,043	)	$	(2,351	)	$	3,394		$	(4,353	)

(a)

Eliminated in consolidation.

(b)

Includes interest income of $856 million and $1.3 billion for the three-month periods ended March 31, 2010 and 2009, respectively, for American International Group, Inc. (As Guarantor).

(c)

Income taxes recorded by American International Group, Inc. (As Guarantor) include deferred tax expense attributable to the pending sale of foreign businesses and a valuation allowance to reduce the consolidated deferred tax asset to the amount more likely than not to be realized. See Note 14 herein for additional information.

83

American International Group, Inc., and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

Condensed Consolidating Statement of Cash Flows

(in millions)		American International Group, Inc. (As Guarantor)			AIGLH			Other Subsidiaries and Eliminations			Consolidated AIG
Three Months Ended March 31, 2010
Net cash (used in) provided by operating activities – continuing operations		$	(83	)	$	(111	)	$	539		$	345
Net cash (used in) provided by operating activities – discontinued operations			-			-			2,850			2,850
Net cash (used in) provided by operating activities			(83	)		(111	)		3,389			3,195
Cash flows from investing activities:
	Sales of investments		490			-			17,174			17,664
	Sales of divested businesses, net		262			-			1,209			1,471
	Purchase of investments		(81	)		-			(19,225	)		(19,306	)
	Loans to subsidiaries – net		(881	)		-			881			-
	Contributions to subsidiaries		(2,171	)		-			2,171			-
	Other, net		(179	)		-			(1,106	)		(1,285	)
Net cash (used in) provided by investing activities – continuing operations			(2,560	)		-			1,104			(1,456	)
Net cash (used in) provided by investing activities – discontinued operations			-			-			(3,060	)		(3,060	)
Net cash (used in) provided by investing activities			(2,560	)		-			(1,956	)		(4,516	)
Cash flows from financing activities:
	Federal Reserve Bank of New York credit facility borrowings		8,300			-			-			8,300
	Federal Reserve Bank of New York credit facility repayments		(4,520	)		-			(31	)		(4,551	)
	Issuance of other long-term debt		-			-			4,170			4,170
	Repayments on other long-term debt		(1,398	)		-			(5,745	)		(7,143	)
	Drawdown on the Department of the Treasury Commitment		2,199			-			-			2,199
	Intercompany loans – net		(1,635	)		109			1,526			-
	Other, net		-			-			(3,394	)		(3,394	)
Net cash (used in) provided by financing activities – continuing operations			2,946			109			(3,474	)		(419	)
Net cash (used in) provided by financing activities – discontinued operations			-			-			153			153
Net cash (used in) provided by financing activities			2,946			109			(3,321	)		(266	)
Effect of exchange rate changes on cash			-			-			(42	)		(42	)
Effect of consolidation/deconsolidation of variable interest entities			-			-			-			-
Change in cash			303			(2	)		(1,930	)		(1,629	)
Cash at beginning of period			57			2			4,341			4,400
Reclassification to assets held for sale			-			-			(638	)		(638	)
Cash at end of period		$	360		$	-		$	1,773		$	2,133

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

(in millions)		American International Group, Inc. (As Guarantor)			AIGLH			Other Subsidiaries and Eliminations			Consolidated AIG
Three Months Ended March 31, 2009
Net cash (used in) provided by operating activities – continuing operations		$	296		$	(118	)	$	1,418		$	1,596
Net cash (used in) provided by operating activities – discontinued operations			-			-			2,174			2,174
Net cash (used in) provided by operating activities			296			(118	)		3,592			3,770
Cash flows from investing activities:
	Sales of investments		405			-			26,812			27,217
	Sales of divested businesses, net		-			-			704			704
	Purchase of investments		(131	)		-			(17,533	)		(17,664	)
	Loans to subsidiaries – net		(4,254	)		-			4,254			-
	Contributions to subsidiaries		(2,495	)		(1,200	)		3,695			-
	Other, net		(324	)		-			(6,697	)		(7,021	)
Net cash (used in) provided by investing activities – continuing operations			(6,799	)		(1,200	)		11,235			3,236
Net cash (used in) provided by investing activities – discontinued operations			-			-			(1,804	)		(1,804	)
Net cash (used in) provided by investing activities			(6,799	)		(1,200	)		9,431			1,432
Cash flows from financing activities:
	Federal Reserve Bank of New York credit facility borrowings		10,900			-			-			10,900
	Federal Reserve Bank of New York credit facility repayments		(4,600	)		-			-			(4,600	)
	Issuance of other long-term debt		-			-			1,209			1,209
	Repayments on other long-term debt		(561	)		-			(5,392	)		(5,953	)
	Intercompany loans – net		800			118			(918	)		-
	Other, net		-			1,200			(9,238	)		(8,038	)
Net cash (used in) provided by financing activities – continuing operations			6,539			1,318			(14,339	)		(6,482	)
Net cash (used in) provided by financing activities – discontinued operations			-			-			(3,162	)		(3,162	)
Net cash (used in) provided by financing activities			6,539			1,318			(17,501	)		(9,644	)
Effect of exchange rate changes on cash			-			-			(171	)		(171	)
Change in cash			36			-			(4,649	)		(4,613	)
Cash at beginning of period			103			-			8,539			8,642
Cash at end of period		$	139		$	-		$	3,890		$	4,029

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

Supplementary disclosure of cash flow information:

		American International Group, Inc. (As Guarantor)			AIGLH			Other Subsidiaries and Eliminations			Consolidated AIG
Cash (paid) received during the three months ended March 31, 2010 for:
Interest:
	Third party	$	(383	)	$	(63	)	$	(601	)	$	(1,047	)
	Intercompany		(1	)		(61	)		62			-
Taxes:
	Income tax authorities	$	-		$	-		$	(604	)	$	(604	)
	Intercompany		1			-			(1	)		-
Cash (paid) received during the three months ended March 31, 2009 for:
Interest:
	Third party	$	(576	)	$	(63	)	$	(827	)	$	(1,466	)
	Intercompany		-			(53	)		53			-
Taxes:
	Income tax authorities	$	(4	)	$	-		$	(175	)	$	(179	)
	Intercompany		126			-			(126	)		-

American International Group, Inc. (As Guarantor) supplementary disclosure of non-cash activities:

Three Months Ended March 31, (in millions)		2010		2009
Intercompany non-cash financing and investing activities:
	Capital contributions to subsidiaries through forgiveness of loans	$	100	$	-
	Other capital contributions in the form of forgiveness of payables and contribution of assets – net		211		292
	Temporary paydown of FRBNY Credit Facility by subsidiary		31		-
	Settlement of payable to subsidiary with return of capital from subsidiary		-		7
	Receivable offset by intercompany payable		25		-

    During 2009, AIG made certain revisions to the American International Group, Inc. (as Guarantor) Condensed Statement of Cash Flows, primarily relating to the effect of reclassifying dividend income received from consolidated subsidiaries. During 2009, AIG made certain revisions to the AIGLH Condensed Statement of Cash Flows, primarily relating to revisions for the presentation of capital contributions by AIGLH. Accordingly, AIG revised the previous period presented to conform to the revised presentation. There was no effect on the Consolidated Statement of Cash Flows or ending cash balances.

The revisions and their effect on the American International Group, Inc. (As Guarantor) and AIGLH Condensed Consolidating Statement of Cash Flows were as follows:

	American International Group, Inc. (As Guarantor)
										AIGLH
Three Months Ended March 31, 2009 (in millions)
	Originally Reported			Revisions			As Revised			Originally Reported		Revisions			As Revised
Cash flows provided by (used in) operating activities	$	(856	)	$	1,152		$	296		$	-	$	(118	)	$	(118	)
Cash flows provided by (used in) investing activities		(5,647	)		(1,152	)		(6,799	)		-		(1,200	)		(1,200	)
Cash flows provided by (used in) financing activities		6,539			-			6,539			-		1,318			1,318

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

Management's Discussion and Analysis of Financial Condition and Results of Operations is designed to provide the reader a narrative with respect to American International Group, Inc.'s (AIG's) operations, financial condition and liquidity and certain other significant matters.

Index				Page
Cautionary Statement Regarding Forward-Looking Information				87
Executive Overview				88
Consideration of AIG's Ability to Continue as a Going Concern				92
Capital Resources and Liquidity				93
	Liquidity			93
Results of Operations				108
	Consolidated Results			108
	Segment Results			113
		General Insurance Operations		114
			Liability for unpaid claims and claims adjustment expense	120
		Domestic Life Insurance & Retirement Services Operations		125
		Foreign Life Insurance & Retirement Services Operations		131
		Deferred Policy Acquisition Costs and Sales Inducement Assets		132
		Financial Services Operations		133
		Other Operations		136
Critical Accounting Estimates				140
Investments				160
	Investment Strategy			161
	Other-Than-Temporary Impairments			171
Risk Management				175
	Overview			175
		Credit Risk Management		175

Cautionary Statement Regarding Forward-Looking Information

    This Quarterly Report on Form 10-Q and other publicly available documents may include, and AIG's officers and representatives may from time to time make, projections and statements which may constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. These projections and statements are not historical facts but instead represent only AIG's belief regarding future events, many of which, by their nature, are inherently uncertain and outside AIG's control. These projections and statements may address, among other things:

•

the outcome of the transactions with the Federal Reserve Bank of New York (FRBNY) and the United States Department of the Treasury (Department of the Treasury);

•

the number, size, terms, cost, proceeds and timing of dispositions and their potential effect on AIG's businesses, financial condition, results of operations, cash flows and liquidity (and AIG at any time and from time to time may change its plans with respect to the sale of one or more businesses);

•

AIG's long-term business mix which will depend on the outcome of AIG's asset disposition program;

•

AIG's exposures to subprime mortgages, monoline insurers and the residential and commercial real estate markets;

•

the separation of AIG's businesses from AIG Parent company;

•

AIG's ability to retain and motivate its employees; and

•

AIG's strategy for customer retention, growth, product development, market position, financial results and reserves.

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    It is possible that AIG's actual results and financial condition will differ, possibly materially, from the anticipated results and financial condition indicated in these projections and statements. Factors that could cause AIG's actual results to differ, possibly materially, from those in the specific projections and statements include:

•

a failure to close transactions contemplated in AIG's restructuring plan;

•

developments in global credit markets; and

•

such other factors as discussed throughout this Management's Discussion and Analysis of Financial Condition and Results of Operations and in Part I, Item 1A. Risk Factors of the Annual Report on Form 10-K for the year ended December 31, 2009 (2009 Annual Report on Form 10-K).

    AIG is not under any obligation (and expressly disclaims any obligation) to update or alter any projection or other statement, whether written or oral, that may be made from time to time, whether as a result of new information, future events or otherwise.

    In addition to reviewing AIG's results for the three-month period ended March 31, 2010, this Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A) supplements and updates the information and discussion included in the 2009 Annual Report on Form 10-K, to reflect developments in or affecting AIG's business to date during 2010.

    Throughout this Management's Discussion and Analysis of Financial Condition and Results of Operations, AIG presents its operations in the way it believes will be most meaningful, as well as most transparent. Certain of the measurements used by AIG management are "non-GAAP financial measures" under SEC rules and regulations. Underwriting profit (loss) is utilized to report results for AIG's General Insurance operations and pre-tax income (loss) before net realized capital gains (losses) is utilized to report results for AIG's life insurance and retirement services operations as these measures enhance the understanding of the underlying profitability of the ongoing operations of these businesses and allow for more meaningful comparisons with AIG's insurance competitors.

    AIG has also incorporated into this discussion a number of cross-references to additional information included throughout this Quarterly Report on Form 10-Q and in the 2009 Annual Report on Form 10-K to assist readers seeking additional information related to a particular subject.

Executive Overview

    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.

•

General Insurance — branded as Chartis in 2009, is comprised of multiple line companies writing substantially all lines of property and casualty insurance and various personal lines both domestically and abroad.

•

Domestic Life Insurance & Retirement Services — branded as SunAmerica Financial Group in 2009. AIG's Domestic Life Insurance businesses offer a broad range of protection products, including individual term and universal life insurance, and group life and health products. In addition, Domestic Life Insurance offers a variety of payout annuities, which include single premium immediate annuities, structured settlements and terminal funding annuities. Domestic Retirement Services businesses offer group retirement products and individual fixed and variable annuities. Certain previously acquired closed blocks and other fixed and variable annuity blocks that have been discontinued are reported as "runoff" annuities. Domestic Retirement Services also maintains a runoff block of Guaranteed Investment Contracts (GICs) that were written in (or issued to) the institutional market place prior to 2006.

•

Foreign Life Insurance & Retirement Services — provides individual insurance and investment-oriented products such as term and whole life, endowments, term and whole life medical, cancer, fixed annuities and group products including life, medical and pension. Following the classification of AIA Group Limited (AIA), American Life Insurance Company (ALICO), and Nan Shan Life Insurance Company, Ltd. (Nan Shan) as discontinued operations (see Note 3 to the Consolidated Financial Statements) and the

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reclassification of certain immaterial non-core entities to Other non-core operations, AIG's remaining Foreign Life Insurance & Retirement Services operations are conducted in Japan through AIG Star Life Insurance Co. Ltd and AIG Edison Life Insurance Company.

•

Financial Services — engages in diversified activities, including commercial aircraft and equipment leasing, capital markets operations, consumer finance and insurance premium financing, both in the United States and abroad.

Priorities for 2010

    AIG is focused on the following priorities for 2010:

•

continuing the stabilization and strengthening of AIG's businesses;

•

realizing additional progress in restructuring and asset disposition initiatives to enable repayment of amounts outstanding under the 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;

•

closing the pending sales transactions for AIA, ALICO and Nan Shan and implementing plans to monetize securities expected to be received upon the AIA and ALICO closings;

•

beginning to address its highly leveraged capital structure;

•

continuing the wind-down of AIG's exposure to certain financial products and derivatives trading activities; and

•

continuing to address the long-term financing needs of International Lease Finance Corporation (ILFC) and American General Finance, Inc. (AGF).

2010 Financial Overview

    The continued improvement in the financial markets contributed significantly to AIG's income from continuing operations before income taxes, which amounted to $835 million in the first quarter of 2010 compared to a loss of $6.5 billion in the same period of 2009, as evidenced by the following:

•

growth in net investment income primarily related to gains on AIG's interests in Maiden Lane II and Maiden Lane III which totaled $911 million in the first quarter of 2010 compared to losses of $2.2 billion in the same period of 2009, and increased income from partnership investments reflecting improvement in the equity markets;

•

a decline in other-than-temporary impairments on available for sale securities due to the improved market conditions. The 2009 period included non-credit impairments (i.e., severity losses) that are no longer required for fixed maturity securities upon adoption of a new other-than-temporary impairments accounting standard commencing in the second quarter of 2009. See Note 6 to the Consolidated Financial Statements; and Investments — Evaluating Investments for Other-Than-Temporary Impairments for more information on this accounting standard;

•

a reduction in losses for Capital Markets as lower unwind costs and a decline in Unrealized market valuation losses related to AIGFP's super senior credit default swap portfolio more than offset a decline in net credit valuation adjustment gains on AIGFP's assets and liabilities; and

•

A significant improvement in earnings for the Mortgage Guaranty business.

    Negatively impacting first quarter 2010 results were $481 million of catastrophe losses in General Insurance primarily related to the Chile earthquake, U.S. wind storms and Madeira (Portugal) floods.

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2010 Business Outlook

    The following discussion supplements and updates the Business Outlook contained in AIG's 2009 Annual Report on Form 10-K.

General Insurance

    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 general insurance and some life operations. Fuji's financial information is reported on a one-quarter lag. As a result, Fuji's results will be consolidated beginning in the third quarter of 2010, and will be reported in the Foreign General Insurance operating segment. Further, AIG has not completed the determination of the fair values of the assets acquired and the liabilities assumed and, as a result, recorded an unallocated purchase price liability. Upon final determination of fair values, AIG may recognize a bargain purchase gain, which could be substantial. See Note 4 to the Consolidated Financial Statements for pro forma results and additional information about the terms of the acquisition.

    On April 20, 2010, an explosion on the Deepwater Horizon offshore drilling rig, operating in the Gulf of Mexico off the coast of Louisiana, resulted in a fire that sank the rig and caused a massive-scale oil spill. AIG estimates that its exposure to property loss on this event was approximately $20 million, which has been paid. It will not be possible to estimate the amount of casualty loss associated with this event, if any, until the determination of the cause and responsibility for the explosion and resulting oil spill and the assessment of damages resulting from the oil spill, as well as other factors, have been resolved. Therefore, although AIG cannot currently quantify its ultimate liabilities arising from this event, it is possible that such liabilities could have a material adverse effect on AIG's consolidated results of operations or consolidated cash flows for an individual reporting period.

Divestitures

    In connection with the announced sale of ALICO on March 7, 2010 and management's decision that ALICO met the held-for-sale criteria on March 31, 2010, total goodwill of $4.6 billion associated with the Foreign Life Insurance & Retirement Services — Japan & Other reporting unit was allocated among ALICO and the Japan & Other businesses to be retained based on their relative fair values as of March 31, 2010. This resulted in $3.3 billion and $1.3 billion of goodwill being allocated to ALICO and the retained businesses, respectively. Future changes in any of the assumptions used to measure the fair value of the ALICO reporting unit could result in a potential impairment of the goodwill allocated to ALICO of up to $3.3 billion, which would be reported in Income (loss) from discontinued operations on the Consolidated Statement of Income (Loss). AIG will continue to monitor overall competitive, business and economic conditions, and other events or circumstances, including ALICO's operating results and the performance of MetLife, Inc.'s (MetLife) common stock, that might result in an impairment of goodwill in the future. See Critical Accounting Estimates — Goodwill Impairment for additional information.

    AIG and AIA are working closely with Prudential to complete the sale of AIA, which AIG expects will close in 2010. Upon closing, AIG expects to realize a significant gain on the transaction, which will be reported in Income (loss) from discontinued operations on the Consolidated Statement of Income (Loss).

Mortgage Guaranty

    The improvement in UGC's results is primarily the result of lower levels of newly reported delinquencies in both the first and second-lien products, higher cure rates on existing first-lien delinquent loans, the recognition of stop loss limits on certain second-lien policies, increased rescission activity on domestic first- and second-lien claims and increased efforts to modify payment plans for currently delinquent loans. If these trends continue, UGC's financial results may show improvement in future quarters. However, there remains considerable uncertainty about the longer term outlook for the housing market, U.S. unemployment rates, the impact of future

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foreclosures on domestic home prices, loan modification programs and mortgage insurance rescission rates and the effects, if any, these factors will have on UGC's financial results.

Significant Events in 2010

AIA Sale

    As of March 1, 2010, AIG and AIA Aurora LLC, a special purpose vehicle formed by AIG and the FRBNY (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 to Prudential Group Limited for approximately $35.5 billion, consisting of $25 billion in cash, approximately $5.5 billion in face value of ordinary shares in the capital of Prudential Group Limited, $3 billion in face value of mandatory convertible securities of Prudential Group Limited, and $2 billion in face value of preferred stock of Prudential (or at Prudential's election, Prudential Group Limited), subject to closing adjustments. The obligations of Prudential Group Limited under the AIA Share Purchase Agreement are guaranteed by Prudential.

    The cash portion of the proceeds from the sale will be paid to the FRBNY to redeem preferred interests with a liquidation preference of approximately $16 billion plus accrued but unpaid preferred return held by the FRBNY in AIA Holdings, and unless otherwise agreed with the FRBNY, to repay approximately $9 billion under the FRBNY Credit Facility. AIG intends to monetize the $10.5 billion in face value of Prudential Group Limited securities over time, subject to market conditions, following the lapse of agreed-upon minimum holding periods. Unless otherwise agreed with the FRBNY, net cash proceeds from the monetization of these securities will be used to repay any outstanding debt under the FRBNY Credit Facility.

ALICO Sale

    As of March 7, 2010, AIG and ALICO Holdings LLC, a special purpose vehicle formed by AIG and the FRBNY (ALICO Holdings) entered into a definitive agreement (the ALICO Stock Purchase Agreement) with MetLife for the sale of 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. 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.

Retained Financial Interest

    In the case of the sales of AIA and ALICO, the value of the securities consideration is subject to fluctuation from the date of signing of the AIA Share Purchase Agreement or the ALICO Stock Purchase Agreement, as the case may be, through closing of each sale until the ultimate monetization by AIG of the Prudential Group Limited securities and the MetLife securities. These fluctuations will be influenced by market prices of Prudential Group Limited securities and MetLife securities generally, and the market prices of Prudential Group Limited ordinary shares and MetLife common stock in particular, which will rise and fall in response to various factors beyond the control of AIG, including the business and financial performance of Prudential and MetLife. AIG is subject in

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each case to agreed-upon minimum holding periods that also restrict AIG's ability to enter into hedging transactions that might protect AIG against fluctuations in the value of the securities consideration. These minimum holding periods and hedging restrictions cannot be altered without the consent of Prudential or MetLife, as the case may be, so AIG will bear the risk of these market price fluctuations during the applicable holding periods. The amount of any gain or loss recognized by AIG upon each sale will depend upon the fair value of the securities consideration received as of closing and the proceeds received by AIG from the monetization of the securities. This may also result in AIG realizing ultimate cash proceeds from the monetization of the securities consideration that is substantially less than what might be expected from the value of such consideration as of the date of signing of the relevant purchase agreement. During the holding period, AIG will carry these securities as available-for-sale investments, with changes in the fair value of the securities recorded to Accumulated other comprehensive income (loss).

    For a discussion of risks surrounding the AIA and ALICO transactions, see Item 1A. — Risk Factors in this Quarterly Report on Form 10-Q.

ILFC and AGF Liquidity

    During the first four months of 2010, ILFC and AGF made substantial progress in addressing their liquidity needs. During March and April 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 $550 million of the approximately $4.0 billion of debt issuances and the extension of the $2.16 billion revolving credit facility are subject to the satisfaction of certain collateralization milestones. In addition, in April 2010, ILFC signed an agreement to sell 53 aircraft, with an aggregate book value of approximately $2.3 billion, which is expected to generate approximately $2.0 billion in gross proceeds during 2010. As of March 31, 2010, none of these aircraft met the criteria to be recorded as held for sale. During March and April 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 in March 2010 and executed and drew down fully a $3.0 billion secured term loan transaction in April 2010. 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 in March 2010 and its $2.125 billion five-year revolving credit facility in April 2010 (both of which were due in July 2010). See Capital Resources and Liquidity — Liquidity — Financial Services for a further discussion.

Sale of Interest in Transatlantic

    On March 15, 2010, AIG closed a secondary public offering of 8,466,693 shares of Transatlantic Holdings, Inc. (Transatlantic) common stock owned by American Home Assurance Company, a subsidiary of AIG, for aggregate gross proceeds of $452 million.

Consideration of AIG's Ability to Continue as a Going Concern

    In connection with the preparation of this Quarterly Report on Form 10-Q, management has assessed whether AIG has the ability to continue as a going concern. In making this assessment, AIG has considered:

•

The commitment of the U.S. government to continue to work with AIG to maintain its ability to meet its obligations as they come due;

•

AIG's liquidity-related actions and plans to stabilize its businesses and repay the debt outstanding under the FRBNY Credit Facility;

•

The additional capital provided or committed through the Department of the Treasury Commitment (as defined below under Department of the Treasury Commitment);

•

The provisions of the definitive agreements for the sales of AIA and ALICO;

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American International Group, Inc., and Subsidiaries

•

The level of AIG's realized and unrealized losses and the negative impact of these losses in shareholders' equity and on the capital levels of AIG's insurance subsidiaries;

•

The continuing liquidity needs in certain of AIG's businesses and AIG's actions to address such needs; and

•

The substantial risks to which AIG is subject.

    In considering these items, management made significant judgments and estimates with respect to the potentially adverse financial and liquidity effects of AIG's risks and uncertainties. Management also assessed other items and risks arising in AIG's businesses and made reasonable judgments and estimates with respect thereto. After consideration, management believes that it will have adequate liquidity to finance and operate AIG's businesses and continue as a going concern 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 the risks and uncertainties could prove to be materially incorrect. 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, if additional support is not available in such circumstances, there could exist substantial doubt about AIG's ability to operate as a going concern.

    See Note 1 to the Consolidated Financial Statements for additional discussion regarding going concern considerations.

Capital Resources and Liquidity

Liquidity

Overview

    AIG manages liquidity at both the parent and subsidiary levels. AIG believes that it has sufficient liquidity to meet its obligations for at least the next twelve months. AIG expects that dividends, distributions, and other payments from subsidiaries will support its liquidity needs; the FRBNY Credit Facility is also expected to continue to be a primary source of liquidity. In addition, the Department of the Treasury Commitment may also be used as a source of funding, primarily to support the capital needs of AIG's insurance company subsidiaries. AIG expects that its primary uses of available cash will be debt service and subsidiary funding. Unless otherwise agreed with the FRBNY, net proceeds from the sales of operations and assets are expected to be used to pay the Preferred Interests and to repay any outstanding debt under the FRBNY Credit Facility, after taking into account taxes, transaction expenses, settlement of intercompany loan facilities, and capital required to be retained for regulatory or ratings purposes.

    At March 31, 2010, remaining amounts available under the FRBNY Credit Facility and the Department of the Treasury Commitment were $12.5 billion and $22.3 billion, respectively, compared to $17.1 billion and $24.5 billion, respectively, at December 31, 2009.

    Net borrowings under the FRBNY Credit Facility increased by approximately $1.5 billion from March 31, 2010 to April 28, 2010. The proceeds were primarily used to repay $2.3 billion of commercial paper outstanding under the FRBNY Commercial Paper Funding Facility (CPFF) for Curzon Funding LLC and Nightingale Finance LLC (Nightingale) on April 26, 2010.

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FRBNY Credit Facility

The following table presents changes in net borrowings outstanding and the remaining available amount that can be borrowed under the FRBNY Credit Facility:

Three Months Ended March 31, 2010 (in millions)
Net borrowings outstanding, January 1, 2010		$	17,900
	Loans to AIGFP for collateral postings, GIA and other maturities		700
	AIGFP repayments to AIG		(454	)
	Debt payments		1,615
	AIG Funding commercial paper maturities		2,000
	Dividends from subsidiaries		(256	)
	Return of deposit to AGF		1,550
	Net cash proceeds from asset sales applied as mandatory prepayments		(844	)
	Other borrowings and repayments, net		(562	)
Net borrowings outstanding, March 31, 2010			21,649
Accrued compounding interest and fees inception through December 31, 2009			5,535
Accrued compounding interest and fees January 1, 2010 through March 31, 2010*			216
Total balance outstanding, March 31, 2010		$	27,400
Total FRBNY Credit Facility, January 1, 2010		$	35,000
	Mandatory prepayments		(844	)
Total FRBNY Credit Facility, March 31, 2010		$	34,156
	Less: borrowings outstanding, March 31, 2010		(21,649	)
Remaining available amount, March 31, 2010		$	12,507

*

Excludes interest payable of $3 million at March 31, 2010, which was included in Other liabilities.

Department of the Treasury Commitment

    On April 17, 2009, AIG entered into a Securities Purchase Agreement with the Department of the Treasury, pursuant to which (i) AIG issued to the Department of the Treasury (a) 300,000 shares of AIG Series F Fixed Rate Non-Cumulative Perpetual Preferred Stock, par value $5.00 per share (AIG Series F Preferred Stock), and (b) a warrant to purchase 150 shares of AIG Common Stock, par value $2.50 per share, and (ii) the Department of the Treasury agreed to provide up to $29.835 billion (Department of the Treasury Commitment) in exchange for increases in the liquidation preference of the AIG Series F Preferred Stock. See Note 10 to the Consolidated Financial Statements and Note 16 to the Consolidated Financial Statements in AIG's 2009 Annual Report on Form 10-K for further discussion.

The following table presents changes in drawdowns and the remaining available amount under the Department of the Treasury Commitment:

Three Months Ended March 31, 2010 (in millions)
Total drawdowns, January 1, 2010		$	5,344
	Redemption and repurchase of securities held by insurance subsidiaries		2,148
	UGC related restructuring transactions		48
	Temporary repayment of FRBNY Credit Facility		3
Total drawdowns, March 31, 2010		$	7,543
Total Department of the Treasury commitment, January 1, 2010		$	29,835
	Less: drawdowns, March 31, 2010		(7,543	)
Remaining available amount, March 31, 2010		$	22,292

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    Additional details regarding liquidity sources are included in Liquidity of Parent and Subsidiaries below.

AIG's Strategy for Stabilization and Repayment of its Obligations as They Come Due

Future Cash Requirements

    AIG expects that the repayment of future debt maturities and the payment of the preferred returns and liquidation preference on the Preferred Interests will be its primary uses of available cash. Unless otherwise agreed with the FRBNY, the net proceeds from the cash consideration and the monetization of the securities consideration from the sales of AIA and ALICO will first be used to pay the Preferred Interests, and then to repay the FRBNY Credit Facility.

The following table summarizes the maturing debt at March 31, 2010 of AIG and its subsidiaries for the next four quarters:

(in millions)	Second Quarter 2010		Third Quarter 2010		Fourth Quarter 2010		First Quarter 2011		Total
ILFC	$	1,485	$	2,003	$	2,501	$	1,642	$	7,631
AGF		659		2,797		210		679		4,345
AIG Matched Investment Program		-		888		776		-		1,664
AIGFP		600		270		269		189		1,328
AIG		-		-		500		12		512
Other		19		511		7		6		543
Total	$	2,763	$	6,469	$	4,263	$	2,528	$	16,023

    AIG's plans for meeting these maturing obligations are as follows:

•

ILFC's sources of liquidity available to meet these needs include existing cash, future cash flows from operations, debt issuances and aircraft sales (see Liquidity of Parent and Subsidiaries — Financial Services — ILFC below). During March and April of 2010, ILFC significantly enhanced 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 $550 million of the approximate $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, in April 2010, ILFC signed an agreement to sell 53 aircraft, with an aggregate book value of approximately $2.3 billion, which is expected to generate approximately $2.0 billion in gross proceeds during 2010. Based on this level of increased liquidity and expected future sources of funding, including future cash flows from operations and potential aircraft sales, AIG now expects that ILFC will be able to meet its existing obligations as they become due for at least the next twelve months solely from its own future cash flows. Therefore, while AIG has acknowledged its intent to support ILFC through February 28, 2011, at the current time AIG believes that any further extension of such support will not be necessary.

•

AGF anticipates that its primary sources of liquidity will be customer receivable collections, additional on-balance sheet securitizations, portfolio sales and borrowings (see Liquidity of Parent and Subsidiaries — Financial Services — AGF below). During March and April 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 in March 2010 and executed and fully drew down a $3.0 billion secured term loan transaction in April 2010. 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 in March 2010 and its $2.125 billion five-year revolving credit facility in April 2010 (both of which were due in July 2010). Based on this level of increased

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liquidity and expected future sources of funding, including future cash flows from operations, AIG now expects that AGF will be able to meet its existing obligations as they become due for at least the next twelve months solely from its own future cash flows. Therefore, while AIG has acknowledged its intent to support AGF through February 28, 2011, at the current time AIG believes that any further extension of such support will not be necessary. AIG is continuing to explore strategic alternatives for AGF, including a potential sale of a majority interest.

•

Debt maturities for the Matched Investment Program (MIP) are expected to be funded through cash flows generated from invested assets, as well as the sale or financing of the asset portfolios in the program. However, mismatches in the timing of cash flows of the MIP, as well as any shortfalls due to impairments of MIP assets, would need to be funded by AIG Parent. In addition, as a result of AIG's restructuring activities, AIG expects to utilize assets from its noncore businesses and subsidiaries to provide future cash flow enhancement and help the MIP meet its maturing debt obligations.

•

Approximately $813 million of AIGFP's debt maturities through March 31, 2011 are fully collateralized, with assets backing the corresponding liabilities; however, mismatches in the timing of cash inflows on the assets and outflows with respect to the liabilities may require assets to be sold to satisfy maturing liabilities. Depending on market conditions and AIGFP's ability to sell assets at that time, proceeds from sales may not be sufficient to satisfy the full amount due on maturing liabilities. Any shortfalls would need to be funded by AIG Parent.

•

AIG expects to meet its debt maturities primarily through borrowings under the FRBNY Credit Facility, and dividends, distributions, and other payments from subsidiaries. The Department of the Treasury Commitment is primarily used for capital support of subsidiaries. In the future, AIG may need to provide additional capital support for its subsidiaries. AIG has developed certain plans, some of which have already been implemented, to provide stability to its businesses and to provide for the timely repayment of the FRBNY Credit Facility. In addition, certain of AIG's outstanding financial derivative transactions could require collateral calls or termination payments based on a downgrade in AIG's credit rating. See Note 8 to the Consolidated Financial Statements.

Sales of Other Businesses

    Since September 2008 and through April 28, 2010, AIG entered into agreements to sell or completed the sale of operations and assets, excluding AIA, ALICO and assets held by AIG Financial Products Corp. and AIG Trading Group Inc. and their respective subsidiaries (collectively, AIGFP), that had aggregate assets and liabilities with carrying values of $95.5 billion and $77.5 billion, respectively, at March 31, 2010 or the date of sale. Of these amounts, pending transactions with aggregate assets and liabilities of $54.7 billion and $49.2, respectively, at March 31, 2010 are expected to generate approximately $709 million of aggregate net cash proceeds that will be available to reduce the amount of the FRBNY Credit Facility, after taking into account taxes, transaction expenses, settlement of intercompany loan facilities, and capital required to be retained for regulatory or ratings purposes. Gains and losses recorded in connection with the dispositions of businesses include estimates that are subject to subsequent adjustment. Based on the transactions closed to date, AIG does not believe that such adjustments will be material to future consolidated results of operations or cash flows.

    See Notes 1 and 3 to the Consolidated Financial Statements for additional information.

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Liquidity of Parent and Subsidiaries

AIG Parent

The following table presents AIG Parent's sources of liquidity:

	As of
(In millions)	March 31, 2010		April 28, 2010
Available borrowing under the FRBNY Credit Facility	$	12,507	$	11,007
Cash and short-term investments		372		375
Available capacity under the Department of the Treasury Commitment		22,292		22,292
Total	$	35,171	$	33,674

    AIG believes that it has sufficient liquidity at the AIG Parent level to meet its obligations through at least the next twelve months. However, no assurance can be given that AIG's cash needs will not exceed projected amounts. Additional collateral calls, deterioration in investment portfolios affecting statutory surplus, higher surrenders of annuities and other policies, further downgrades in AIG's credit ratings, catastrophic losses or reserve strengthening, or a further deterioration in the super senior credit default swap portfolio may result in significant additional cash needs, or loss of some sources of liquidity, or both. Regulatory and other legal restrictions could limit AIG's ability to transfer funds freely, either to or from its subsidiaries.

    Historically, AIG has 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 FRBNY as a primary source of liquidity, and on the Department of the Treasury Commitment to support the capital needs of AIG's insurance company subsidiaries. In the first three months of 2010, AIG Parent collected $323 million in dividends and other payments from subsidiaries (primarily from insurance company subsidiaries), which included $250 million in dividends from Chartis U.S.

    AIG's primary uses of cash flow are for debt service and subsidiary funding. In the first three months of 2010, AIG Parent retired $850 million of debt and made interest payments totaling $345 million, excluding MIP and Series AIGFP debt. AIG Parent made $2.2 billion in net capital contributions to subsidiaries in the three months ended March 31, 2010, of which the majority was contributed to AIG Capital Corporation, enabling AIG Capital Corporation to redeem its preferred securities held by a Chartis U.S. subsidiary. In addition, in March 2010, AIG Parent repurchased AIG common stock from an insurance subsidiary and repaid $1.6 billion in loans to AGF.

    At the current time, AIG Parent has no access to the commercial paper market, one of its traditional sources for its short-term working capital needs. While no assurance can be given that AIG will be able to access its traditional sources of long-term or short-term financing through the public debt markets again, AIG periodically evaluates its ability to access the capital markets.

General Insurance

    AIG currently expects that its Chartis subsidiaries will be able to continue to meet their obligations as they come due through cash from operations and, to the extent necessary, asset dispositions. One or more large catastrophes, however, may require AIG to provide additional support to the affected General Insurance operations. In addition, further downgrades in AIG's credit ratings could put pressure on the insurer financial strength ratings of its subsidiaries. A downgrade in the insurer financial strength ratings of an insurance company subsidiary could result in non-renewals or cancellations by policyholders and adversely affect the subsidiary's ability to meet its own obligations and require AIG to provide capital or liquidity support to the subsidiary. Increases in market interest rates may adversely affect the financial strength ratings of General Insurance subsidiaries as rating agency capital models may reduce the amount of available capital relative to required capital.

    Given the size and liquidity profile of AIG's General Insurance investment portfolios, AIG believes that deviations from its projected claim experience do not constitute a significant liquidity risk. AIG's asset/liability

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management process takes into account the expected maturity of investments and the specific nature and risk profile of liabilities. Historically, there has been no significant variation between the expected maturities of AIG's General Insurance investments and the payment of claims. See Management's Discussion and Analysis of Financial Condition and Results of Operations — Investments for further information.

Domestic and Foreign Life Insurance & Retirement Services operations

    The most significant potential liquidity needs of AIG's Domestic and Foreign Life Insurance & Retirement Services companies are the funding of surrenders and withdrawals. A substantial increase in these needs could place stress on the liquidity of these companies. However, management considers the sources of liquidity for Domestic and Foreign Life Insurance & Retirement Services subsidiaries adequate to meet foreseeable liquidity needs. These subsidiaries generally have been lengthening their maturity profile by purchasing investment grade fixed income securities, in order to reduce the high levels of liquidity which had been maintained during 2009. Given the size and liquidity profile of AIG's Domestic and Foreign Life Insurance & Retirement Services investment portfolios, AIG believes that deviations from their projected claim experience do not constitute a significant liquidity risk. A significant increase in policy surrenders and withdrawals, which could be triggered by a variety of factors, including AIG specific concerns, could result in a substantial liquidity strain. Other potential events causing a liquidity strain could include economic collapse of a nation or region significant to Domestic and Foreign Life Insurance & Retirement Services operations, nationalization, catastrophic terrorist acts, pandemics or other economic or political upheaval.

    AIG believes that its Domestic and Foreign Life Insurance & Retirement Services companies currently have adequate capital to support their business plans. However, to the extent that these subsidiaries experience significant future losses or declines in their investment portfolios, AIG may need to contribute capital to these companies.

Financial Services

    AIG's major Financial Services operating subsidiaries consist of ILFC, AIGFP, AGF and AIG Consumer Finance Group, Inc (AIGCFG). Traditional sources of funds to meet the liquidity needs of these operations are generally no longer available. These sources included issuances of guaranteed investment agreements (GIAs), issuance of long- and short-term debt, issuance of commercial paper, bank loans and bank credit facilities. However, during the three months ended March 31, 2010 and through April 30, 2010, ILFC and AGF made significant progress in addressing their foreseeable liquidity needs, as further described below. In addition, AIGCFG has been able to retain a significant portion of customer deposits, providing a measure of liquidity.

ILFC

    During the first three months of 2010, ILFC refinanced five aircraft under its ECA Facility, borrowed $1.3 billion through secured financing arrangements and issued $2.0 billion senior notes as part of a private placement. Subsequent to March 31, 2010, ILFC issued an additional $750 million of senior notes under the same indenture as that used in the private placement.

    At March 31, 2010, ILFC had reached the maximum amount available for secured financing under its revolving credit facilities and term loans. The capacity was approximately $5.3 billion. In addition, ILFC also reached the maximum amount of secured financing available for ILFC and its restricted subsidiaries under its bond indentures. Subsequent to March 31, 2010, ILFC amended its bank facilities and term loans to increase its capacity to enter into secured financings to 35 percent of its consolidated tangible net assets as defined in its revolving credit facilities, which assets approximated $15.0 billion at March 31, 2010 (subject to certain prepayment requirements), and extended the maturity date of $2.16 billion of its $2.5 billion revolving credit facility from October 2011 to October 2012. This agreement is subject to the satisfaction of certain collateralization milestones.

    In addition, in April 2010, ILFC signed an agreement to sell 53 aircraft, with an aggregate book value of approximately $2.3 billion, which is expected to generate approximately $2.0 billion in gross proceeds during 2010.

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The sales of the individual aircraft are expected to be consummated during the remainder of 2010 and the related proceeds are receivable upon the completion of each individual sale. ILFC is currently pursuing additional potential aircraft sales. Proposed portfolios have been presented to potential buyers; some bids have been received and are being evaluated. In evaluating these bids, ILFC management is balancing the need for funds with the long-term value of holding aircraft and other financing alternatives. Significant uncertainties currently exist about the possibility of additional sales, including the aircraft comprising an actual sale portfolio, the sale price and whether a sale agreement could be reached on acceptable terms.

    Because the current market for aircraft is depressed due to the economic downturn and limited availability of buyer financing, it is likely that if additional aircraft are sold to meet liquidity needs, realized losses may be incurred. For the three months ended March 31, 2010, ILFC recorded asset impairment charges aggregating $347 million and operating lease related losses of $84 million on aircraft under contract to be sold.

    AIG expects that ILFC's existing cash balances, future cash flows from operations, including potential debt issuances and aircraft sales will be sufficient for ILFC to meet its existing obligations for at least the next twelve months.

ILFC Notes and Bonds Payable

    As of March 31, 2010 notes and bonds aggregating $18.2 billion were outstanding with maturity dates ranging from 2010 to 2016. To the extent considered appropriate, ILFC may enter into swap transactions to manage its effective borrowing rates with respect to these notes and bonds.

    On October 13, 2009, ILFC entered into two term loan agreements (the Term Loans) with AIG Funding comprised of a new $2.0 billion credit agreement and a $1.7 billion amended and restated credit agreement. The Term Loans are secured by a portfolio of aircraft and all related equipment and leases. ILFC used the proceeds from the $2.0 billion loan to repay in full its obligations under its $2.0 billion revolving credit facility that matured on October 15, 2009. The second credit agreement amended and restated the two demand note agreements aggregating $1.7 billion that ILFC entered into in March 2009 with AIG Funding, including extending the maturity date of such demand notes. Both Term Loans mature on September 13, 2013 and currently bear interest at 3-month LIBOR plus 6.025 percent, of which 3.0 percent is permitted to be paid-in-kind and is added to the principal balance of the loans. The Term Loans are due in full at maturity with no scheduled amortization. On December 4, 2009, the new $2.0 billion credit agreement was increased to $2.2 billion. The funds for the Term Loans were provided to AIG Funding through the FRBNY Credit Facility. As a condition of the FRBNY approving the Term Loans, ILFC entered into agreements to guarantee the repayment of AIG's obligations under the FRBNY Credit Agreement up to an amount equal to the aggregate outstanding balance of the Term Loans.

ILFC ECA Facilities

    ILFC has a $4.3 billion 1999 ECA Facility that was used in connection with the purchase of 62 Airbus aircraft delivered through 2001. This facility is guaranteed by various European Export Credit Agencies. The interest rate varies from 5.81 percent to 5.86 percent on these amortizing ten-year borrowings depending on the delivery date of the aircraft. At March 31, 2010, ILFC had 27 loans with a remaining principal balance of $120 million outstanding under this facility. At March 31, 2010, the net book value of the related aircraft was $1.7 billion. The debt is collateralized by a pledge of shares of an ILFC subsidiary, which holds title to the aircraft financed under the facility.

    ILFC has a similarly structured 2004 ECA Facility, which was amended in May 2009 to allow ILFC to borrow up to a maximum of $4.6 billion to fund the purchase of Airbus aircraft delivered through June 30, 2010. The facility becomes available as the various European Export Credit Agencies provide their guarantees for aircraft based on a forward-looking calendar, and the interest rate is determined through a bid process. The interest rates are either LIBOR based with spreads ranging from (0.04) percent to 2.25 percent or at fixed rates ranging from 4.20 percent to 4.71 percent. At March 31, 2010, ILFC had financed 71 aircraft using approximately $4.1 billion under this facility and approximately $2.9 billion was outstanding. At March 31, 2010, the interest rate of the loans

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outstanding ranged from 0.35 percent to 4.71 percent. The debt is collateralized by a pledge of shares of a subsidiary of ILFC, which holds title to the aircraft financed under the facility. At March 31, 2010, the net book value of the related aircraft was approximately $4.2 billion. Borrowings with respect to these facilities are included in ILFC's notes and bonds payable in the table below.

    Under its current long-term debt ratings, ILFC needs written consent from the security trustee of its 2004 ECA Facility before it can fund Airbus aircraft deliveries under the facility. As of April 30, 2010, ILFC had approximately $500 million available under the 2004 ECA Facility to finance its Airbus aircraft purchases through June 2010. ILFC refinanced five aircraft under the 2004 ECA Facility during the first three months of 2010. ILFC's current credit ratings also require (i) the segregation of security deposits, maintenance reserves and rental payments received for aircraft funded under both its 1999 and 2004 ECA Facilities into separate accounts, controlled by the trustees of the 1999 and 2004 ECA Facilities; and (ii) the filings of individual mortgages on the aircraft funded under the facility in the respective local jurisdictions in which the aircraft is registered. At March 31, 2010, ILFC had segregated security deposits, maintenance reserves and rental payments aggregating $350 million related to such aircraft. Segregated rental payments are used to pay principal and interest on the ECA facilities as they become due.

    During the three months ended March 31, 2010, ILFC entered into agreements to cross-collateralize the two ECA Facilities. In conjunction with the agreement, ILFC agreed to an acceleration event, which would accelerate all debt related to aircraft funded during 2010 if, among other things, ILFC were to sell aircraft with an aggregate book value exceeding an agreed upon amount, currently approximately $10.8 billion, within a period starting from the date of the agreement until December 31, 2012.

ILFC Bank Financings

    At March 31, 2010, the total funded amount of ILFC's bank financings was $5.0 billion, which includes $4.5 billion of revolving credit facilities. The fundings mature through February 2012. The interest rates are LIBOR-based, with spreads ranging from 0.25 percent to 0.40 percent. At March 31, 2010, the interest rates ranged from 0.56 percent to 0.90 percent. AIG does not guarantee any of the debt obligations of ILFC.

    Subsequent to March 31, 2010, ILFC amended covenants under its revolving credit facilities and term loans to increase its capacity to enter into secured financings from 12.5 percent to 35 percent of its consolidated tangible net assets, as defined in its credit facility agreement, which assets approximated $15.0 billion at March 31, 2010 (subject to certain prepayment requirements). In conjunction with the amendment, ILFC (i) extended the maturity date of $2.16 billion of its $2.5 billion revolving credit facility from October 2011 to October 2012 (subject to the satisfaction of certain collateralization milestones), with the loan secured by aircraft with an initial loan-to-value ratio of 75 percent, and increased the interest rate by 1.5 percent; (ii) pre-paid $410 million of bank term debt with original maturity dates through 2012; and, (iii) increased the interest rate by 1.5 percent on $75 million principal amount of bank term debt.

AIGFP

    Prior to September 2008, AIGFP had historically funded its operations through the issuance of notes and bonds, GIA borrowings, other structured financing transactions and repurchase agreements.

    On April 26, 2010, an aggregate of $2.3 billion of commercial paper of Curzon Funding LLC and Nightingale Finance LLC outstanding under the CPFF was repaid through an increase in borrowings under the FRBNY Credit Facility. AIGFP continues to rely on AIG Parent to meet most of its liquidity needs.

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The following table presents a rollforward of the amount of collateral posted by AIGFP:

	Collateral Posted as of December 31, 2009		Additional Postings, Netted by Counterparty		Collateral Returned by Counterparties		Collateral Posted as of March 31, 2010
Three Months Ended March 31, 2010
(in millions)
Collateralized GIAs and other borrowings	$	6,129	$	112	$	217	$	6,024
Super senior CDS portfolio		4,590		60		198		4,452
All other derivatives		5,217		450		1,414		4,253
Total	$	15,936	$	622	$	1,829	$	14,729

AIGFP Wind-down

    AIGFP has continued unwinding its businesses and portfolios. During 2010, AIGFP reduced the notional amount of its derivative portfolio by 20 percent, from $940.7 billion at December 31, 2009 to $755.4 billion at March 31, 2010. AIGFP reduced the number of its outstanding trade positions by approximately 1,800, from approximately 16,100 at December 31, 2009 to approximately 14,300 at March 31, 2010. In connection with these activities, AIGFP has disaggregated its portfolio of existing transactions into a number of separate "books" and has developed a plan for addressing each book, including assessing each book's risks, risk mitigation options, monitoring metrics and certain implications of various potential outcomes. Each plan has been reviewed by a steering committee whose membership includes senior executives of AIG. The plans are subject to change as efforts progress and as conditions in the financial markets evolve, and they contemplate, depending on the book in question, alternative strategies, including sales, assignments or other transfers of positions, terminations of positions, and/or run-offs of positions in accordance with existing terms. Execution of these plans is overseen by a transaction approval process involving senior members of AIGFP's and AIG's respective management groups as specific actions entail greater liquidity and financial consequences. Successful execution of these plans is subject, to varying degrees depending on the transactions of a given book, to market conditions and, in many circumstances, counterparty negotiation and agreement.

    In connection with the wind-down, certain assets were sold. The proceeds from these sales have been used to fund AIGFP's wind-down and are not included in the amounts described above under AIG's Strategy for Stabilization and Repayment of its Obligations as They Come Due. The FRBNY waived the requirement under the FRBNY Credit Agreement that the proceeds of these specific sales be applied as a mandatory prepayment under the FRBNY Credit Facility, which would have resulted in a permanent reduction of the FRBNY's commitment to lend to AIG. Instead, the FRBNY has given AIGFP permission to retain the proceeds of these completed sales, and has required that such proceeds received from certain future sales be used to voluntarily prepay the FRBNY Credit Facility, with the amounts prepaid available for future reborrowing subject to the terms of the FRBNY Credit Facility. AIGFP is also opportunistically terminating contracts. As a consequence of its wind-down strategy, AIGFP is entering into new derivative transactions only to hedge its current portfolio, reduce risk and hedge the currency, interest rate and other market risks associated with its affiliated businesses. AIGFP has already reduced the size of certain portions of its portfolio, including effecting a substantial reduction in credit derivative transactions in respect of multi-sector collateralized debt obligations (CDOs) in connection with Maiden Lane III LLC (ML III), a sale of its commodity index business, termination and sale of its activities as a foreign exchange prime broker, and sale and other disposition of its energy/infrastructure investment portfolio. Due to the long-term duration of AIGFP's derivative contracts and the complexity of AIGFP's portfolio, AIG expects that an orderly wind-down of AIGFP's businesses and portfolios will take a substantial period of time. The cost of executing the wind-down will depend on many factors, many of which are not within AIG's control, including market conditions, AIGFP's access to markets via market counterparties, the availability of liquidity and the potential implications of further rating downgrades. In addition, the Determination Memoranda issued by the Special Master for TARP Executive Compensation place significant new restrictions on the compensation of AIGFP employees included in the five executives named in AIG's Proxy Statement and the next twenty highest paid employees of AIG (Top 25) and AIG's next 75 most highly compensated employees and executive officers

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(together, the Top 100) and may impair AIGFP's ability to retain these employees, and consequently negatively impact the wind-down of AIGFP's businesses and portfolios.

AGF

    Prior to September 2008, AGF's traditional source of liquidity had been collections of customer receivables and borrowings in the public markets.

    AGF anticipates that its primary sources of funds to support its operations and repay its obligations will be customer receivable collections, additional on-balance sheet securitizations, portfolio sales and other borrowings. In order to improve cash flow from operations, AGF has significantly limited its lending activities and aggressively managed its expenses. Since year end 2009, AGF has continued to manage its liquidity with proceeds of more than $500 million from a real estate loan securitization in March 2010 and the execution and full drawdown of a $3.0 billion five-year secured term loan in April 2010. In addition, AIG is exploring other strategic alternatives for AGF, including a potential sale of a majority interest. AIG made an $11 million capital contribution to AGF (through AIG Capital Corporation) during the first three months of 2010. In March 2010, AGF repaid the $2.45 billion one-year term loans and in April 2010, AGF repaid the $2.125 billion revolving credit facility, both prior to their due dates in July 2010. AIG manages its liquidity on a consolidated basis, which may include making or receiving short-term loans with AGF.

AGF Notes and Bonds Payable

    As of March 31, 2010, notes and bonds payable aggregating $16.9 billion were outstanding with maturity dates ranging from 2010 to 2031 at interest rates ranging from 0.51 percent to 9.00 percent. To the extent considered appropriate, AGF may enter into swap transactions to manage its effective borrowing rates with respect to these notes and bonds. AIG does not guarantee any of the debt obligations of AGF.

AIGCFG

    AIG believes that the funding needs of AIGCFG have stabilized, as AIGCFG has been able to retain a significant portion of customer deposits, but it is possible that renewed customer and counterparty concerns could increase AIGCFG's liquidity needs in 2010.

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Debt

The following table provides the rollforward of AIG's total debt outstanding:

Three Months Ended March 31, 2010 (in millions)		Balance at December 31, 2009		Issuances		Maturities and Repayments			Effect of Foreign Exchange			Other Non-Cash Changes(a)			Activity of Discontinued Operations			Reclassified to Liabilities of Businesses Held for Sale			Balance at March 31, 2010
Debt issued by AIG:
	FRBNY Credit Facility	$	23,435	$	8,300	$	(4,551	)	$	-		$	216		$	-		$	-		$	27,400
	Notes and bonds payable		10,419		-		(850	)		(109	)		(3	)		-			-			9,457
	Junior subordinated debt		12,001		-		-			(302	)		-			-			-			11,699
	Junior subordinated debt attributable to equity units		5,880		-		-			-			-			-			-			5,880
	Loans and mortgages payable		438		-		-			(11	)		-			-			-			427
	MIP matched notes and bonds payable		13,371		-		(500	)		(152	)		(77	)		-			-			12,642
	Series AIGFP matched notes and bonds payable		3,913		-		(48	)		-			3			-			-			3,868
	Total AIG debt		69,457		8,300		(5,949	)		(574	)		139			-			-			71,373
Debt guaranteed by AIG:
AIGFP, at fair value(b):
	FRBNY commercial paper funding facility		2,742		2,272		(3,837	)		-			1,108			-			-			2,285
	GIAs		8,257		100		(295	)		-			291			-			-			8,353
	Notes and bonds payable		2,029		12		(162	)		-			37			-			-			1,916
	Loans and mortgages payable		1,022		18		(162	)		-			(53	)		-			-			825
	Hybrid financial instrument liabilities		1,887		-		(34	)		-			(147	)		-			-			1,706
	Total AIGFP debt		15,937		2,402		(4,490	)		-			1,236			-			-			15,085
AIG Funding – FRBNY
	commercial paper funding facility		1,997		-		(2,000	)		-			3			-			-			-
AIGLH notes and bonds payable			798		-		-			-			-			-			-			798
Liabilities connected to trust preferred stock			1,339		-		-			-			-			-			-			1,339
Total debt issued or guaranteed by AIG			89,528		10,702		(12,439	)		(574	)		1,378			-			-			88,595
Debt not guaranteed by AIG:
ILFC:
	Notes and bonds payable, ECA facilities, bank financings and other secured financings(c)		25,174		3,407		(740	)		(131	)		1			-			-			27,711
	Junior subordinated debt		999		-		-			-			-			-			-			999
	Total ILFC debt		26,173		3,407		(740	)		(131	)		1			-			-			28,710
AGF:
	Notes and bonds payable(d)		19,770		501		(3,292	)		(61	)		16			-			-			16,934
	Junior subordinated debt		349		-		-			-			-			-			-			349
	Total AGF debt		20,119		501		(3,292	)		(61	)		16			-			-			17,283
AIGCFG loans and mortgages payable			216		62		(62	)		(8	)		(140	)		-			-			68
Other subsidiaries			295		14		(4	)		(4	)		164			-			(7	)		458
Total debt of consolidated investments(e)			5,141		55		(1,063	)		(14	)		834			(63	)		(575	)		4,315
Total debt not guaranteed by AIG			51,944		4,039		(5,161	)		(218	)		875			(63	)		(582	)		50,834
Total debt:
Total long-term debt			136,733		12,469		(11,763	)		(792	)		1,142			(63	)		(582	)		137,144
FRBNY commercial paper funding facility			4,739		2,272		(5,837	)		-			1,111			-			-			2,285
Total debt		$	141,472	$	14,741	$	(17,600	)	$	(792	)	$	2,253		$	(63	)	$	(582	)	$	139,429

(a)

FRBNY Credit Facility reflects $216 million of accrued compounding interest and fees. Other subsidiaries include $164 million of debt assumed on the acquisition of Fuji. AIGFP FRBNY commercial paper funding facility, which was repaid on April 26, 2010, includes the consolidation of Nightingale during the first quarter of 2010.

(b)

Includes increases of $690 million in the fair value of AIGFP debt.

(c)

Includes $410 million of bank debt that ILFC has prepaid in April 2010 and $126 million of secured financings that are non-recourse to ILFC.

(d)

Includes $2.125 billion that AGF repaid in April 2010 on a revolving credit facility prior to its July 2010 maturity date.

(e)

Includes debt of consolidated investments held through AIG Global Real Estate Investment of $3.8 billion, AIG Credit of $363 million and SunAmerica of $123 million at March 31, 2010.

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The following table summarizes maturities of long-term debt, excluding borrowings of consolidated investments:

						Year Ending
At March 31, 2010				Remainder of 2010
(in millions)		Total				2011		2012		2013		2014		2015		Thereafter
AIG:
	FRBNY Credit Facility	$	27,400	$	-	$	-	$	-	$	27,400	$	-	$	-	$	-
	Notes and bonds payable		9,457		500		543		27		998		-		998		6,391
	Junior subordinated debt		11,699		-		-		-		-		-		-		11,699
	Junior subordinated debt attributable to equity units		5,880		-		-		-		-		-		-		5,880
	Loans and mortgages payable		427		-		-		-		358		-		2		67
	MIP matched notes and bonds payable		12,642		1,664		3,090		2,138		856		436		363		4,095
	Series AIGFP matched notes and bonds payable		3,868		-		27		56		3		-		-		3,782
Total AIG			71,373		2,164		3,660		2,221		29,615		436		1,363		31,914
AIGFP, at fair value:
	GIAs		8,353		791		272		268		303		670		570		5,479
	Notes and bonds payable		1,916		100		171		707		5		67		113		753
	Loans and mortgages payable		825		39		222		192		81		140		-		151
	Hybrid financial instrument liabilities		1,706		209		276		96		161		57		178		729
Total AIGFP			12,800		1,139		941		1,263		550		934		861		7,112
AIGLH notes and bonds payable			798		500		-		-		-		-		-		298
Liabilities connected to trust preferred stock			1,339		-		-		-		-		-		-		1,339
ILFC(a):
	Notes and bonds payable		18,234		3,558		4,560		3,571		3,542		1,041		1,011		951
	Junior subordinated debt		999		-		-		-		-		-		-		999
	ECA Facilities(b)		3,021		373		443		414		414		409		321		647
	Bank financings and other secured financings(c)		6,456		2,058		2,849		165		16		37		760		571
Total ILFC			28,710		5,989		7,852		4,150		3,972		1,487		2,092		3,168
AGF(a):
	Notes and bonds payable(d)		16,934		3,666		3,436		2,379		2,339		595		855		3,664
	Junior subordinated debt		349		-		-		-		-		-		-		349
Total AGF			17,283		3,666		3,436		2,379		2,339		595		855		4,013
AIGCFG Loans and mortgages payable(a)			68		32		13		9		8		4		2		-
Other subsidiaries(a)			458		5		8		7		5		8		19		406
Total		$	132,829	$	13,495	$	15,910	$	10,029	$	36,489	$	3,464	$	5,192	$	48,250

(a)

AIG does not guarantee these borrowings.

(b)

Reflects future minimum payment for ILFC's borrowings under the 1999 and 2004 ECA Facilities.

(c)

Includes $126 million of secured financings that are non-recourse to ILFC. On April 16, 2010, ILFC extended the maturity date of $2.16 billion of its $2.5 billion revolving credit facility from October 2011 to October 2012 (subject to the satisfaction of certain collateralization milestones). Includes $410 million of bank debt that ILFC prepaid in April 2010.

(d)

Includes $2.125 billion that AGF repaid in April 2010 on a revolving credit facility prior to its July 2010 maturity date.

Credit Ratings

    The cost and availability of unsecured financing for AIG and its subsidiaries are generally dependent on their short-and long-term debt ratings. The following table presents the credit ratings of AIG and certain of its subsidiaries as of April 30, 2010. In parentheses, following the initial occurrence in the table of each rating, is an indication of that rating's relative rank within the agency's rating categories. That ranking refers only to the

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generic or major rating category and not to the modifiers appended to the rating by the rating agencies to denote relative position within such generic or major category.

	Short-Term Debt						Senior Long-Term Debt
	Moody's		S&P		Fitch		Moody's(a)		S&P(b)		Fitch(c)
AIG		P-1 (1st of 3)(d)		A-1 (1st of 8)		F1 (1st of 5)		A3 (3rd of 9)(d)		A- (3rd of 8)(d)	BBB (4th of 9)(e)
AIG Financial Products Corp.(f)		P-1(d)		A-1		-		A3(d)		A-(d)	-
AIG Funding, Inc.(f)		P-1(d)		A-1		F1		-		-	-
ILFC		Not prime(d)		-		-		B1 (6th of 9)(d)		BBB- (4th of 8)(g)	BB (5th of 9)(e)
American General Finance Corporation		Not prime(d)		C (5th of 8)		-		B2 (6th of 9)(d)		B (6th of 8)(d)	B- (6th of 9)(d)
American General Finance, Inc.		Not prime		C (5th of 8)		-		-		-	B- (6th of 9)(d)

(a)

Moody's appends numerical modifiers 1, 2 and 3 to the generic rating categories to show relative position within the rating categories.

(b)

S&P ratings may be modified by the addition of a plus or minus sign to show relative standing within the major rating categories.

(c)

Fitch ratings may be modified by the addition of a plus or minus sign to show relative standing within the major rating categories.

(d)

Negative Outlook.

(e)

Evolving Outlook.

(f)

AIG guarantees all obligations of AIG Financial Products Corp. and AIG Funding.

(g)

Credit Watch Negative.

(h)

Rating Watch Negative.

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

    "Ratings triggers" have been defined by one independent rating agency to include clauses or agreements the outcome of which depends upon the level of ratings maintained by one or more rating agencies. "Ratings triggers" generally relate to events that (i) could result in the termination or limitation of credit availability, or require accelerated repayment, (ii) could result in the termination of business contracts or (iii) could require a company to post collateral for the benefit of counterparties.

    A significant portion of AIGFP's GIAs, structured financing arrangements and financial derivative transactions include provisions that require AIGFP, upon a downgrade of AIG's long-term debt ratings, to post collateral or, with the consent of the counterparties, assign or repay its positions or arrange a substitute guarantee of its obligations by an obligor with higher debt ratings. Furthermore, certain downgrades of AIG's long-term senior debt ratings would permit either AIG or the counterparties to elect early termination of contracts.

    The actual amount of collateral that AIGFP would be required to post to counterparties in the event of such downgrades, or the aggregate amount of payments that AIG could be required to make, depends on market conditions, the fair value of outstanding affected transactions and other factors prevailing at the time of the downgrade. For a discussion of the effect of a downgrade in AIG's credit ratings on AIGFP's financial derivative transactions, see Item 1A. Risk Factors in the 2009 Annual Report on Form 10-K and Note 8 to the Consolidated Financial Statements.

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Contractual Obligations

The following table summarizes contractual obligations in total, and by remaining maturity:

			Payments due by Period
At March 31, 2010 (in millions)	Total Payments		Remainder of 2010		2011 - 2012		2013 - 2014		2015		Thereafter
Borrowings(a)	$	105,429	$	13,495	$	25,939	$	12,553	$	5,192	$	48,250
FRBNY Credit Facility		27,400		-		-		27,400		-		-
Interest payments on borrowings		62,116		3,635		8,865		10,436		3,119		36,061
Loss reserves(b)		86,489		15,049		25,774		14,357		4,670		26,639
Insurance and investment contract liabilities(c)		670,735		19,514		41,449		47,608		21,710		540,454
GIC liabilities(d)		8,828		220		2,530		2,463		263		3,352
Aircraft purchase commitments		13,745		243		887		2,926		1,568		8,121
Other long-term obligations(e)		578		209		187		63		4		115
Total(f)(g)	$	975,320	$	52,365	$	105,631	$	117,806	$	36,526	$	662,992

(a)

Excludes borrowings incurred by consolidated investments and includes hybrid financial instrument liabilities recorded at fair value.

(b)

Represents future loss and loss adjustment expense payments estimated based on historical loss development payment patterns. Due to the significance of the assumptions used, the periodic amounts presented could be materially different from actual required payments.

(c)

Insurance and investment contract liabilities include various investment-type products with contractually scheduled maturities, including periodic payments of a term certain nature. Insurance and investment contract liabilities also include benefit and claim liabilities, of which a significant portion represents policies and contracts that do not have stated contractual maturity dates and may not result in any future payment obligations. For these policies and contracts (i) AIG is currently not making payments until the occurrence of an insurable event, such as death or disability, (ii) payments are conditional on survivorship, or (iii) payment may occur due to a surrender or other non-scheduled event out of AIG's control. AIG has made significant assumptions to determine the estimated undiscounted cash flows of these contractual policy benefits, which assumptions include mortality, morbidity, future lapse rates, expenses, investment returns and interest crediting rates, offset by expected future deposits and premiums on inforce policies. Due to the significance of the assumptions used, the periodic amounts presented could be materially different from actual required payments. The amounts presented in this table are undiscounted and therefore exceed the future policy benefits and policyholder contract deposits included in the Consolidated Balance Sheet.

(d)

Represents guaranteed maturities under GICs.

(e)

Primarily includes contracts to purchase future services and other capital expenditures.

(f)

Does not reflect unrecognized tax benefits of $4.6 billion, the timing of which is uncertain.

(g)

The majority of AIGFP's credit default swaps require AIGFP to provide credit protection on a designated portfolio of loans or debt securities. At March 31, 2010, the fair value derivative liability was $4.3 billion relating to AIGFP's super senior multi-sector CDO credit default swap portfolio, net of amounts realized in extinguishing derivative obligations. Due to the long-term maturities of these credit default swaps, AIG is unable to make reasonable estimates of the periods during which any payments would be made. However, AIGFP has posted collateral of $3.7 billion with respect to these swaps (prior to offsets for other transactions).

    The repayment of long-term debt maturities, net borrowings under the FRBNY Credit Facility, and interest payments on borrowings by AIG and its subsidiaries are expected to be made through the disposition of assets, future cash flows from operations, cash flows generated from invested assets, future debt issuance and other financing arrangements, as more fully described in AIG's Strategy for Stabilization and Repayment of its Obligations as They Come Due above.

    Loss reserves relate primarily to General Insurance business. Management believes that adequate financial resources are maintained by the individual General Insurance subsidiaries to meet the actual required payments under these obligations. These subsidiaries maintain substantial liquidity in the form of cash and short-term investments and investment-grade fixed income securities, including substantial holdings in government and corporate bonds (see Investments herein). Generally, these assets are not transferable across various legal entities; however, management believes there are generally sufficient resources within those legal entities such that they can meet their individual needs.

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    Insurance and investment contract liabilities, and GIC liabilities, relate primarily to Life Insurance and Retirement Services business. Management believes that adequate financial resources are maintained by individual Life Insurance and Retirement Services subsidiaries to meet the actual required payments under these obligations. These subsidiaries maintain substantial liquidity in the form of cash and short-term investments and investment-grade fixed income securities, including substantial holdings in government and corporate bonds (see Investments herein). Generally, these assets are not transferable across various legal entities; however, management believes there are generally sufficient resources within those legal entities such that they can meet their individual needs.

    At March 31, 2010, ILFC has committed to purchase 120 new aircraft deliverable from 2010 through 2019, at an estimated aggregate purchase price of $13.7 billion. See Note 9 to the Consolidated Financial Statements.

Off Balance Sheet Arrangements and Commercial Commitments

The following table summarizes Off Balance Sheet Arrangements and Commercial Commitments in total, and by remaining maturity:

At March 31, 2010				Amount of Commitment Expiration
(in millions)		Total Amounts Committed		Remainder of 2010		2011 - 2012		2013 - 2014		2015		Thereafter
Guarantees:
	Liquidity facilities(a)	$	856	$	-	$	755	$	-	$	-	$	101
	Standby letters of credit		1,263		1,094		28		18		-		123
	Construction guarantees(b)		92		2		21		-		-		69
	Guarantees of indebtedness		213		-		-		-		-		213
	All other guarantees(c)		813		32		178		159		243		201
Commitments:
	Investment commitments(d)		6,239		1,710		2,056		1,398		241		834
	Commitments to extend credit		179		50		97		28		2		2
	Letters of credit		245		161		84		-		-		-
	Other commercial commitments(e)		767		10		-		-		-		757
Total(f)		$	10,667	$	3,059	$	3,219	$	1,603	$	486	$	2,300

(a)

Primarily liquidity facilities provided in connection with certain municipal swap transactions and collateralized bond obligations.

(b)

Primarily SunAmerica construction guarantees connected to affordable housing investments.

(c)

Excludes potential amounts attributable to indemnifications included in asset sales agreements.

(d)

Includes commitments to invest in limited partnerships, private equity, hedge funds and mutual funds and commitments to purchase and develop real estate in the United States and abroad. The commitments to invest in limited partnerships and other funds are called at the discretion of each fund, as needed for funding new investments or expenses of the fund. The expiration of these commitments is estimated in the table above based on the expected life cycle of the related fund, consistent with past trends of requirements for funding. Investors under these commitments are primarily insurance and real estate businesses.

(e)

Includes options to acquire aircraft. Excludes commitments with respect to pension plans. The remaining pension contribution for 2010 is expected to be approximately $97 million for U.S. and non-U.S. plans.

(f)

Does not include guarantees or other support arrangements among AIG consolidated entities.

    The fair value of securities transferred under repurchase agreements accounted for as sales was $2.1 billion and $2.3 billion at March 31, 2010 and December 31, 2009, respectively, and the related cash collateral obtained was $1.7 billion and $1.5 billion at March 31, 2010 and December 31, 2009, respectively.

    See Note 16 to the Consolidated Financial Statements in the 2009 Annual Report on Form 10-K for discussion on restrictions on payments of dividends.

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Arrangements with Variable Interest Entities

    While AIG enters into various arrangements with variable interest entities (VIEs) in the normal course of business, AIG's involvement with VIEs is primarily as a passive investor in debt securities (rated and unrated) and equity interests issued by VIEs. AIG consolidates a VIE when it is the primary beneficiary of the entity. For a further discussion of AIG's involvement with VIEs, see Notes 1 and 7 to the Consolidated Financial Statements.

Results of Operations

    AIG reports the results of its operations through four reportable segments: General Insurance, Domestic Life Insurance & Retirement Services, Foreign Life Insurance & Retirement Services, and Financial Services. Through these reportable segments, AIG provides insurance, financial and investment products and services to both businesses and individuals in more than 130 countries and jurisdictions. AIG's Other operations category consists of business and items not allocated to AIG's reportable segments. AIG's subsidiaries serve commercial, institutional and individual customers through an extensive property-casualty and life insurance and retirement services network. AIG's Financial Services businesses include commercial aircraft and equipment leasing, capital markets operations and consumer finance, both in the United States and abroad.

    The following discussion of consolidated and segment results represent comparisons of the three-month period ended March 31, 2010 compared to the three-month period March 31, 2009.

Consolidated Results

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

Three Months Ended March 31, (in millions)		2010			2009			Percentage Increase/ (Decrease)
Revenues:
	Premiums and other considerations	$	10,067		$	12,841			(22	)%
	Net investment income		4,836			915			429
	Net realized capital losses		(548	)		(2,774	)		-
	Unrealized market valuation gains (losses) on AIGFP super senior credit default swap portfolio		119			(452	)		-
	Other income		1,856			2,785			(33	)
	Total revenues		16,330			13,315			23
Benefits, claims and expenses:
	Policyholder benefits and claims incurred		8,519			11,353			(25	)
	Policy acquisition and other insurance expenses		3,262			3,576			(9	)
	Interest expense		1,734			2,587			(33	)
	Restructuring expenses and related asset impairment and other expenses		110			338			(67	)
	Net (gain) loss on sale of divested businesses		77			(262	)		-
	Other expenses		1,793			2,239			(20	)
	Total benefits, claims and expenses		15,495			19,831			(22	)
Income (loss) from continuing operations before income tax benefit			835			(6,516	)		-
Income tax benefit			(91	)		(1,303	)		-
Income (loss) from continuing operations			926			(5,213	)		-
Income (loss) from discontinued operations, net of income tax expense (benefit)			1,173			80			-
Net income (loss)			2,099			(5,133	)		-
Less: Net income (loss) attributable to noncontrolling interests			648			(780	)		-
Net income (loss) attributable to AIG		$	1,451		$	(4,353	)		-	%

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Premiums and Other Considerations

    Premiums and other considerations decreased due to:

•

a reduction of $1.9 billion in 2010 from dispositions during 2009, including the sales of HSB Group, Inc. (HSB) and 21^st Century Insurance Group (21^st Century), and the deconsolidation of Transatlantic; and

•

a decline in Commercial Insurance net premiums earned due to the continued unfavorable pricing environment and weak economy. The decline also reflects price discipline in workers' compensation and capital management initiatives.

Net Investment Income

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

Three Months Ended March 31, (in millions)	2010		2009			Percentage Increase/ (Decrease)
Fixed maturities, including short-term investments	$	3,186	$	3,630			(12	)%
Maiden Lane interests		911		(2,194	)		-
Equity securities		40		68			(41	)
Interest on mortgage and other loans		104		124			(16	)
Partnerships		388		(787	)		-
Mutual funds		16		(27	)		-
Real estate		222		226			(2	)
Other investments		7		87			(92	)
Total investment income before policyholder income and trading gains (losses)		4,874		1,127			332
Policyholder investment income and trading losses		5		(35	)		-
Total investment income		4,879		1,092			347
Investment expenses		43		177			(76	)
Net investment income	$	4,836	$	915			429	%

    Net investment income increased primarily due to:

•

a gain of $751 million in 2010 associated with the change in fair value of AIG's interest in ML III and a gain of $160 million in 2010 associated with the change in fair value of ML II compared to losses of $2.2 billion in 2009. This improvement was due to favorable valuation changes, primarily resulting from:

•

the shortening of the weighted average lives;

•

the narrowing of credit spreads; and

•

the improvement in credit quality of the underlying collateral securities.

•

increased income from partnership investments in 2010 compared to losses in 2009, reflecting stronger market conditions in 2010.

    These increases were partially offset by:

•

lower levels of invested assets, including the effect of divested businesses; and

•

lower returns as a result of increased levels of short-term investments that were held for liquidity purposes.

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Net Realized Capital Gains (Losses)

Three Months Ended March 31, (in millions)		2010			2009
Sales of fixed maturity securities		$	295		$	-
Sales of equity securities			110			(57	)
Sales of real estate and loans			(9	)		(29	)
Other-than-temporary impairments:
	Severity		(51	)		(1,610	)
	Change in intent		(28	)		(700	)
	Foreign currency declines		(32	)		(78	)
	Issuer-specific credit events		(963	)		(1,120	)
	Adverse projected cash flows on structured securities		-			(141	)
Provision for loan losses			(123	)		-
Foreign exchange transactions			645			272
Derivative instruments			(460	)		964
Other			68			(275	)
Total		$	(548	)	$	(2,774	)

    Net realized capital losses decreased primarily due to the following:

•

lower other-than-temporary impairment charges for the three-month period ended March 31, 2009 included non-credit impairments (i.e. severity losses) that are no longer required for fixed maturity securities due to the adoption of the new other-than-temporary impairments accounting standard commencing in the second quarter of 2009. See Note 6 to the Consolidated Financial Statements; and Investments — Other-Than-Temporary Impairments;

•

gains on sales of fixed maturity and equity securities in the current year reflecting improvement in the credit markets; and

•

increased foreign exchange transaction gains.

    Partially offsetting the above items were losses on derivative instruments not qualifying for hedge accounting treatment compared to gains in the year-ago period due primarily to the tightening of credit spreads.

Unrealized Market Valuation Gains (Losses) on AIGFP Super Senior Credit Default Swap Portfolio

    AIG recognized unrealized market valuation gains related to AIGFP's super senior credit default swap portfolio in 2010 compared to losses in 2009 due to the improvement in market conditions as well as the narrowing of corporate credit spreads.

    See Segment Results — Financial Services Operations — Financial Services Results — Capital Markets Results and Critical Accounting Estimates — Valuation of Level 3 Assets and Liabilities and Note 5 to the Consolidated Financial Statements.

Other Income

    Other income decreased due to:

•

a decline of $1.6 billion in net credit valuation adjustment gains on AIGFP's assets and liabilities which are measured at fair value, excluding gains and losses which are reflected in Unrealized gains (losses) on AIGFP's super senior credit default swap portfolio, partially offset by reduced losses from Capital Markets from lower unwind costs and lower unrealized market valuation losses; and

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•

lower aircraft leasing revenues resulting from ILFC aircraft asset impairment charges of $347 million with respect to aircraft which will be sold subsequent to March 31, 2010, and operating lease related charges totaling $84 million related to those aircraft for the three-month period ended March 31, 2010.

Policyholder Benefits and Claims Incurred

    Policyholder benefits and claims incurred decreased due to:

•

a reduction of $1.3 billion as a result of dispositions in 2009, including the sales of HSB and 21^st Century, and the deconsolidation of Transatlantic;

•

lower production levels for General Insurance and Domestic Life & Retirement Services; and

•

a decrease in claims and claims adjustment expense for Mortgage Guaranty operations of $794 million primarily due to lower levels of newly reported delinquencies and higher cure rates on existing first-lien delinquent loans and the recognition of stop loss limits on certain second-lien policies.

    Partially offsetting the items above were catastrophe losses for General Insurance in 2010 totaling $481 million primarily related to the Chile earthquake, U.S. wind storms and Madeira (Portugal) floods.

Policy Acquisition and Other Insurance Expenses

    Policy acquisition and other insurance expenses decreased primarily due a reduction of $580 million as a result of dispositions during 2009, including the sales of HSB, 21^st Century and the deconsolidation of Transatlantic, partially offset by the effects of $222 million of amortization of a premium deficiency reserve by UGC in 2009.

Interest Expense

    Interest expense decreased primarily due to lower interest expense on the FRBNY Credit Facility. Interest expense on the FRBNY Credit Facility benefited from a reduced interest rate of 3.25 percent in 2010 compared to 6.5 percent in 2009 as well as a lower outstanding balance of $27.4 billion at March 31, 2010 compared to $47.4 billion at March 31, 2009. Interest expense on the FRBNY Credit Facility was $650 million in 2010 compared to $1.3 billion in 2009. Interest expense in 2010 included $521 million of amortization of the prepaid commitment fee asset associated with the FRBNY Credit Facility compared to $705 million in 2009.

Restructuring Expenses and Related Asset Impairment and Other Expenses

    Restructuring expenses decreased in 2010 reflecting progress made under the restructuring plan and asset disposition initiatives. See Note 11 to the Consolidated Financial Statements for additional discussion regarding restructuring and separation expenses.

Net (gain) loss on Sale of Divested Businesses

    Net gain (loss) on sale of divested businesses includes the net gain (loss) on the sale of divested businesses that did not qualify as discontinued operations. In 2009, included a gain of $251 million from the sale of HSB. See Segment Results — Other Operations — Other Results herein for further information.

Other Expenses

    Other expenses decreased primarily due to lower compensation-related costs for the noncore Asset Management businesses reflecting the effect of the deconsolidation of certain portfolio investments, as well as a decline in Consumer Finance provision for loan losses of $226 million.

Income Tax Benefits

    For the three-month period ended March 31, 2010, the effective tax rate on the pre-tax income from continuing operations was (10.9) percent and the effective tax rate on the pre-tax income included in discontinued operations

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was (13.2) percent. The effective tax rate was negative because AIG recorded a tax benefit on pre-tax income. The tax benefit was primarily due to decreases in the deferred tax asset valuation allowance of $82 million related to certain subsidiaries that file separate income tax returns, $140 million which principally offsets the tax expense related to the pre-tax income from continuing operations earned during the quarter, and $665 million related to changes in value of subsidiaries to be sold and included in discontinued operations.

    The effective tax rate on the pre-tax loss from continuing operations for the three-month period ended March 31, 2009 was 20.0 percent. The effective tax rate was lower than the statutory rate due primarily to a $1.6 billion increase in the deferred tax asset valuation allowance against a portion of AIG's net deferred tax asset, partially offset by $632 million of deferred tax benefits mainly attributable to the book to tax basis differences of AIG Parent's investment in subsidiaries and other discrete period items.

    At March 31, 2010 AIG's net deferred tax asset was comprised of $8.3 billion of net deferred tax asset related to its U.S. consolidated income tax group (net of $19.6 billion valuation allowance) and $0.1 billion of net deferred tax liability related to foreign subsidiaries, state and local tax jurisdictions, and certain domestic subsidiaries that file separate tax returns. AIG assesses its ability to realize the deferred tax asset based on AIG's ability to generate sufficient earnings from transactions expected to be completed in the near future and tax planning strategies that would be implemented, if necessary, to protect against the loss of the deferred tax asset. This assessment does not depend on projected future operating income.

    In any interim period, the U.S. consolidated income tax group may generate income or loss. To the extent that any operating income is generated, the related tax expense may be offset by a reduction in the valuation allowance. Conversely, any tax benefits arising from operating losses may be offset by an additional valuation allowance to reduce the net deferred tax asset to an amount that is more likely than not to be realized. Any reduction of the valuation allowance will be allocated to continuing operations, discontinued operations and components of shareholder's equity based on the intraperiod tax allocation rules. AIG's foreign subsidiaries and U.S. subsidiaries filing separate returns will continue to recognize tax expense and tax benefits, based on their income or loss, which will be reflected in AIG's consolidated provision.

    See Critical Accounting Estimates — Valuation Allowance on Deferred Tax Assets and Note 14 to the Consolidated Financial Statements.

Discontinued Operations

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

								Pre-tax Income (Loss)
	Total Revenues				Percentage Increase/ (Decrease)									Percentage Increase/ (Decrease)
Three Months Ended March 31, (in millions)
	2010		2009					2010			2009
AIA	$	3,175	$	2,787		14	%	$	658		$	390			69	%
ALICO		3,522		2,461		43			543			175			210
Nan Shan		2,143		1,638		31			18			(158	)		-
Interest allocation*		-		-		-			(183	)		(258	)		-
Total	$	8,840	$	6,886		28	%	$	1,036		$	149			-	%

*

Represents interest expense, including periodic amortization of the prepaid commitment fee asset, on debt to be assumed by the buyers of AIA and ALICO and on the estimated portion of the FRBNY Credit Facility required to be repaid as a result of the disposition transactions.

American International Assurance Company, Ltd.

    AIA total revenues for the first quarter of 2010 increased over the same period last year reflecting increased business growth, higher net investment income, realized capital gains and the positive effect of foreign exchange. Premiums and other considerations increased 7 percent to $2.4 billion from continued strength in new and renewal business. Net investment income increased 27 percent to $0.7 billion as higher investment yields and

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growth in assets under management offset higher net investment losses related to policyholder investment income and trading gains (losses) which are offset in policyholder benefits and claims incurred. In the first quarter of 2010 AIA reported net realized capital gains of $107 million compared to $25 million in the same period last year. The improvement in net realized capital gains was due to lower impairment charges and equity gains realized in 2010.

    Pre-tax income increased significantly over last year largely due to growth in business, higher realized capital gains, higher investment returns, and the positive effect of foreign exchange.

American Life Insurance Company

    ALICO total revenues for the first quarter of 2010 increased over the same period last year reflecting increased business growth, higher net investment income and lower net realized capital losses. Premiums and other considerations increased 7 percent to $2.5 billion from continued strength in new and renewal business. Net investment income more than doubled from last year to $1.1 billion due to net investment income related to policyholder investment income and trading gains (losses) of $292 million in 2010 compared to a net investment loss related to policyholder investment income and trading gains (losses) of $239 million in 2009, as well as fair value gains on trading account assets in the U.K. Net investment income related to policyholder investment income and trading gains (losses) is offset in policyholder benefits and claims incurred. Realized capital losses declined in the first quarter of 2010 compared to the prior year primarily due to lower other-than-temporary impairment charges.

    Pre-tax income increased significantly over last year largely due to lower realized capital losses and higher investment returns from trading gains in 2010 compared to trading losses in 2009. In addition, 2009 included a DAC benefit related to net realized capital losses of $232 million which more than offset the negative effect of market volatility on Japan annuity and investment-linked products.

Nan Shan Life Insurance Company

    Nan Shan total revenues increased over the same period last year primarily due to net realized capital gains of $74 million in 2010 compared to net realized capital losses of $243 million in 2009, growth in business and the favorable effect of foreign exchange. Net realized capital gains in 2010 were driven mainly by realized capital gains on equity securities which more than offset impairment and derivative losses. The net realized capital losses in 2009 were comprised primarily of losses on derivatives hedging currency risk and other-than-temporary impairment charges.

    Nan Shan reported pre-tax income in 2010 compared to a loss in 2009 primarily due to the realized capital gains which offset the effect of increased negative interest rate spreads.

    Net income from discontinued operations also reflects a partial release of a valuation allowance attributable to an increase in estimated value to be realized on the expected sales of AIA and ALICO, which are classified as discontinued operations. See Note 14 to the Consolidated Financial Statements.

    See Note 3 to the Consolidated Financial Statements.

Segment Results

    AIG believes it should present and discuss its financial information in a manner most meaningful to its financial statement users. In managing its businesses, AIG analyzes the operating performance of each business based on pre-tax income (loss), excluding net realized capital gains (losses), results from discontinued operations and net gains (losses) on sales of divested businesses, because AIG believes that this permits better assessment and enhances understanding of the operating performance of each business by highlighting the results from ongoing operations and the underlying profitability of its businesses. When such measures are disclosed, reconciliations to GAAP pre-tax income are provided.

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American International Group, Inc., and Subsidiaries

The following table summarizes the operations of each reportable segment. (See also Note 2 to the Consolidated Financial Statements.)

Three Months Ended March 31, (in millions)		2010			2009
Total revenues:
	General Insurance	$	8,849		$	8,099
	Domestic Life Insurance & Retirement Services		3,226			1,703
	Foreign Life Insurance & Retirement Services		1,075			763
	Financial Services		1,508			1,265
	Other		2,062			2,180
	Consolidation and eliminations		(390	)		(695	)
Total			16,330			13,315
Pre-tax income (loss) :
	General Insurance		1,016			102
	Domestic Life Insurance & Retirement Services		327			(1,827	)
	Foreign Life Insurance & Retirement Services		85			(128	)
	Financial Services		(439	)		(1,130	)
	Other		(294	)		(3,444	)
	Consolidation and eliminations		140			(89	)
Total		$	835		$	(6,516	)

General Insurance Operations

    AIG's General Insurance subsidiaries, branded as Chartis in 2009, are multiple line companies writing substantially all lines of property and casualty insurance both domestically and abroad.

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

    Commercial Insurance writes substantially all classes of business insurance, accepting such business mainly from insurance brokers. This provides Commercial Insurance the opportunity to select specialized markets and retain underwriting control. Any licensed broker is able to submit business to Commercial Insurance without the traditional agent-company contractual relationship, but such broker usually has no authority to commit Commercial Insurance to accept a risk.

    AIG's Foreign General insurance group writes both commercial and consumer lines of insurance through a network of branches and foreign based insurance subsidiaries. Foreign General insurance group uses various marketing methods and multiple distribution channels to write both commercial and consumer lines insurance with certain refinements for local laws, customs and needs. Foreign General insurance group operates in Asia, the Pacific Rim, Europe, the U.K., Africa, the Middle East and Latin America.

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American International Group, Inc., and Subsidiaries

General Insurance Results

The following table presents General Insurance results:

Three Months Ended March 31, (in millions)		2010			2009			Percentage Increase/ (Decrease)
Underwriting results:
	Net premiums written	$	7,644		$	7,727			(1)	%
	Decrease (increase) in unearned premiums		(3	)		545			-
	Net premiums earned		7,641			8,272			(8	)
	Claims and claims adjustment expenses incurred		5,459			5,787			(6	)
	Change in deferred acquisition costs		(18	)		5			-
	Other underwriting expenses		2,392			2,205			8
	Underwriting profit (loss)		(192	)		275			-
Net investment income			1,071			435			146
Net realized capital gains (losses)			137			(608	)		-
Pre-tax income		$	1,016		$	102			-	%

General Insurance Underwriting Results

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

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

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

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

General Insurance Net Premiums Written

    General Insurance recorded $7.6 billion in net premiums written in the first quarter of 2010, a 1 percent decrease from the first quarter of 2009. The modest decline reflects General Insurance's price discipline where market rates are unsatisfactory, including workers' compensation, strategic growth in high margin lines of business, and the favorable effect of foreign exchange. While the business continues to see increased business retention, new business submissions, and a continued stable rate environment, net premium writings continue to be affected by challenging economic conditions.

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

Three Months Ended March 31,	2010 vs. 2009
Decrease in original currency*		(3.8	)%
Foreign exchange effect		2.7
Decrease as reported in U.S. dollars		(1.1	)%

*

Computed using a constant exchange rate for each period.

General Insurance Underwriting Ratios

The following table summarizes General Insurance GAAP combined ratios:

Three Months Ended March 31,	2010		2009
Loss ratio		71.4		70.0
Expense ratio		31.1		26.7
Combined ratio		102.5		96.7

    The increase in the General Insurance combined ratio primarily resulted from the following:

•

a loss ratio for accident year 2010 recorded in 2010 which was 7.0 points higher than the loss ratio for accident year 2009. This increase is the product of higher catastrophe losses driven by a $310 million loss due to the earthquake in Chile, $119 million in losses due to two severe windstorms in the Northeastern United States and $52 million in losses due to flooding in Madeira (Portugal), in total accounting for a 6.0 point increase in the accident year loss ratio;

•

an increase of 4.4 points in the expense ratio primarily due to a decline in earned premiums and higher expenses, driven by increased pension costs and higher transition and financial remediation costs; and

•

the effects of premium rate decreases and adverse changes in loss trends.

    These increases were partially offset by favorable prior year development which amounted to $244 million for the three months ended March 31, 2010 compared to adverse development of $172 million for the three months ended March 31, 2009. The current period includes $204 million of favorable development in the Lexington businesses of Commercial Insurance, while the three months ended March 31, 2009 includes $169 million of adverse development related to the Excess Casualty business.

General Insurance Net Loss Development

    General Insurance experienced $244 million of favorable development in the three months ended March 31, 2010. This is primarily attributable to strong favorable development in Commercial Insurance's Lexington lines of business, partially offset by adverse development in Risk Finance and Reinsurance. Foreign General Insurance also experienced favorable development, primarily in its directors & officers' liability (D&O) lines.

General Insurance Investing Results and Other Income

    Net investment income for General Insurance increased primarily due to improvement in returns from partnership investments. Net realized capital gains were recognized in 2010 compared to losses in 2009 primarily due to lower other-than-temporary impairments on investments.

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

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American International Group, Inc., and Subsidiaries

Commercial Insurance Results

The following table presents Commercial Insurance results:

Three Months Ended March 31, (in millions)		2010			2009			Percentage Increase/ (Decrease)
Underwriting results:
	Net premiums written	$	3,787		$	4,184			(9	)%
	Decrease in unearned premiums		775			1,043			(26	)
	Net premiums earned		4,562			5,227			(13	)
	Claims and claims adjustment expenses incurred		3,474			4,094			(15	)
	Change in deferred acquisition costs		129			130			(1	)
	Other underwriting expenses		1,070			1,024			4
	Underwriting loss		(111	)		(21	)		-
Net investment income			844			300			181
Net realized capital losses			(3	)		(503	)		-
Pre-tax income (loss)		$	730		$	(224	)		-	%

Commercial Insurance Underwriting Results

Commercial Insurance Net Premiums written

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

Three Months Ended March 31, (in millions)	2010		2009		Percentage Increase/ (Decrease)
General liability/auto liability	$	582	$	669		(13	)%
Workers' compensation		547		719		(24	)
Property		418		427		(2	)
A&H products		385		331		16
Management/professional liability		353		345		2
Commercial umbrella/excess		325		353		(8	)
Multinational P&C		236		268		(12	)
Private client group		227		210		8
Programs		158		168		(6	)
Healthcare		113		158		(28	)
Environmental		109		119		(8	)
Aviation		32		34		(6	)
Other		302		383		(21	)
Total	$	3,787	$	4,184		(9	)%

    Commercial Insurance net premiums written decreased primarily due to:

•

lower U.S. workers' compensation premiums due to declining rates, lower employment levels, increased competition and a strategy to remain price disciplined; and

•

declines in the construction, real estate and transportation lines of business, which were more negatively affected by the credit crisis compared to other lines of businesses. In addition, limited capital for new projects reduced the demand for general liability and commercial umbrella insurance.

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Commercial Insurance Underwriting Ratios

The following table presents Commercial Insurance GAAP combined ratios:

Three Months Ended March 31,	2010		2009
Loss ratio		76.2		78.3
Expense ratio		26.3		22.1
Combined ratio		102.5		100.4

    The increase in the Commercial Insurance combined ratio primarily resulted from the following:

•

an accident year loss ratio for the three months ended March 31, 2010 that was 5.5 points higher than the accident year loss ratio for the three months ended March 31, 2009, resulting from an increase in catastrophe-related losses of $177 million attributable to the combined losses of two severe windstorms in the Northeastern US and the earthquake in Chile;

•

an increase in the expense ratio of 4.2 points due to a decline in earned premiums and higher expenses driven by increased pension costs and transition and financial remediation costs; and

•

the effects of premium rate decreases and adverse changes in loss trends.

    These increases were partially offset by a change in prior-year development. For the three month period ended March 31, 2010 Commercial Insurance recorded favorable development of $190 million compared to adverse development of $164 million in the same period of 2009. The net favorable development for 2010 includes $59 million of favorable development related to loss sensitive policies compared to $100 million of favorable development related to loss sensitive policies in the same period in 2009.

Commercial Insurance Net Loss Development

    The $190 million of favorable development in the three months ended March 31, 2010 is primarily attributable to favorable development in the Lexington lines of business, with property contributing $127 million and catastrophe excess liability contributing $40 million. Lexington's development was partially offset by $35 million of adverse development in Risk Finance and $21 million of adverse development in Reinsurance. Excess casualty and excess workers' compensation, while not contributing to the favorable development in 2010, did not experience any further adverse development.

Commercial Insurance Investing Results

    Net investment income for Commercial Insurance increased primarily due to improvement in returns from partnership investments of $463 million.

    Net realized capital losses for Commercial Insurance declined due to lower other-than-temporary impairments on investments.

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

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American International Group, Inc., and Subsidiaries

Foreign General Insurance Results

The following table presents Foreign General Insurance results:

Three Months Ended March 31, (in millions)		2010			2009			Percentage Increase/ (Decrease)
Underwriting results:
	Net premiums written	$	3,857		$	3,543			9	%
	Increase in unearned premiums		(778	)		(498	)		-
	Net premiums earned		3,079			3,045			1
	Claims and claims adjustment expenses incurred		1,985			1,693			17
	Change in deferred acquisition costs		(147	)		(125	)		-
	Other underwriting expenses		1,322			1,181			12
	Underwriting profit (loss)		(81	)		296			-
Net investment income			227			135			68
Net realized capital gains (losses)			140			(105	)		-
Pre-tax income		$	286		$	326			(12	)%

Foreign General Insurance Underwriting Results

Foreign General Insurance Net Premiums Written

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

Three Months Ended March 31, (in millions)	2010		2009		Percentage Increase/ (Decrease)
A&H products	$	982	$	937		5	%
Specialty lines		781		689		13
Casualty		671		579		16
Personal lines		567		553		3
Marine & Energy		259		204		27
Lloyds		235		231		2
Property		174		165		5
Aviation		104		102		2
Other		84		83		1
Total	$	3,857	$	3,543		9	%

    Foreign General Insurance net premiums written increased primarily due to:

•

positive effect of changes in foreign exchange rates, which contributed 6 percent to the increase; and

•

new business as global economic conditions improved.

    From a regional perspective, Europe achieved growth of 6.0 percent in its critical renewal season. In addition, positive growth of 1.6 percent in the U.K and Ireland operations contributed to the continuing upward trend in production since the third quarter of 2009 which is attributable to improved retention and strong new business submissions.

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

Three Months Ended March 31,	2010 vs. 2009
Increase in original currency*		2.9	%
Foreign exchange effect		6.0
Increase as reported in U.S. dollars		8.9	%

*

Computed using a constant exchange rate for each period.

Foreign General Insurance Underwriting Ratios

The following table presents Foreign General Insurance combined ratios:

Three Months Ended March 31,	2010		2009
Loss ratio		64.5		55.6
Expense ratio		38.2		34.7
Combined ratio		102.7		90.3

    The increase in the Foreign General Insurance combined ratio primarily resulted from the following:

•

significant catastrophe related losses in the three months ended March 31, 2010, compared to none in the three months ended March 31, 2009, contributed 9 points to the loss ratio. Catastrophe losses included $252 million due to the earthquake in Chile and $52 million due to the flooding in Madeira (Portugal); and

•

an increase in the expense ratio was primarily due to higher general operating expenses and acquisition costs.

Foreign General Insurance Net Loss Development

    Foreign General Insurance experienced $54 million of favorable development in the three months ended March 31, 2010, including $28 million of favorable development from the D&O line of business. The remainder was spread throughout the other lines of business.

Foreign General Insurance Investing Results and Other Income

    Foreign General Insurance Net investment income increased primarily due to higher partnership and mutual fund results partially offset by lower interest and dividend income.

    Foreign General Insurance recorded Net realized capital gains in 2010 due to gains in the sales of fixed maturity securities, the favorable effect of foreign exchange and lower other-than-temporary impairments on investments.

    On March 31, 2010, a subsidiary of Chartis International purchased additional voting shares in Fuji. Investment income for the three months ended March 31, 2010 includes an equity pick-up of $56 million pertaining to the minority ownership as well as a gain of $47 million reflecting remeasurement of the equity interest in Fuji held prior to the acquisition of the additional shares, offset by a $72 million charge resulting from the reversal through income of Chartis' share of Fuji's other comprehensive income. See Note 4 to the Consolidated Financial Statements for additional information.

Liability for unpaid claims and claims adjustment expense

    The following discussion on the consolidated liability for unpaid claims and claims adjustment expenses (loss reserves) presents loss reserves for the Commercial Insurance and Foreign General Insurance reporting units in

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the General Insurance operating segment and loss reserves pertaining to divested and/or Noncore businesses, comprising the Mortgage Guaranty reporting unit reported in AIG's Other category.

The following table presents the components of the loss reserves by major lines of business on a statutory annual statement basis^(a):

(in millions)	March 31, 2010		December 31, 2009
Other liability occurrence	$	20,473	$	20,344
International(b)		16,269		12,582
Workers' compensation		15,632		15,200
Other liability claims made		11,650		12,619
Mortgage Guaranty/Credit		5,253		5,477
Property		3,868		3,872
Auto liability		3,175		4,164
Products liability		2,338		2,414
Medical malpractice		1,757		1,672
Accident and health		1,361		1,677
Aircraft		1,172		1,388
Commercial multiple peril		1,006		1,081
Fidelity/surety		943		875
Reinsurance		130		154
Other		1,462		1,867
Total	$	86,489	$	85,386

(a)

Presented by lines of business pursuant to statutory reporting requirements as prescribed by the National Association of Insurance Commissioners.

(b)

Includes $1.5 billion related to the acquisition of Fuji on March 31, 2010.

    AIG's gross loss reserves represent the accumulation of estimates of ultimate losses, including estimates for incurred but not yet reported reserves (IBNR) and loss expenses. The methods used to determine loss reserve estimates and to establish the resulting reserves are continually reviewed and updated. Any adjustments resulting from this review are currently reflected in pre-tax income. Because loss reserve estimates are subject to the outcome of future events, changes in estimates are unavoidable given that loss trends vary and time is often required for changes in trends to be recognized and confirmed. Reserve changes that increase previous estimates of ultimate cost are referred to as unfavorable or adverse development or reserve strengthening. Reserve changes that decrease previous estimates of ultimate cost are referred to as favorable development.

    The net loss reserves represent loss reserves reduced by reinsurance recoverable, net of an allowance for unrecoverable reinsurance and applicable discount for future investment income.

The following table classifies the components of the net liability for unpaid claims and claims adjustment expense by business unit:

(in millions)		March 31, 2010		December 31, 2009
General Insurance segment:
	Commercial Insurance	$	50,089	$	50,498
	Foreign General Insurance		13,956		12,688
Total General Insurance			64,045		63,186
	Mortgage Guaranty		4,504		4,713
Total net loss reserves		$	68,549	$	67,899

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Discounting of Reserves

    At March 31, 2010, net loss reserves reflect a loss reserve discount of $2.66 billion, including tabular and non-tabular calculations. The tabular workers' compensation discount is calculated using a 3.5 percent interest rate and the 1979-81 Decennial Mortality Table. The non-tabular workers' compensation discount is calculated separately for companies domiciled in New York and Pennsylvania, and follows the statutory regulations for each state. For New York companies, the discount is based on a five percent interest rate and the companies' own payout patterns. For Pennsylvania companies, the statute has specified discount factors for accident years 2001 and prior, which are based on a six percent interest rate and an industry payout pattern. For accident years 2002 and subsequent, the discount is based on the payout patterns and investment yields of the companies. The discount is comprised of the following: $669 million — tabular discount for workers' compensation in Commercial Insurance and $1.99 billion — non-tabular discount for workers' compensation in Commercial Insurance.

Quarterly Reserving Process

    AIG believes that the net loss reserves are adequate to cover net losses and loss expenses as of March 31, 2010. While AIG regularly reviews the adequacy of established loss reserves, there can be no assurance that AIG's ultimate loss reserves will not develop adversely and materially exceed AIG's loss reserves as of March 31, 2010. In the opinion of management, such adverse development and resulting increase in reserves is not likely to have a material adverse effect on AIG's consolidated financial condition, although it could have a material adverse effect on AIG's consolidated results of operations for an individual reporting period.

The following table presents the reconciliation of net loss reserves:

Three Months Ended March 31, (in millions)		2010			2009
Net liability for unpaid claims and claims adjustment expense at beginning of year		$	67,899		$	72,455
Foreign exchange effect			(553	)		(290	)
Acquisitions(a)			1,538			-
Dispositions			(25	)		(287	)(b)
Losses and loss expenses incurred:(c)
	Current year		5,998			7,862
	Prior years, other than accretion of discount		(476	)		64
	Prior years, accretion of discount		86			98
Losses and loss expenses incurred			5,608			8,024
Losses and loss expenses paid(c)			5,916			7,648
Reclassified to liabilities of businesses held for sale			(2	)		-
Net liability for unpaid claims and claims adjustment expense at end of period		$	68,549		$	72,254

(a)

Represents the acquisition of Fuji on March 31, 2010.

(b)

HSB was sold during the first quarter of 2009.

(c)

Includes amounts related to dispositions through the date of disposition.

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The following tables summarize development, (favorable) or unfavorable, of incurred losses and loss expenses for prior years (other than accretion of discount):

Three Months Ended March 31, (in millions)		2010			2009
Prior Accident Year Development by Reporting Unit:
General Insurance segment:
	Commercial Insurance	$	(190	)	$	164
	Foreign General Insurance		(54	)		8
Total General Insurance segment			(244	)		172
Noncore businesses:
	Mortgage Guaranty		(232	)		(94	)
	Other noncore insurance businesses*		-			(14	)
Total Noncore businesses			(232	)		(108	)
Prior years, other than accretion of discount		$	(476	)	$	64

*

Entities were sold during 2009.

		Calendar Year
Three Months Ended March 31, (in millions)
		2010			2009
Prior Accident Year Development by Accident Year:
Accident Year
	2009	$	(263	)
	2008		(116	)	$	(147	)
	2007		(58	)		115
	2006		(56	)		(25	)
	2005		(35	)		(83	)
	2004		29			5
	2003 and prior		23			199
Prior years, other than accretion of discount		$	(476	)	$	64

    In determining the loss development from prior accident years, AIG conducts analyses to determine the change in estimated ultimate loss for each accident year for each class of business. For example, if loss emergence for a class of business is different than expected for certain accident years, the actuaries examine the indicated effect such emergence would have on the reserves of that class of business. In some cases, the higher or lower than expected emergence may result in no clear change in the ultimate loss estimate for the accident years in question, and no adjustment would be made to the reserves for the class of business for prior accident years. In other cases, the higher or lower than expected emergence may result in a larger change, either favorable or unfavorable, than the difference between the actual and expected loss emergence. Such additional analyses were conducted for each class of business, as appropriate, in the three-month period ended March 31, 2010 to determine the loss development from prior accident years for three-month period ended March 31, 2010. As part of its reserving process, AIG also considers notices of claims received with respect to emerging issues, such as those related to the U.S. mortgage and housing market.

    See General Insurance Results herein for further discussion of net loss development.

Asbestos and Environmental Reserves

    The estimation of loss reserves relating to asbestos and environmental claims on insurance policies written many years ago is subject to greater uncertainty than other types of claims due to inconsistent court decisions as well as judicial interpretations and legislative actions that in some cases have tended to broaden coverage beyond the original intent of such policies and in others have expanded theories of liability.

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    As described more fully in the 2009 Annual Report on Form 10-K, AIG's reserves relating to asbestos and environmental claims reflect a comprehensive ground-up analysis.

The following table provides a summary of reserve activity, including estimates for applicable IBNR, relating to asbestos and environmental claims separately and combined:

		2010						2009
Three Months Ended March 31, (in millions)
		Gross			Net			Gross			Net
Asbestos:
	Liability for unpaid claims and claims adjustment expense at beginning of year	$	3,236		$	1,151		$	3,443		$	1,200
	Losses and loss expenses incurred*		1			2			27			12
	Losses and loss expenses paid*		(188	)		(48	)		(140	)		(17	)
Liability for unpaid claims and claims adjustment expense at end of period		$	3,049		$	1,105		$	3,330		$	1,195
Environmental:
	Liability for unpaid claims and claims adjustment expense at beginning of year	$	338		$	159		$	417		$	194
	Losses and loss expenses incurred*		-			1			3			-
	Losses and loss expenses paid*		(12	)		(8	)		(12	)		(12	)
Liability for unpaid claims and claims adjustment expense at end of period		$	326		$	152		$	408		$	182
Combined:
	Liability for unpaid claims and claims adjustment expense at beginning of year	$	3,574		$	1,310		$	3,860		$	1,394
	Losses and loss expenses incurred*		1			3			30			12
	Losses and loss expenses paid*		(200	)		(56	)		(152	)		(29	)
Liability for unpaid claims and claims adjustment expense at end of period		$	3,375		$	1,257		$	3,738		$	1,377

*

All amounts pertain to policies underwritten in prior years, primarily to policies issued in 1984 and prior years.

The following table presents the estimate of the gross and net IBNR included in the Liability for unpaid claims and claims adjustment expense, relating to asbestos and environmental claims separately and combined:

	2010				2009
Three Months Ended March 31, (in millions)
	Gross		Net		Gross		Net
Asbestos	$	2,016	$	838	$	2,246	$	929
Environmental		159		63		246		93
Combined	$	2,175	$	901	$	2,492	$	1,022

The following table presents a summary of asbestos and environmental claims count activity:

		2010									2009
Three Months Ended March 31,
		Asbestos			Environmental			Combined			Asbestos			Environmental			Combined
Claims at beginning of year			5,417			5,994			11,411			5,780			6,674			12,454
Claims during year:
	Opened		133			111			244			232			181			413
	Settled		(55	)		(44	)		(99	)		(133	)		(38	)		(171	)
	Dismissed or otherwise resolved		(287	)		(1,321	)		(1,608	)		(178	)		(289	)		(467	)
Claims at end of period			5,208			4,740			9,948			5,701			6,528			12,229

Survival Ratios — Asbestos and Environmental

    The following table presents AIG's survival ratios for asbestos and environmental claims at March 31, 2010 and 2009. The survival ratio is derived by dividing the current carried loss reserve by the average payments for the three most recent calendar years for these claims. Therefore, the survival ratio is a simplistic measure estimating

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the number of years it would be before the current ending loss reserves for these claims would be paid off using recent year average payments. The March 31, 2010 gross asbestos survival ratio is lower than the ratio at March 31, 2009 because the more recent periods included in the rolling average reflect higher claims payments. In addition, AIG's survival ratio for asbestos claims was negatively affected by certain favorable settlements during 2008 and 2007. These settlements reduced gross and net asbestos survival ratios at March 31, 2010 by approximately 0.5 years and 1.4 years, respectively; and reduced gross and net asbestos survival ratios at March 31, 2009 by approximately 1.1 years and 2.3 years, respectively. Many factors, such as aggressive settlement procedures, mix of business and level of coverage provided, have a significant effect on the amount of asbestos and environmental reserves and payments and the resultant survival ratio. Moreover, as discussed above, the primary basis for AIG's determination of its reserves is not survival ratios, but instead the ground-up and top-down analysis. Thus, caution should be exercised in attempting to determine reserve adequacy for these claims based simply on this survival ratio.

The following table presents AIG's survival ratios for asbestos and environmental claims, separately and combined, which were based upon a three-year average payment:

		2010				2009
Three Months Ended March 31,		Gross		Net		Gross		Net
Survival ratios:
	Asbestos		4.5		3.9		5.0		3.9
	Environmental		4.4		3.3		4.4		3.2
	Combined		4.5		3.8		4.9		3.8

Domestic Life Insurance & Retirement Services Operations

    AIG's Domestic Life Insurance & Retirement Services segment, operating as SunAmerica Financial Group, is comprised of several life insurance and retirement services businesses that offer a comprehensive suite of life insurance, retirement savings products and guaranteed income solutions through an established multi-channel distribution network that includes banks, national, regional and independent broker-dealers, career financial advisors, wholesale life brokers, insurance agents and a direct-to-consumer platform.

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

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

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Domestic Life Insurance & Retirement Services Results

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

Three Months Ended March 31, (in millions)		2010			2009			Percentage Increase/ (Decrease)
	Premiums and other considerations	$	1,315		$	1,440			(9	)%
	Net investment income		2,707			1,930			40
	Policyholder benefits and claims incurred		2,201			2,590			(15	)
	Policy acquisition and other expenses		698			940			(26	)
Pre-tax income (loss) before net realized capital losses			1,123			(160	)		-
Net realized capital losses			(796	)		(1,667	)		-
Pre-tax income (loss)		$	327		$	(1,827	)		-	%

    Domestic Life Insurance & Retirement Services reported higher pre-tax income before net realized capital losses primarily due to the following:

•

an increase in net investment income as a result of growth in partnership returns, which amounted to $235 million in the three month period ended March 31, 2010 compared to losses of $373 million in the same period of 2009, as well as higher income from valuation adjustments from the interest in ML II, which offset the negative effects of higher liquidity in the investment portfolios; and

•

lower DAC and SIA unlocking and related reserve strengthening of $558 million. There were no unlockings in the three months ended March 31, 2010. Unlockings in the three months ended March 31, 2009 primarily were the result of reductions in the long-term growth assumptions for group retirement products and individual variable annuities and deteriorating equity market conditions early in 2009.

    These improvements were partially offset by lower DAC and sale inducement assets (SIA) benefits related to net realized capital losses of $4 million in the three months ended March 31, 2010 compared to $349 million in the three months ended March 31, 2009.

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

Domestic Life Insurance Results

The following table presents Domestic Life Insurance results:

Three Months Ended March 31, (in millions)		2010			2009			Percentage Increase/ (Decrease)
	Premiums and other considerations	$	1,040		$	1,182			(12	)%
	Net investment income		1,034			825			25
	Policyholder benefits and claims incurred		1,320			1,373			(4	)
	Policy acquisition and other expenses		387			451			(14	)
Pre-tax income before net realized capital losses			367			183			101
Net realized capital losses			(140	)		(481	)		-
Pre-tax income (loss)		$	227		$	(298	)		-	%

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    Domestic Life Insurance pre-tax income before net realized capital losses increased primarily due to the following:

•

higher net investment income due to a $141 million increase in partnership income and a $129 million increase in the fair value of the interest in ML II; and

•

favorable life insurance mortality experience.

    Partially offsetting these increases was a lower DAC benefit related to net realized capital losses of $2 million in 2010 compared to a benefit of $25 million in 2009.

    Domestic Life Insurance premiums and other considerations declined primarily due to the sale of AIG Life Canada on April 1, 2009. Policy acquisition and other insurance expenses declined primarily due to expense reductions.

    Domestic Life Insurance reported pre-tax income in the three months ended March 31, 2010 compared to a pre-tax loss in the three months ended March 31, 2009 reflecting lower levels of net realized capital losses in 2010, due principally to a $291 million decline in other-than-temporary impairment charges.

Domestic Life Insurance Sales and Deposits

The following table summarizes Domestic Life Insurance sales and deposits by product^(a):

Three Months Ended March 31, (in millions)				2010		2009		Percentage Increase/ (Decrease)
Life insurance
Periodic premium by product:
	Universal life			$	9	$	14		(36	)%
	Variable universal life				-		8		-
	Term life				16		24		(33	)
	Whole life/other				1		2		(50	)
		Total periodic premiums by product			26		48		(46	)
Group life/health					22		55		(60	)
Unscheduled and single deposits					15		37		(59	)
		Total life insurance			63		140		(55	)
Career distribution
	By product:
		Periodic life insurance premiums			19		16		19
		Unscheduled and single deposits			5		4		25
		Accident and health insurance			2		1		100
		Fixed annuities			17		56		(70	)
			Total career distribution		43		77		(44	)
	Payout annuities				217		191		14
	Individual fixed and runoff annuities				161		195		(17	)
Total sales and deposits(b)				$	484	$	603		(20	)%

(a)

Includes divested operations. Life insurance sales include periodic premiums from new business expected to be collected over a one-year period and unscheduled and single premiums from new and existing policyholders. Sales of group accident and health insurance represent annualized first-year premium from new policies. Annuity sales represent deposits from new and existing customers.

(b)

The sales and deposit amounts presented for payout annuities have been revised in the first quarter of 2010 to better align with how management views the business. Prior periods have been revised to conform with the current period presentation.

    Total Domestic Life Insurance sales and deposits decreased primarily due to lower fixed annuity deposits, life insurance premiums and the sale of AIG Life Canada, partially offset by increased payout annuity sales. Life

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insurance premiums decreased primarily due to lower Domestic Life Insurance financial strength ratings while fixed annuity sales declined as a result of the low interest rate environment. Payout annuity sales increased as a result of improved structured settlement, immediate annuity and terminal funding sales.

Domestic Retirement Services Results

The following table presents Domestic Retirement Services results:

Three Months Ended March 31, (in millions)		2010			2009			Percentage Increase/ (Decrease)
	Premiums and other considerations	$	275		$	258			7	%
	Net investment income		1,673			1,105			51
	Policyholder benefits and claims incurred		881			1,217			(28	)
	Policy acquisition and other expenses		311			489			(36	)
Pre-tax income (loss) before net realized capital losses			756			(343	)		-
Net realized capital losses			(656	)		(1,186	)		-
Pre-tax income (loss)		$	100		$	(1,529	)		-	%

    Domestic Retirement Services pre-tax income before net realized capital gains (losses) increased primarily due to the following:

•

higher net investment income due to a $467 million increase in partnership income and $276 million higher income from valuation adjustments in ML II; and

•

lower DAC and SIA unlockings and related reserve strengthening of $558 million. There were no unlockings in the three-month period ended March 31, 2010. Unlockings in the three-month period ended March 31, 2009 primarily were the result of reductions in the long-term growth assumptions for group retirement products and individual variable annuities and deteriorating equity market conditions early in 2009.

    Partially offsetting these benefits were:

•

reduced DAC and SIA benefits of $322 million from lower net realized capital losses; and

•

a decrease in investment income due to lower reserves and assets in the GIC and fixed annuity blocks. As the GIC block is in runoff, AIG anticipates reserve and asset declines in future periods.

    Pre-tax income for Domestic Retirement Services reflected lower levels of net realized capital losses principally from lower other-than-temporary impairment charges of $1.2 billion, partially offset by an increase of $853 million related to derivative fair value losses on interest rate and foreign exchange derivatives used to economically hedge the effect of interest rate and foreign exchange movements on GIC reserves.

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Domestic Retirement Services Sales and Deposits

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

Three Months Ended March 31, (in millions)		2010			2009
Group retirement products
Balance, beginning of year		$	63,419		$	56,861
	Deposits – annuities		1,254			1,228
	Deposits – mutual funds		354			401
	Total Deposits		1,608			1,629
	Surrenders and other withdrawals		(1,676	)		(1,669	)
	Death benefits		(73	)		(68	)
	Net inflows (outflows)		(141	)		(108	)
	Change in fair value of underlying investments, interest credited, net of fees		1,591			(1,889	)
Balance, end of period		$	64,869		$	54,864
Individual fixed annuities
Balance, beginning of year		$	47,202		$	48,394
	Deposits		1,153			1,474
	Surrenders and other withdrawals		(905	)		(2,369	)
	Death benefits		(370	)		(433	)
	Net inflows (outflows)		(122	)		(1,328	)
	Change in fair value of underlying investments, interest credited, net of fees		467			464
Balance, end of period		$	47,547		$	47,530
Individual variable annuities
Balance, beginning of year		$	24,637		$	23,593
	Deposits		357			262
	Surrenders and other withdrawals		(674	)		(732	)
	Death benefits		(120	)		(110	)
	Net inflows (outflows)		(437	)		(580	)
	Change in fair value of underlying investments, interest credited, net of fees		666			(1,516	)
Balance, end of period		$	24,866		$	21,497
Total Domestic Retirement Services
Balance, beginning of year		$	135,258		$	128,848
	Deposits		3,118			3,365
	Surrenders and other withdrawals		(3,255	)		(4,770	)
	Death benefits		(563	)		(611	)
	Net inflows (outflows)		(700	)		(2,016	)
	Change in fair value of underlying investments, interest credited, net of fees		2,724			(2,941	)
	Balance, end of year, excluding runoff		137,282			123,891
	Individual annuities runoff		4,579			4,898
	GICs runoff		8,427			11,928
Balance at end of period		$	150,288		$	140,717
General and separate account reserves and mutual funds
	General account reserve	$	95,400		$	100,243
	Separate account reserve		46,639			34,513
Total general and separate account reserves			142,039			134,756
	Group retirement mutual funds		8,249			5,961
Total reserves and mutual funds		$	150,288		$	140,717

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    Deposits for individual fixed annuities decreased primarily as a result of a slowdown in industry fixed annuity sales primarily due to less competitive rates and increased pricing on long term certificate of deposit products at certain banks. Variable annuity sales increased due to competitive product enhancements, reinstatements at a number of key broker-dealers, and increased wholesaler productivity.

    Surrender rates and withdrawals have improved for individual fixed annuities and individual variable annuities as surrenders have returned to more normal levels.

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

		March 31, 2010									March 31, 2009
(in millions)		Group Retirement Products*			Individual Fixed Annuities			Individual Variable Annuities			Group Retirement Products*			Individual Fixed Annuities			Individual Variable Annuities
	No surrender charge	$	48,590		$	12,211		$	11,488		$	42,196		$	9,986		$	7,945
	0% – 2%		1,952			3,029			4,216			1,119			3,184			2,878
	Greater than 2% – 4%		1,906			5,660			2,040			1,739			6,570			1,891
	Greater than 4%		3,338			23,483			6,692			2,849			24,572			6,907
	Non-Surrenderable		834			3,164			430			1,000			3,218			1,876
	Total Reserves	$	56,620		$	47,547		$	24,866		$	48,903		$	47,530		$	21,497
Surrender rates			10.6	%		7.7	%		11.2	%		12.2	%		19.8	%		14.6	%

*

Excludes mutual funds of $8.2 billion and $6.0 billion at March 31, 2010 and 2009, respectively.

Foreign Life Insurance & Retirement Services Operations

    AIG's Foreign Life Insurance & Retirement Services operations include individual insurance and investment-oriented products such as term and whole life, endowments, term and whole life medical, cancer, fixed annuities and group products including life, medical and pension. The Foreign Life Insurance & Retirement Services products are sold through career agents, independent producers, financial institutions and direct marketing channels.

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

    Following the classification of AIA, ALICO, and Nan Shan as discontinued operations (see Note 3 to the Consolidated Financial Statements), AIG's remaining Foreign Life Insurance & Retirement Services operations are conducted through AIG Star Life Insurance Co. Ltd (AIG Star) and AIG Edison Life Insurance Company (AIG Edison).

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Foreign Life Insurance & Retirement Services Results

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

Three Months Ended March 31, (in millions)		2010			2009			Percentage Increase/ (Decrease)
	Premiums and other considerations	$	864		$	925			(7	)%
	Net investment income		346			324			7
	Policyholder benefits and claims incurred		726			700			4
	Policy acquisition and other expenses		264			191			38
Pre-tax income before net realized capital losses			220			358			(39	)
Net realized capital losses			(135	)		(486	)		-
Pre-tax income (loss)		$	85		$	(128	)		-	%

    AIG's foreign life operations transact business solely in Japan and therefore Premiums and other considerations reported in U.S. dollars vary by volume and from changes in the Yen to U.S. dollar translation exchange rate.

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

Three Months Ended March 31,	2010 vs. 2009
Decrease in original currency*		(5.6	)%
Foreign exchange effect		(1.0	)
Decline as reported in U.S. dollars		(6.6	)%

*

Computed using a constant exchange rate each period.

    Premiums and other considerations declined due to lower in-force business as a result of surrenders and low sales volumes throughout 2009. Net investment income increased modestly due to higher returns from partnerships and mutual funds. The increase in policy acquisition and other expenses resulted from $74 million of lower DAC benefit, net of unearned revenue liability, related to higher realized capital losses in 2010 compared to a year ago.

    Pre-tax income before net realized capital losses for Foreign Life Insurance & Retirement Services declined primarily due to the lower DAC benefit and decline of in-force business. Those declines were partially offset by the increase in net investment income.

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

Foreign Life Insurance and Retirement Services Sales

    As a consequence of the classification of AIA, ALICO and Nan Shan as discontinued operations, the segment is now comprised of Japan operations. In managing the Japan operations, management analyzes sales performance on an annualized new business premium basis. Annualized new business premiums represent the amount of premium expected to be collected over a twelve month period and also include 10 percent of first year premiums or deposits from single pay products.

The following table summarizes annualized new business premiums for Foreign Life Insurance & Retirement Services:

Three Months Ended March 31, (in millions)	2010		2009		Percentage Increase/ (Decrease)
Life	$	72	$	63		14	%
Medical		53		45		18
Annuity		33		27		22
Total	$	158	$	135		17	%

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    Sales are transacted primarily in yen and therefore annualized new business premiums reported in U.S. dollars vary by volume and from changes in the Yen/U.S. dollar translation exchange rate. Annualized new business premiums measured on a constant exchange rate basis are as follows:

Three Months Ended March 31, (in millions)	2010		2009		Percentage Increase/ (Decrease)
Life	$	65	$	58		12	%
Medical		48		41		17
Annuity		30		24		25
Total	$	143	$	123		16	%

    Life sales increased as independent producers have gradually returned to selling products of AIG Star and AIG Edison. Medical sales growth was supported by the launch of new products early in 2010, resulting in increased sales by both the captive agent and independent producer channels. Annuity sales increased due to a high rate of recapture of maturing annuities driven by a strong Yen exchange rate, and by gradually improving sales from banks that had previously suspended sales of products of AIG Star and AIG Edison.

Deferred Policy Acquisition Costs

    DAC for Life Insurance & Retirement Services products arises from the deferral of costs that vary with, and are directly related to, the acquisition of new or renewal business. Policy acquisition costs for life insurance products are generally deferred and amortized over the premium paying period. Policy acquisition costs that relate to universal life and investment-type products are generally deferred and amortized, with interest in relation to the incidence of estimated gross profits to be realized over the estimated lives of the contracts. Value of Business Acquired (VOBA) is determined at the time of acquisition and is reported on the consolidated balance sheet with DAC and amortized over the life of the business similar to DAC.

The following table summarizes the major components of the changes in DAC/VOBA:

Three Months Ended March 31, (in millions)		2010			2009
Domestic Life Insurance & Retirement Services
Balance at beginning of year		$	11,098		$	14,447
	Acquisition costs deferred		233			282
	Amortization charged to pre-tax income		(267	)		(463	)
	Change in unrealized gains (losses) on securities		(422	)		(503	)
	Decrease due to foreign exchange		(1	)		(15	)
	Consolidation and eliminations		48			54
Balance at end of period		$	10,689		$	13,802
Foreign Life Insurance & Retirement Services
Balance at beginning of year		$	24,792		$	26,166
	Acquisition costs deferred		169			204
	Amortization charged to pre-tax income		(129	)		(56	)
	Change in unrealized gains (losses) on securities		(32	)		(12	)
	Decrease due to foreign exchange		(84	)		(64	)
	Other		-			(10	)
	Activity of discontinued operations		(184	)		(568	)
	Reclassified to Assets of businesses held for sale		(20,925	)		-
Balance at end of period		$	3,607		$	25,660

    As AIG operates in various global markets, the estimated gross profits used to amortize DAC and VOBA are subject to differing market returns and interest rate environments in any single period. The combination of market

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returns and interest rates may lead to acceleration of amortization in some products and regions and simultaneous deceleration of amortization in other products and regions.

    DAC and VOBA for insurance-oriented, investment-oriented and retirement services products are reviewed for recoverability, which involves estimating the future profitability of current business. This review involves significant management judgment. If actual future profitability is substantially lower than estimated, AIG's DAC and VOBA may be subject to an impairment charge and AIG's results of operations could be significantly affected in future periods.

Financial Services Operations

    AIG's Financial Services subsidiaries engage in diversified activities including aircraft leasing, capital markets, and consumer finance and insurance premium finance. Together, the Aircraft Leasing, Capital Markets and Consumer Finance operations generate the majority of the revenues produced by the Financial Services operations.

Aircraft Leasing

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

Capital Markets

    Capital Markets represents the operations of AIGFP, which engaged as principal in a wide variety of financial transactions, including standard and customized financial products involving commodities, credit, currencies, energy, equities and interest rates. AIGFP also invests in a diversified portfolio of securities and engaged in borrowing activities that involve issuing standard and structured notes and other securities and entering into GIAs. AIGFP has continued to unwind its businesses and portfolios, including those associated with credit protection written through credit default swaps on super senior risk tranches of diversified pools of loans and debt securities. See Liquidity of Parent and Subsidiaries — Financial Services — AIGFP Wind-down.

    Historically, AIG's Capital Markets operations derived a significant portion of their revenues from hedged financial positions entered into in connection with counterparty transactions. AIGFP has also participated as a dealer in a wide variety of financial derivatives transactions. Revenues and pre-tax income of the Capital Markets operations and the percentage change in these amounts for any given period are significantly affected by changes in the fair value of AIGFP's assets and liabilities and by the number, size and profitability of transactions entered into during that period relative to those entered into during the comparative period.

Consumer Finance

    AIG's Consumer Finance operations in North America are principally conducted through AGF. AGF derives most of its revenues from finance charges assessed on real estate loans, secured and unsecured non-real estate loans and retail sales finance receivables.

    AIG's foreign consumer finance operations are principally conducted through AIGCFG. AIGCFG operates primarily in emerging and developing markets. At March 31, 2010, AIGCFG had operations in Argentina, Poland, Taiwan, India and Colombia. During 2009 and through April 30, 2010, AIG has completed the sale of the AIGCFG operations in China, Colombia, Thailand, the Philippines, Mexico, Hong Kong, Brazil, Russia and Taiwan. AIG has also entered into contracts to sell the AIGCFG operations in Argentina, India and Poland.

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Financial Services Results

Financial Services results were as follows:

Three Months Ended March 31, (in millions)		2010			2009			Percentage Increase/ (Decrease)
Revenues:
	Aircraft Leasing	$	882		$	1,281			(31	)%
	Capital Markets		(234	)		(969	)		-
	Consumer Finance		779			813			(4	)
	Other, including intercompany adjustments		81			140			(42	)
Total		$	1,508		$	1,265			19	%
Pre-tax income (loss):
	Aircraft Leasing	$	(81	)	$	316			-	%
	Capital Markets		(298	)		(1,121	)		-
	Consumer Finance		(25	)		(306	)		-
	Other, including intercompany adjustments		(35	)		(19	)		-
Total		$	(439	)	$	(1,130	)		-	%

    Financial Services reported a lower pre-tax loss for the three-month period ended March 31, 2010 compared to the same period in 2009 due to the following:

•

AIGFP reported a pre-tax loss of $298 million for the three-month period ended March 31, 2010 compared to a pre-tax loss of $1.1 billion during the first quarter of 2009. AIGFP reported unrealized market valuation gains related to its super senior credit default swap portfolio of $119 million in the three-month period ended March 31, 2010 and unrealized market valuation losses of $452 million in the three-month period ended March 31, 2009. The operating results in the three-month period ended March 31, 2010 and 2009 include a net loss of $49 million and a net gain of $1.8 billion, respectively, representing the effect of changes in credit spreads on the valuation of AIGFP's assets and liabilities, including a credit valuation adjustment loss of $113 million and a credit valuation adjustment gain of $106 million, respectively, reflected in Unrealized market valuation gains (losses) on AIGFP super senior credit default swap portfolio. Interest expense on intercompany borrowings and the effect on operating results related to the continued wind-down of AIGFP's portfolios were significantly lower during the three-month period ended March 31, 2010 compared to the same period in 2009.

•

ILFC reported a pre-tax loss of $81 million for the three-month period ended March 31, 2010 due to impairment charges taken primarily on aircraft under contract to be sold subsequent to March 31, 2010. ILFC signed an agreement to sell 53 aircraft. Due to current market conditions, ILFC recorded asset impairment losses aggregating $347 million and operating lease related charges aggregating $84 million related to those aircraft under contract to sell and two aircraft that are subject to a letter of intent between ILFC and a potential buyer. These charges more than offset the benefit from a larger fleet and lower administrative expenses.

•

Consumer Finance operations reported a decrease in pre-tax losses of $281 million primarily due to improvement in AGF results. AGF's pre-tax loss decreased primarily from a decline in provision for loan losses as a result of amounts provided for allowance for loan losses in first quarter 2009; foreign exchange gains on AGF's foreign currency denominated debt; lower interest expense due to lower average debt; and lower operating expenses due to management expense reductions across all AGF operations. These favorable variances were partially offset by a decline in AGF's finance charges reflecting the 2009 sales of real estate portfolios as part of AGF's liquidity management efforts.

Capital Markets Results

    AIGFP reported a lower pre-tax loss in 2010 compared to 2009 primarily due to lower interest expense on intercompany borrowings and the effect on operating results related to the continued wind-down of AIGFP's portfolios along with a market valuation gain in 2010 compared to a loss in 2009 on its super senior credit default swap portfolio. These positive results were partially offset by the significant decrease related to the net effect of

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changes in credit spreads on the valuation of AIGFP's assets and liabilities. For a further discussion, see Executive Overview — 2010 Business Outlook — Financial Services — Capital Markets.

    The principal components of AIGFP's valuation gains and losses recognized on its super senior credit default swap portfolio were as follows:

•

AIGFP recognized an unrealized market valuation loss of $7 million in the three-month period ended March 31, 2010, with respect to CDS transactions in the corporate arbitrage portfolio, compared to an unrealized market valuation gain of $358 million in the three-month period ended March 31, 2009 as a result of a reduced portfolio size and shorter maturities.

•

AIGFP recognized an unrealized market valuation gain of $158 million in the three-month period ended March 31, 2010, with respect to CDS transactions written on multi-sector CDOs, compared to unrealized market valuation losses of $809 million in the three-month period ended March 31, 2009.

•

AIGFP recognized an unrealized market valuation gain of $33 million in the three-month period ended March 31, 2010, with respect to CDS transactions written on regulatory capital prime residential mortgage transactions. During the fourth quarter of 2009, one counterparty notified AIG that it would not terminate early two of its prime residential mortgage transactions. With respect to these two transactions, the counterparty no longer has any rights to terminate the transaction early and is required to pay fees on the original notional amounts reduced only by realized losses through the final maturity. Because these two transactions have weighted average lives that are considerably less than their final legal maturities, there is value to AIGFP due to the counterparty paying its contractual fees beyond the date at which the net notional amounts have fully amortized through the final maturity date. The gain was more than offset by losses on the mezzanine tranches of those transactions.

    See Critical Accounting Estimates — Level 3 Assets and Liabilities — Valuation of Level 3 Assets and Liabilities for a discussion of AIGFP's super senior credit default swap portfolio.

    During the three-month period ended March 31, 2010, AIGFP:

•

recognized a gain of $17 million on credit default swap contracts referencing single-name exposures written on corporate, index and asset backed credits which are not included in the super senior credit default swap portfolio; and

•

incurred interest charges of $521 million compared to $933 million relating to intercompany borrowings with AIG that are eliminated in consolidation.

The following table presents AIGFP's credit valuation adjustment gains (losses) (excluding intercompany transactions):

(in millions)
Counterparty Credit Valuation Adjustment on Assets				AIG's Own Credit Valuation Adjustment on Liabilities
Three Months Ended March 31, 2010
Bond trading securities	$	823		Notes and bonds payable	$	(196	)
Loans and other assets		46		Hybrid financial instrument liabilities		(249	)
Derivative assets		(57	)	GIAs		(145	)
				Other liabilities		(37	)
				Derivative liabilities*		(234	)
Increase in assets	$	812		Increase in liabilities	$	(861	)
Net pre-tax decrease to Other income	$	(49	)
Three Months Ended March 31, 2009
Bond trading securities	$	(1,131	)	Notes and bonds payable	$	644
Loans and other assets		(48	)	Hybrid financial instrument liabilities		604
Derivative assets		441		GIAs		451
				Other liabilities		104
				Derivative liabilities*		722
Decrease in assets	$	(738	)	Decrease in liabilities	$	2,525
Net pre-tax increase to Other income	$	1,787

*

Includes super senior credit default swap portfolio.

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    AIGFP's pre-tax loss in the three-month period ended March 31, 2010 includes a net loss representing the effect of changes in credit spreads on the valuation of AIGFP's assets and liabilities, including $113 million of losses reflected in the unrealized market valuation gain on super senior credit default swaps. The loss was primarily the result of tightening of AIG's credit spreads during the first quarter, and was partially offset by the continued tightening of spreads on asset-backed securities and CDOs, which represent a significant segment of AIGFP's investment portfolio.

    AIGFP's operating loss in the three-month period ended March 31, 2009 includes a net gain representing the effect of changes in credit spreads on the valuation of AIGFP's assets and liabilities, including $106 million of gains reflected in the unrealized market valuation loss on super senior credit default swaps. The gain in the first quarter of 2009 was primarily the result of significant widening in AIG's credit spreads during the quarter, and was partially offset by continued widening of spreads on asset-backed securities and CDOs, which represent a significant component of AIGFP's investment portfolio.

Other Operations

    AIG's Other operations includes results from Parent & Other operations, after allocations to AIG's business segments, and results from noncore businesses.

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

    Noncore businesses include results of certain businesses that have been divested or are being wound down or repositioned.

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Other Results

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

Three Months Ended March 31, (in millions)			2010			2009			Percentage Increase/ (Decrease)
Parent & Other:
	Interest income		$	588		$	976			(40	)%
		Accrued and compounding interest		(194	)		(708	)		-
		Amortization of prepaid commitment asset		(639	)		(822	)		-
	Total interest expense on FRBNY Credit Facility(a)			(833	)		(1,530	)		-
	Other interest expense			(540	)		(546	)		-
	Unallocated corporate expenses			(83	)		(63	)		-
	Restructuring expenses			(97	)		(120	)		-
	Change in fair value of ML III(b)			-			(1,940	)		-
	Net realized capital gains			285			732			(61	)
	Net gain (loss) on sale of divested businesses			(77	)		262			-
	Other miscellaneous, net			112			172			(35	)
Total Parent & Other			$	(645	)	$	(2,057	)		-	%
Noncore businesses:
	Mortgage Guaranty		$	96		$	(480	)		-	%
	Change in fair value of ML III(b)			751			-			-
	Noncore Asset Management			(463	)		(1,012	)		-
	Other noncore insurance			(33	)		105			-
Total Noncore businesses			$	351		$	(1,387	)		-	%
Total Other operations			$	(294	)	$	(3,444	)		-	%

(a)

Includes interest expense of $183 million and $258 million for the first three months of 2010 and 2009, respectively, allocated to discontinued operations in consolidation.

(b)

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

Parent & Other

    Parent & Other pre-tax loss decreased primarily due to a decline in interest expense on the FRBNY Credit Facility and the reclassification of ML III to Noncore businesses in the second quarter of 2009. These decreases were partially offset by lower interest income on intercompany loans, which is eliminated in consolidation and a decline in net realized capital gains. See Consolidated Results — Interest Expense herein for further discussion of the decline in interest expense.

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

		Gain/(loss)
Three Months Ended March 31, (in millions)
		2010			2009
	HSB	$	-		$	251
	Consumer Finance businesses		(16	)		11
	AIG Credit businesses		(33	)		-
	AIG Capital India		(42	)		-
	AIG Life Canada		(8	)		-
	Other businesses		22			-
Total net gain (loss)		$	(77	)	$	262

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Noncore businesses

Mortgage Guaranty

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

    Mortgage Guaranty reported pre-tax income of $96 million compared to a pre-tax loss of $480 million in 2009. This improvement reflected a decline in claim and claims adjustment expenses incurred of $794 million, offset in part by an amortization of the second-lien premium deficiency reserve of $222 million in the first quarter of 2009. Domestic first-lien and second-lien businesses reported pre-tax income of $19 million and $67 million respectively, for the three months ended March 31, 2010 which was $423 million and $104 million, respectively, higher than the three months ended March 31, 2009. The improvement in pre-tax income reflects the decline in loss and loss expenses of $414 million for first liens and $343 million for second liens. The improved operating results correspond to lower levels of newly reported delinquencies in both the first- and second-lien products, higher mortgage cure rates on existing first-lien delinquent loans and the recognition of stop loss limits on certain second-lien policies.

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

    UGC has found increased occurrences of fraudulent claims, underwriting guideline violations and other deviations from contractual terms, mostly related to the 2006 and 2007 vintage books of business. These policy violations have resulted in increased loan rescissions and increased claims denials (collectively referred to as rescissions). UGC rescinded $58 million of claims on first lien business during the first quarter of 2010. UGC expects this increased rescission activity to continue during 2010 and to affect its financial results, but cannot reasonably estimate the ultimate financial impact from these rescissions. AIG believes it has provided appropriate reserves for currently delinquent loans, consistent with industry practice.

    In December 2009, UGC entered into two stock purchase agreements for the sale of its Canadian and Israel operations. The Israel transaction closed on January 21, 2010 and the Canadian transaction closed on April 16, 2010.

    UGC's domestic first-lien mortgage risk in force totaled $26.1 billion as of March 31, 2010 and the 60+ day delinquency ratio on primary loans was 18.7 percent (based on number of policies, consistent with mortgage industry practice) compared to domestic first-lien mortgage risk in force of $27.1 billion and a delinquency ratio of 12.4 percent at March 31, 2009.

    The second-lien risk in force at March 31, 2010 totaled $2.5 billion compared to $2.9 billion of risk in force at March 31, 2009. Risk in force represents the full amount of second-lien loans insured reduced for contractual aggregate loss limits on certain pools of loans, usually 10 percent of the full amount of loans insured in each pool. Certain second-lien pools have reinstatement provisions.

Change in Fair Value of ML III

    Gains in the three-month period ended March 31, 2010 resulted from improvements in valuation, primarily resulting from the shortening of weighted average life from 9.6 years to 9.0 years, and the narrowing of credit spreads by approximately 128 basis points. Positively affecting the fair value was a decrease in projected credit losses in the underlying collateral securities.

Noncore Asset Management Operations

    AIG's Noncore Asset Management operations include the results of the MIP program and Institutional Asset Management businesses.

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

MIP Results

    The MIP reported a lower pre-tax loss due to significantly lower other-than-temporary impairments on fixed maturity investments due primarily to the improved credit environment and the adoption of the new accounting standard on other-than-temporary impairments. The results were also affected by the discontinuation of hedge accounting in the first quarter of 2010 as a result of the novation of certain intercompany derivative transactions with AIGFP to another AIG subsidiary, AIG Markets, which is part of Institutional Asset Management. These novations were done in conjunction with the wind-down of AIGFP. The discontinuation of hedge accounting resulted in additional income statement volatility which will continue for the foreseeable future until hedge accounting is reestablished. Residual balances from de-designated hedges will be amortized prospectively into operating income.

    AIG enters into derivative arrangements to hedge the effect of changes in currency and interest rates associated with the fixed and floating rate and foreign currency denominated obligations issued under these programs. Further, the MIP invests in short single name credit default swaps in order to obtain unfunded credit exposure.

Institutional Asset Management Results

    Institutional Asset Management recognized higher pre-tax operating losses primarily resulting from higher real estate impairments and the negative impact of AIG's narrowing credit spreads on the valuation of derivative liabilities held through AIG Markets. These losses were partially offset by lower operating losses on investments originally acquired for warehouse purposes, as many of these investments have been divested, and lower unrealized carried interest losses.

    Real estate impairments of $309 million during 2010 were incurred in the direct investment portfolio as well as through real estate joint ventures as a result of continued pressure on real estate values, occupancy rates and leasing activity. Approximately $37 million of these impairments was included in noncontrolling interests, which is not part of pre-tax income (loss). The availability of refinancing and required capital has caused management to reduce the estimated time period before sale for certain investments, resulting in impairments. AIG Markets acts as a derivative intermediary transacting with AIG and its subsidiaries and the third parities.

Other Noncore Insurance Businesses

    Other noncore insurance businesses include the operating results of the following divested businesses through the date of their sale.

•

Transatlantic

    Transatlantic offers reinsurance capacity on both a treaty and facultative basis both in the U.S. and abroad. Transatlantic structures programs for a full range of property and casualty products with an emphasis on specialty risk.

    On June 10, 2009, AIG closed a secondary public offering of 29.9 million shares of Transatlantic common stock owned directly and indirectly by AIG for aggregate gross proceeds of $1.1 billion. At the close of the public offering, AIG indirectly retained 13.9 percent of the Transatlantic common stock issued and outstanding. As a result, AIG deconsolidated Transatlantic, which resulted in a $1.4 billion reduction in Noncontrolling interests, a component of Total equity. On March 15, 2010, AIG closed a secondary public

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offering of 8,466,693 shares of Transatlantic common stock owned by American Home Assurance Company, a subsidiary of AIG, for aggregate gross proceeds of approximately $452 million.

•

21st Century

    On July 1, 2009, AIG closed the sale of 21st Century Insurance Group and the Agency Auto Division (excluding AIG Private Client Group).

•

HSB

    On March 31, 2009, AIG closed the sale of HSB, the parent company of the Hartford Steam Boiler Inspection and Insurance Company.

Critical Accounting 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:

•

AIG's ability to continue as a going concern. See Note 1 to the Consolidated Financial Statements for additional discussion regarding going concern considerations;

•

liability for general insurance unpaid claims and claims adjustment expenses;

•

future policy benefits for life and accident and health contracts;

•

recoverability of DAC;

•

estimated gross profits for investment-oriented products;

•

the allowance for finance receivable losses;

•

flight equipment recoverability;

•

other-than-temporary impairments of investments;

•

goodwill impairment;

•

liability for legal contingencies;

•

estimates with respect to income taxes;

•

fair value measurements of certain financial assets and liabilities, including credit default swaps and AIG's interests in ML II and ML III (Maiden Lane Interests);

•

classification of entities as discontinued operations; and

•

measurement of the fair values of the assets and liabilities including noncontrolling interests related to acquisitions.

    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 financial condition and results of operations would be directly affected. Refer to the 2009 Annual Report on Form 10-K for more information on AIG's accounting estimates.

Allowance for Finance Receivable Losses

    AGF estimates its allowance for finance receivable losses primarily using migration analysis and the Monte Carlo technique applied to sub-portfolios of large numbers of relatively small homogenous accounts. Both techniques are historically-based statistical techniques that attempt to predict the future amount of losses for existing pools of finance receivables. AGF adjusts the amounts determined by migration and Monte Carlo for

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AGF management's estimate of the effects of model imprecision, any changes to its underwriting criteria, portfolio seasoning, and current economic conditions, including the levels of unemployment and personal bankruptcies.

    AGF uses its internal data of net charge-offs and delinquency by sub-portfolio as the basis to determine the historical loss experience component of its allowance for finance receivable losses. AGF used monthly bankruptcy statistics, monthly unemployment statistics, and various other monthly or periodic economic statistics published by departments of the U.S. government and other economic statistics providers to determine the economic component of its allowance for finance receivable losses.

    AGF also establishes troubled debt restructuring (TDR) reserves for impaired loans, which are included in its allowance for finance receivable losses. The allowance for finance receivable losses related to AGF's TDRs is calculated in homogeneous aggregated pools of impaired loans that have common risk characteristics. AGF establishes its allowance for finance receivable losses related to its TDRs by calculating the present value (discounted at the loan's effective interest rate prior to modification) of all expected cash flows less the recorded investment in the aggregated pool. AGF uses certain assumptions to estimate the expected cash flows from its TDRs. The primary assumptions for AGF's model are prepayment speeds, default rates, and severity rates.

Goodwill Impairment:

    Goodwill is the excess of the cost of an acquired business over the fair value of the identifiable net assets of the acquired business. Goodwill is tested for impairment annually or more frequently if circumstances indicate impairment may have occurred. As a result of entering into the ALICO Stock Purchase Agreement, AIG performed a goodwill impairment test at March 31, 2010 for ALICO and separately for the businesses to be retained that previously composed the Japan & Other reporting unit.

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

    Management initially assesses the potential for impairment by estimating the fair value of each of AIG's reporting units and comparing the estimated fair values with the carrying amounts of those reporting units, including allocated goodwill. The estimate of a reporting unit's fair value may be based on one or a combination of approaches including market-based earning multiples of the unit's peer companies, discounted expected future cash flows, external appraisals or, in the case of reporting units being considered for sale, third-party indications of fair value, if available. Management considers one or more of these estimates when determining the fair value of a reporting unit to be used in the impairment test. As part of the impairment test, management compares the sum of the estimated fair values of all of AIG's reporting units with AIG's market capitalization as a basis for concluding on the reasonableness of the estimated reporting unit fair values.

    If the estimated fair value of a reporting unit exceeds its carrying value, goodwill is not impaired. If the carrying value of a reporting unit exceeds its estimated fair value, goodwill associated with that reporting unit potentially is impaired. The amount of impairment, if any, is measured as the excess of the carrying value of goodwill over the estimated fair value of the goodwill. The estimated fair value of the goodwill is measured as the excess of the fair value of the reporting unit over the amounts that would be assigned to the reporting unit's assets and liabilities in a hypothetical business combination. An impairment charge is recognized in earnings to the extent of the excess.

    In connection with the announced sale of ALICO on March 7, 2010 and management's decision that ALICO met the held-for-sale criteria on March 31, 2010, total goodwill of $4.6 billion associated with the Foreign Life Insurance & Retirement Services — Japan & Other reporting unit was allocated among ALICO and the Japan & Other businesses to be retained based on their relative fair values as of March 31, 2010. This resulted in $3.3 billion and $1.3 billion of goodwill being allocated to ALICO and the retained businesses, respectively. Management tested goodwill for impairment in both groups and determined the fair values of ALICO and the retained businesses exceeded book value at March 31, 2010, by 1 percent and 51 percent, respectively, and, therefore, the goodwill of these reporting units was considered not impaired.

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    The fair value of ALICO used to test goodwill for impairment was determined by AIG by considering, among other information, a third-party valuation at March 31, 2010 of the announced proceeds from the sale of ALICO to MetLife. Given the significance of the equity component of the consideration, the fair value of ALICO is sensitive to the market value and volatility of MetLife common stock, the risk-free interest rate yield curve and discount rate assumptions used in estimating fair value. Given that the amount of estimated fair value of ALICO only exceeded the book value by 1 percent, a relatively modest change in any of these assumptions could have resulted in a potential impairment of the goodwill allocated to ALICO, ranging from zero to $3.3 billion. The evaluation of the potential impairment is an ongoing requirement. As such, an increase in the net assets of ALICO through future operating or comprehensive income generation could result in impairment when compared to the fair value of consideration at that future time.

    AIG will continue to monitor overall competitive, business and economic conditions, and other events or circumstances, including ALICO's operating results and level of net assets and the performance of MetLife's common stock, that might result in an impairment of goodwill in the future.

Valuation Allowance on Deferred Tax Assets:

    At March 31, 2010 and December 31, 2009, AIG recorded a net deferred tax asset after valuation allowance of $8.2 billion and $5.9 billion, respectively. A valuation allowance is established, if necessary, to reduce the deferred tax asset to an amount that is more likely than not to be realized (a likelihood of more than 50 percent). Realization of AIG's net deferred tax asset depends upon its ability to generate sufficient earnings from transactions expected to be completed in the near future and tax planning strategies that would be implemented, if necessary, to protect against the loss of the deferred tax asset, but does not depend on projected future operating income.

    When making its assessment about the realization of its deferred tax asset at March 31, 2010, AIG considered all available evidence, including:

•

the nature, frequency, and severity of current and cumulative financial reporting losses;

•

transactions completed, including the sale of the Otemachi building in Tokyo, and the sales of AIA and ALICO expected to be completed in 2010;

•

the carryforward periods for the net operating and capital loss and foreign tax credit carryforwards; and

•

tax planning strategies that would be implemented, if necessary, to protect against the loss of the deferred tax asset.

    Estimates of future taxable income generated from specific transactions and tax planning strategies discussed above could change in the near term, perhaps materially, which may require AIG to adjust its valuation allowance. Such adjustment, either positive or negative, could be material to AIG's consolidated financial condition or its results of operations for an individual reporting period.

U.S. Income Taxes on Earnings of Certain Foreign Subsidiaries:

    Due to the complexity of the U.S. federal income tax laws involved in determining the amount of income taxes incurred on potential dispositions, as well as AIG's reliance on reasonable assumptions and estimates in calculating this liability, AIG considers the U.S. federal income taxes accrued on the earnings of certain foreign subsidiaries to be a critical accounting estimate.

Measurement of the Fair Values of the Assets Acquired, Liabilities Assumed, and Noncontrolling Interests of Fuji

    On March 31, 2010, AIG, through a Chartis International subsidiary, purchased additional voting shares in Fuji. 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 obtaining control of Fuji.

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    Chartis' acquisition was accounted for under the acquisition method of accounting. The identifiable assets acquired, liabilities assumed and noncontrolling interest in Fuji were recorded at their respective acquisition date estimated fair values. The fair values were determined based on information available to Chartis. Chartis is in the process of obtaining appraisals to support the estimated fair values of the assets acquired and liabilities assumed. Therefore, the fair values are provisional and subject to refinement for up to one year after the closing date as information relative to closing date fair values become available. The assumptions used in determining the provisional fair values are subject to a significant amount of sensitivity, which may result in significant differences between the estimated fair values recorded as of March 31, 2010 and the appraisals. Upon completion of the appraisals, AIG will adjust the allocated acquisition price for any significant differences to the provisional amounts. An adjustment of the allocated acquisition price may also occur if new information on Fuji becomes known or discovered during the allocation period, the period of time required to identify and measure the fair values of the assets and liabilities acquired in the business combination.

    Based on the fair values assigned to the assets acquired, liabilities assumed and noncontrolling interests, Chartis recorded an unallocated purchase price of $581 million in Other liabilities in the Consolidated Balance Sheet. Chartis is in the process of reassessing the recognition and measurement of identifiable assets acquired and liabilities assumed. Upon completion of the reassessment process, Chartis will adjust the fair value of the assets acquired and liabilities assumed for any significant differences to the provisional fair values. Upon final determination of fair values, AIG may recognize a bargain purchase gain, which could be substantial. It is anticipated that any gain recognized will not be subject to U.S. or foreign income tax, since such gain would only be recognized for tax purposes upon sale of the Fuji shares.

    For a discussion regarding the Liability for general insurance unpaid claims and claims adjustment expense and flight equipment recoverability, see General Insurance Operations — Liability for Unpaid Claims and Claims Adjustment Expense, and Financial Services Operations — Financial Services Results, respectively.

Fair Value Measurements of Certain Financial Assets and Liabilities:

Overview

The following table presents the fair value of fixed income and equity securities by source of value determination:

At March 31, 2010 (in billions)	Fair Value		Percent of Total
Fair value based on external sources(a)	$	265		91	%
Fair value based on internal sources		26		9
Total fixed income and equity securities(b)	$	291		100	%

(a)

Includes $19 billion for which the primary source is broker quotes.

(b)

Includes available for sale, trading and securities lending invested collateral securities.

    See Note 5 to the Consolidated Financial Statements for more detailed information about AIG's accounting policy for the incorporation of credit risk in fair value measurements and the measurement of fair value of financial assets and financial liabilities.

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Level 3 Assets and Liabilities

    Assets and liabilities recorded at fair value in the Consolidated Balance Sheet are 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 value. See Note 5 to the Consolidated Financial Statements for additional information about the three levels of observability.

    At March 31, 2010, AIG classified $35.9 billion and $9.1 billion of assets and liabilities, respectively, measured at fair value on a recurring basis as Level 3. This represented 4.2 percent and 1.2 percent of the total assets and liabilities, respectively, at March 31, 2010. At December 31, 2009, AIG classified $38.9 billion and $13.9 billion of assets and liabilities, respectively, measured at fair value on a recurring basis as Level 3. This represented 4.6 percent and 1.9 percent of the total assets and liabilities, respectively, at December 31, 2009. Level 3 fair value measurements are based on valuation techniques that use at least one significant input that is unobservable. These measurements are made under circumstances in which there is little, if any, market activity for the asset or liability. AIG's assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment.

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

Level 3 Transfers

    During the three-month period ended March 31, 2010, AIG transferred into Level 3 approximately $1.2 billion of assets, primarily representing investments in certain ABS, RMBS and CMBS, which coincided with a decrease in market transparency and downward credit migration of these securities, and investments in private placement corporate debt securities, for which pricing adjustments were made to reflect an additional risk premium not captured in the matrix pricing. In addition certain municipal bonds related to SunAmerica Affordable Housing partnerships were transferred into Level 3 based on limitations on market activity and related input for their valuation. During the three-month period ended March 31, 2010, AIG transferred approximately $1.1 billion of assets out of Level 3. These transfers out of Level 3 primarily related to investments in certain ABS and RMBS and investments in private placement corporate debt. See Note 5 to the Consolidated Financial Statements for additional information about transfers into and out of Level 3.

Valuation of Level 3 Assets and Liabilities

    AIG values its assets and liabilities classified as Level 3 using judgment and valuation models or other pricing techniques that 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, some of which may be unobservable. The following paragraphs describe the methods AIG uses to measure on a recurring basis the fair value of the major classes of assets and liabilities classified in Level 3.

    Private equity and real estate fund investments:    These assets initially are valued at the transaction price, i.e., the price paid to acquire the asset. Subsequently, they are measured based on net asset value using information provided by the general partner or manager of these investments, the accounts of which generally are audited on an annual basis. AIG considers observable market data and performs diligence procedures in validating the appropriateness of using the net asset value as a fair value measurement.

    Corporate bonds and private placement debt:    These assets initially are valued at the transaction price. Subsequently, they are valued using market data for similar instruments (e.g., recent transactions, bond spreads or credit default swap spreads). When observable price quotations are not available, fair value is determined based on cash flow models using yield curves observed from indices or credit default swap spreads.

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    Certain RMBS and CMBS:    These assets initially are valued at the transaction price. Subsequently, they may be valued by comparison to transactions in instruments with similar collateral and risk profiles considering remittances received and updated cumulative loss data on underlying obligations, or discounted cash flow techniques.

    Certain ABS — non-mortgage:    These assets initially are valued at the transaction price. Subsequently, they may be valued based on external price/spread data. When position-specific external price data are not observable, the valuation is based on prices of comparable securities.

    CDOs:    These assets initially are valued at the transaction price. Subsequently, they are valued based on external price/spread data from independent third parties, dealer quotations, matrix pricing, the Binomial Expansion Technique (BET) model or a combination of these methods.

    Interests in the Maiden Lane Interests:    At their inception, ML II and ML III were valued at the transaction prices of $1 billion and $5 billion, respectively. Subsequently, Maiden Lane Interests are valued using a discounted cash flow methodology that uses the estimated future cash flows of the assets to which the Maiden Lane Interests are entitled and the discount rates applicable to such interests as derived from the fair value of the entire asset pool. The implicit 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 of 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.

    Refer to Note 5 for sensitivity analysis disclosures with respect to the Maiden Lane Interests.

    AIGFP's Super Senior Credit Default Swap Portfolio:    AIGFP wrote credit protection on the super senior risk layer of collateralized loan obligations (CLOs), multi-sector CDOs and diversified portfolios of corporate debt, and prime residential mortgages. In these transactions, AIGFP is at risk of credit performance on the super senior risk layer related to such assets. To a lesser extent, AIGFP also wrote protection on tranches below the super senior risk layer, primarily in respect of regulatory capital relief transactions.

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

						Fair Value of Derivative (Asset) Liability at
		Net Notional Amount										Unrealized Market Valuation Gain (Loss) Three Months Ended March 31,
		March 31, 2010(a)		December 31, 2009(a)		March 31, 2010(b)(c)			December 31, 2009(b)(c)
(in millions)												2010(c)			2009(c)
Regulatory Capital:
	Corporate loans	$	41,993	$	55,010	$	-		$	-		$	-		$	-
	Prime residential mortgages		65,844		93,276		(170	)		(137	)		33			-
	Other		1,552		1,760		15			21			6			(14	)
	Total		109,389		150,046		(155	)		(116	)		39			(14	)
Arbitrage:
	Multi-sector CDOs(d)(e)		7,574		7,926		4,250			4,418			158			(809	)
	Corporate debt/CLOs(d)(f)		16,367		22,076		308			309			(7	)		358
	Total		23,941		30,002		4,558			4,727			151			(451	)
Mezzanine tranches(g)			3,104		3,478		214			143			(71	)		13
Total		$	136,434	$	183,526	$	4,617		$	4,754		$	119		$	(452	)

(a)

Net notional amounts presented are net of all structural subordination below the covered tranches.

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(b)

Fair value amounts are shown before the effects of counterparty netting adjustments and offsetting cash collateral.

(c)

Includes credit valuation adjustment losses of $113 million and credit valuation adjustment gains of $106 million in the three-month periods ended March 31, 2010 and 2009, respectively, representing the effect of changes in AIG's credit spreads on the valuation of the derivatives liabilities.

(d)

During the three-month period ended March 31, 2010, AIGFP terminated super senior CDS transactions with its counterparties with a net notional amount of $5.4 billion, included in Corporate debt/CLOs. These transactions were terminated at approximately their fair value at the time of the termination. As a result, an $8 million loss, which was previously included in the fair value derivative liability as an unrealized market valuation loss, was realized. During the three-month period ended March 31, 2010, AIGFP also made a payment of $10 million to its counterparty with respect to a Multi-sector CDO. Upon payment, a $10 million loss, which was previously included in the fair value derivative liability as an unrealized market valuation loss, was realized.

(e)

Includes $6.1 billion and $6.3 billion in net notional amount of credit default swaps written with cash settlement provisions at March 31, 2010 and December 31, 2009, respectively.

(f)

Includes $1.4 billion in net notional amount of credit default swaps written on the super senior tranches of CLOs at both March 31, 2010 and December 31, 2009.

(g)

Net of offsetting purchased CDS of $1.4 billion and $1.5 billion in net notional amount at March 31, 2010 and December 31, 2009, respectively.

The following table presents changes in the net notional amount of the AIGFP super senior credit default swap portfolio, including credit default swaps written on mezzanine tranches of certain regulatory capital relief transactions:

For the Three Months Ended March 31, 2010 (in millions)		Net Notional Amount December 31, 2009(a)		Terminations			Maturities		Effect of Foreign Exchange Rates(b)			Amortization/ Reclassification, net of Replenishments			Net Notional Amount March 31, 2010(a)
Regulatory Capital:
	Corporate loans	$	55,010	$	(3,058	)	$	-	$	(2,857	)	$	(7,102	)	$	41,993
	Prime residential mortgages		93,276		(22,577	)		-		(3,725	)		(1,130	)		65,844
	Other		1,760		-			-		(105	)		(103	)		1,552
	Total		150,046		(25,635	)		-		(6,687	)		(8,335	)		109,389
Arbitrage:
	Multi-sector CDOs(c)		7,926		-			-		(176	)		(176	)		7,574
	Corporate debt/CLOs(d)		22,076		(5,379	)		-		(404	)		74			16,367
	Total		30,002		(5,379	)		-		(580	)		(102	)		23,941
Mezzanine tranches(e)			3,478		(226	)		-		(141	)		(7	)		3,104
Total		$	183,526	$	(31,240	)	$	-	$	(7,408	)	$	(8,444	)	$	136,434

(a)

Net notional amounts presented are net of all structural subordination below the covered tranches.

(b)

Relates to the strengthening of the U.S. dollar, primarily against the Euro and the British Pound.

(c)

Includes $6.1 billion and $6.3 billion in net notional amount of credit default swaps written with cash settlement provisions at March 31, 2010 and December 31, 2009, respectively.

(d)

Includes $1.4 billion in net notional amount of credit default swaps written on the super senior tranches of CLOs at both March 31, 2010 and December 31, 2009.

(e)

Net of offsetting purchased CDS of $1.4 billion and $1.5 billion in net notional amount at March 31, 2010 and December 31, 2009, respectively.

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The following table presents summary statistics for AIGFP's super senior credit default swaps at March 31, 2010 and totals for December 31, 2009:

	Regulatory Capital Portfolio												Arbitrage Portfolio												Total
Category	Corporate Loans			Prime Residential Mortgages			Other			Subtotal			Corporate Debt/ CLOs			Multi-Sector CDOs w/ Subprime			Multi-Sector CDOs w/ No Subprime			Subtotal			March 31, 2010			December 31, 2009
Gross Transaction Notional Amount (in millions)	$	59,264		$	73,736		$	1,809		$	134,809		$	23,461		$	7,034		$	9,732		$	40,227		$	175,036		$	246,215
Net Notional Amount (in millions)	$	41,993		$	65,844		$	1,552		$	109,389		$	16,367		$	3,752		$	3,822		$	23,941		$	133,330		$	180,048
Number of Transactions		15			15			1			31			17			10			6			33			64			71
Weighted Average Subordination (%)		27.19	%		10.74	%		14.17	%		18.02	%		23.55	%		35.22	%		22.57	%		25.35	%		19.70	%		18.67%
Weighted Average Number of loans/ Transaction		1,056			91,777			2,065			50,691			122			146			96
Weighted Average Expected Maturity (Years)		1.05			2.48			5.54			1.89			5.01			5.80			6.22

Regulatory Capital Portfolio

    During the three-month period ended March 31, 2010, $25.6 billion in net notional amount was terminated or matured at no cost to AIGFP. Through April 30, 2010, AIGFP had also received a formal termination notice with respect to an additional $11.6 billion in net notional amount with an effective termination date in 2010. AIGFP continues to reassess the expected maturity of this portfolio. As of March 31, 2010, AIGFP estimated that the weighted average expected maturity of the portfolio was 1.89 years. AIGFP has not been required to make any payments as part of terminations initiated by counterparties. The regulatory benefit of these transactions for AIGFP's financial institution counterparties is generally derived from the terms of Basel I that existed through the end of 2007 and which is in the process of being replaced by Basel II. It was expected that financial institution counterparties would have transitioned from Basel I to Basel II by the end of the two-year adoption period on 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, in 2009, 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.

    The weighted average expected maturity of the Regulatory Capital Portfolio increased as of March 31, 2010 by 0.5 years from December 31, 2009 due to certain counterparties not terminating transactions with a combined net notional amount of $33.1 billion. Where these counterparties continue to have a right to terminate the transaction early, AIGFP has extended the expected maturity dates by one year, which is based on how long AIGFP believes the Basel I extension will be effective. Where the counterparties no longer have the right to terminate early, AIGFP has used the weighted average life of those transactions as their expected maturity. These counterparties in the Corporate Loan and Prime Residential Mortgage portfolios continue to receive favorable regulatory capital benefits as a result of the extension of the Basel I capital floor announced by the Basel Committee on Banking Supervision and, thus, AIG continues to categorize them as Regulatory Capital transactions.

    In addition, as of March 31, 2010, AIG had expected $304 million of Regulatory Capital CDS transactions to terminate early between April 1, 2010 and April 30, 2010. Of that amount, none had been called. The counterparties to these transactions continue to receive favorable regulatory benefits as a result of the extension of the Basel I capital floor. Since all of these counterparties retain the right to terminate the transactions early, the expected maturity for these transactions has been extended by one year.

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    Included in the Regulatory Capital portfolio are transactions with one counterparty that notified AIG that it would not terminate early two of its Prime Residential Mortgage transactions with a combined net notional amount of $29.7 billion that were expected to be terminated in the first quarter of 2010. With respect to these transactions, the counterparty no longer has any rights to terminate the transactions early and is required to pay AIG fees on the original notional amounts reduced only by realized losses through the final contractual maturity. Since the two transactions have weighted average lives that are considerably less than their final contractual maturities, there is value to AIGFP representing counterparty contractual fees to be received beyond the date at which the net notional amounts have fully amortized through to the final contractual maturity date. The fair value of these two super senior transactions as of March 31, 2010 was a derivative asset of $170 million. With respect to these two transactions, AIGFP has also written CDS transactions on the mezzanine tranches of these portfolios; however, the majority of the transactions on the mezzanine tranches were hedged by AIGFP with other third party CDS transactions. The fair value of the net derivative liability for all mezzanine tranches (including hedge transactions) increased from $143 million as of December 31, 2009 to $214 million as of March 31, 2010. For more information on AIGFP collateral calls, see Collateral Calls below.

    In light of early termination experience to date and after analyses of other market data, to the extent deemed relevant and available, AIG determined that there was no unrealized market valuation adjustment for any of the transactions in this regulatory capital relief portfolio for the three-month period ended March 31, 2010 other than (1) for transactions where AIGFP believes the counterparty is no longer using the transaction to obtain regulatory capital relief as discussed above and (2) for transactions where the counterparty has failed to terminate the transaction early as expected and no longer has any rights to terminate early in the future. Although AIGFP believes the value of contractual fees receivable on these transactions through maturity exceeds the economic benefits of any potential payments to the counterparties, the counterparties' early termination rights, and AIGFP's expectation that such rights will be exercised, preclude the recognition of a derivative asset for these transactions.

The following table presents, for each of the regulatory capital CDS transactions in the corporate loan portfolio, the gross transaction notional amount, net notional amount, attachment points, inception to date realized losses and percent non-investment grade:

(dollars in millions) CDS	Gross Transaction Notional Amount at March 31, 2010		Net Notional Amount at March 31, 2010		Attachment Point at Inception(a)		Attachment Point at March 31, 2010(a)		Realized Losses through March 31, 2010(b)		Percent Non-investment Grade at March 31, 2010(c)
1	$	588	$	492		10.03%		16.38%		0.52%		25.57%
2(d)		8,609		2,662		44.00%		69.08%		0.00%		9.29%
3		1,839		1,599		10.00%		13.02%		0.16%		25.86%
4		8,001		7,094		11.00%		11.33%		0.00%		10.84%
5		369		126		18.00%		65.90%		0.00%		67.80%
6		10,241		9,073		10.80%		11.41%		0.00%		6.78%
7(e)		5,619		4,223		11.30%		24.84%		0.19%		32.30%
8		5,052		4,462		11.00%		11.68%		0.09%		12.71%
9		3,757		3,210		13.26%		14.54%		0.00%		70.12%
10(f)		2,907		617		12.00%		39.06%		0.00%		8.21%
11		2,369		1,973		15.85%		16.73%		0.00%		11.57%
12		1,122		657		14.00%		32.54%		0.16%		36.34%
13		710		386		14.00%		32.54%		0.16%		36.34%
14		1,735		1,363		14.00%		32.54%		0.16%		36.34%
15(g)		6,346		4,056		17.00%		36.10%		0.05%		17.48%
Total	$	59,264	$	41,993

(a)

Expressed as a percentage of gross transaction notional amount of the referenced obligations. As a result of participation ratios and replenishment rights, the attachment point may not always be computed by dividing net notional amount by gross transaction notional amount.

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(b)

Represents realized losses incurred by the transaction (defaulted amounts less amounts recovered) from inception through March 31, 2010 expressed as a percentage of the initial gross transaction notional amount.

(c)

Represents non-investment grade obligations in the underlying pools of corporate loans expressed as a percentage of gross transaction notional amount.

(d)

Terminated effective June 15, 2010.

(e)

Terminated effective April 1, 2010.

(f)

Terminated effective June 21, 2010.

(g)

Terminated effective May 19, 2010.

The following table presents, for each of the regulatory capital CDS transactions — prime residential mortgage portfolio, the gross transaction notional amount, net notional amount, attachment points, and inception to date realized losses:

(dollars in millions) CDS	Gross Transaction Notional Amount at March 31, 2010		Net Notional Amount at March 31, 2010		Attachment Point at Inception(a)		Attachment Point at March 31, 2010(a)		Realized Losses through March 31, 2010(b)
1	$	466	$	255		17.01%		44.27%		2.49%
2		295		154		18.48%		47.54%		1.86%
3		271		177		16.81%		34.51%		1.42%
4		1,232		1,097		10.00%		10.97%		0.00%
5		391		304		13.19%		22.15%		0.40%
6(c)		5,242		4,770		7.95%		9.19%		0.03%
7(c)		1,749		1,391		7.95%		20.33%		0.05%
8(c)		4,994		4,571		8.00%		8.62%		0.04%
9(c)		6,184		5,707		7.85%		7.86%		0.01%
10		10,889		10,077		7.50%		7.46%		0.04%
11(c)		8,198		7,555		7.95%		7.95%		0.01%
12		2,301		1,814		12.40%		21.15%		0.00%
13		21,704		19,603		9.20%		9.68%		0.06%
14		8,454		7,452		11.50%		11.86%		0.00%
15		1,366		917		14.57%		32.86%		0.00%
Total	$	73,736	$	65,844

(a)

Expressed as a percentage of gross transaction notional amount of the referenced obligations. As a result of participation ratios and replenishment rights, the attachment point may not always be computed by dividing net notional amount by gross transaction notional amount.

(b)

Represents realized losses incurred by the transaction (defaulted amounts less amounts recovered) from inception through March 31, 2010 expressed as a percentage of the initial gross transaction notional amount.

(c)

Delinquency information is not provided to AIGFP for the underlying pools of residential mortgages of these transactions. However, information with respect to principal amount outstanding, defaults, recoveries, remaining term, property use, geography, interest rates, and ratings of the underlying junior tranches are provided to AIGFP for such referenced pools.

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

    As further discussed below, AIGFP receives information monthly or quarterly regarding the performance and credit quality of the underlying referenced assets. AIGFP also obtains other information, such as ratings of the tranches below the super senior risk layer. The nature of the information provided or otherwise available to AIGFP with respect to the underlying assets in each regulatory capital CDS transaction is not consistent across all transactions. Furthermore, in a majority of corporate loan transactions and all of the residential mortgage transactions, the pools are blind, meaning that the identities of the obligors are not disclosed to AIGFP. In

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addition, although AIGFP receives periodic reports on the underlying asset pools, virtually all of the regulatory capital CDS transactions contain confidentiality restrictions that preclude AIGFP's public disclosure of information relating to the underlying referenced assets. The originating financial institutions, calculation agents or trustees (each a Report Provider) provide periodic reports on all underlying referenced assets as described below, including for those within the blind pools. While much of this information received by AIGFP cannot be aggregated in a comparable way for disclosure purposes because of the confidentiality restrictions and the inconsistency of the information, it does provide a sufficient basis for AIGFP to evaluate the risks of the portfolio and to determine a reasonable estimate of fair value.

    For regulatory capital CDS transactions written on underlying pools of corporate loans, AIGFP receives monthly or quarterly updates from one or more Report Providers for each such referenced pool detailing, with respect to the corporate loans comprising such pool, the principal amount outstanding and defaults. In virtually all of these reports, AIGFP also receives information on recoveries and realized losses. AIGFP also receives quarterly stratification tables for each pool incorporating geography, industry and, when not publicly rated, the counterparty's assessment of the credit quality of the underlying corporate loans. Additionally, for a significant majority of these regulatory capital CDS transactions, upon the occurrence of a credit event with respect to any corporate loan included in any such pool, AIG receives a notice detailing the identity or identification number of the borrower, notional amount of such loan and the effective date of such credit event.

    Ratings from independent ratings agencies for the underlying assets of the corporate loan portfolio are not universally available, but AIGFP estimates the ratings for the assets not rated by independent agencies by mapping the information obtained from the Report Providers to rating agency criteria. The "Percent Non-Investment Grade" information in the table above is provided as an indication of the nature of loans underlying the transactions, not necessarily as an indicator of relative risk of the CDS transactions, which is determined by the individual transaction structures. For example, Small and Medium Enterprise (SME) loan balances tend to be rated lower than loans to large, well-established enterprises. However, the greater number of loans and the smaller average size of the SME loans mitigate the risk profile of the pools. In addition, the transaction structures reflect AIGFP's assessment of the loan collateral arrangements, expected recovery values, and reserve accounts in determining the level of subordination required to minimize the risk of loss. The percentage of non-investment grade obligations in the underlying pools of corporate loans varies considerably. The two pools containing the highest percentages of non-investment grade obligations, which include all transactions with pools having non-investment grade percentages greater than 40.00 percent, are all granular SME loan pools which benefit from collateral arrangements made by the originating financial institutions and from work out of recoveries by the originating financial institutions. The average number of loans in each pool is over 4,800. This large number of SME loans increases the predictability of the expected loss and lessens the probability that discrete events will have a meaningful impact on the results of the overall pool. These transactions benefit from a tranche junior to it which was still rated AAA by at least two rating agencies at March 31, 2010. Three other pools, with a total net notional amount of $2.4 billion, have non-investment grade percentages greater than 35.00 percent, each with a remaining life to maturity of 16.0 years. These pools have realized losses of 0.16 percent from inception through March 31, 2010 and have current weighted average attachment points of 32.54 percent. Approximately 0.47 percent of the assets underlying the corporate loan transactions are in default. The percentage of assets in default by transaction was available for all transactions and ranged from 0.00 percent to 2.86 percent.

    For regulatory capital CDS transactions written on underlying pools of residential mortgages, AIGFP receives quarterly reports for each such referenced pool detailing, with respect to the residential mortgages comprising such pool, the aggregate principal amount outstanding, defaults and realized losses. These reports include additional information on delinquencies for the large majority of the transactions and recoveries for substantially all transactions. AIGFP also receives quarterly stratification tables for each pool incorporating geography for the underlying residential mortgages. The stratification tables also include information on remaining term, property use and interest rates for a large majority of the transactions.

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    Delinquency information for the mortgages underlying the residential mortgage transactions was available on approximately 64.24 percent of the total gross transaction notional amount and mortgages delinquent more than 30 days ranged from 0.08 percent to 3.49 percent, averaging 0.86 percent. For all but three transactions, which comprised less than 1.50 percent of the total gross transaction notional amount, the average default rate (expressed as a percentage of gross transaction notional amount) was 0.22 percent and ranged from 0.00 percent to 2.42 percent. The default rate on the remaining three transactions ranged from 4.53 percent to 16.71 percent. The subordination on these three transactions ranged from 34.51 percent to 47.54 percent.

    For all regulatory capital transactions, where the rating agencies directly rate the junior tranches of the pools, AIG monitors the rating agencies' releases for any affirmations or changes in such ratings, as well as any changes in rating methodologies or assumptions used by the rating agencies to the extent available. The tables below show the percentage of regulatory capital CDS transactions where there is an immediately junior tranche that is rated and the average rating of that tranche across all rated transactions.

    AIGFP analyzes the information regarding the performance and credit quality of the underlying pools of assets to make its own risk assessment and to determine any changes in credit quality with respect to such pools of assets. This analysis includes a review of changes in pool balances, subordination levels, delinquencies, realized losses, and expected performance under more adverse credit conditions. Using data provided by the Report Providers, and information available from rating agencies, governments, and other public sources that relate to macroeconomic trends and loan performance, AIGFP is able to analyze the expected performance of the overall portfolio because of the large number of loans that comprise the collateral pools.

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

The following table presents AIGFP's Regulatory Capital — Corporate loans portfolio by geographic location:

													Weighted Average Maturity (Years)			Ratings of Junior Tranches(d)
At March 31, 2010 Exposure Portfolio		Net Notional Amount (in millions)					Current Average Attachment Point(a)			Realized Losses through March 31, 2010(b)
				Percent of Total									To First Call(c)	To Maturity	Number of Transactions	Percent Rated			Average Rating
Primarily Single Country:
	Germany	$	5,301		12.62	%		14.27	%		0.09	%	2.50	8.90	3		100	%	A+
	Finland		126		0.30	%		65.90	%		-		0.79	4.79	1		100		AAA
Subtotal Single Country			5,427		12.92	%		17.17	%		0.08		2.40	8.66	4		100		A+
Regional:
	Asia		1,973		4.70	%		16.73	%		-		0.76	2.00	1		100		AAA
	Europe		34,593		82.38	%		28.99	%		0.06	%	0.88	4.36	10		100		AA+
Subtotal Regional			36,566		87.08	%		28.44	%		0.06		0.88	4.26	11		100		AA+
Total		$	41,993		100.00	%		27.19	%		0.06		1.05	4.74	15		100		AA

(a)

Expressed as a percentage of gross transaction notional amount of the referenced obligations.

(b)

Represents realized losses incurred by the transaction (defaulted amounts less amounts recovered) from inception through March 31, 2010 expressed as a percentage of the initial gross transaction notional amount.

(c)

Where no call right remains, the weighted average expected maturity is used.

(d)

Represents the weighted average ratings, when available, of the tranches immediately junior to AIGFP's super senior tranche. The percentage rated represents the percentage of net notional amount where there exists a rated tranche immediately junior to AIGFP's super senior tranche.

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The following table presents AIGFP's Regulatory Capital — Prime residential mortgage portfolio summarized by geographic location:

													Weighted Average Maturity (Years)			Ratings of Junior Tranches(d)
At March 31, 2010		Net Notional Amount (in millions)		Percent of Total			Current Average Attachment Point(a)			Realized Losses through March 31, 2010(b)
													To First Call(c)	To Maturity	Number of Transactions	Percent Rated			Average Rating
Country:
	Denmark	$	29,680		45.08	%		8.94	%		0.05	%	4.36	29.48	2		100.00	%	AAA
	France		23,994		36.44			9.12	%		0.03	%	0.96	29.95	5		100.00		AAA
	Germany		3,621		5.50			28.73	%		0.59	%	1.53	43.41	6		75.00		AAA
	Netherlands		1,097		1.66			10.97	%		0.00	%	0.75	70.75	1		-		Not rated
	Sweden		7,452		11.32			11.86	%		0.00	%	0.85	29.85	1		100.00		AAA
Total		$	65,844		100.00	%		10.74	%		0.10	%	2.48	31.34	15		97.00	%	AAA

(a)

Expressed as a percentage of gross transaction notional amount of the referenced obligations.

(b)

Represents realized losses incurred by the transaction (defaulted amounts less amounts recovered) from inception through March 31, 2010 expressed as a percentage of the initial gross transaction notional amount.

(c)

Where no call right remains, the weighted average expected maturity is used.

(d)

Represents the weighted average ratings, when available, of the tranches immediately junior to AIGFP's super senior tranche. The percentage rated represents the percentage of net notional amount where there exists a rated tranche immediately junior to AIGFP's super senior tranche.

Arbitrage Portfolio

    A portion of AIGFP's super senior credit default swaps as of March 31, 2010 are arbitrage-motivated transactions written on multi-sector CDOs or designated pools of investment grade senior unsecured corporate debt or CLOs.

Multi-Sector CDOs

The following table summarizes gross transaction notional amount of the multi-sector CDOs on which AIGFP wrote protection on the super senior tranche, subordination below the super senior risk layer, net notional amount and fair value of derivative liability by underlying collateral type:

At March 31, 2010 (in millions)		Gross Transaction Notional Amount(a)		Subordination Below the Super Senior Risk Layer		Net Notional Amount		Fair Value of Derivative Liability
High grade with sub-prime collateral		$	3,459	$	1,847	$	1,612	$	681
High grade with no sub-prime collateral			8,057		5,032		3,025		1,263
	Total high grade(b)		11,516		6,879		4,637		1,944
Mezzanine with sub-prime collateral			3,575		1,435		2,140		1,693
Mezzanine with no sub-prime collateral			1,675		878		797		613
	Total mezzanine(c)		5,250		2,313		2,937		2,306
Total		$	16,766	$	9,192	$	7,574	$	4,250

(a)

Total outstanding principal amount of securities held by a CDO.

(b)

"High grade" refers to transactions in which the underlying collateral credit ratings on a stand-alone basis were predominantly AA or higher at origination.

(c)

"Mezzanine" refers to transactions in which the underlying collateral credit ratings on a stand-alone basis were predominantly A or lower at origination.

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The following table summarizes net notional amounts of the remaining multi-sector CDOs on which AIGFP wrote protection on the super senior tranche, by settlement alternative:

(in millions)		March 31, 2010		December 31, 2009
CDS transactions with cash settlement provisions
	U.S. dollar-denominated	$	4,545	$	4,580
	Euro-denominated		1,574		1,720
	Total CDS transactions with cash settlement provisions		6,119		6,300
CDS transactions with physical settlement provisions
	U.S. dollar-denominated		201		265
	Euro-denominated		1,254		1,361
	Total CDS transactions with physical settlement provisions		1,455		1,626
Total		$	7,574	$	7,926

The following table summarizes changes in the fair values of the derivative liability of the AIGFP super senior multi-sector CDO credit default swap portfolio:

(in millions)		Three Months Ended March 31, 2010			Year Ended December 31, 2009
Fair value of derivative liability, beginning of year		$	4,418		$	5,906
	Unrealized market valuation (gain) loss		(158	)		669
	Purchases of underlying CDO securities*		-			(234	)
	Other terminations and realized losses		(10	)		(1,923	)
Fair value of derivative liability, end of period		$	4,250		$	4,418

*

In connection with the exercise of the 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) by counterparties, AIGFP acquired the underlying CDO securities. In certain cases, simultaneously with the exercise of the 2a-7 Puts by AIGFP's counterparties, AIGFP accessed financing arrangements previously entered into with such counterparties, pursuant to which the counterparties remained the legal owners of the underlying CDO securities. However, these securities were reported as part of AIGFP's investment portfolio as required by generally accepted accounting principles. Most of these underlying CDO securities were later acquired by ML III from AIGFP's counterparties. In a separate case, AIGFP extinguished its obligations with respect to one CDS by purchasing the protected CDO security.

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The following table presents, for each multi-sector CDO that is a reference obligation in a CDS written by AIGFP, the gross and net notional amounts, attachment points and percentage of gross notional amount rated less than B-/B-3:

(dollars in millions) CDO	Gross Notional Amount at March 31, 2010		Net Notional Amount at March 31, 2010		Attachment Point at Inception*		Attachment Point at March 31, 2010*		Percentage of Gross Notional Amount Rated Less than B-/B-3 at March 31, 2010
1	$	1,075	$	443	40.00	%	58.84	%		52.75%
2		687		326	53.00	%	52.52	%		27.45%
3		988		470	53.00	%	52.39	%		56.07%
4		1,192		322	76.00	%	73.00	%		69.62%
5		880		3	10.83	%	8.17	%		25.75%
6		268		192	39.33	%	28.38	%		84.04%
7		982		497	12.27	%	6.30	%		5.70%
8		1,058		757	25.24	%	23.23	%		7.43%
9		1,387		1,287	10.00	%	7.25	%		24.21%
10		387		296	33.00	%	23.62	%		72.55%
11		2,311		1,574	16.50	%	18.75	%		2.51%
12		376		197	32.00	%	47.51	%		68.61%
13		653		420	24.49	%	35.66	%		72.55%
14		543		402	32.90	%	26.04	%		91.83%
15		272		191	34.51	%	29.98	%		91.89%
16		3,707		197	9.72	%	15.58	%		63.58%
Total	$	16,766	$	7,574

*

Expressed as a percentage of gross notional amount of the referenced obligations. As a result of participation ratios and partial terminations, the attachment point may not always be computed by dividing net notional amount by gross notional amount.

    In a number of instances, the level of subordination with respect to individual CDOs has increased since inception relative to the overall size of the CDO. While the super senior tranches are amortizing, subordinate layers have not been reduced by realized losses to date. Such losses are expected to emerge in the future. At inception, substantially all of the underlying assets were rated B-/B3 or higher and in most cases at least BBB or Baa. Thus, the percentage of gross notional amount rated less than B-/B3 represents deterioration in the credit quality of the underlying assets.

The following table summarizes the gross transaction notional amount, percentage of the total CDO collateral pools, and ratings and vintage breakdown of collateral securities in the multi-sector CDOs, by asset-backed securities (ABS) category:

At March 31, 2010 (in millions)
	Gross Transaction Notional Amount					Ratings																				Vintage
			Percent of Total
ABS Category						AAA			AA			A			BBB			BB			<BB			NR		2009			2008			2007			2006			2005+P
RMBS PRIME	$	2,030		12.11	%		0.47	%		0.46	%		0.45	%		0.59	%		1.90	%		8.24	%		0.00%		0.00	%		0.41	%		6.98	%		3.35	%		1.37	%
RMBS ALT-A		2,808		16.75	%		0.12	%		0.09	%		0.32	%		1.41	%		0.52	%		14.29	%		0.00%		0.00	%		0.62	%		4.73	%		6.21	%		5.19	%
RMBS     SUBPRIME		3,604		21.50	%		0.70	%		1.01	%		0.52	%		0.66	%		1.18	%		17.43	%		0.00%		0.00	%		0.00	%		1.03	%		1.87	%		18.60	%
CMBS		3,270		19.50	%		0.76	%		1.88	%		2.19	%		3.18	%		1.87	%		9.50	%		0.12%		0.00	%		0.10	%		1.71	%		8.41	%		9.28	%
CDO		1,781		10.62	%		0.12	%		0.86	%		0.83	%		0.92	%		0.99	%		6.79	%		0.11%		0.00	%		0.00	%		0.67	%		1.77	%		8.18	%
OTHER		3,273		19.52	%		5.45	%		4.54	%		4.75	%		3.03	%		0.79	%		0.84	%		0.12%		0.00	%		0.62	%		1.09	%		5.14	%		12.67	%
Total	$	16,766		100.00	%		7.62	%		8.84	%		9.06	%		9.79	%		7.25	%		57.09	%		0.35%		0.00	%		1.75	%		16.21	%		26.75	%		55.29	%

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Corporate Debt/CLOs

    The corporate arbitrage portfolio consists principally of CDS written on portfolios of corporate obligations that were generally rated investment grade at the inception of the CDS. These CDS transactions require cash settlement. This portfolio also includes CDS with a net notional amount of $1.4 billion written on the senior part of the capital structure of CLOs, which require physical settlement.

    The following table summarizes gross transaction notional amount of CDS transactions written on portfolios of corporate obligations, percentage of the total referenced portfolios, and ratings by industry sector, in addition to the subordinations below the super senior risk layer, AIGFP's net notional amounts and fair value of derivative liability:

								Ratings
At March 31, 2010 (in millions)			Gross Transaction Notional Amount		Percent of Total
								Aa			A			Baa			Ba			<Ba			NR
Industry Sector
United States
	Industrial		$	8,660		36.9	%		0.2	%		5.1	%		17.4	%		4.1	%		8.1	%		2.0%
	Financial			2,336		10.0	%		0.2	%		3.3	%		3.3	%		0.2	%		1.8	%		1.2%
	Utilities			672		2.9	%		0.0	%		0.3	%		2.4	%		0.0	%		0.1	%		0.1%
	Other			162		0.7	%		0.0	%		0.1	%		0.1	%		0.1	%		0.0	%		0.4%
		Total United States		11,830		50.5	%		0.4	%		8.8	%		23.2	%		4.4	%		10.0	%		3.7%
Non-United States
	Industrial			9,199		39.2	%		0.2	%		6.0	%		12.7	%		4.3	%		4.8	%		11.2%
	Financial			1,152		4.9	%		0.0	%		2.5	%		1.7	%		0.1	%		0.2	%		0.4%
	Government			884		3.8	%		0.1	%		1.6	%		1.5	%		0.4	%		0.0	%		0.2%
	Utilities			314		1.3	%		0.0	%		0.1	%		0.7	%		0.0	%		0.1	%		0.4%
	Other			82		0.3	%		0.0	%		0.1	%		0.0	%		0.0	%		0.1	%		0.1%
		Total Non-United States		11,631		49.5	%		0.3	%		10.3	%		16.6	%		4.8	%		5.2	%		12.3%
Total gross transaction notional amount				23,461		100.0	%		0.7	%		19.1	%		39.8	%		9.2	%		15.2	%		16.0%
Subordination				7,094
Net Notional Amount			$	16,367
Fair Value of Derivative Liability			$	308

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The following table presents, for each of the corporate debt and CLO CDS transactions, the net notional amounts, attachment points and inception to date defaults:

(dollars in millions) CDS	Type	Net Notional Amount at March 31, 2010		Attachment Point at Inception(a)			Attachment Point at March 31, 2010(a)			Defaults through March 31, 2010(b)
1	Corporate Debt	$	2,520		20.68	%		19.52	%		6.10%
2	Corporate Debt		989		22.14	%		20.60	%		3.58%
3	Corporate Debt		5,338		22.00	%		20.68	%		3.73%
4	Corporate Debt		989		22.14	%		20.60	%		3.58%
5	Corporate Debt		1,967		22.15	%		20.93	%		3.78%
6	Corporate Debt		983		20.80	%		18.91	%		4.17%
7	Corporate Debt		216		28.00	%		27.68	%		1.01%
8	Corporate Debt		641		24.00	%		22.98	%		3.54%
9	Corporate Debt		1,288		24.00	%		22.89	%		3.67%
10	CLO		249		35.85	%		30.14	%		3.96%
11	CLO		127		43.76	%		42.36	%		2.58%
12	CLO		198		44.20	%		45.62	%		1.86%
13	CLO		80		44.20	%		45.62	%		1.86%
14	CLO		151		44.20	%		45.62	%		1.86%
15	CLO		167		31.76	%		34.10	%		1.39%
16	CLO		337		30.40	%		28.75	%		0.00%
17	CLO		127		31.23	%		29.08	%		0.03%
Total		$	16,367

(a)

Expressed as a percentage of gross transaction notional amount of the referenced obligations.

(b)

Represents defaults (assets that are technically defaulted but for which the losses have not yet been realized) from inception through March 31, 2010 expressed as a percentage of the gross transaction notional amount at March 31, 2010.

Collateral

    Most of AIGFP's credit default swaps are subject to collateral posting provisions. These provisions differ among counterparties and asset classes. Although AIGFP has collateral posting obligations associated with both regulatory capital relief transactions and arbitrage transactions, the large majority of these obligations to date have been associated with arbitrage transactions in respect of multi-sector CDOs.

Regulatory Capital Relief Transactions

    As of March 31, 2010, 61.5 percent of AIGFP's regulatory capital relief transactions (measured by net notional amount) were subject to Credit Support Annexes (CSA) linked to AIG's credit rating and 38.5 percent of the regulatory capital relief transactions were not subject to collateral posting provisions. In general, each regulatory capital relief transaction is subject to a stand-alone International Swaps and Derivatives Association, Inc. (ISDA) Master Agreement (Master Agreement) or similar agreement, under which the aggregate Exposure is calculated with reference to only a single transaction.

    The underlying mechanism that determines the amount of collateral to be posted varies by counterparty, and there is no standard formula. The varied mechanisms resulted from individual negotiations with different counterparties. The following is a brief description of the primary mechanisms that are currently being employed to determine the amount of collateral posting for this portfolio.

Reference to Market Indices—Under this mechanism, the amount of collateral to be posted is determined based on a formula that references certain tranches of a market index, such as either iTraxx or CDX. This mechanism is used for CDS transactions that reference either corporate loans, or residential mortgages. While the market index is not a direct proxy, it has the advantage of being readily obtainable.

Expected Loss Models—Under this mechanism, the amount of collateral to be posted is determined based on the amount of expected credit losses, generally determined using a rating-agency model.

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Negotiated Amount—Under this mechanism, the amount of collateral to be posted is determined based on terms negotiated between AIGFP and the counterparty, which could be a fixed percentage of the notional amount or present value of premiums to be earned by AIGFP.

The following table presents the amount of collateral postings by underlying mechanism as described above with respect to the regulatory capital relief portfolio (prior to consideration of transactions other than AIGFP's super senior credit default swaps subject to the same Master Agreements) as of the periods ended:

(in millions)	December 31, 2009		March 31, 2010		April 30, 2010
Reference to market indices	$	60	$	28	$	36
Expected loss models		20		19		19
Negotiated amount		230		219		220
Total	$	310	$	266	$	275

Arbitrage Portfolio — Multi-Sector CDOs

    In the CDS transactions, with physical settlement provisions, in respect of multi-sector CDOs, the standard CSA provisions for the calculation of Exposure have been modified, with the Exposure amount determined pursuant to an agreed formula that is based on the difference between the net notional amount of such transaction and the market value of the relevant underlying CDO security, rather than the replacement value of the transaction. As of any date, the "market value" of the relevant CDO security is the price at which a marketplace participant would be willing to purchase such CDO security in a market transaction on such date, while the "replacement value of the transaction" is the cost on such date of entering into a credit default swap transaction with substantially the same terms on the same referenced obligation (e.g., the CDO security). In cases where a formula is utilized, a transaction-specific threshold is generally factored into the calculation of Exposure, which reduces the amount of collateral required to be posted. These thresholds typically vary based on the credit ratings of AIG and/or the reference obligations, with greater posting obligations arising in the context of lower ratings. For the large majority of counterparties to these transactions, the Master Agreement and CSA cover non-CDS transactions (e.g., interest rate and cross currency swap transactions) as well as CDS transactions. As a result, the amount of collateral to be posted by AIGFP in relation to the CDS transactions will be added to or offset by the amount, if any, of the Exposure AIG has to the counterparty on the non-CDS transactions.

Arbitrage Portfolio — Corporate Debt/CLOs

    All of AIGFP's corporate arbitrage transactions are subject to CSAs. None of these transactions (measured by net notional amount) contains a special collateral posting provision, but each is subject to a Master Agreement that includes a CSA. These transactions are treated the same as other transactions subject to the same Master Agreement and CSA, with the calculation of collateral in accordance with the standard CSA procedures outlined above. None of these transactions, although subject to a Master Agreement and CSA, has specific valuation and threshold provisions.

Collateral Calls

    AIGFP has received collateral calls from counterparties in respect of certain super senior credit default swaps, of which a large majority relate to multi-sector CDOs. To a lesser extent, AIGFP has also received collateral calls in respect of certain super senior credit default swaps entered into by counterparties for regulatory capital relief purposes and in respect of corporate arbitrage.

    From time to time, valuation methodologies used and estimates made by counterparties with respect to certain super senior credit default swaps or the underlying reference CDO securities, for purposes of determining the amount of collateral required to be posted by AIGFP in connection with such instruments, have resulted in estimates that differ, at times significantly, from AIGFP's estimates. In almost all cases, AIGFP has been able to successfully resolve the differences or otherwise reach an accommodation with respect to collateral posting levels, including in certain cases by entering into compromise collateral arrangements. Due to the ongoing nature of

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collateral arrangements, AIGFP regularly is engaged in discussions with one or more counterparties in respect of these differences, including at the present time. Valuation estimates made by counterparties for collateral purposes are, like any other third-party valuation, considered in the determination of the fair value estimates of AIGFP's super senior credit default swap portfolio.

The following table presents the amount of collateral postings with respect to AIGFP's super senior credit default swap portfolio (prior to offsets for other transactions) as of the periods ended:

(in millions)	December 31, 2009		March 31, 2010		April 30, 2010
Regulatory capital	$	310	$	266	$	275
Arbitrage – multi-sector CDO		3,715		3,683		3,606
Arbitrage – corporate		565		503		538
Total	$	4,590	$	4,452	$	4,419

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

Valuation Sensitivity — Arbitrage Portfolio

Multi-Sector CDOs

    AIG utilizes sensitivity analyses that estimate the effects of using alternative pricing and other key inputs on AIG's calculation of the unrealized market valuation loss related to the AIGFP super senior credit default swap portfolio. While AIG believes that the ranges used in these analyses are reasonable, given the current difficult market conditions, AIG is unable to predict which of the scenarios is most likely to occur. As recent experience demonstrates, actual results in any period are likely to vary, perhaps materially, from the modeled scenarios, and there can be no assurance that the unrealized market valuation loss related to the AIGFP super senior credit default swap portfolio will be consistent with any of the sensitivity analyses. On average, prices for CDOs increased 0.90 percent of the notional amount outstanding for the first quarter of 2010. Further, it is difficult to extrapolate future experience based on current market conditions.

    For the purposes of estimating sensitivities for the super senior multi- sector CDO credit default swap portfolio, the change in valuation derived using the BET model is used to estimate the change in the fair value of the derivative liability. Out of the total $7.6 billion net notional amount of CDS written on multi-sector CDOs outstanding at March 31, 2010, a BET value is available for $4.8 billion net notional amount. No BET value is determined for $2.8 billion of CDS written on European multi-sector CDOs as prices on the underlying securities held by the CDOs are not provided by collateral managers; instead these CDS are valued using counterparty prices. Therefore, sensitivities disclosed below apply only to the net notional amount of $4.8 billion.

    The most significant assumption used in the BET model is the estimated price of the securities within the CDO collateral pools. If the actual price of the securities within the collateral pools differs from the price used in estimating the fair value of the super senior credit default swap portfolio, there is potential for material variation in the fair value estimate. Any further declines in the value of the underlying collateral securities held by a CDO will similarly affect the value of the super senior CDO securities. While the models attempt to predict changes in the prices of underlying collateral securities held within a CDO, the changes are subject to actual market conditions which have proved to be highly volatile, especially given current market conditions. AIG cannot predict reasonably likely changes in the prices of the underlying collateral securities held within a CDO at this time.

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The following table presents key inputs used in the BET model, and the potential increase (decrease) to the fair value of the derivative liability by ABS category at March 31, 2010 corresponding to changes in these key inputs:

					Increase (Decrease) to Fair Value of Derivative Liability
		Average Inputs Used at March 31, 2010
(dollars in millions)				Change	Entire Portfolio			RMBS PRIME			RMBS ALT-A			RMBS Subprime			CMBS			CDOs			Other
Bond prices			42 points	Increase of 5 points	$	(299	)	$	(11	)	$	(25	)	$	(134	)	$	(82	)	$	(32	)	$	(15	)
				Decrease of 5 points		258			12			24			103			83			13			23
Weighted				Increase of 1 year		49			1			6			38			-			1			3
	average life		5.98 years	Decrease of 1 year		(90	)		(3	)		(3	)		(86	)		4			(1	)		(1	)
Recovery rates			23%	Increase of 10%		(38	)		(1	)		(1	)		(10	)		(23	)		(1	)		(2	)
				Decrease of 10%		41			-			1			16			23			-			1
Diversity score(a)			13	Increase of 5		(9	)
				Decrease of 5		31
Discount curve(b)			N/A	Increase of 100bps		13

(a)

The diversity score is an input at the CDO level. A calculation of sensitivity to this input by type of security is not possible.

(b)

The discount curve is an input at the CDO level. A calculation of sensitivity to this input by type of security is not possible. Furthermore, for this input it is not possible to disclose a weighted average input as a discount curve consists of a series of data points.

    These results are calculated by stressing a particular assumption independently of changes in any other assumption. No assurance can be given that the actual levels of the key inputs will not exceed, perhaps significantly, the ranges assumed by AIG for purposes of the above analysis. No assumption should be made that results calculated from the use of other changes in these key inputs can be interpolated or extrapolated from the results set forth above.

Corporate Debt

The following table represents the relevant market credit inputs used to estimate the sensitivity for the credit default swap portfolio written on investment-grade corporate debt and the estimated increase (decrease) to fair value of derivative liability at March 31, 2010 corresponding to changes in these market credit inputs:

Input Used at March 31, 2010 (in millions)		Increase (Decrease) To Fair Value of Derivative Liability
Credit spreads for all names
	Effect of an increase by 10 basis points	$23
	Effect of a decrease by 10 basis points	$(23)
All base correlations
	Effect of an increase by 1%	$6
	Effect of a decrease by 1%	$(6)
Assumed recovery rate
	Effect of an increase by 1%	$(5)
	Effect of a decrease by 1%	$5

    These results are calculated by stressing a particular assumption independently of changes in any other assumption. No assurance can be given that the actual levels of the indices and maturity will not exceed, perhaps significantly, the ranges assumed by AIGFP for purposes of the above analysis. No assumption should be made that results calculated from the use of other changes in these indices and maturity can be interpolated or extrapolated from the results set forth above.

    Other derivatives.    Valuation models that incorporate unobservable inputs initially are calibrated to the transaction price. Subsequent valuations are based on observable inputs to the valuation model (e.g., interest rates, credit spreads, volatilities, etc.). Model inputs are changed only when corroborated by observable market data.

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Investments

Investments by Segment

The following tables summarize the composition of AIG's investments by segment:

(in millions)		General Insurance		Domestic Life Insurance & Retirement Services		Foreign Life Insurance & Retirement Services		Financial Services		Other		Total
At March 31, 2010
Fixed maturity securities:
	Bonds available for sale, at fair value	$	86,560	$	122,669	$	35,553	$	2,025	$	10,063	$	256,870
	Bond trading securities, at fair value		-		960		208		19,927		5,270		26,365
Equity securities:
	Common and preferred stock available for sale, at fair value		4,466		293		1,383		22		667		6,831
	Common and preferred stock trading, at fair value		50		1		238		317		7		613
Mortgage and other loans receivable, net of allowance			623		17,222		1,587		467		2,634		22,533
Finance receivables, net of allowance			-		-		-		18,912		-		18,912
Flight equipment primarily under operating leases, net of accumulated depreciation			-		-		-		43,258		-		43,258
Other invested assets			12,184		13,131		1,754		182		5,999		33,250
Securities purchased under agreements to resell, at fair value			-		-		-		1,615		-		1,615
Short-term investments			13,094		14,808		838		7,056		3,004		38,800
Total investments(a)			116,977		169,084		41,561		93,781		27,644		449,047
Cash			694		299		168		460		512		2,133
Total cash and investments(b)		$	117,671	$	169,383	$	41,729	$	94,241	$	28,156	$	451,180

(in millions)		General Insurance		Domestic Life Insurance & Retirement Services		Foreign Life Insurance & Retirement Services		Financial Services		Other		Total
At December 31, 2009
Fixed maturity securities:
	Bonds available for sale, at fair value	$	79,507	$	116,629	$	158,279	$	2,057	$	9,079	$	365,551
	Bond trading securities, at fair value		-		846		6,227		19,651		4,519		31,243
Equity securities:
	Common and preferred stock available for sale, at fair value		2,770		320		5,781		22		629		9,522
	Common and preferred stock trading, at fair value		48		1		7,881		388		-		8,318
Mortgage and other loans receivable, net of allowance			9		17,728		6,810		428		2,486		27,461
Finance receivables, net of allowance			-		-		-		20,327		-		20,327
Flight equipment primarily under operating leases, net of accumulated depreciation			-		-		-		44,091		-		44,091
Other invested assets			11,668		13,141		13,749		213		6,464		45,235
Securities purchased under agreements to resell, at fair value			-		-		-		2,154		-		2,154
Short-term investments			12,094		17,456		10,840		3,767		3,106		47,263
Total investments(a)			106,096		166,121		209,567		93,098		26,283		601,165
Cash			780		63		1,151		1,847		559		4,400
Total cash and investments		$	106,876	$	166,184	$	210,718	$	94,945	$	26,842	$	605,565

(a)

At March 31, 2010, approximately 82 percent and 18 percent of investments were held by domestic and foreign entities, respectively, compared to approximately 60 percent and 40 percent, respectively, at December 31, 2009.

(b)

Total cash and investments of businesses held for sale amounted to $216.2 billion at March 31, 2010. See Note 3 to the Consolidated Financial Statements.

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Investment Strategy

    AIG's investment strategies are tailored to the specific business needs of each operating unit. The investment objectives are driven by the business model for each of the businesses: General Insurance, life insurance, retirement services and the Matched Investment Program. The primary objectives are generation of investment income, preservation of capital, liquidity management and growth of surplus to support the insurance products.

    At the local operating unit level, investment strategies are based on considerations that include the local market, liability duration and cash flow characteristics, rating agency and regulatory capital considerations, legal investment limitations, tax optimization and diversification.

    The majority of assets backing insurance liabilities at AIG consist of intermediate and long duration fixed maturity securities. In the case of life insurance & retirement services companies, as well as in the MIP portfolio, the fundamental investment strategy is, as nearly as is practicable, to match the duration characteristics of the liabilities with comparable duration assets. Fixed maturity securities held by the insurance companies included in the Commercial Insurance Group historically have consisted primarily of laddered holdings of tax-exempt municipal bonds, which provided attractive after-tax returns and limited credit risk. In order to meet the Commercial Insurance Group's current risk/return and tax objectives, the domestic property and casualty companies have begun to shift investment allocations away from tax exempt municipal bonds towards taxable instruments which meet the companies' liquidity, duration and quality objectives as well as current risk-return and tax objectives. Fixed maturity securities held by Foreign General Insurance companies consist primarily of intermediate duration high grade securities.

    The market price of fixed maturity securities reflects numerous components, including interest rate environment, credit spread, embedded optionality (such as call features), liquidity, structural complexity, foreign exchange risk, and other credit and non-credit factors. However, in most circumstances, pricing is most sensitive to interest rates, such that the market price declines as interest rates rise, and increases as interest rates fall. This effect is more pronounced for longer duration securities.

    AIG accounts for the vast majority of the invested assets held by its insurance companies at fair value. However, with limited exceptions (primarily with respect to separate account products on AIG's Consolidated Balance Sheet), AIG does not mark-to-market its insurance liabilities for changes in interest rates, even though rising interest rates have the effect of reducing the fair value of such liabilities, and falling interest rates have the opposite effect. This results in the recording of changes in unrealized gains (losses) on securities in Accumulated other comprehensive income resulting from changes in interest rates without any correlative, inverse changes in gains (losses) on AIG's liabilities. Because AIG's asset duration in certain low-yield currencies, particularly Japan and Taiwan, is shorter than its liability duration, AIG views increasing interest rates in these countries as economically advantageous, notwithstanding the effect that higher rates have on the market value of its fixed maturity portfolio.

    At March 31, 2010, approximately 78 percent of the fixed maturity securities were in domestic entities. Approximately 29 percent of such securities were rated AAA by one or more of the principal rating agencies. Approximately 11 percent were below investment grade or not rated. AIG's investment decision process relies primarily on internally generated fundamental analysis and internal risk ratings. Third-party rating services' ratings and opinions provide one source of independent perspectives for consideration in the internal analysis.

    A significant portion of the foreign fixed maturity portfolio is rated by Moody's, S&P or similar foreign rating services. Rating services are not available in all overseas locations. AIG's Credit Risk Committee closely reviews the credit quality of the foreign portfolio's non-rated fixed maturity securities. At March 31, 2010, approximately 17 percent of the foreign fixed income investments were either rated AAA or, on the basis of AIG's internal analysis, were equivalent from a credit standpoint to securities so rated. Approximately 2 percent were below investment grade or not rated at that date. Approximately one third of the foreign fixed maturity portfolio is sovereign fixed maturity securities supporting policy liabilities in the country of issuance.

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The following table presents the credit ratings of AIG's fixed maturity investments:

		March 31, 2010*			December 31, 2009
Rating:
	AAA		27	%		23	%
	AA		24			24
	A		21			28
	BBB		19			17
	Below investment grade		7			6
	Non-rated		2			2
Total			100	%		100	%

*

Excludes fixed maturity securities of businesses held for sale as of March 31, 2010.

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Available for Sale Investments

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

(in millions)			Amortized Cost or Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value		Other-Than- Temporary Impairments in AOCI(a)
March 31, 2010
Bonds available for sale:
	U.S. government and government sponsored entities		$	4,777	$	106	$	(27	)	$	4,856	$	-
	Obligations of states, municipalities and political subdivisions			50,427		2,018		(292	)		52,153		-
	Non-U.S. governments			23,305		725		(213	)		23,817		(1	)
	Corporate debt			127,707		8,507		(1,862	)		134,352		14
	Mortgage-backed, asset-backed and collateralized:
		RMBS		30,089		1,027		(3,897	)		27,219		(1,595	)
		CMBS		10,869		256		(3,180	)		7,945		(451	)
		CDO/ABS		7,242		324		(1,038	)		6,528		64
	Total mortgage-backed, asset-backed and collateralized			48,200		1,607		(8,115	)		41,692		(1,982	)
Total bonds available for sale(b)				254,416		12,963		(10,509	)		256,870		(1,969	)
Equity securities available for sale:
	Common stock			2,511		1,770		(19	)		4,262		-
	Preferred stock			635		103		(1	)		737		-
	Mutual funds			1,736		102		(6	)		1,832		-
Total equity securities available for sale				4,882		1,975		(26	)		6,831		-
Total(c)			$	259,298	$	14,938	$	(10,535	)	$	263,701	$	(1,969	)
December 31, 2009
Bonds available for sale:
	U.S. government and government sponsored entities		$	5,098	$	174	$	(49	)	$	5,223	$	-
	Obligations of states, municipalities and political subdivisions			52,324		2,163		(385	)		54,102		-
	Non-U.S. governments			63,080		3,153		(649	)		65,584		(1	)
	Corporate debt			185,188		10,826		(3,876	)		192,138		119
	Mortgage-backed, asset-backed and collateralized:
		RMBS		32,173		991		(4,840	)		28,324		(2,121	)
		CMBS		18,717		195		(5,623	)		13,289		(739	)
		CDO/ABS		7,911		284		(1,304	)		6,891		(63	)
	Total mortgage-backed, asset-backed and collateralized			58,801		1,470		(11,767	)		48,504		(2,923	)
Total bonds available for sale(b)				364,491		17,786		(16,726	)		365,551		(2,805	)
Equity securities available for sale:
	Common stock			4,460		2,913		(75	)		7,298		-
	Preferred stock			740		94		(20	)		814		-
	Mutual funds			1,264		182		(36	)		1,410		-
Total equity securities available for sale				6,464		3,189		(131	)		9,522		-
Total			$	370,955	$	20,975	$	(16,857	)	$	375,073	$	(2,805	)

(a)

Represents the amount of other-than-temporary impairment losses recognized in Accumulated other comprehensive income, which, starting on April 1, 2009, were not included in earnings. Amount includes unrealized gains and losses on impaired securities relating to changes in the value of such securities subsequent to the impairment measurement date.

(b)

At March 31, 2010 and December 31, 2009, bonds available for sale held by AIG that were below investment grade or not rated totaled $18.2 billion and $24.5 billion, respectively.

(c)

Excludes $163.0 billion and $36.1 billion of available for sale investments at fair value from businesses held for sale at March 31, 2010 and December 31, 2009, respectively. See Note 3 to the Consolidated Financial Statements.

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The following table presents the industry categories of AIG's available for sale corporate debt securities:

Industry Category		March 31, 2010(a)			December 31, 2009
Financial institutions:
	Money Center /Global Bank Groups		14	%		18	%
	Regional banks – other		4			5
	Life insurance		4			4
	Securities firms and other finance companies		2			2
	Insurance non-life		3			3
	Regional banks – North America		3			2
	Other financial institutions		5			4
Utilities			16			14
Communications			7			8
Consumer noncyclical			9			8
Capital goods			7			7
Consumer cyclical			5			5
Energy			6			6
Other			15			14
	Total(b)		100	%		100	%

(a)

Excludes corporate debt of businesses held for sale as of March 31, 2010.

(b)

At March 31, 2010 and December 31, 2009, approximately 92 percent and 94 percent, respectively, of these investments were rated investment grade.

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Structured Securities

    Excluded in the tables below as of March 31, 2010 are structured securities of businesses held for sale with a fair value of $7.8 billion.

Investments in RMBS

The following table presents AIG's RMBS investments by year of vintage:

		March 31, 2010												December 31, 2009
(in millions)		Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value		Percent of Amortized Cost			Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value		Percent of Amortized Cost
Total RMBS(a)
	2010	$	537	$	-	$	-		$	537		2	%	$	-	$	-	$	-		$	-		-	%
	2009		1,794		27		(5	)		1,816		6			1,716		19		(6	)		1,729		5
	2008		3,110		146		-			3,256		10			3,418		135		(1	)		3,552		11
	2007		4,523		146		(703	)		3,966		15			4,982		135		(881	)		4,236		16
	2006		4,979		193		(907	)		4,265		17			5,206		197		(1,161	)		4,242		16
	2005 and prior		15,146		515		(2,282	)		13,379		50			16,851		505		(2,791	)		14,565		52
Total RMBS		$	30,089	$	1,027	$	(3,897	)	$	27,219		100	%	$	32,173	$	991	$	(4,840	)	$	28,324		100	%
Alt-A
	2010	$	71	$	-	$	-		$	71		1	%	$	-	$	-	$	-		$	-		-	%
	2009		-		-		-			-		-			-		-		-			-		-
	2008		-		-		-			-		-			-		-		-			-		-
	2007		1,431		37		(331	)		1,137		27			1,490		21		(408	)		1,103		28
	2006		1,458		10		(467	)		1,001		28			1,484		9		(568	)		925		28
	2005 and prior		2,269		15		(595	)		1,689		44			2,397		13		(705	)		1,705		44
Total Alt-A		$	5,229	$	62	$	(1,393	)	$	3,898		100	%	$	5,371	$	43	$	(1,681	)	$	3,733		100	%
Subprime
	2010	$	-	$	-	$	-		$	-		-	%	$	-	$	-	$	-		$	-		-	%
	2009		-		-		-			-		-			-		-		-			-		-
	2008		-		-		-			-		-			-		-		-			-		-
	2007		58		17		(15	)		60		4			61		16		(18	)		59		4
	2006		150		8		(24	)		134		10			180		6		(42	)		144		11
	2005 and prior		1,329		1		(578	)		752		86			1,358		-		(659	)		699		85
Total Subprime		$	1,537	$	26	$	(617	)	$	946		100	%	$	1,599	$	22	$	(719	)	$	902		100	%
Prime non-agency(b)
	2010	$	79	$	-	$	-		$	79		1	%	$	-	$	-	$	-		$	-		-	%
	2009		334		6		(1	)		339		3			387		6		-			393		3
	2008		55		6		-			61		1			109		9		-			118		1
	2007		1,638		13		(259	)		1,392		16			1,920		21		(340	)		1,601		17
	2006		2,163		99		(309	)		1,953		21			2,259		91		(415	)		1,935		20
	2005 and prior		5,861		49		(981	)		4,929		58			6,783		42		(1,272	)		5,553		59
Total Prime non-agency		$	10,130	$	173	$	(1,550	)	$	8,753		100	%	$	11,458	$	169	$	(2,027	)	$	9,600		100	%

(a)

Includes $13.2 billion in agency backed securities.

(b)

Includes foreign and jumbo RMBS-related securities.

    AIG's operations held investments in RMBS with an estimated fair value of $27.2 billion or approximately 6 percent of AIG's total invested assets at March 31, 2010. In addition, AIG's insurance operations held investments with a fair value totaling $6.2 billion in CDOs/ABS, of which $6 million included some level of subprime exposure. AIG's RMBS investments are predominantly in tranches that contain substantial protection features through collateral subordination. As of April 30, 2010, $11.5 billion of AIG's RMBS portfolio had been downgraded as a result of rating agency actions since January 1, 2007, and $121 million of such investments had been upgraded. Of the downgrades, $10.0 billion were AAA rated securities. In addition to the downgrades, as of April 30, 2010, the rating agencies had $1.4 billion of RMBS on watch for downgrade.

    In the three-month periods ended March 31, 2010 and 2009, AIG collected approximately $1.3 billion and $1.0 billion, respectively, of principal payments on RMBS.

165

American International Group, Inc., and Subsidiaries

The following table presents AIG's RMBS investments by credit rating:

		March 31, 2010												December 31, 2009
(in millions)		Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value		Percent of Amortized Cost			Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value		Percent of Amortized Cost
Rating:
Total RMBS
	AAA	$	19,119	$	812	$	(830	)	$	19,101		64	%	$	20,503	$	793	$	(1,256	)	$	20,040		64	%
	AA		1,442		1		(377	)		1,066		5			1,547		22		(447	)		1,122		5
	A		858		-		(319	)		539		3			1,423		6		(451	)		978		4
	BBB		991		29		(274	)		746		3			1,428		30		(440	)		1,018		5
	Below investment grade		7,607		174		(2,095	)		5,686		25			7,204		131		(2,245	)		5,090		22
	Non-rated		72		11		(2	)		81		-			68		9		(1	)		76		-
Total RMBS(a)(b)		$	30,089	$	1,027	$	(3,897	)	$	27,219		100	%	$	32,173	$	991	$	(4,840	)	$	28,324		100	%
Alt-A RMBS
	AAA	$	1,460	$	27	$	(262	)	$	1,225		28	%	$	1,707	$	15	$	(406	)	$	1,316		32	%
	AA		364		-		(115	)		249		7			296		-		(108	)		188		5
	A		156		-		(63	)		93		3			247		-		(95	)		152		5
	BBB		151		-		(41	)		110		3			141		3		(46	)		98		3
	Below investment grade		3,098		34		(912	)		2,220		59			2,980		25		(1,026	)		1,979		55
	Non-rated		-		1		-			1		-			-		-		-			-		-
Total Alt-A		$	5,229	$	62	$	(1,393	)	$	3,898		100	%	$	5,371	$	43	$	(1,681	)	$	3,733		100	%
Subprime RMBS
	AAA	$	581	$	13	$	(151	)	$	443		38	%	$	677	$	13	$	(207	)	$	483		42	%
	AA		185		-		(75	)		110		12			150		1		(70	)		81		10
	A		135		-		(65	)		70		9			191		1		(107	)		85		12
	BBB		102		-		(48	)		54		6			160		-		(99	)		61		10
	Below investment grade		534		13		(278	)		269		35			421		7		(236	)		192		26
	Non-rated		-		-		-			-		-			-		-		-			-		-
Total Subprime		$	1,537	$	26	$	(617	)	$	946		100	%	$	1,599	$	22	$	(719	)	$	902		100	%
Prime non-agency
	AAA	$	4,591	$	18	$	(392	)	$	4,217		44	%	$	5,191	$	40	$	(600	)	$	4,631		45	%
	AA		863		-		(177	)		686		9			1,018		21		(258	)		781		9
	A		474		-		(138	)		336		5			879		5		(187	)		697		8
	BBB		600		29		(139	)		490		6			957		4		(225	)		736		8
	Below investment grade		3,530		115		(704	)		2,941		35			3,345		90		(757	)		2,678		29
	Non-rated		72		11		-			83		1			68		9		-			77		1
Total prime non-agency		$	10,130	$	173	$	(1,550	)	$	8,753		100	%	$	11,458	$	169	$	(2,027	)	$	9,600		100	%

(a)

The weighted average expected life is 6 years.

(b)

Includes $13.2 billion in agency backed securities.

    AIG's underwriting practices for investing in RMBS, other asset-backed securities and CDOs take into consideration the quality of the originator, the manager, the servicer, security credit ratings, underlying characteristics of the mortgages, borrower characteristics, and the level of credit enhancement in the transaction. AIG's strategy is typically to invest in securities rated AA or better at the time of the investment.

166

American International Group, Inc., and Subsidiaries

Investments in CMBS

The following table presents the amortized cost, gross unrealized gains (losses) and fair value of AIG's CMBS investments:

	March 31, 2010												December 31, 2009
(in millions)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value		Percent of Amortized Cost			Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value		Percent of Amortized Cost
CMBS (traditional)	$	9,657	$	161	$	(2,733	)	$	7,085		89	%	$	16,599	$	161	$	(4,925	)	$	11,835		89	%
ReRemic/CRE CDO		696		29		(390	)		335		6			932		20		(578	)		374		5
Agency		216		9		-			225		2			200		8		(3	)		205		1
Other		300		57		(57	)		300		3			986		6		(117	)		875		5
Total	$	10,869	$	256	$	(3,180	)	$	7,945		100	%	$	18,717	$	195	$	(5,623	)	$	13,289		100	%

The following table presents AIG's CMBS investments by credit rating:

		March 31, 2010												December 31, 2009
(in millions)		Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value		Percent of Amortized Cost			Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value		Percent of Amortized Cost
Rating:
	AAA	$	3,626	$	115	$	(241	)	$	3,500		33	%	$	8,579	$	127	$	(997	)	$	7,709		45	%
	AA		1,179		1		(346	)		834		11			2,265		2		(839	)		1,428		12
	A		1,429		10		(374	)		1,065		13			1,967		13		(832	)		1,148		11
	BBB		2,107		23		(918	)		1,212		19			2,188		15		(1,009	)		1,194		12
	Below investment grade		2,449		86		(1,286	)		1,249		23			3,155		38		(1,844	)		1,349		17
	Non-rated		79		21		(15	)		85		1			563		-		(102	)		461		3
Total		$	10,869	$	256	$	(3,180	)	$	7,945		100	%	$	18,717	$	195	$	(5,623	)	$	13,289		100	%

The following table presents AIG's CMBS investments by year of vintage:

	March 31, 2010												December 31, 2009
(in millions)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value		Percent of Amortized Cost			Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value		Percent of Amortized Cost
Year:
2009	$	35	$	-	$	-		$	35		-	%	$	35	$	-	$	(1	)	$	34		-	%
2008		256		2		(51	)		207		2			263		-		(70	)		193		1
2007		3,476		119		(1,383	)		2,212		32			4,968		42		(2,134	)		2,876		27
2006		1,455		33		(538	)		950		13			2,842		19		(1,250	)		1,611		15
2005 and prior		5,647		102		(1,208	)		4,541		53			10,609		134		(2,168	)		8,575		57
Total	$	10,869	$	256	$	(3,180	)	$	7,945		100	%	$	18,717	$	195	$	(5,623	)	$	13,289		100	%

167

American International Group, Inc., and Subsidiaries

The following table presents the percentage of AIG's CMBS investments by geographic region:

		March 31, 2010			December 31, 2009
Geographic region:
	New York		15	%		15	%
	California		13			14
	Texas		6			7
	Florida		6			6
	Virginia		4			3
	Illinois		3			3
	New Jersey		3			3
	Maryland		3			2
	Georgia		3			3
	Pennsylvania		2			3
	All Other*		42			41
Total			100	%		100	%

*

Includes Non-U.S. locations.

The following table presents the percentage of AIG's CMBS investments by industry:

		March 31, 2010			December 31, 2009
Industry:
	Office		31	%		30	%
	Retail		28			30
	Multi-family		17			15
	Lodging		8			7
	Industrial		7			7
	Other		9			11
Total			100	%		100	%

    There have been disruptions in the CMBS market due to weakness in underlying commercial real estate fundamentals and the market's anticipation of increasing delinquencies and defaults. Although the market value has improved and CMBS spreads have tightened during the three-month period ended March 31, 2010, the market value of the holdings continues to be below amortized cost. The majority of AIG's investments in CMBS are in tranches that contain substantial protection features through collateral subordination. As indicated in the tables, downgrades have occurred on many CMBS holdings. The majority of CMBS holdings are traditional conduit transactions, broadly diversified across property types and geographical areas.

168

American International Group, Inc., and Subsidiaries

Investments in CDOs

The following table presents AIG's CDO investments, other than those of AIGFP, by collateral type:

		March 31, 2010												December 31, 2009
(in millions)		Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value		Percent of Amortized Cost			Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value		Percent of Amortized Cost
Collateral Type:
	Bank loans (CLO)	$	1,884	$	61	$	(495	)	$	1,450		78	%	$	2,015	$	63	$	(596	)	$	1,482		75%
	Synthetic investment grade		116		87		(8	)		195		5			220		83		(21	)		282		8
	Other		380		29		(97	)		312		16			443		27		(107	)		363		16
	Subprime ABS		30		1		(25	)		6		1			33		1		(27	)		7		1
Total		$	2,410	$	178	$	(625	)	$	1,963		100	%	$	2,711	$	174	$	(751	)	$	2,134		100	%

The following table presents AIG's CDO investments, other than those of AIGFP, by credit rating:

		March 31, 2010												December 31, 2009
(in millions)		Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value		Percent of Amortized Cost			Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value		Percent of Amortized Cost
Rating:
	AAA	$	216	$	2	$	(25	)	$	193		9	%	$	326	$	5	$	(42	)	$	289		12	%
	AA		151		1		(26	)		126		6			135		1		(29	)		107		5
	A		813		23		(217	)		619		34			1,028		22		(311	)		739		38
	BBB		690		22		(210	)		502		29			670		19		(214	)		475		25
	Below investment grade		540		130		(147	)		523		22			550		108		(155	)		503		20
	Non-rated		-		-		-			-		-			2		19		-			21		-
Total		$	2,410	$	178	$	(625	)	$	1,963		100	%	$	2,711	$	174	$	(751	)	$	2,134		100%

Commercial Mortgage Loans

    At March 31, 2010, AIG had direct commercial mortgage loan exposure of $14.8 billion, with $14.4 billion representing U.S. loan exposure. At that date, over 98 percent of the U.S. loans were current. Foreign commercial mortgage loans of $0.3 billion are secured predominantly by properties in Japan. A total of $1.0 billion of commercial mortgage loans are recorded in assets of businesses held for sale.

169

American International Group, Inc., and Subsidiaries

The following table presents the U.S. commercial mortgage loan exposure by state and type of loan:

At March 31, 2010 (dollars in millions)		Number of Loans		Amount*		Apartments		Offices		Retails		Industrials		Hotels		Others		Percent of Total
State:
	California		210	$	3,856	$	117	$	1,587	$	231	$	980	$	403	$	538		27	%
	New York		75		1,579		305		928		173		40		48		85		11
	New Jersey		72		1,272		591		281		274		49		-		77		9
	Texas		70		1,019		74		450		125		259		81		30		7
	Florida		102		985		41		355		234		114		29		212		7
	Pennsylvania		64		518		94		134		141		116		18		15		4
	Ohio		62		421		198		51		71		47		40		14		3
	Maryland		23		398		28		192		169		1		4		4		3
	Arizona		18		329		107		55		61		11		9		86		2
	Colorado		25		328		18		208		4		11		27		60		2
	Other states		412		3,742		308		1,513		735		404		324		458		25
Total			1,133	$	14,447	$	1,881	$	5,754	$	2,218	$	2,032	$	983	$	1,579		100	%

*

Excludes portfolio valuation losses.

AIGFP Trading Investments

The following table presents the fair value of AIGFP's fixed maturity trading investments:

		March 31, 2010					December 31, 2009
(in millions)		Fair Value		Percent of Total			Fair Value		Percent of Total
U.S. government and government sponsored entities		$	6,284		32	%	$	6,292		33	%
Non-U.S. governments			224		1			247		1
Corporate debt			1,633		8			1,342		7
State, territories and political subdivisions			348		2			365		2
Mortgage-backed, asset-backed and collateralized:
	RMBS		2,539		13			2,806		15
	CMBS		2,534		13			2,219		12
	CDO/ABS and other collateralized		5,933		31			5,991		30
Total mortgage-backed, asset-backed and collateralized			11,006		57			11,016		57
Total		$	19,495		100	%	$	19,262		100	%

The following table presents the credit ratings of AIGFP's fixed maturity trading investments:

		March 31, 2010			December 31, 2009
Rating:
	AAA		56	%		64	%
	AA		16			13
	A		13			12
	BBB		4			3
	Below investment grade		11			8
Total			100	%		100	%

170

American International Group, Inc., and Subsidiaries

Other-Than-Temporary Impairments

    As a result of AIG's periodic evaluation of its securities for other-than-temporary impairments in value, AIG recorded impairment charges in earnings of $1.1 billion and $3.6 billion in the three-month periods ended March 31, 2010 and 2009, respectively. Refer to Note 6 to the Consolidated Financial Statements for a discussion of AIG's other-than-temporary impairment accounting policy.

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

(in millions)		General Insurance		Domestic Life Insurance & Retirement Services		Foreign Life Insurance & Retirement Services		Financial Services		Other		Total
Three Months Ended March 31, 2010
Impairment Type:
	Severity	$	20	$	8	$	23	$	-	$	-	$	51
	Change in intent		1		6		21		-		-		28
	Foreign currency declines		2		-		30		-		-		32
	Issuer-specific credit events		78		577		140		6		162		963
	Adverse projected cash flows on structured securities		-		-		-		-		-		-
Total		$	101	$	591	$	214	$	6	$	162	$	1,074
Three Months Ended March 31, 2009
Impairment Type:
	Severity	$	110	$	813	$	195	$	2	$	490	$	1,610
	Change in intent		121		537		-		-		42		700
	Foreign currency declines		-		-		78		-		-		78
	Issuer-specific credit events		252		588		3		7		270		1,120
	Adverse projected cash flows on structured securities		-		116		-		4		21		141
Total		$	483	$	2,054	$	276	$	13	$	823	$	3,649

171

American International Group, Inc., and Subsidiaries

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

(in millions)		RMBS		CDO/ABS		CMBS		Other Fixed Income		Equities/Other Invested Assets*		Total
Three Months Ended March 31, 2010
Impairment Type:
	Severity	$	-	$	-	$	-	$	-	$	51	$	51
	Change in intent		-		-		6		7		15		28
	Foreign currency declines		-		-		-		32		-		32
	Issuer-specific credit events		248		4		466		20		225		963
	Adverse projected cash flows on structured securities		-		-		-		-		-		-
Total		$	248	$	4	$	472	$	59	$	291	$	1,074
Three Months Ended March 31, 2009
Impairment Type:
	Severity	$	824	$	440	$	23	$	98	$	225	$	1,610
	Change in intent		-		-		-		585		115		700
	Foreign currency declines		-		-		17		61		-		78
	Issuer-specific credit events		690		64		97		126		143		1,120
	Adverse projected cash flows on structured securities		140		1		-		-		-		141
Total		$	1,654	$	505	$	137	$	870	$	483	$	3,649

*

Includes other-than-temporary impairment charges on partnership investments and direct private equity investments.

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

(in millions)		RMBS		CDO/ABS		CMBS		Other Fixed Income		Equities/Other Invested Assets*		Total
Three Months Ended March 31, 2010
Rating:
	AAA	$	2	$	-	$	-	$	14	$	-	$	16
	AA		7		1		-		10		-		18
	A		19		-		6		13		3		41
	BBB		23		-		36		1		4		64
	Below investment grade		197		3		292		21		-		513
	Non-rated		-		-		138		-		284		422
Total		$	248	$	4	$	472	$	59	$	291	$	1,074
Three Months Ended March 31, 2009
Rating:
	AAA	$	755	$	15	$	50	$	26	$	-	$	846
	AA		316		17		41		61		10		445
	A		174		330		29		209		14		756
	BBB		122		77		13		208		28		448
	Below investment grade		287		65		4		346		132		834
	Non-rated		-		1		-		20		299		320
Total		$	1,654	$	505	$	137	$	870	$	483	$	3,649

*

Includes other-than-temporary impairment charges on partnership investments and direct private equity investments.

172

American International Group, Inc., and Subsidiaries

    AIG has recognized the other-than-temporary impairment charges (severity losses) shown above in the three-month periods ended March 31, 2010 and 2009, respectively. With the adoption of the new other-than-temporary impairments accounting standard on April 1, 2009, such severity loss charges subsequent to that date exclusively related to equity securities and other invested assets. In all prior periods, such charges primarily related to mortgage-backed, asset-backed and collateralized securities, corporate debt securities of financial institutions and other equity securities. Notwithstanding AIG's intent and ability to hold such securities until they had recovered their cost or amortized cost basis, and despite structures that indicated, at the time, that a substantial amount of the securities should have continued to perform in accordance with original terms, AIG concluded, at the time, that it could not reasonably assert that the impairment would be temporary.

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

    In addition to the above severity losses, AIG recorded other-than-temporary impairment charges in the three-month periods ended March 31, 2010 and 2009 related to:

•

securities for which AIG has changed its intent to hold or sell;

•

declines due to foreign exchange rates;

•

issuer-specific credit events;

•

certain structured securities; and

•

other impairments, including equity securities, partnership investments and private equity investments.

    With respect to the issuer-specific credit events shown above, no other-than-temporary impairment charge with respect to any one single credit was significant to AIG's consolidated financial condition or results of operations, and no individual other-than-temporary impairment charge exceeded 0.10 percent and 0.06 percent of Total equity in the three-month periods ended March 31, 2010 and 2009, respectively.

    In periods subsequent to the recognition of an other-than-temporary impairment charge for available for sale fixed maturity securities that is not foreign exchange related, AIG generally prospectively accretes into earnings the difference between the new amortized cost and the expected undiscounted recovery value over the remaining expected holding period of the security. The amounts of accretion recognized in earnings for the three-month periods ended March 31, 2010 and 2009 were $92 million and $445 million, respectively. For a discussion of recent accounting standards affecting fair values and other-than-temporary impairments, see Notes 1 and 6 to the Consolidated Financial Statements.

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An aging of the pre-tax unrealized losses of fixed maturity and equity securities, distributed as a percentage of cost relative to unrealized loss (the extent by which the fair value is less than amortized cost or cost), including the number of respective items was as follows:

		Less than or equal to 20% of Cost(b)						Greater than 20% to 50% of Cost(b)						Greater than 50% of Cost(b)
																				Total
At March 31, 2010 Aging(a) (dollars in millions)
		Cost(c)		Unrealized Loss		Items(e)		Cost(c)		Unrealized Loss		Items(e)		Cost(c)		Unrealized Loss		Items(e)		Cost(c)		Unrealized Loss(d)		Items(e)
Investment grade bonds
	0-6 months	$	22,520	$	419		2,536	$	161	$	40		21	$	41	$	21		8	$	22,722	$	480		2,565
	7-12 months		6,554		477		465		2,520		819		254		884		561		104		9,958		1,857		823
	> 12 months		23,422		1,659		2,347		5,175		1,520		604		1,449		1,001		168		30,046		4,180		3,119
Total		$	52,496	$	2,555		5,348	$	7,856	$	2,379		879	$	2,374	$	1,583		280	$	62,726	$	6,517		6,507
Below investment grade bonds
	0-6 months	$	855	$	45		170	$	67	$	17		18	$	29	$	18		57	$	951	$	80		245
	7-12 months		2,676		289		337		1,643		525		198		1,293		852		116		5,612		1,666		651
	> 12 months		2,466		233		282		3,170		1,012		311		1,478		1,001		233		7,114		2,246		826
Total		$	5,997	$	567		789	$	4,880	$	1,554		527	$	2,800	$	1,871		406	$	13,677	$	3,992		1,722
Total bonds
	0-6 months	$	23,375	$	464		2,706	$	228	$	57		39	$	70	$	39		65	$	23,673	$	560		2,810
	7-12 months		9,230		766		802		4,163		1,344		452		2,177		1,413		220		15,570		3,523		1,474
	> 12 months		25,888		1,892		2,629		8,345		2,532		915		2,927		2,002		401		37,160		6,426		3,945
Total(e)		$	58,493	$	3,122		6,137	$	12,736	$	3,933		1,406	$	5,174	$	3,454		686	$	76,403	$	10,509		8,229
Equity securities
	0-6 months	$	262	$	18		351	$	19	$	5		16	$	-	$	-		1	$	281	$	23		368
	7-12 months		7		1		15		6		2		9		-		-		-		13		3		24
	> 12 months		-		-		-		-		-		-		-		-		-		-		-		-
Total		$	269	$	19		366	$	25	$	7		25	$	-	$	-		1	$	294	$	26		392

(a)

Represents the number of consecutive months that fair value has been less than cost by any amount.

(b)

Represents the percentage by which fair value is less than cost at the balance sheet date.

(c)

For bonds, represents amortized cost.

(d)

The effect on Net income of unrealized losses after taxes will be mitigated upon realization because certain realized losses will be charged to participating policyholder accounts, or realization will result in current decreases in the amortization of certain DAC.

(e)

Item count is by CUSIP by subsidiary.

    For the three-month period ended March 31, 2010, net unrealized gains related to fixed maturity and equity securities increased by $3.8 billion reflecting an increase in fair value primarily due to the narrowing of credit spreads.

    See also Note 6 to the Consolidated Financial Statements.

Regulation

    Directive 2002/87/EC (Directive) issued by the European Parliament provides that certain financial conglomerates with regulated entities in the European Union are subject to supplementary supervision. Pursuant to the Directive, the Commission Bancaire (the French banking regulator) was appointed as AIG's supervisory coordinator. From February 2007 until March 2010, with the approval of the Commission Bancaire, the Office of Thrift Supervision (OTS) acted as AIG's equivalent supervisor, as permitted by the Directive in circumstances in which a financial conglomerate organized outside the European Union (such as AIG) has proposed to have one of its existing regulators recognized as its coordinator and such regulator's supervision is determined to be equivalent to that required by the Directive. Since March 2010, AIG has been in discussions with the Commission Bancaire regarding the possibility of proposing another of AIG's existing regulators as its equivalent supervisor.

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    For additional information concerning the regulation of AIG and its businesses, see Item 1. Business — Regulation in the 2009 Annual Report on Form 10-K.

Risk Management

    For a complete discussion of AIG's risk management program, see Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations — Risk Management in the 2009 Annual Report on Form 10-K.

Overview

    AIG continues to focus on enhancing its risk management control environment, risk management processes and its enterprise risk management functions, at the board, corporate and individual business levels. AIG continues to explore process improvements and risk mitigation strategies, both at the corporate and business levels in an effort to minimize the capital and liquidity needs of AIG's local legal entities.

Credit Risk Management

    AIG defines its aggregate credit exposures to a counterparty as the sum of its fixed maturities, loans, finance leases, reinsurance recoverables, derivatives (mark-to-market), deposits and letters of credit (both in the case of financial institutions) and the specified credit equivalent exposure to certain insurance products which embody credit risk.

The following table presents AIG's largest credit exposures as a percentage of Total equity:

At March 31, 2010 Category		Risk Rating(a)			Credit Exposure as a Percentage of Total Equity
Investment Grade:
	10 largest combined		A-	(b)		112.9	%(c)
	Single largest non-sovereign (financial institution)		BBB-			9.2
	Single largest corporate		AA			3.3
	Single largest sovereign		AAA			26.1
Non-Investment Grade:
	Single largest sovereign		BB-			2.0
	Single largest non-sovereign		BB			0.6

(a)

Reflects AIG's internal risk ratings.

(b)

Six of the ten largest credit exposures are to financial institutions and four are to investment-grade rated sovereigns. Based on support from the US Government, the exposure to government-sponsored entities is included in the US Government total, rather than in financial institutions. None of the top ten is rated lower than BBB- or its equivalent.

(c)

Exposure to the ten largest combined as a percentage of Total equity was 102.8 percent at December 31, 2009.

    AIG monitors its aggregate cross-border exposures by country and regional group of countries. AIG defines its cross-border exposure to include both cross- border credit exposures and its cross-border investments in its own international subsidiaries. Nine countries had cross-border exposures in excess of 10 percent of Total equity at March 31, 2010 and December 31, 2009. Based on AIG's internal risk ratings, at that date, six were rated AAA, two were rated AA and one was rated A. The two largest sovereign exposures are to Bermuda and the United Kingdom.

    In addition, AIG reviews and manages its industry concentrations. AIG's single largest industry credit exposure is to the global financial institutions sector, which includes banks and finance companies, securities firms and insurance and reinsurance companies.

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The following table presents AIG's largest credit exposures to the global financial institution sector as a percentage of Total equity:

At March 31, 2010		Credit Exposure as a Percentage of Total Equity(a)
Industry Category:
	Money Center / Global Bank Groups		82.6	%(b)
	European Regional Financial Institutions		14.7
	Global Life Insurance Companies		13.2
	Global Reinsurance Companies		12.4
	Asian Regional Financial Institutions		10.1
	Supranational Banks		8.0
	North American Based Regional Financial Institutions		7.7

(a)

The table includes amounts related to AIA, ALICO and Nan Shan because their respective sales have not yet closed.

(b)

Exposure to Money Center/Global Bank Groups as a percentage of Total equity was 83.9 percent at December 31, 2009.

    AIG's exposure to its five largest money center/global bank group institutions was 34.0 percent of Total equity at March 31, 2010 compared to 33.5 percent of Total equity at December 31, 2009.

    AIG also has a risk concentration through the investment portfolios of its insurance companies in the U.S. municipal sector. AIG holds approximately $48.8 billion of tax-exempt and taxable securities issued by a wide number of municipal authorities across the U.S. and its territories. A majority of these securities are held in available-for-sale portfolios of AIG's domestic property-casualty insurance companies. These securities are comprised of the general obligations of states and local governments, revenue bonds issued by these same governments and bonds issued by transportation authorities, universities, state housing finance agencies and hospital systems. The average credit quality of these issuers is A-.

    Currently, several states, local governments and other issuers are facing pressures on their budget revenues from the effects of the recession and have had to cut spending and draw on reserve funds. Consequently, several municipal issuers in AIG's portfolios have been downgraded one or more notches by the rating agencies. The most notable of these issuers is the State of California, of which AIG holds approximately $1.1 billion of general obligation bonds, $95.7 million of which are defeased, and which at March 31, 2010 was also the largest single issuer in AIG's municipal finance portfolio. Nevertheless, despite the budget pressures facing the sector, AIG does not expect any significant defaults in portfolio holdings of municipal issuers.

    On April 27, 2010 one nationally recognized statistical rating agency lowered its rating of the government of Greece to sub-investment grade. As of May 4, 2010, AIG holds sovereign bonds issued by the Greek government amounting to $1.03 billion, the majority of which is in ALICO and its subsidiaries. AIG also holds sovereign bonds issued by the governments of Italy, Spain, Portugal and Ireland which collectively total approximately $2.0 billion. Although all are still investment grade, both Spain and Portugal were recently downgraded. The majority (approximately $1.2 billion) is held by ALICO and its subsidiaries.

    The Credit Risk Committee (CRC) reviews quarterly concentration reports in all categories listed above as well as credit trends by risk ratings. The CRC may adjust limits to provide reasonable assurance that AIG does not incur excessive levels of credit risk and that AIG's credit risk profile is properly calibrated across business units.

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American International Group, Inc., and Subsidiaries

ITEM 3.    Quantitative and Qualitative Disclosures About Market Risk

    Included in Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.

ITEM 4.    Controls and Procedures

    In connection with the preparation of this Quarterly Report on Form 10-Q, an evaluation was carried out by AIG's management, with the participation of AIG's Chief Executive Officer and Chief Financial Officer, of the effectiveness of AIG's disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 (Exchange Act)). Disclosure controls and procedures are designed to ensure that information required to be disclosed in reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms and that such information is accumulated and communicated to management, including the Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosures. Based on that evaluation, AIG's Chief Executive Officer and Chief Financial Officer have concluded that, as of March 31, 2010, AIG's disclosure controls and procedures were effective. There has been no change in AIG's internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act) that occurred during the quarter ended March 31, 2010 that has materially affected, or is reasonably likely to materially affect, AIG's internal control over financial reporting.

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American International Group, Inc., and Subsidiaries

Part II — OTHER INFORMATION

ITEM 1.    Legal Proceedings

    Included in Note 9(a) to the Consolidated Financial Statements.

ITEM 1A.    Risk Factors

    The following updates the "Execution of Restructuring Plan" risk factor in Item 1A. Risk Factors of the 2009 Annual Report on Form 10-K.

Significant conditions precedent must be satisfied in order to complete the AIA and ALICO sales on the agreed terms.

    Completion of the AIA sale is subject to the satisfaction (or waiver) of a number of conditions precedent, including:

•

the approval of the transaction by 75 percent of Prudential shareholders;

•

the approval of the scheme of arrangement between Prudential and existing Prudential shareholders by The High Court of Justice in England and Wales;

•

regulatory approvals in various foreign jurisdictions in connection with the acquisition by Prudential of the transferred businesses; and

•

regulatory approvals in certain U.S. states and various foreign jurisdictions in connection with the acquisition by AIG of the securities consideration.

    The ALICO sale also is subject to the satisfaction (or waiver) of similar regulatory approvals in both the United States and various foreign jurisdictions.

    Any relevant regulatory body may refuse its approval or may seek to make its approval subject to compliance by Prudential or MetLife, as the case may be, with unanticipated or onerous conditions, or, even if approval is not required, the regulator may impose requirements on Prudential or MetLife or the local operations of the transferred businesses. Prudential or MetLife, as the case may be, may not agree to those requirements.

    Because of the closing conditions applicable to each transaction, completion of either or both of the AIA sale and ALICO sale is not assured or may be delayed or, even if completed, may need to be significantly restructured.

Failure to complete the sales of AIA and ALICO could negatively affect AIG's businesses and financial results.

    If the sale of AIA or ALICO is not completed, the ongoing businesses of AIG may be adversely affected and AIG will be subject to several risks, including the following:

•

alternative plans to dispose of AIA or ALICO may be difficult to structure and may take extended periods of time to implement;

•

AIG may not be able to realize equivalent value for AIA or ALICO under an alternative asset disposition plan;

•

AIG will have incurred certain significant costs relating to the sales without receiving the benefits of the sales; and

•

negative customer perception could adversely affect the ability of the retained businesses to compete for, or to win, new and renewal business in the marketplace.

ITEM 6.    Exhibits

    See accompanying Exhibit Index.

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American International Group, Inc., and Subsidiaries

SIGNATURES

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

	AMERICAN INTERNATIONAL GROUP, INC.                                                  (Registrant)
	/s/ DAVID L. HERZOG David L. Herzog Executive Vice President Chief Financial Officer Principal Financial Officer
	/s/ JOSEPH D. COOK Joseph D.Cook Vice President Controller Principal Accounting Officer
Dated: May 7, 2010

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American International Group, Inc., and Subsidiaries

Exhibit Index

Exhibit Number	Description	Location
2.1	Share Purchase Agreement, dated as of March 1, 2010 between AIA Aurora LLC, American International Group, Inc., Prudential Group Limited and Prudential plc	Incorporated by reference to Exhibit 2.1 to AIG's Current Report on Form 8-K filed with the SEC on March 5, 2010 (File No. 1-8787)
2.2	Stock Purchase Agreement, dated as of March 7, 2010, among American International Group, Inc., ALICO Holdings LLC and MetLife, Inc.	Incorporated by reference to Exhibit 2.1 to AIG's Current Report on Form 8-K filed with the SEC on March 11, 2010 (File No. 1-8787)
10.1	Determination Memorandum, dated March 23, 2010, from the Office of the Special Master for TARP Executive Compensation to AIG	Incorporated by reference to Exhibit 10.1 to AIG's Current Report on Form 8-K filed with the SEC on April 2, 2010 (File No. 1-8787)
10.2	Determination Memorandum, dated April 16, 2010, from the Office of the Special Master for TARP Executive Compensation to AIG	Filed herewith.
10.3	Asset Purchase Agreement, dated as of December 12, 2008, among the Sellers party thereto, AIF Securities Lending Corp., AIG, Maiden Lane II LLC and the Federal Reserve Bank of New York	Filed herewith.
11	Statement re computation of per share earnings	Included in Note 9 to the Consolidated Financial Statements.
12	Computation of ratios of earnings to fixed charges	Filed herewith.
31	Rule 13a-14(a)/15d-14(a) Certifications	Filed herewith.
32	Section 1350 Certifications	Filed herewith.
101	Interactive data files pursuant to Rule 405 of Regulation S-T: (i) the Consolidated Balance Sheet as of March 31, 2010 and December 31, 2009, (ii) the Consolidated Statement of Income (Loss) for the three months ended March 31, 2010 and March 31, 2009, (iii) the Consolidated Statement of Equity for the three months ended March 31, 2010, (iv) the Consolidated Statement of Cash Flows for the three months ended March 31, 2010 and March 31, 2009, (v) the Consolidated Statement of Comprehensive Income (Loss) for the three months ended March 31, 2010 and March 31, 2009 and (vi) the Notes to the Consolidated Financial Statements, tagged as blocks of text.*	Filed herewith.

*

As provided in Rule 406T of Regulation S-T, this information is furnished and not filed for purposes of Sections 11 and 12 of the Securities Act of 1933 and Section 18 of the Securities Exchange Act of 1934.

180

EX-10.2

Exhibit 10.2

	DEPARTMENT OF THE TREASURY
	WASHINGTON, D.C. 20220

April 16, 2010

Mr. Robert Benmosche

President and Chief Executive Officer

American International Group, Inc.

70 Pine Street

New York, NY 10270

Re:Proposed Compensation Structures for Certain Executive Officers and Most Highly Compensated Employees (“Covered Employees 26 –100”)

Dear Mr. Benmosche:

Pursuant to the Department of the Treasury’s Interim Final Rule on TARP Standards for Compensation and Corporate Governance (the “Rule”), the Office of the Special Master has completed its review of your 2010 compensation submission on behalf of employees who are either executive officers of American International Group, Inc. (“AIG”) or one of AIG’s 100 most highly compensated employees, excluding those employees subject to Section 30.10 of the Rule (“Covered Employees 26 – 100”). The Special Master’s compensation reviews for Covered Employees 26 – 100 differ from the reviews of AIG’s “Top 25” employees, which addressed individual “amounts payable” to those employees, 31 C.F.R. § 30.16(a)(3)(i). For Covered Employees 26 – 100, the Rule does not require individual payment determinations; instead, the Special Master must determine only whether the proposed compensation structures “will or may result in payments that are inconsistent with the purposes of Section 111 of EESA or TARP, or are otherwise contrary to the public interest” (as applied to Covered Employees 26 – 100 of AIG, the “Public Interest Standard”). Id. § 30.16(a)(3)(ii).

On December 11, 2009, the Special Master issued determinations (the “2009 Determinations”) designed to ensure that 2009 compensation structures for AIG’s 2009 Covered Employees 26 – 100 met the Public Interest Standard. The 2009 Determinations were informed by a number of considerations, including each of the principles articulated in the Rule. Id. § 30.16(b)(1). In particular, the determinations emphasized allocating significant portions of compensation to long-term structures tied to AIG’s overall value, using structures that are performance-based and easily understood by shareholders, and protecting the Company’s ability to remain a competitive enterprise and ultimately to repay the its taxpayer assistance.

The Special Master has concluded that, for the reasons provided in the 2009 Determinations, the principles and requirements of those determinations should generally continue to apply in 2010. Accordingly, the Special Master has determined that the compensation structures described in Annex A, which reaffirm the compensation structures approved in 2009, are consistent with the Public Interest Standard. AIG’s proposed compensation structures, with minor modifications, are consistent with the Special Master’s prescriptions, which require that:

·Compensation may be provided in three primary components: cash salary, stock salary, and incentive compensation. The amounts and conditions of the components for each Covered Employee will be determined by AIG’s compensation committee.

·Compensation must be performance-based. Fixed compensation should consist only of cash salaries and stock salaries at levels sufficient to attract and retain employees and provide them a reasonable level of liquidity. Cash salaries should not exceed $500,000 per year, except in exceptional cases for good cause shown, as certified by the Company’s independent compensation committee.

·Compensation must emphasize long-term results. At least 50% of any incentive payment to a Covered Employee must be delivered in long-term stock. In most cases, half of total pay — whatever the overall mix of components for that individual — must not be transferable for at least three years.

·Stock compensation must constitute a significant portion of each Covered Employee’s compensation structure. For employees who earn more than $500,000 in total cash, that portion must be 55% at the minimum.

·Incentives may be paid if—and only if—the payments are appropriate in light of AIG’s overall circumstances and a particular Covered Employee achieves objective performance metrics. Incentive payments must be subject to “clawback” if the performance assessment resulting in the compensation is later discovered to be inaccurate.

·Incentive payments must be payable over time and delivered in a mix of cash and stock, and the total value of all incentive compensation payments cannot exceed a specified percentage of the company’s eligible earnings, to be determined by the compensation committee.

·The restrictions described in the Special Master’s previous determinations pertaining to perquisites, severance benefits, hedging transactions, tax “gross-ups” and supplemental executive retirement plans shall continue to apply to Covered Employees 26 – 100.

The Special Master’s determinations are limited to the compensation structures described in Annex A, and shall not be relied upon with respect to any other employee. The determinations have relied upon, and are qualified in their entirety by, the accuracy of the materials submitted by AIG to the Office of the Special Master, and the absence of any material misstatement or omission in such materials. Pursuant to the Interim Final Rule, AIG may, within 30 days of the date hereof, request in writing that the Special Master reconsider the determinations set forth in Annex A. If the Company does not request reconsideration within 30 days, these initial determinations will be treated as final determinations. Id. § 30.16(c)(1).

		Very truly yours,
		/s/ Kenneth R. Feinberg
		Kenneth R. Feinberg
		Office of the Special Master for TARP Executive Compensation
Attachments
cc:	Jeffrey Hurd, Esq.
	Marc R. Trevino, Esq.

2

ANNEX A

APPROVED 2010 COMPENSATION STRUCTURES

This Annex sets forth terms and conditions for the 2010 compensation structures for AIG’s 2010 Covered Employees 26 – 100. (For the avoidance of doubt, if the compensation structure for a Covered Employee fits within the $500,000 “safe harbor” exemption set forth in Section 30.16(a)(3)(ii) of the Rule, the Special Master’s approval is not required for that employee’s compensation structure.) Capitalized terms used in this Annex have the meaning given to them in the preceding letter. To the extent that AIG’s proposed structures do not meet the principles and requirements of this Annex, AIG must make such modifications as are necessary to comply with such principles and requirements.

1.Primary Components of Compensation

·Cash salary. Covered Employees should not receive cash salaries payments in excess of $500,000, other than in exceptional circumstances for good cause shown. Any such exceptions must be individually certified to the Office of the Special Master by AIG’s compensation committee, which is comprised solely of independent directors.

·Stock salary. Stock salary must be determined as a dollar amount through the date salary is earned, be accrued at the same time or times as the salary would otherwise be paid in cash, and vest immediately upon grant, with the number of shares or units based on the fair market value on the date of grant. Whether a grant or payment that is labeled stock salary is salary or a bonus for purposes of the Rule is determined based on all the facts and circumstances.

·Incentive compensation. Under any incentive compensation structure, payments to a Covered Employee must be conditioned upon achievement of objective performance criteria (other than continued service), with such achievement to be assessed and certified by the compensation committee. Performance criteria must be developed by the compensation committee and may be reviewed by the Office of the Special Master. The aggregate amount of incentives paid to Covered Employees for performance achieved only in 2010 may not exceed a specified percentage of AIG’s eligible earnings. The amount and calculation of such eligible earnings will be determined by the compensation committee and may be reviewed by the Office of the Special Master.

2.Allocation Rules

·Application of allocation rules.The allocation rules apply to each Covered Employee’s 2010 “primary compensation structure,” which is equal to the sum of the amounts potentially payable to a Covered Employee (1) in 2010 cash salary, (2) in 2010 stock salary, or (3) under 2010 incentive plans. For purposes of these determinations, 2010 incentive plans are plans for which incentives are earned (a) solely with respect to 2010, and (b) under a multi-year incentive plan established in 2010. Compliance with the allocation rules is to be assessed based on a Covered Employee’s primary compensation structure as designed and established in 2010, assuming both target level of achievement under each incentive plan and maximum level of achievement under each incentive plan.

·Equity allocation.For a Covered Employee whose 2010 primary compensation structure includes more than $500,000 of cash compensation, at least 55% of his or her 2010 primary compensation structure must be allocated to stock compensation. AIG may allocate less than 55% of a Covered Employee’s 2010 primary compensation structure to stock compensation if the cash allocation of the employee’s primary compensation structure does not exceed $500,000, provided that for such employee the allocation in the employee’s 2010 primary compensation

A1

structure to stock compensation must constitute a significant portion of the primary compensation structure.

·Long-term allocation.At least 50% of each Covered Employee’s 2010 primary compensation structure must be allocated to primary components of compensation that will not be paid or become transferable prior to the third anniversary of grant. For a Covered Employee whose 2010 primary compensation structure does not include more than $500,000 of cash compensation, the long-term allocation rule excludes cash salary.

3.Additional Terms and Conditions

·Payment of incentives.No payment or stock compensation grant under a 2010 incentive plan may be made prior to the conclusion of the applicable performance period. Payment under each 2010 incentive plan must consist of at least 50% stock compensation; however, no cash may be paid under an incentive plan to a Covered Employee unless either (1) 50% of the target incentive amount under such plan has been first paid in the form of stock compensation, or (2) at the time of such payment, the percentage of compensation actually received in stock under such Covered Employee’s 2010 primary compensation structure equals or exceeds the percentage of stock compensation required in such Covered Employee’s compensation structure.* The stock compensation paid under a 2010 incentive plan may not be transferred or otherwise redeemed prior to the third anniversary of grant, provided that any performance period exceeding one year in an incentive plan may be counted toward this three-year holding period. For a Covered Employee whose 2010 primary compensation structure includes more than $500,000 of cash compensation, at least 50% of the amount payable in cash under each incentive plan must be deferred at least one year after the date of the initial cash payment under that plan.

·Stock compensation generally.For purposes of these determinations, “stock” compensation means the securities referenced by the “basket” described in Part IV of the March 23, 2010, determinations for AIG’s “Top 25” executives, or, for purposes of “long-term restricted stock” (as defined in the Rule) only, AIG common stock or common stock units. No stock compensation paid to a Covered Employee may be redeemed or become transferable prior to the first anniversary of the date on which such stock compensation vests. Notwithstanding the requirements of the foregoing sentence and the transferability restrictions otherwise applicable to any stock compensation, (1) an amount of stock sufficient to cover an employee’s tax withholding obligations may become immediately transferable to the extent necessary to satisfy the employee’s obligations, and (2) to the extent permitted by the Rule, stock may become immediately transferable upon an employee’s death or separation from service resulting from disability, as defined in the Company’s broad-based long-term disability plan.

*For example: E, a Covered Employee, participates in an incentive program that meets the structural requirements of this Annex, and has a target incentive payment of $100. If E achieves the applicable performance criteria, E would be eligible for a payment of $100, consisting of stock compensation of at least $50, and up to $50 in cash. On the other hand, if E fails to fully meet the performance criteria and as a result is eligible to receive $75 in incentive payments, the amount of E’s incentive payable in cash will depend on whether E previously received 2010 stock compensation, such as stock salary. If E had not received other stock compensation, only $25 of the payment could be in cash because no cash could be paid prior to the payment of 50% of the target payment — $50 in this case — in stock compensation. If, however, E had received other stock compensation, the amount of cash payable under the incentive plan could exceed $25, but only to the extent the cash proportion of compensation actually paid to E with respect to 2010 would not exceed the portion required to be allocated to cash in E’s primary compensation structure.

A2

·Clawbacks and hedging.Any incentive payment must be subject to “clawback” if the payment or the amount thereof was based on materially inaccurate financial statements (which term includes, but is not limited to, statements of earnings, revenues, or gains) or any other materially inaccurate performance metric criteria, or if the Covered Employee is terminated due to misconduct that occurred during the period the incentive was earned. In addition, the compensation structure for each Covered Employee must prohibit the employee from engaging in any derivative or similar transaction with respect to AIG that would undermine the long-term performance incentives created by the compensation structures set forth in this Annex.

·Employees entering the “Top 25”.If AIG reasonably concludes that a Covered Employee may become one of the “Top 25” employees in 2011, the compensation structure for that Covered Employee will be subject to the following additional terms and conditions to assure compliance with pertinent statutory and regulatory requirements. Any payment under a 2010 incentive plan that would be payable to the Covered Employee in cash in the first quarter of 2011 consistent with the terms of this Annex may be paid on or before December 31, 2010. In addition, notwithstanding the other requirements of this Annex, any incentive compensation for performance in 2010 may be paid to the Covered Employee in the form of AIG common stock (but not stock units) that vests on or before December 31, 2010, provided that the transferability of such stock shall be consistent with the structural principles of this Annex. Finally, notwithstanding the other requirements of this Annex, up to one-third of the Covered Employee’s “annual compensation” for 2010 may be paid in the form of “long-term restricted stock,” as those terms are defined in the Rule.

·Severance.No 2010 compensation structure may establish the right to a “golden parachute” payment (as defined in the Rule) or permit an increase in the amount of such a payment under an already-existing arrangement.

4.Other components of compensation

·Tax gross-ups.AIG is prohibited from providing (formally or informally) tax gross-ups to any of the Covered Employees, in the same manner as the gross-up prohibition applies to “Top 25” employees under the Rule.

·Other compensation and perquisites.No more than $25,000 in total other compensation and perquisites may be provided to any Covered Employee, absent exceptional circumstances for good cause shown, as defined by pertinent SEC regulations. Payments to Covered Employees under expatriate arrangements, not to exceed $350,000 per employee (excluding “tax equalization agreements” as defined in the Rule), are excluded from the limitation in the foregoing sentence.

·Supplemental executive retirement plans and non-qualified deferred compensation plans.No amounts may be accrued under supplemental executive retirement plans, and no Company contributions may be made to other “non-qualified deferred compensation” plans, as defined by pertinent SEC regulations, for any Covered Employee for 2010. For the avoidance of doubt, neither the foregoing limitation nor the corresponding limitation in the 2009 Determinations (1) applies to employee-funded elective deferral arrangements, or (2) precludes continuing recognition of age and service credit for Company employees for the purposes of vesting in previously accrued benefits under any plans referred to in this paragraph.

·Qualified plans.For the avoidance of doubt, the Special Master has determined that participation by the Covered Employees in broad-based, tax-qualified retirement and health and welfare plans is consistent with the Public Interest Standard, and amounts contributed to or payable under such plans are not counted against the $25,000 limit on other compensation and perquisites.

A3

EX-10.3

Exhibit 10.3

ASSET PURCHASE AGREEMENT

among

THE SELLERS PARTY HERETO

AIG SECURITIES LENDING CORP.,
as AIG Agent

AMERICAN INTERNATIONAL GROUP, INC.,

MAIDEN LANE II LLC,
as Buyer

and

FEDERAL RESERVE BANK OF NEW YORK,
as Controlling Party

Dated as of December 12, 2008

i

TABLE OF CONTENTS

	PAGE
ARTICLE 1
PURCHASE AND SALE OF RMBS POOL; LIMITED RECOURSE; ASSIGNMENTS
Section 1.01. Purchase and Sale of RMBS Pool	2
Section 1.02. Determination and Payment of the Cash Purchase Price	2
Section 1.03. Payment and Priority of the Deferred Purchase Price	4
Section 1.04. Treatment	7
Section 1.05. Misallocated Assets	8
Section 1.06. Delivery of RMBS Issues	8
Section 1.07. Purchase Prices of RMBS Issues	9
ARTICLE 2
REPRESENTATIONS AND WARRANTIES OF EACH SELLER PARTY
Section 2.01. Organization; Powers	10
Section 2.02. Authorization; No Conflict	10
Section 2.03. Enforceability	10
Section 2.04. Governmental Approvals	10
Section 2.05. Litigation; Compliance With Laws	11
Section 2.06. Margin Regulations	11
Section 2.07. Investment Company Act	11
Section 2.08. Sanctioned Persons	11
Section 2.09. Participation Percentage	12
Section 2.10. Certain Information	12
Section 2.11. Solvency	12
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF AIG
Section 3.01. RMBS Issues	13
Section 3.02. Litigation; Compliance With Laws	13
Section 3.03. No Material Misstatements	13
Section 3.04. Book Value of RMBS Pool	14
Section 3.05. Reasonable Consideration	14
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF THE BUYER
Section 4.01. Organization; Powers	14

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		PAGE
Section 4.02. Authorization; No Conflict		14
Section 4.03. Enforceability		14
ARTICLE 5
CONDITIONS TO SALE AND PURCHASE
Section 5.01. Conditions to Sale by Each Seller of its Share of Each RMBS Issue		15
Section 5.02. Conditions to Purchase of RMBS Pool by the Buyer		15
ARTICLE 6
MISCELLANEOUS
Section 6.01. Waivers; Amendments		17
Section 6.02. Notices; Electronic Communications		18
Section 6.03. Binding Effect		19
Section 6.04. Survival Of Agreement		19
Section 6.05. Indemnity		19
Section 6.06. Successors and Assigns		20
Section 6.07. Counterparts		21
Section 6.08. Severability		21
Section 6.09. Integration		22
Section 6.10. Applicable Law		22
Section 6.11. Jurisdiction; Consent to Service of Process		22
Section 6.12. Confidentiality		23
Section 6.13. WAIVER OF JURY TRIAL		23
Section 6.14. Limited Recourse		24
Section 6.15. Certain Tax Matters		24
Section 6.16. Headings		25
Section 6.17. Further Assurances		25
Section 6.18. Third Party Beneficiary		25
Section 6.19. Role Of Investment Manager And Controlling Party		25
ARTICLE 7
DEFINITIONS
Section 7.01. Certain Definitions		25
Section 7.02. Other Definitional Provisions		30
SCHEDULES
Schedule A	Designated RMBS Issues
Schedule B	Sellers
Schedule C	Notice Information
EXHIBIT

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Exhibit A	Cash Purchase Price Adjustment Amount Certificate
Exhibit B	Form of opinion of Sullivan & Cromwell LLP, New York counsel to each Seller and the AIG Agent
Exhibit C	Form of opinion of Richards Layton & Finger, Delaware counsel to each Delaware Seller
Exhibit D	Form of opinion of local insurance counsel to each Seller
Exhibit E	Form of opinion of in-house counsel to each Seller

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ASSET PURCHASE AGREEMENT

This ASSET PURCHASE AGREEMENT (this “Agreement”) is entered into as of December         , 2008 among American General Life Insurance Company (“Seller 1”), American General Life and Accident Insurance Company (“Seller 2”), The United States Life Insurance Company in the City of New York (“Seller 3”), AIG Life Insurance Company (“Seller 4”), American International Life Assurance Company of New York (“Seller 5”), American Life Insurance Company (“Seller 6”), AIG Annuity Insurance Company (“Seller 7”), The Variable Annuity Life Insurance Company (“Seller 8”), SunAmerica Life Insurance Company (“Seller 9”), First SunAmerica Life Insurance Company (“Seller 10”), AIG SunAmerica Life Assurance Company (“Seller 11”), AIG Securities Lending Corp., as agent of the Sellers (the “AIG Agent”), American International Group, Inc. (“AIG”), Maiden Lane II LLC, a Delaware limited liability company (the “Buyer”) and Federal Reserve Bank of New York in its capacity as Controlling Party (the “Controlling Party”). Each of Seller 1, Seller 2, Seller 3, Seller 4, Seller 5, Seller 6, Seller 7, Seller 8, Seller 9, Seller 10, and Seller 11 are referred to herein as a “Seller” and such entities are collectively referred to herein as the “Sellers.” Each Seller and the AIG Agent are referred to herein as a “Seller Party” and such entities are collectively referred to herein as the “Seller Parties.” Seller Parties, the Buyer and the Controlling Party are sometimes referred to herein collectively as the “Parties” or individually as a “Party.”

RECITALS

A. Each Seller wishes to sell to the Buyer, effective as of the Closing Date, all of its Share of each RMBS Issue.

B. The Buyer proposes to purchase from each Seller such Seller’s Share of each RMBS Issue on the Closing Date by payment to it of its Share of the Cash Purchase Price, the Fixed Deferred Purchase Price and the Variable Deferred Purchase Price.

NOW, THEREFORE, in consideration of the foregoing and the covenants and agreements set forth below, the Parties hereto agree as follows:

ARTICLE 1
PURCHASE AND SALE OF RMBS POOL; LIMITED RECOURSE; ASSIGNMENTS

Section 1.01. Purchase and Sale of RMBS Pool. Subject to the terms and conditions hereof, effective on the Closing Date, each Seller shall sell, transfer, convey and deliver to the Buyer all of its right, title and interest in and to its Share of each RMBS Issue and the Buyer hereby accepts each Seller’s Share of each such RMBS Issue in exchange for such Seller’s Share of the Cash Purchase Price and of the Deferred Purchase Price. Immediately upon the sale by all Sellers to the Buyer of all of their Shares in all of the RMBS Issues on the Closing Date, all Sellers shall instruct the AIG Agent to, and the AIG Agent shall, deliver all RMBS Issues to the Collateral Agent in accordance with Section 1.06 hereof.

Section 1.02. Determination and Payment of the Cash Purchase Price.

(a) The Buyer shall pay to each Seller on the Closing Date its Share of an amount equal to the Cash Purchase Price (as adjusted for the estimated Cash Purchase Price Adjustment Amount) by paying such amount to the Escrow Account to be released for purposes only of payment to Federal Reserve Bank of New York, as counterparty, to close out outstanding securities lending transactions later on the Closing Date.

(b) Within 30 days after the Closing Date, the AIG Agent shall deliver to the Controlling Party a final Cash Purchase Price Adjustment Amount Certificate describing the AIG Agent’s calculation of the final Cash Purchase Price Adjustment Amount and such other information as shall permit the Controlling Party to review such calculation. If the Controlling Party and the AIG Agent agree on the amount of the final Cash Purchase Price Adjustment Amount and such amount differs from the estimated Cash Purchase Price Adjustment Amount as of the Closing Date, then within five Business Days after such agreement is reached each Seller shall pay to the Buyer its Share of the amount by which the final Cash Purchase Price Adjustment Amount exceeds the estimated Cash Purchase Price Adjustment Amount or the Buyer shall pay to the AIG Agent for the account of each Seller its Share of the amount by which the final Cash Purchase Price Adjustment Amount is less than the estimated Cash Purchase Price Adjustment Amount.

(c) If the AIG Agent or the Controlling Party determines at any time after a determination of the actual Cash Purchase Price Adjustment Amount is made and before the 90th day following the Closing Date (and notifies the other party of the same within that same 90-day period) that such Cash Purchase Price Adjustment Amount must be revised because of the discovery subsequent to such prior determination of relevant facts, then the AIG Agent shall deliver to the Controlling Party a revised final Cash Purchase Price Adjustment Amount Certificate describing the AIG Agent’s calculation of the revised final Cash Purchase Price Adjustment Amount and such other information as shall permit the Controlling Party to review such calculation. Any further challenges to the Cash

2

Purchase Price Adjustment that have not been raised by the AIG Agent or the Controlling Party within 90 days after the Closing Date will be deemed waived; provided that such 90-day period may be extended by mutual agreement of the Parties in which case any further challenges to the Cash Purchase Price Adjustment may be raised in accordance with this Section within such other mutually-agreed period of time. If the Controlling Party and the AIG Agent agree on the actual amount of the revised final Cash Purchase Price Adjustment Amount and such amount differs from the prior final Cash Purchase Price Adjustment Amount, then within five Business Days after such agreement is reached each Seller shall pay to the Buyer its Share of the amount by which the revised final Cash Purchase Price Adjustment Amount exceeds the prior final Cash Purchase Price Adjustment Amount or the Buyer shall pay to the AIG Agent for the account of each Seller its Share of the amount by which the revised final Cash Purchase Price Adjustment Amount is less than the prior final Cash Purchase Price Adjustment Amount.

(d) All calculations and determinations made by the AIG Agent and the Controlling Party under this Section shall be made in good faith and in a commercially reasonable manner and each such Person shall provide each other such Person reasonable cooperation in connection with the process of making such calculations and determinations. In furtherance of the foregoing, the AIG Agent and each of the Sellers agrees to provide access to its books and records relating to each RMBS Issue to the Controlling Party and its designees during regular business hours to aid the Controlling Party and its agents and advisors in their calculations and determinations under this Section. The Cash Purchase Price Adjustment Amount Certificates delivered pursuant to subsection (b) and (c) of this Section shall be prepared on a basis consistent with the preparation of Exhibit A hereto and shall be complete and correct as of the time when delivered by AIG Agent to the Buyer.

(e) If the AIG Agent and the Controlling Party are unable to reach an agreement on the Cash Purchase Price Adjustment Amount or any other calculation or determination under Section 1.02(b) or (c) above, they shall promptly thereafter cause independent accountants (who shall not have any material relationship with the AIG Agent or any of its Affiliates) of nationally recognized standing reasonably satisfactory to the AIG Agent and the Controlling Party, promptly to review this Agreement and the disputed items or amounts for the purpose of calculating the applicable Cash Purchase Price Adjustment Amount. Such independent accountants shall deliver to the AIG Agent and the Controlling Party, as promptly as practicable, a report setting forth such calculation. Such report shall be final and binding upon the AIG Agent, each Seller, the Buyer, the Senior Lender and the Controlling Party. The cost of such review and report shall be borne by the Buyer.

(f) If on the scheduled Closing Date any RMBS Issue is delivered to the Collateral Account in anticipation of purchase by the Buyer but is not purchased in accordance with Section 1.02(a) by 1:30 pm, EST on such day, the Buyer will

3

instruct the Collateral Agent to redeliver such RMBS Issues to the account of the AIG Agent for the account of the Sellers.

Section 1.03. Payment and Priority of the Deferred Purchase Price.

(a) After the Closing Date the Deferred Purchase Price shall be paid by the Buyer only in accordance with the Waterfall. Each Seller shall be entitled to such Seller’s Share of the Deferred Purchase Price. Interest on the Fixed Deferred Purchase Price shall accrue during each Calculation Period on a daily basis on the amount of the Fixed Deferred Purchase Price outstanding as of each day and at a rate per annum equal to LIBOR in effect for such Calculation Period plus 3.00%; provided that interest on the Fixed Deferred Purchase Price shall accrue during the initial Calculation Period at the rate of 4.635% per annum. Interest shall be calculated during any Calculation Period on the basis of the actual days elapsed and the actual number of days in the calendar year during which such Calculation Period occurs. Interest on the Fixed Deferred Purchase Price shall be capitalized as of the start of each Interest Capitalization Date by increasing the outstanding amount of the Fixed Deferred Purchase Price by the amount of accrued but unpaid interest on the Fixed Deferred Purchase Price as of such time and thereafter deeming such accrued interest paid in full as of such time. Interest shall not accrue on the Variable Deferred Purchase Price.

(b) All rights of the Sellers to payment of the Deferred Purchase Price and any amounts owed by the Buyer to the Seller Parties under any Transaction Document (other than pursuant to Section 1.02 hereof) or otherwise (collectively, the “Junior Obligations”) are subordinate and junior in right of payment to (i) the Obligations (excluding the Contingent Interest) owing to the Senior Lender pursuant to the Credit Agreement, including in respect of principal and interest on the Senior Loan (excluding the Contingent Interest), and (ii) all other items above the Fixed Deferred Purchase Price in the priority of payments set forth in the Waterfall (the amounts in clauses (i) and (ii) being, collectively, the “Senior Debt”) to the extent and in the manner provided in the Credit Agreement and in the Security Agreement.

(c) Unless and until all Senior Debt shall have been paid in full in cash in accordance with its terms, the Buyer shall not, directly or indirectly, make or agree to make:

(i) any payment (in cash or property, by set-off or otherwise), direct or indirect, of or on account of Junior Obligations (except for payments relating to the Cash Purchase Price Adjustment Amount under Section 1.02(b) or (c) above) and no such payment shall be accepted by any Seller Party; or

(ii) any purchase, prepayment or other acquisition, direct or indirect, in respect of the Junior Obligations, and no such payment shall be accepted by any Seller Party.

4

(d) Upon any payment by the Buyer of any kind or character, whether in cash, property or securities, to creditors upon any dissolution or winding up or total or partial liquidation or reorganization of the Buyer, whether voluntary or involuntary or in bankruptcy, insolvency, receivership or other statutory or common law proceedings or arrangements, then and in any such event all principal and interest and all other amounts due or that become due upon the Senior Debt shall first be paid in full in cash before any Seller Party shall be entitled to retain any amounts so paid in respect of the Junior Obligations and, upon any such dissolution or winding up or liquidation or reorganization, any payment of any kind or character, whether in cash, property or securities, to which any Seller Party would be entitled, except as otherwise provided herein, shall be paid by the Buyer or by any receiver, trustee in bankruptcy, liquidating trustee, agent or other Person making such payment, or by any Seller Party if received by them, to the Collateral Agent for distribution in accordance with the Waterfall, to the extent necessary to pay all the Senior Debt in full in cash, after giving effect to any concurrent payment to or for any holder of the Senior Debt, before any payment is made to any Seller Party on account of the Junior Obligations.

(e) Until the Senior Debt shall have been paid in full in cash, each Seller Party irrevocably authorizes and empowers (without imposing any obligation on) the Senior Lender and its representatives, under the circumstances set forth in paragraph (c) above, to demand, sue for, collect and receive every such payment described therein and give acquittance therefor and to file claims and proofs of claims in any statutory or nonstatutory proceeding. Each Seller Party shall execute and deliver to the Senior Lender and its representatives all such further instruments confirming the foregoing authorization, and all such powers of attorney, proofs of claim, assignments of claim and other instruments, and shall take all such other action as may be requested by the Senior Lender or its representatives in order to enable the Senior Lender to enforce all of its claims upon or in respect of the Junior Obligations.

(f) Until the Senior Debt shall have been paid in full in cash, should any payment be collected or received by any Seller Party or should any Seller Party acquire custody, control or possession of all or any portion of the Collateral or the proceeds thereof other than, in each case, pursuant to or in accordance with the terms of this Agreement, any such Seller Party shall promptly (but in any event within five Business Days) turn over the same to the Collateral Agent in the form received (except for the endorsement or the assignment of any such Seller Party when necessary) and, until so turned over, the same shall be held in trust by any such Seller Party as the property of the Senior Lender.

(g) Each Seller Party agrees that it will not at any time, without the prior written consent of the Controlling Party, (i) commence or institute against the Buyer or join with or facilitate any other Person in commencing or instituting against the Buyer, any bankruptcy, reorganization, arrangement, readjustment of debt, dissolution, receivership, insolvency or liquidation proceedings, or other proceedings under any United States Federal or state, or other jurisdiction,

5

bankruptcy or similar law or statute now or hereafter in effect in connection with any obligations relating to this Agreement or any of the other Transaction Documents or (ii) participate in any assignment for benefit of creditors, compositions, or arrangements with respect to the Buyer’s debts. The agreements in this Section 1.03 shall survive termination of this Agreement and payment in full of the Senior Debt.

(h) No Seller Party shall have any right to demand payment of, or institute any proceedings in respect of, the Junior Obligations, or exercise any remedies under this Agreement or any of the Transaction Documents or request or instruct the Controlling Party or the Collateral Agent to exercise any such remedies until the Senior Debt is paid in full in cash.

(i) Application of the foregoing provisions to the Junior Obligations, the subordination effected thereby and the rights of the Senior Lender shall not be affected by (i) any amendment of or addition or supplement to any Transaction Document or the Senior Debt or any instrument or agreement relating thereto or providing collateral security for any Senior Debt, (ii) any exercise or non-exercise of any right, power or remedy under or in respect of any Transaction Document or the Senior Debt or any instrument or agreement relating thereto, or any release of any collateral securing the Senior Debt or (iii) any waiver, consent, release, indulgence, extension, renewal, modification, delay or any other action, inaction or omission in respect of any Transaction Document or the Senior Debt or any instrument or agreement relating thereto or providing collateral security for the Senior Debt, in each case whether or not any Seller Party shall have had notice or knowledge of any of the foregoing.

(j) Each Seller Party hereby waives notice of or proof of reliance by the Senior Lender upon the provisions hereof, and the Senior Debt shall conclusively be deemed to have been created, contracted, incurred or maintained in reliance upon the provisions hereof.

(k) The Buyer hereby waives diligence, presentment, demand, protest and notice of any kind whatsoever. The non-exercise by any holder of Senior Debt, the Controlling Party or the Collateral Agent of any of its rights hereunder or under any other Transaction Document in any particular instance shall not constitute a waiver thereof in that or any subsequent instance.

(l) The subordination provisions contained herein are for the benefit of the holders of Senior Debt and their respective successors and assigns and may not be rescinded or cancelled or modified in any way without the prior written consent of the Controlling Party.

(m) Notwithstanding anything herein to the contrary, neither the Controlling Party nor any holder of Senior Debt shall have any obligation to take the interests of any Seller Party into consideration when making decisions

6

concerning the exercise of any rights or remedies as against the Buyer or in respect of the Collateral.

(n) Notwithstanding anything in this Section to the contrary, the Contingent Interest and the Variable Deferred Purchase Price will rank pari passu with each other and subordinate to the Senior Debt.

(o) In addition, none of the foregoing provisions of this Section 1.03 is intended or will be interpreted as requiring any Seller to return to the Buyer any amounts received by it pursuant to the Waterfall.

Section 1.04. Treatment.

(a) It is the intention of each Party that the sale, transfer, conveyance and delivery of the RMBS Pool and each Seller’s Share thereof shall constitute a true sale and absolute assignment, without recourse (except as specifically provided herein), and not for security of RMBS Pool from the applicable Seller Party to the Buyer and that neither any RMBS Issue nor the RMBS Pool nor any Seller’s Share thereof be a part of any Seller’s property or estate for any purpose under any state or federal law, including without limitation in the event of the insolvency of any Seller, after the Closing Date. Although it is not the intent of the Parties, if the sale, transfer, conveyance and delivery of any RMBS Issue, the RMBS Pool or any Seller’s Share thereof contemplated by this Agreement is deemed to be other than a true sale notwithstanding the express intent of the Parties hereto, this Agreement shall be deemed to be a security agreement that grants as of the date hereof a first priority security interest from the relevant Seller to the Buyer, and the Buyer shall have all the rights, powers and privileges of a secured party under the UCC. In such event, each Seller agrees, at the Buyer’s expense, to take such action and execute and file such documents as shall be necessary or requested by the Buyer in order to fully realize the benefits of such secured party status, including, without limitation, powers of attorney, financing statements, notices of lien or other instruments or documents.

(b) In accordance with Section 1.04(a), each Party will report the transfer, conveyance, and delivery of the RMBS Pool, as applicable to such Party, contemplated hereunder as an absolute sale in any general ledger or other accounting record and, as to each Seller, the separate unconsolidated financial statements of such Seller. In addition, the transfer, conveyance and delivery of the RMBS Pool (i) is intended to constitute a sale of such assets and will be reported as such under United States generally accepted accounting principles or statutory accounting principles (or such recognized accounting principles applicable to the respective reporting Party) and for United States federal income tax purposes such that the RMBS Pool will no longer be included in any consolidated financial statements in which any financial statements of any Seller are included and (ii) meet all of the requirements for such accounting and tax treatment. Except as described herein, neither the Sellers nor the AIG Agent now has or intends to acquire any other direct or indirect ownership or other economic

7

interest in, or swap, cap or other hedge or derivative instrument or other right or obligation with respect to, any RMBS Issue or security backed thereby.

(c) Each of the parties hereto hereby agrees that, with respect to any RMBS Issue or other property, assets or rights purported to be transferred, in whole or in part, by Seller 4 or Seller 6 (together, the “Delaware Sellers” and each a “Delaware Seller”) pursuant to this Agreement, such transfer shall be deemed to constitute a “securitization transaction” as the term is defined in the Asset-Backed Securities Facilitation Act, 6 Del. C. § 2701A et seq.(the “Securitization Act”). In addition, each of the Parties agrees that any transfer of any RMBS Issue or other property, assets or rights, in whole or in part, by the Delaware Sellers pursuant to this Agreement shall be subject to the provisions of the Securitization Act, all of which are incorporated herein by reference. For purposes of complying with the requirements of the Securitization Act, each of the Parties hereby further agrees that:

(i) Any property, assets or rights purported to be transferred, in whole or in part, by a Seller Party pursuant to this Agreement shall be deemed to no longer be the property, assets or rights of such Seller Party;

(ii) None of the Delaware Sellers, their respective creditors or, in any insolvency proceeding with respect to a Delaware Sellers or its property, a bankruptcy trustee, receiver, debtor, debtor in possession or similar person, to the extent the issue is governed by Delaware law, shall have any rights, legal or equitable, whatsoever to reacquire (except pursuant to provision of this Agreement), reclaim, recover, repudiate, disaffirm, redeem or recharacterize as property of the Delaware Sellers any property, assets or rights purported to be transferred, in whole or in part, by the Delaware Sellers pursuant to this Agreement; and

(iii) In the event of a bankruptcy, receivership or other insolvency proceeding with respect to a Delaware Seller or its property, to the extent the issue is governed by Delaware law, such property, assets and rights shall not be deemed to be part of such Delaware Seller’s property, assets, rights or estate.

Section 1.05. Misallocated Assets. If, at any time or from time to time (whether prior to or after the Closing Date), any Party hereto shall receive or otherwise possess any asset that is allocated to any other Person pursuant to this Agreement, such Party shall promptly transfer, or cause to be transferred, such asset to the Person so entitled thereto. Prior to any such transfer, the Person receiving or possessing such asset shall hold such asset in trust for the other Person entitled to such asset.

Section 1.06. Delivery of RMBS Issues. In furtherance of the assignment, transfer, conveyance and delivery of the RMBS Pool, (a) on the Closing Date each Seller shall instruct the AIG Agent to, and the AIG Agent shall, execute and

8

deliver such stock powers, certificates of title, assignments of contracts and other instruments of assignment, transfer and conveyance as and to the extent necessary to evidence the sale, assignment, transfer, conveyance and delivery of all of the Seller Parties’ right, title and interest in and to each RMBS Issue to the Buyer and (b) on the Closing Date or as soon as reasonably practicable thereafter (but, in any event, not later than 30 days following the date of this Agreement), the AIG Agent shall use commercially reasonable efforts to provide to the Collateral Agent the originals (or, if originals, are not held by the AIG Agent, true and complete copies) and to the Investment Manager electronic copies of all Related Instruments, if any, in its possession relating to the RMBS Issues sold to the Buyer under this Agreement. Without limiting the foregoing, the AIG Agent shall, prior to 10 a.m., New York time, on the Closing Date, cause The Bank of New York Mellon, as custodian for the RMBS Pool for the benefit of the AIG Agent, to (i) debit the RMBS Issues to the AIG Agent’s account with The Bank of New York Mellon and credit such RMBS Issues to the Collateral Account established under the Control Agreement and (ii) confirm in writing to the Buyer, the Controlling Party and the AIG Agent that all RMBS Issues have been so credited to the Collateral Account; provided that, if any RMBS Issues have not been so transferred by such time, the Cash Purchase Price for such RMBS Issues, adjusted as provided in Section 1.02(a) hereof, shall be subtracted from the Cash Purchase Price payable by the Buyer at the Closing on the Closing Date. If less than all RMBS Issues are credited to the Collateral Account as of the Closing Date, each Seller Party agrees to take all further action that may be required to cause all RMBS Issues to be credited to the Collateral Account promptly following the Closing Date and in no event later than five Business Days after the Closing Date.

Section 1.07. Purchase Prices of RMBS Issues. Each of the Parties hereto hereby acknowledges that: (a) the Investment Manager provided certain mid-market pricing estimates of the RMBS Issues to the Parties and advised them that they were as of October 31, 2008, that such estimates do not purport to be current as of the Closing Date and are based on projected cash flows relating to such RMBS Issues (based in turn on agreed upon assumptions); (b) such estimates, like any estimates provided under or in connection with the Transaction (including, without limitation, any estimates of the market value for each RMBS Issue), are inherently uncertain, do not purport to reflect prices at which transactions in any such RMBS Issues could actually be effected (if any transactions could be effected) and do not necessarily reflect discounts that would be reflected in actual market transactions as a result of, among other things, the highly illiquid nature of the RMBS Issues and related markets; and (c) the parties used such estimates as the basis for their negotiation of the Purchase Price of the RMBS Issues.

ARTICLE 2
REPRESENTATIONS AND WARRANTIES OF EACH SELLER PARTY

Each Seller Party, as to itself, represents and warrants to the Buyer that:

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Section 2.01. Organization; Powers. Such Seller (a) is duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization, (b) has all requisite power and authority to (i) own its Share of each RMBS Issue, (ii) sell, transfer, convey and deliver its Share of each RMBS Issue to the Buyer hereunder and (iii) execute, deliver and perform its obligations under each Transaction Document and each other agreement or instrument contemplated thereby to which it is a party and (c) has authorized the Agent to transfer its Share to the RMBS Pool to ML II and accept the Cash Purchase Price proceeds on such Seller’s behalf as provided in this Agreement and the other Transaction Documents.

The AIG Agent represents and warrants to the Buyer that it (a) is duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization and (b) has all requisite power and authority to (i) act as agent for each Seller, (ii) sell, transfer, convey and deliver the RMBS Pool as agent on behalf of the Sellers hereunder and (iii) execute, deliver and perform its obligations under each Transaction Document and each other agreement or instrument contemplated thereby to which it is or will be a party.

Section 2.02. Authorization; No Conflict. The execution, delivery and performance of each Transaction Document (to which it is a party) by such Seller Party (a) have been duly authorized by all requisite corporate and, if required, stockholder action and (b) will not (i) result in the violation by such Seller Party of (A) any provision of law, statute, rule or regulation, or of the certificate or articles of incorporation or other constitutive documents or bylaws of such Seller Party, (B) any order of any Governmental Authority or (C) any provision of any indenture, agreement or other instrument to which such Seller Party is a party or by which it or any of its property is or may be bound, (ii) be in conflict with, result in a breach of or constitute (alone or with notice or lapse of time or both) a default under, or give rise to any right to accelerate or to require the prepayment, repurchase or redemption of any obligation under any such indenture, agreement or other instrument or (iii) result in the creation or imposition of any Lien upon or with respect to any property or assets now owned or hereafter acquired by such Seller Party.

Section 2.03. Enforceability. This Agreement has been duly executed and delivered by such Seller Party and constitutes, and each other Transaction Document to which it is a party, when executed and delivered by such Seller Party, will constitute, a legal, valid and binding agreement of such Seller Party enforceable against such Seller Party in accordance with its terms, except that such enforceability may be limited by bankruptcy, insolvency, or other similar laws of general applicability affecting the enforcement of creditors’ rights generally and by the court’s discretion in relation to equitable remedies.

Section 2.04. Governmental Approvals. No action, consent or approval of, notice, registration or filing with, or any other action by, any Governmental Authority is or will be required to be taken, obtained or made by such Seller Party

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in connection with the Transactions except such as (i) have been made or obtained and are in full force and effect and (ii) with respect to any Governmental Authority of the United States or any state thereof, if the failure to take such action, obtain such consent or approval or register to file with such Governmental Authority could not reasonably be expected to have a Material Adverse Effect.

Section 2.05. Litigation; Compliance With Laws. Except as set forth in AIG’s most recent Form 10-Q filed with the Securities and Exchange Commission, there are no actions, suits or proceedings at law or in equity or by or before any Governmental Authority or arbitrator now pending or, to the knowledge of such Seller Party, threatened against or affecting such Seller Party or any business, property or rights of any such Seller Party (i) that involve any Transaction Document or the Transactions or (ii) as to which there is a reasonable possibility of an adverse determination and that, if adversely determined, could reasonably be expected, individually or in the aggregate, to result in a Material Adverse Effect.

Section 2.06. Margin Regulations. No part of the proceeds of such Seller’s Share of the Purchase Price will be used, whether directly or indirectly, and whether immediately, incidentally or ultimately, for any purpose that entails a violation of, or that is inconsistent with, the provisions of the regulations of the Board of Governors of the Federal Reserve System, including Regulation T, Regulation U or Regulation X.

Section 2.07. Investment Company Act. The AIG Agent represents that it is not, and in the case of each Seller, such Seller represents that it is not, and after application of the proceeds of its portion of the Purchase Price will not be, required to register as an “investment company” as such term is defined in the Investment Company Act of 1940, as amended.

Section 2.08. Sanctioned Persons.

(a) Each Seller Party represents that neither such Seller Party nor, to the knowledge of such Seller Party, any director, officer, agent or Affiliate of such Seller Party is a Person that is, or is owned or controlled by a Person that is, currently:

(i) the subject of any U.S. sanctions administered by the Office of Foreign Assets Control of the U.S. Treasury Department or other relevant non-U.S. sanctions authority (collectively “Sanctions”) or

(ii) located, organized or resident in a country or territory that is the subject of Sanctions (including, without limitation, Burma/Myanmar, Cuba, Iran, North Korea, Sudan and Syria).

(b) Each Seller Party represents and covenants that such Seller Party will not, directly or indirectly, use the proceeds of its Share of the Cash Purchase

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Price or the Deferred Purchase Price of the RMBS Pool, or otherwise make available such proceeds to any Person, for the purposes of financing any activities or business of or with any Person or in any country or territory that, at the time of such financing, is the subject of Sanctions.

Section 2.09. Participation Percentage. Such Seller agrees that the Participation Percentage set forth opposite its name in the definition thereof is its Participation Percentage.

Section 2.10. Certain Information. The exact legal name of such Seller and jurisdiction of organization of such Seller is set forth on Schedule B and such information is correct and complete.

Section 2.11. Solvency. (a) As of the date hereof and immediately after the Closing, (i) the consolidated fair value of the assets of such Seller, at a fair valuation, do and will exceed such Seller’s consolidated debts and liabilities, subordinated, contingent or otherwise; (ii) the consolidated present fair saleable value of the property of such Seller is and will be greater than the amount that will be required to pay the probable amount of such Seller’s consolidated debts and other liabilities, subordinated, contingent or otherwise, as such debts and other liabilities become absolute and matured; (iii) such Seller is and will be able to pay its consolidated debts and liabilities, subordinated, contingent or otherwise, as such debts and liabilities become absolute and matured and (iv) such Seller does not have and will not have unreasonably small capital with which to conduct the business in which such Seller is engaged as such business is now conducted and is proposed to be conducted after the Closing.

(b) With respect to each Seller which is a regulated insurance company, as of the date hereof and immediately after the Closing: (a) such Seller’s assets exceeded and will exceed its liabilities as measured in accordance with statutory accounting principals permitted or prescribed by such Seller’s primary regulator; (b) net realizable value of the property of such Seller is and will be greater than the amount that will be required to pay the probable amount of such Seller’s debts and other liabilities, subordinate, contingent or otherwise, as such debts and other liabilities become absolute and matured; (c) such Seller is and will be able to pay its liabilities, subordinated, continent or otherwise, as such liabilities become absolute and matured; and (d) such Seller has and will have capital in excess of company action levels (or, in the case of Seller 6, its equivalent).

(c) In any proceeding involving, or determining, any of the matters set forth in subsection (a) of this Section, if and to the extent that the laws of the State of New York other than the insurance laws are applicable, the provisions of subsection (a) and not subsection (b) shall be applicable. In any proceeding involving, or determining, any of the matters set forth in subsection (b) of this Section, if and to the extent insurance laws are applicable, the provisions of subsection (b) and not subsection (a) shall be applicable.

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ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF AIG

AIG represents to the Buyer that:

Section 3.01. RMBS Issues. (a) Each Seller has good and marketable title to its Share of each of the RMBS Issues and has full right to sell and assign its Share of each RMBS Issue to the Buyer free and clear of any Lien or impediment to sale, or any other adverse claim (as defined in Article 8 of the NYUCC), and has full right and authority to sell and assign its Share of each RMBS Issue pursuant to this Agreement. On the Closing Date, upon the sale, conveyance and delivery to the Buyer of all of such Seller’s right, title and interest in and to its Share of each RMBS Issue in accordance with Section 1.06 hereof and on payment of the Cash Purchase Price by the Buyer to the Sellers, the Buyer shall have good and marketable title to 100% of all of the right, title and interest in each RMBS Issue free and clear of all Liens and any other adverse claims other than by or on behalf of the Buyer and will be a bona fide holder for value with respect to each RMBS Issue.

(b) Each RMBS Issue is in the custody of or maintained on the books of the Depository Trust Company.

Section 3.02. Litigation; Compliance With Laws. Except as set forth in AIG’s most recent Form 10-Q filed with the Securities and Exchange Commission, there are no actions, suits or proceedings at law or in equity or by or before any Governmental Authority or arbitrator now pending or, to the knowledge of AIG, threatened against or affecting AIG or any business, property or rights of AIG (i) that involve any RMBS Issue or (ii) as to which there is a reasonable possibility of an adverse determination and that, if adversely determined, could reasonably be expected, individually or in the aggregate, to result in a Material Adverse Effect.

Section 3.03. No Material Misstatements. No information, report, certificate, financial statement, exhibit or schedule furnished by AIG or by the Seller Parties to the Buyer in connection with the negotiation of any Transaction Document or in connection with the acquisition of any RMBS Issue, when taken as a whole, contained any material misstatement of fact or omitted to state any material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading; provided that to the extent any such information, report, certificate, financial statement, exhibit or schedule was based upon or constitutes a forecast or projection, AIG represents only that it or the Seller Parties, as the case may be, acted in good faith and utilized assumptions reasonable at the time made (based upon accounting principles consistent with the historical audited financial statements of AIG or such Seller Party, as the case may be) and exercised due care in the preparation of such information, report, certificate, financial statement, exhibit or schedule.

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Section 3.04. Book Value of RMBS Pool. The AIG Agent’s October 31, 2008 valuation of the RMBS Pool, as previously provided to Buyer, was prepared applying the same policies, processes and procedures that are used for valuations performed for use in AIG’s quarter-end financial statements in accordance with FASB Statement No. 115 Accounting for Certain Investments in Debt and Equity Securities and FASB Statement No. 157 Fair Value Measurement.

Section 3.05. Reasonable Consideration. Prior to entering into this Agreement, AIG Agent explored various means of monetizing the RMBS Pool on behalf of the Sellers. These efforts included, among other things, internal analysis and retaining and consulting with BlackRock Financial Management, Inc. (“BlackRock”) and Morgan Stanley & Co. Incorporated to assist the AIG Agent in determining available options for disposing of the RMBS Pool. Based upon (a) the foregoing efforts, (b) the AIG Agent’s valuation of the RMBS Pool for purposes of AIG’s third quarter financial statements and also as of October 31, 2008, (c) the AIG Agent’s assessment of market conditions and pricing provided by third-party pricing services and (d) the valuations determined by Blackrock in consultation with the Controlling Person and Buyer, the Seller Parties concluded that the Purchase Price was reasonable consideration for the RMBS Pool.

ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF THE BUYER

The Buyer represents to each Seller Party as of the date hereof that:

Section 4.01. Organization; Powers. The Buyer (i) is duly organized and validly existing under the laws of the State of Delaware, (ii) is in good standing under the laws of such state and (iii) has full power and authority to execute, deliver and perform its obligations under this Agreement and each of the other Transaction Documents to which it will be a party.

Section 4.02. Authorization; No Conflict. The Buyer’s execution, delivery, and performance of this Agreement and the other Transaction Documents to which it is a party have not resulted, and will not result, in a breach or violation of any provision of (i) the Buyer’s organizational documents, (ii) any statute, law, writ, order, rule or regulation of any governmental authority applicable to the Buyer, (iii) any judgment, injunction, decree order or determination applicable to the Buyer or (iv) any contract, indenture, mortgage, loan agreement, note, lease or other instrument by which the Buyer may be bound or to which any of the assets of the Buyer are subject.

Section 4.03. Enforceability. This Agreement and each other Transaction Document to which the Buyer is a party (i) has been duly authorized, executed and delivered by the Buyer and (ii) constitutes the legal, valid, and binding

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obligation of the Buyer, enforceable against the Buyer in accordance with its terms, except that such enforceability may be limited by bankruptcy, insolvency, or other similar laws of general applicability affecting the enforcement of creditors’ rights generally and by the court’s discretion in relation to equitable remedies. No notice to, registration with, consent or approval of, or any other action by, any relevant Governmental Authority or other Person is or will be required for the Buyer to execute, deliver and perform its obligations under this Agreement or any other Transaction Document except such as have been obtained and are in full force and effect.

ARTICLE 5
CONDITIONS TO SALE AND PURCHASE

Section 5.01. Conditions to Sale by Each Seller of its Share of Each RMBS Issue. Each Seller’s obligation to sell, transfer, convey and deliver its Share of the RMBS Pool to the Buyer on the Closing Date shall be subject to the conditions that (a) the Buyer’s representations and warranties set forth in Article 4 hereof are true and correct on the Closing Date as if made on and as of the Closing Date, (b) such Seller shall have received a counterpart of this Agreement duly executed on behalf of the Buyer and (c) such Seller shall have received payment of its Share of the Cash Purchase Price for the RMBS Pool from the Buyer.

Section 5.02. Conditions to Purchase of RMBS Pool by the Buyer. The Buyer’s obligation to purchase all of the Sellers’ Shares of the RMBS Pool and to pay the Cash Purchase Price on the Closing Date are subject to satisfaction of the following conditions precedent on the Closing Date:

(a) The Buyer shall have received executed legal opinions dated the Closing Date and addressed to, and in form satisfactory to, the Buyer and the Controlling Party and covering such other matters incident to the Transactions as any the Buyer or the Controlling Party shall have reasonably requested from:

(i) Sullivan & Cromwell LLP, New York counsel to each Seller and the AIG Agent, in substantially the form of Exhibit B hereto;

(ii) Richards Layton & Finger, Delaware counsel to each Delaware Seller in substantially the form of Exhibit C hereto;

(iii) local insurance counsel to each Seller in substantially the form of Exhibit D hereto; and

(iv) in-house counsel for each Seller in substantially the form of Exhibit E hereto.

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(b) All legal matters incident to this Agreement, the purchase and sale of each Seller’s Share of the RMBS Pool hereunder and the other Transaction Documents shall be satisfactory to the Buyer.

(c) The Buyer shall have received (i) a copy of the certificate or articles of incorporation, formation or organization (as applicable), including all amendments thereto, of each Seller Party, certified as of a recent date by the Secretary of State of the state of its organization, and a certificate as to the good standing of each Seller Party, as of a recent date, from such Secretary of State; (ii) a certificate of the Secretary or Assistant Secretary of each Seller Party dated the Closing Date and certifying (A) that attached thereto is a true and complete copy of the bylaws, operating agreement, partnership agreement or other applicable constitutive document of such Seller Party as in effect on the Closing Date and at all times since a date prior to the date of the resolutions described in clause (B) below, (B) that attached thereto is a true and complete copy of resolutions duly adopted by the Board of Directors or equivalent body of such Seller Party authorizing the execution, delivery and performance of the Transaction Documents to which such Seller Party is a Party and that such resolutions have not been modified, rescinded or amended and are in full force and effect, (C) that the certificate or articles of incorporation, formation or organization (as applicable) of such Seller Party have not been amended since the date of the last amendment thereto furnished pursuant to clause (i) above and (D) as to the incumbency and specimen signature of each officer executing any Transaction Document or any other document delivered in connection herewith on behalf of such Seller Party; (iii) a certificate of another officer as to the incumbency and specimen signature of the Secretary or Assistant Secretary executing the certificate pursuant to clause (ii) above; and (iv) such other documents as the Buyer may reasonably request.

(d) The Buyer shall be satisfied in its sole discretion with the collateral (including the value of such collateral) securing the obligations of the Obligors with respect to the RMBS Issues.

(e) The Buyer shall have received the results of a search of the Uniform Commercial Code filings (or equivalent filings) made with respect to each Seller Party in the states (or other jurisdictions) of formation of such Seller Parties as indicated on Schedule B hereto and no Liens on or with respect to any RMBS Issue or any Seller’s Share of any RMBS Issue shall be indicated by such search.

(f) All requisite Governmental Authorities and third parties shall have approved or consented to the Transactions to the extent required, all applicable appeal periods shall have expired and there shall not be any pending or threatened litigation, governmental, administrative or judicial action that could reasonably be expected to restrain, prevent or impose burdensome conditions on the Transactions.

(g) The representations and warranties of each of the Seller Parties set forth in Article 2 hereof and of AIG set forth in Article 3 hereof and in each other

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Transaction Document to which a Seller Party or AIG is a party shall be true and correct on and as of the Closing Date with the same effect as though made on and as of such date, except to the extent such representations and warranties expressly relate to an earlier date.

(h) At the time of and immediately after the Closing, no Default (as defined in the Credit Agreement dated as of September 22, 2008 between AIG, as Borrower, and Federal Reserve Bank of New York, as Lender) shall have occurred and be continuing.

(i) If the Collateral Agent shall have advised the Buyer in writing prior to noon, EST, on the Closing Date that not all RMBS Issues have been delivered to the Collateral Account, the Buyer shall be satisfied, in its sole discretion, with the number of RMBS Issues so delivered.

(j) The Buyer shall have received a copy of the true sale and non-consolidation signed legal opinions delivered to each Seller or its accountants.

(k) The Buyer shall have received counterparts of this Agreement duly executed by each Party other than the Buyer.

(l) Agreements terminating the Sec Lending Program upon closing out the last of the transactions then outstanding thereunder, in form and substance satisfactory to the Buyer, shall have been executed and delivered by all the parties thereto other than Federal Reserve Bank of New York.

(m) Each of the conditions precedent set forth in Section 6.01 of the Credit Agreement shall have been satisfied.

ARTICLE 6
MISCELLANEOUS

Section 6.01. Waivers; Amendments.

(a) No failure or delay of the Buyer in exercising any power or right hereunder or under any other Transaction Document shall operate as a waiver thereof, nor shall any single or partial exercise of any such right or power, or any abandonment or discontinuance of steps to enforce such a right or power, preclude any other or further exercise thereof or the exercise of any other right or power. The rights and remedies of the Buyer hereunder and under the other Transaction Documents are cumulative and are not exclusive of any rights or remedies that it would otherwise have. No waiver of any provision of this Agreement or any other Transaction Document or consent to any departure by any Seller Party shall in any event be effective unless the same shall be permitted by paragraph (b) below, and then such waiver or consent shall be effective only in the specific instance and for the purpose for which given. No notice or demand

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on any Seller Party in any case shall entitle any Seller Party to any other or further notice or demand in similar or other circumstances.

(b) The Buyer may, with the consent of the Controlling Party (and shall, if directed by the Controlling Party), from time to time, (i) enter into written amendments, supplements or modifications hereto and to the other Transaction Documents for the purpose of adding any provisions to this Agreement or the other Transaction Documents or changing in any manner the rights of the Controlling Party or the Buyer hereunder or thereunder or (ii) waive any of the requirements of this Agreement or the other Transaction Documents or any Event of Default and its consequences; provided that no such waiver and no such amendment, supplement or modification shall, without the written consent of each AIG Entity directly affected thereby, (A) reduce the Purchase Price, (B) reduce the rate at which interest accrues hereunder on the Fixed Deferred Purchase Price, (C) amend the Waterfall in a way that is material and adverse to the Sellers or (D) amend any term or provision of this Agreement or any other Transaction Document in a way that is material and adverse to such AIG Entity. Any such waiver and any such amendment, supplement or modification shall be binding upon the Buyer, the Controlling Party and each AIG Entity. No waiver of any Event of Default shall extend to any subsequent or other Event of Default or impair any right consequent thereon. Neither this Agreement nor any provision hereof may be waived, amended or modified except in accordance with the provisions of this Section, and any purported amendment, supplement or modification not complying with the terms of this Section shall be null and void.

Section 6.02. Notices; Electronic Communications.

(a) Except in the case of notices and other communications expressly permitted to be given by telephone, notices and other communications provided for herein shall be in writing and shall be delivered by hand or overnight courier service, mailed by certified or registered mail or sent by fax or e-mail, and all notices and other communications expressly permitted hereunder to be given by telephone shall be made, to the applicable address, fax number, e-mail address or telephone number specified for the applicable Party in Schedule C.

(b) All notices and other communications given to any Party hereto in accordance with the provisions of this Agreement shall be deemed to have been given on the date of receipt if delivered by hand or overnight courier service or sent by fax or email or on the date five Business Days after dispatch by certified or registered mail if mailed, in each case delivered, sent or mailed (properly addressed) to such Party as provided in this Section or in accordance with the latest unrevoked direction from such Party given in accordance with this Section. As agreed to among the Parties from time to time, notices and other communications may also be delivered by e-mail to the e-mail address of a representative of the applicable Party provided from time to time by such Party.

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(c) The Buyer hereby agrees that it shall cause the Administrative Agent to provide to AIG on behalf of the Sellers copies of all notices and reports (other than those by or from the Investment Manager) delivered to the Buyer or the holders of the Senior Loan pursuant to the Transaction Documents to the extent such notices and reports have not been delivered to AIG or the Sellers pursuant to the other Transaction Documents. AIG shall provide to the Sellers copies of all notices and reports delivered to AIG pursuant to the Transaction Documents to the extent such notices and reports have not been delivered to the Sellers pursuant to the other Transaction Documents.

Section 6.03. Binding Effect. This Agreement shall become effective when it shall have been executed by each Party and a fully executed counterpart hereof is delivered to the Buyer and, on behalf of each Seller Party, to the AIG Agent.

Section 6.04. Survival Of Agreement. All covenants, agreements, representations and warranties made by each Seller Party herein and in the certificates or other instruments prepared or delivered in connection with or pursuant to this Agreement or any other Transaction Document shall be considered to have been relied upon by the Buyer and shall survive the Closing, regardless of any investigation made by the Buyer or on its behalf, and shall continue in full force and effect as long as any RMBS Issue is outstanding and unpaid. Notwithstanding anything to the contrary herein, the provisions of Section 6.05 and Section 6.14 shall remain operative and in full force and effect regardless of the expiration of the term of this Agreement, the consummation of the Transactions, the Disposition, repayment, prepayment or collection of the last RMBS Issue, the invalidity or unenforceability of any term or provision of this Agreement or any other Transaction Document or any investigation made by or on behalf of the Buyer.

Section 6.05. Indemnity. (a) Each Seller Party severally agrees to indemnify the Buyer, the Controlling Party and each of their respective Related Parties (each such party being called an “Indemnitee”) against, and to hold each Indemnitee harmless from, any and all losses, claims, damages, liabilities and related expenses, including reasonable counsel fees, charges and disbursements, incurred by or asserted against any Indemnitee arising out of, in any way connected with or as a result of any claim, litigation, investigation or proceeding relating to such Seller having made a representation or warranty herein or in any other Transaction Document that is incorrect in any respect at the time made or deemed made, whether or not any Indemnitee is a Party thereto (and regardless of whether such matter is initiated by a third Party or by any Seller Party or any of their respective Affiliates), provided that no Seller Party shall have any obligation under this subsection to any such Indemnitee if the representation or warranty alleged to be incorrect is determined by a final and unappealable decision of a court not to have been incorrect.

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(b) The indemnities in clause (a) of this Section shall not, as to any Indemnitee, be available to the extent that such losses, claims, damages, liabilities or related expenses are determined by a court of competent jurisdiction by final and nonappealable judgment to have resulted primarily from the bad faith, gross negligence, fraudulent actions or willful misconduct of such Indemnitee; provided that the Seller Parties shall not be obligated to pay, indemnify or hold harmless any Indemnitee if such Indemnitee (i) does not provide reasonably prompt notice to the Seller Parties (with a copy to the Controlling Party) of any claim for which indemnification is sought or (ii) admits any liability or incurs any significant expenses after receiving actual written notice of the claim (which is sufficiently specific to give reasonable notice of the existence of the claims and the expenses of such legal proceedings), or agrees to any settlement without the prior written consent of the Seller Parties. The Seller Parties may, in their sole discretion and at their expense, control the defense of the claim including designating counsel for the Indemnitees and controlling all negotiations, litigation, arbitration, settlements, compromises and appeals of any claim.

(c) To the extent permitted by applicable law, no Party, and no Person benefitting from the indemnity provided herein, shall assert, and each Party waives and the Seller Parties shall have no obligation with respect to, any claim against any other party, on any theory of liability, for special, indirect, consequential or punitive damages (as opposed to direct or actual damages) arising out of, in connection with, or as a result of, this Agreement or any agreement or instrument contemplated hereby, the Transactions, the Senior Loan, or the use of the proceeds thereof.

(d) Notwithstanding any provision in this Agreement or any other Transaction Document, the Seller Parties shall have no liability to the Buyer with respect to the collectibility of any amounts under the RMBS Pool, the Obligor of any RMBS Issue, the default by any Obligor on any obligation of such Obligor with respect to the applicable RMBS Issue, or the failure of any Obligor to make any payment pursuant to the applicable RMBS Issue and its Related Instruments.

Section 6.06. Successors and Assigns.

(a) The provisions of this Agreement shall be binding upon and inure to the benefit of the Parties hereto and their respective successors and assigns permitted by this Section. Any assignment or transfer by a Party of rights or obligations under this Agreement that does not comply with this Section shall be null and void.

(b) No Party may assign, delegate or otherwise transfer any of its rights or obligations under this Agreement without the consent of the Controlling Party and each other Party hereto, other than in accordance with this Section.

(c) The Buyer may transfer or assign its rights and obligations under this Agreement, in whole or from time to time in part, to (i) one or more of its

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Affiliates at any time and (ii) after the Closing Date, to any Person; provided that no such transfer or assignment by the Buyer will relieve the Buyer of its obligations hereunder or enlarge, alter or change any obligation of any other party hereto or due to the Buyer; provided further that no such transfer or assignment shall be permitted unless the Buyer first obtains an opinion (reasonably satisfactory to the Controlling Party) of nationally recognized tax counsel that such transfer or assignment will not (I) result in the income from the RMBS Pool becoming subject to corporate income tax in such a manner that it would reduce the amounts of Deferred Purchase Price available for payment to the Sellers or (II) cause losses realized by the Sellers from the sale of any RMBS Issue hereunder that were deferred by the Sellers under section 267(f) of the Code, if any, to be disallowed pursuant to Section 267(a) of the Code. The Buyer agrees to provide a copy of any such opinion to the Sellers at least 3 Business Days prior to such assignment or transfer (if such prior delivery is reasonably practicable under the circumstances, and if not, as soon as such delivery is reasonably practicable) copying such notice and opinion to Tax Director, American International Group, Inc., 70 Pine Street, New York, New York, 10270. AIG and the Sellers shall provide the Buyer and its tax counsel any information reasonably requested for the purpose of counsel’s rendering the required opinion.

(d) Each Seller may sell, assign or otherwise transfer (including through participation) all, but not less than all, of its Share of the Deferred Purchase Price to (i) AIG if it is at the time a “qualified purchaser” (as defined in Section 2(a)(51)(A) of the Investment Company Act of 1940, as amended) or (ii) any other Person with the consent of the Controlling Party. Any assigning Seller shall promptly notify the Controlling Party, any other Seller, the Senior Lender, the Investment Manager, the Collateral Agent, the Administrator and the Buyer of such assignment and the date of effectiveness of such assignment. From and after the date of such notice of assignment, AIG or such other Person shall be a party hereto and have the rights and obligations of the assigning Seller under this Agreement and the other Transaction Documents, and the assigning Seller shall be released from its obligations under this Agreement (to the extent of the interest so assigned) and such Seller shall cease to be a Party hereto but shall continue to be subject to the obligations set forth in Section 6.05.

Section 6.07. Counterparts. This Agreement may be executed in counterparts (and by different Parties hereto on different counterparts), each of which shall constitute an original but all of which when taken together shall constitute a single contract, and shall become effective when the condition described in Section 6.03 is satisfied. Delivery of an executed signature page to this Agreement by facsimile transmission shall be as effective as delivery of a manually signed counterpart of this Agreement.

Section 6.08. Severability. If any one or more of the provisions contained in this Agreement or in any other Transaction Document should be held invalid, illegal or unenforceable in any respect, then, to the extent permitted by applicable law, the validity, legality and enforceability of the remaining provisions contained

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herein and therein shall not in any way be affected or impaired thereby (it being understood that the invalidity of a particular provision in a particular jurisdiction shall not in and of itself affect the validity of such provision in any other jurisdiction). The Parties shall endeavor in good-faith negotiations to replace the invalid, illegal or unenforceable provisions with valid provisions, the economic effect of which comes as close as possible to that of the invalid, illegal or unenforceable provisions.

Section 6.09. Integration. This Agreement and the other Transaction Documents represent the entire agreement of the Parties with respect to the subject matter hereof and thereof, and there are no promises, undertakings, representations or warranties by the Borrower, any Seller Party or the Controlling Party relative to the subject matter hereof not expressly set forth or referred to herein or in the other Transaction Documents.

Section 6.10. Applicable Law. THIS AGREEMENT AND THE OTHER TRANSACTION DOCUMENTS SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK; provided, however, that any sale, transfer, assignment or other conveyance of any RMBS Issue or other property, assets or rights by a Delaware Seller to the Buyer pursuant to this Agreement shall be governed by and construed in accordance with the laws of the state of Delaware, including the Securitization Act, without reference to its conflict of law provisions, and the effectiveness and nature of any such sale, transfer, assignment or other conveyance shall be determined in accordance with such laws.

Section 6.11. Jurisdiction; Consent to Service of Process. (a) Each Party hereby irrevocably and unconditionally submits, for itself and its property, to the exclusive jurisdiction of any New York State court or federal court of the United States of America sitting in New York City, and any appellate court from any thereof, in any action or proceeding arising out of or relating to this Agreement or the other Transaction Documents, or for recognition or enforcement of any judgment, and each of the Parties hereto hereby irrevocably and unconditionally agrees that all claims in respect of any such action or proceeding may be heard and determined in such New York State or, to the extent permitted by law, in such federal court. Each Party agrees that a final judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law.

(b) Each Party hereby irrevocably and unconditionally waives, to the fullest extent it may legally and effectively do so, any objection that it may now or hereafter have to the laying of venue of any suit, action or proceeding arising out of or relating to this Agreement or the other Transaction Documents in any New York State or federal court. Each Party hereby irrevocably waives, to the fullest extent permitted by law, the defense of an inconvenient forum to the maintenance of such action or proceeding in any such court.

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(c) Each Party to this Agreement irrevocably consents to service of process in the manner provided for notices in Section 6.02. Nothing in this Agreement will affect the right of any Party to this Agreement to serve process in any other manner permitted by law.

Section 6.12. Confidentiality. AIG and each Seller Party agrees to keep confidential all non public information, including, without limitation, the Transaction Documents, and other related documents provided to it by any Party pursuant to or in connection with the Transaction Documents; provided that nothing herein shall prevent AIG or any Seller Party (or its Related Parties who are provided such information pursuant to clause (a) below) from disclosing any such information (a) to its Related Parties who have a need to know such information (it being understood that the Persons to whom such disclosure is made will be informed of the confidential nature of such information and instructed to keep such information confidential), (b) upon the request or demand of any regulatory authority, any tax authority or the National Association of Insurance Commissioners, (c) to the extent required by applicable laws or regulations or by any subpoena or similar legal process, (d) in connection with the exercise of any remedies hereunder or under the other Transaction Documents or any suit, action or proceeding relating to the enforcement of its rights hereunder or thereunder, (e) with the consent of the Controlling Party, (f) to the extent such information becomes publicly available other than as a result of a breach of this Section or (g) to any prospective buyers of such Seller Party or prospective providers of financing for such buyers and their agents and representatives if such buyer or financing provider and their agents and representatives agree to be bound by the provisions of this Section with respect to such information; provided, further, that prior to any disclosure of information pursuant to clause (b) or (c) of the proviso above, AIG or such Seller Party shall notify the Buyer, if legally permitted to do so, of any proposed disclosure as far in advance of such disclosure as practicable and, upon the Buyer’s or the Controlling Party’s request, take all reasonable actions to ensure that any information disclosed is accorded confidential treatment, or if such notice to the Buyer and the Controlling Party is prohibited by law, inform the relevant court or regulatory authority of the Buyer’s and the Controlling Party’s interest in the disclosed information and request that such court, regulatory authority inform the Buyer and the Controlling Party of the disclosure.

Section 6.13. WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT OR ANY OF THE OTHER TRANSACTION DOCUMENTS. EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE

23

EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT AND THE OTHER TRANSACTION DOCUMENTS, AS APPLICABLE, BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION.

Section 6.14. Limited Recourse. Notwithstanding anything to the contrary contained in this Agreement and the other Transaction Documents, the obligations of the Buyer under this Agreement and all other Transaction Documents are solely the obligations of the Buyer and shall be payable solely to the extent of funds received by and available to the Buyer in accordance with the Waterfall. Whether or not any portion of the Purchase Price or any other amount remains outstanding at the time, all obligations of the Buyer with respect to the Purchase Price and such other amounts shall be terminated and extinguished on the date on which all of the assets of the Buyer have been fully liquidated and disposed of and all proceeds thereof have been distributed in accordance with the Waterfall. No recourse shall be had for the payment of any amount owing in respect of any obligation of, or claim against, the Buyer arising out of or based upon this Agreement or any other Transaction Document against any holder of a Membership Interest, employee, officer or Affiliate thereof and, except as specifically provided herein and in the other Transaction Documents, no recourse shall be had for the payment of any amount owing in respect of any obligation of, or claim against, the Buyer arising out of or based upon this Agreement against the Collateral Agent, the Administrator, the Investment Manager or any holder of the Membership Interests of the Buyer or any Related Party of any thereof; provided that the foregoing shall not relieve any such person or entity from any liability they might otherwise have as a result of willful misconduct, gross negligence or fraudulent actions taken or omissions by them. The provisions of this Section shall survive the termination or expiration of this Agreement and payment in full of all of the Purchase Price.

Section 6.15. Certain Tax Matters. It is the intention of the Parties that for U.S. federal income tax purposes: (a) the Senior Loan shall be treated as the sole equity interest in the Buyer; (b) the proceeds realized by the Sellers of the RMBS Pool shall be the sum of (i) the Cash Purchase Price, (ii) the Fixed Deferred Purchase Price (other than any interest thereon) and (iii) the Variable Deferred Purchase Price (other than any interest imputed thereon for federal income tax purposes); (c) the Buyer shall be treated as the owner of the RMBS Pool; and (d) the Buyer shall be treated as an entity disregarded from its owner. The terms of this Agreement and the other Transaction Documents shall be interpreted consistently with this intention, and the Parties agree to not take any position for U.S. federal income tax purposes (in a filing or otherwise) contrary to this intention. For the avoidance of doubt, each Party agrees that it shall not make an election to treat the Buyer as an association taxable as a corporation for federal income tax purposes.

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Section 6.16. Headings. Article and Section headings used herein are for convenience of reference only, are not part of this Agreement and are not to affect the construction of, or to be taken into consideration in interpreting, this Agreement.

Section 6.17. Further Assurances. Each of the Seller Parties and the Buyer agrees to execute any and all further documents, financing statements, agreements and instruments, and take all further action (including filing Uniform Commercial Code and other financing statements) that may be required under applicable law, or that the Buyer or any of the Seller Parties may reasonably request, in order to effectuate the transactions contemplated by this Agreement; provided that no party shall be required to incur any costs or liabilities in connection therewith.

Section 6.18. Third Party Beneficiary. The Senior Lender is an express third party beneficiary of Sections 1.03 and 6.06(d) hereof. The Investment Manager is an express third party beneficiary of Sections 1.06, 1.07, 3.05, 3.06, 6.06(d), 6.14 and 6.19 hereof. The Collateral Agent is an express third party beneficiary of Sections 1.01, 1.03, 1.06, 6.06(d) and 6.14 hereof.

Section 6.19. Role Of Investment Manager And Controlling Party. Each party hereby accepts the role and powers of the Investment Manager described in the Credit Agreement and the other Transaction Documents and understands that the Investment Manager will be solely the agent of the Controlling Party. In addition, the Controlling Party has ultimate authority with respect to all decisions regarding the management of the Collateral (which it may delegate, in whole or in part, to the Investment Manager or otherwise), including decisions as to when to dispose of Collateral. In exercising such control, the Controlling Party and its agents, including the Investment Manager, shall have no duty to maximize returns on the Collateral or to take into account the interests of any AIG Entity or the Senior Lender or any other Secured Party.

ARTICLE 7
DEFINITIONS

Section 7.01. Certain Definitions. Capitalized terms used herein and not defined herein shall have the meanings ascribed to such terms in the Credit Agreement dated as of the date hereof (the “Credit Agreement”) among the Buyer, as Borrower, Federal Reserve Bank of New York, as the Senior Lender and the Controlling Party, and the Collateral Agent. The following capitalized terms used herein shall have the following meanings:

“Accrual Rate” means one month LIBOR as of October 29, 2008, which was 3.1175%, plus 1.0%.

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“Affiliate” means, when used with respect to a specified Person, another Person that directly, or indirectly through one or more intermediaries, Controls or is Controlled by or is under common Control with the Person specified. For the avoidance of doubt, none of the Buyer, any Federal Reserve Bank nor the United States Treasury shall be deemed to be an “Affiliate” of any AIG Entity for purposes of any Transaction Document. “Control” means the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of a Person, whether through the ownership of voting securities, by contract or otherwise, and the terms “Controlling” and “Controlled” shall have meanings correlative thereto.

“AIG” means American International Group, Inc.

“AIG Agent” has the meaning set forth in the introductory paragraph of this Agreement.

“AIG Entity” has the meaning set forth in the Credit Agreement.

“Buyer” has the meaning set forth in the introductory paragraph to this Agreement.

“Calculation Period” has the meaning set forth in the Credit Agreement.

“Cash Purchase Price” means an amount equal to (i) the Designated Purchase Price plus (ii) interest from and including the Designation Date to but excluding the Closing Date on the Designated Purchase Price at the Accrual Rate as set forth in column G of Schedule A hereto minus (iii) the Cash Purchase Price Adjustment Amount.

“Cash Purchase Price Adjustment Amount” means an amount equal to (i) interest and other yield payments received by or on behalf of any Seller on each RMBS Issue (except payments due prior to the Designation Date and not included in the determination of the Designated Purchase Price of such RMBS Issue) on or after the Designation Date set forth in column J of Schedule A hereto (as may be revised by the Cash Purchase Price Adjustment Amount Certificate in accordance with Sections 1.02 (b) and (c)) plus (ii) all net sale proceeds, if any, and payments of principal received by or on behalf of any Seller in respect of each RMBS Issue on or after the Designation Date (except payments due prior to the Designation Date and not included in the determination of the Designated Purchase Price of such RMBS Issue) set forth in column I of Schedule A hereto (as may be revised by the Cash Purchase Price Adjustment Amount Certificate in accordance with Sections 1.02 (b) and (c)) plus (iii) interest at the Accrual Rate on each amount referred to in clauses (i) and (ii) above from and including the date as of which such amount is credited to the account of the AIG Agent or a Seller as set forth in column H of Schedule A hereto to but excluding the Closing Date as set forth in column L of Schedule A hereto (as may be revised by the

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Cash Purchase Price Adjustment Amount Certificate in accordance with Sections 1.02 (b) and (c)).

“Cash Purchase Price Adjustment Amount Certificate” means a certificate of the AIG Agent in substantially the form of Exhibit A hereto delivered pursuant to Section 1.02 (b) or (c) hereof.

“Closing” means the consummation of the Transactions scheduled to occur on the Closing Date upon satisfaction of the conditions precedent set forth in Article 5 hereof and in Section 4.01 of the Credit Agreement.

“Closing Date” has the meaning set forth in the Credit Agreement.

“Collateral Account” has the meaning set forth in the Security Agreement.

“Collateral Agent” has the meaning set forth in the Security Agreement.

“Controlling Party” has the meaning set forth in the Credit Agreement.

“Deferred Purchase Price” means the Fixed Deferred Purchase Price and the Variable Deferred Purchase Price.

“Designated Purchase Price” means the sum of the amounts set forth opposite the Designated RMBS Issues in column F of Schedule A hereto, which amounts were determined as of the Designation Date and include accrued and unpaid interest and other yield payments (but not overdue interest and other equivalent yield payments) through but excluding the Designation Date as set forth in column E of Schedule A hereto.

“Designated RMBS Issue” means an RMBS Issue listed on Schedule A attached hereto that is owned by the AIG Agent for the benefit of the Sellers on the Designation Date.

“Designation Date” means October 31, 2008.

“Disposition” means, with respect to any RMBS Issue or any right therein or thereunder, any sale, assignment, conveyance, transfer or other disposition thereof. The terms “Dispose” and “Disposed of” have correlative meanings.

“Financial Officer” of any Person means the chief financial officer, principal accounting officer, treasurer or controller of such Person.

“Fixed Deferred Purchase Price” means, with respect to all of the Sellers, an amount equal to one billion dollars ($1,000,000,000) plus interest thereon and, with respect to any Seller, such Seller’s Share of the Fixed Deferred Purchase Price.

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“Governmental Authority” means any federal, state, local, municipal or foreign court or governmental agency, authority, instrumentality or regulatory body, including any board of insurance, insurance department or insurance commissioner.

“Junior Obligations” has the meaning set forth in Section 1.03(b).

“LIBOR” has the meaning set forth in the Credit Agreement.

“Lien” means any mortgage, pledge, hypothecation, assignment, deposit arrangement, encumbrance, lien (statutory or other), charge or other security interest or any preference, priority or other security agreement or preferential arrangement of any kind or nature whatsoever (including any conditional sale or other title retention agreement and any capital lease having substantially the same economic effect as any of the foregoing).

“Material Adverse Effect” means (a) a material impairment of the totality of the rights and remedies of, or benefits available to the Buyer, the Senior Lender or the Collateral Agent under the Transaction Documents taken as a whole or (b) a material adverse effect on the value of the RMBS Pool.

“NYUCC” means the UCC as in effect from time to time in the State of New York.

“Obligor” means the issuer or the guarantor or both of any RMBS Issue, as the context requires.

“Participation Percentage” means, with respect to each Seller, the percentage set forth below for that Seller:

	Participation
Seller	Percentage
Seller 1: American General Life Insurance Company	17.65	%
Seller 2: American General Life and Accident Insurance Company	4.41	%
Seller 3: The United States Life Insurance Company in the City of New York	1.76	%
Seller 4: AIG Life Insurance Company	3.91	%
Seller 5: American International Life Assurance Company of New York	3.46	%
Seller 6: American Life Insurance Company	2.13	%
Seller 7: AIG Annuity Insurance Company	34.79	%
Seller 8: The Variable Annuity Life Insurance Company	17.38	%
Seller 9: SunAmerica Life Insurance Company	9.85	%

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	Participation
Seller	Percentage
Seller 10: First SunAmerica Life Insurance Company	3.17	%
Seller 11: AIG SunAmerica Life Assurance Company	1.49	%

“Party” has the meaning set forth in the preamble to this Agreement.

“Person” means any natural person, corporation, business trust, joint venture, association, company, limited liability company, partnership, Governmental Authority or other entity.

“Purchase Price” means, with respect to all of the Sellers, the sum of the Cash Purchase Price, the Fixed Deferred Purchase Price and the Variable Deferred Purchase Price and, with respect to any Seller, such Seller’s Share of the Purchase Price.

“Related Instruments” means any participation, pooling, servicing or other agreement, document or instrument pursuant to which an RMBS Issue has been created, pooled, securitized, issued, sold, serviced, enhanced, insured or guaranteed and each other agreement, document, indenture and instrument that governs or affects the terms of, or secures the obligations represented by, such RMBS Issue or of which the holders of such RMBS Issue are the beneficiaries.

“Related Parties” means, with respect to any specified Person, such Person’s Affiliates and the respective directors, officers, employees, agents, attorneys, accountants, and other advisors, and controlling persons of such Person and such Person’s Affiliates. For the avoidance of doubt, none of the Buyer, any Federal Reserve Bank nor the United States Treasury shall be deemed to be a “Related Party” of any AIG Entity for purposes of any Transaction Document.

“RMBS Issue” means the securities of a single issue of residential mortgage-backed securities listed on Schedule A attached hereto that is owned by the AIG Agent for the benefit of the Sellers immediately prior to the Closing, together with all right, title and interest in and to all Related Instruments.

“RMBS Pool” means the RMBS Issues collectively.

“S&P” means Standard & Poor’s.

“Sanctions” has the meaning set forth in Section 2.08

“Security Interest” has the meaning set forth in the Security Agreement.

“Security Agreement” means the Security Agreement dated as of the date hereof among the Buyer, as borrower, the Federal Reserve Bank of New York, as

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the Senior Lender and the Controlling Party, and The Bank of New York Mellon, as Collateral Agent.

“Seller” and “Sellers” have the respective meanings set forth in the introductory paragraph to this Agreement.

“Seller Parties” has the meaning set forth in the introductory paragraph of this Agreement.

“Senior Debt” has the meaning set forth in Section 1.03(b).

“Senior Lender” has the meaning set forth in the Credit Agreement.

“Share” means, with respect to any Seller, such Seller’s ownership interest in an RMBS Issue, RMBS Pool, Cash Purchase Price or Deferred Purchase Price in the amount of its Participation Percentage thereof.

“Transaction Documents” has the meaning set forth in the Credit Agreement.

“Transactions” means the transactions contemplated by the Transaction Documents.

“UCC” means the Uniform Commercial Code as in effect from time to time in any applicable state.

“Variable Deferred Purchase Price” means, with respect to all of the Sellers, 1/6th of the net cash proceeds from the RMBS Pool plus cash on hand with the Buyer after payment in full of the Senior Loan plus accrued interest thereon and the Fixed Deferred Purchase Price plus accrued interest thereon and, with respect to any Seller, such Seller’s Share of the Variable Deferred Purchase Price.

“Waterfall” means the order of payments set forth in Section 5(b) of the Security Agreement.

Section 7.02. Other Definitional Provisions. (a) As used herein and in any certificate or other document made or delivered pursuant hereto or thereto, (i) accounting terms shall have the respective meanings given to them under GAAP, (ii) the words “include”, “includes” and “including” shall be deemed to be followed by the phrase “without limitation”, (iii) the word “incur” shall be construed to mean incur, create, issue, assume, become liable in respect of or suffer to exist (and the words “incurred” and “incurrence” shall have correlative meanings), (iv) the words “asset” and “property” shall be construed to have the same meaning and effect and to refer to any and all tangible and intangible assets and properties, including cash, capital stock, securities, revenues, accounts, leasehold interests and contract rights, and (v) references to agreements or other contractual obligations shall, unless otherwise specified, be deemed to refer to

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such agreements or contractual obligations as amended, supplemented, restated or otherwise modified from time to time, or any successor or replacement agreement which may be entered into from time to time.

(b) The words “hereof”, “herein” and “hereunder” and words of similar import, when used in this Agreement, shall refer to this Agreement as a whole and not to any particular provision of this Agreement, and Section, Schedule and Exhibit references are to this Agreement unless otherwise specified.

(c) The meanings given to terms defined herein shall be equally applicable to both the singular and plural forms of such terms.

[signature pages follow]

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IN WITNESS WHEREOF, each of the Parties has caused this Asset Purchase Agreement to be executed on its behalf by its officers thereunto duly authorized on the day and year first above written.

MAIDEN LANE II LLC, by the Federal Reserve Bank of New York, as its sole Managing Member			FEDERAL RESERVE BANK OF NEW YORK, as Controlling Party
By:	/s/ Helen Mucciolo		By:	/s/ Helen Mucciolo
	Name:	Helen Mucciolo		Name:	Helen Mucciolo
	Title:	Senior Vice President		Title:	Senior Vice President
AMERICAN INTERNATIONAL GROUP, INC.
By:	/s/ David L. Herzog
	Name:	David L. Herzog
	Title:	Executive Vice President and Chief Financial Officer
AMERICAN GENERAL LIFE INSURANCE COMPANY			AMERICAN GENERAL LIFE AND ACCIDENT INSURANCE COMPANY
By:	/s/ Mary Jane B. Fortin		By:	/s/ Mary Jane B. Fortin
	Name:	Mary Jane B. Fortin		Name:	Mary Jane B. Fortin
	Title:	Executive Vice President and Chief Financial Officer		Title:	Executive Vice President
AMERICAN GENERAL LIFE INSURANCE COMPANY			AMERICAN GENERAL LIFE AND ACCIDENT INSURANCE COMPANY
By:	/s/ Kyle L. Jennings		By:	/s/ Kyle L. Jennings
	Name:	Kyle L. Jennings		Name:	Kyle L. Jennings
	Title:	Executive Vice President, General Counsel and Secretary		Title:	Executive Vice President, General Counsel and Secretary

THE UNITED STATES LIFE INSURANCE COMPANY IN THE CITY OF NEW YORK			THE UNITED STATES LIFE INSURANCE COMPANY IN THE CITY OF NEW YORK
By:	/s/ Mary Jane B. Fortin		By:	/s/ Kyle L. Jennings
	Name:	Mary Jane B. Fortin		Name:	Kyle L. Jennings
	Title:	Executive Vice President and Chief Financial Officer		Title:	Executive Vice President, General Counsel and Secretary
AIG LIFE INSURANCE COMPANY			AMERICAN INTERNATIONAL LIFE ASSURANCE COMPANY OF NEW YORK
By:	/s/ Mary Jane B. Fortin		By:	/s/ Mary Jane B. Fortin
	Name:	Mary Jane B. Fortin		Name:	Mary Jane B. Fortin
	Title:	Executive Vice President and Chief Financial Officer		Title:	Executive Vice President and Chief Financial Officer
AIG LIFE INSURANCE COMPANY			AMERICAN INTERNATIONAL LIFE ASSURANCE COMPANY OF NEW YORK
By:	/s/ Kyle L. Jennings		By:	/s/ Kyle L. Jennings
	Name:	Kyle L. Jennings		Name:	Kyle L. Jennings
	Title:	Executive Vice President, General Counsel and Secretary		Title:	Executive Vice President, General Counsel and Secretary
AMERICAN LIFE INSURANCE COMPANY			AIG ANNUITY INSURANCE COMPANY
By:	/s/ Dennis R. Vigneau		By:	/s/ N. Scott Gillis
	Name:	Dennis R. Vigneau		Name:	N. Scott Gillis
	Title:	Chief Financial Officer		Title:	Senior Vice President Chief Financial Officer

THE VARIABLE ANNUITY LIFE INSURANCE COMPANY			SUNAMERICA LIFE INSURANCE COMPANY
By:	/s/ N. Scott Gillis		By:	/s/ N. Scott Gillis
	Name:	N. Scott Gillis		Name:	N. Scott Gillis
	Title:	Senior Vice President Chief Financial Officer		Title:	Senior Vice President Chief Financial Officer
FIRST SUNAMERICA LIFE INSURANCE COMPANY			AIG SUNAMERICA LIFE ASSURANCE COMPANY
By:	/s/ N. Scott Gillis		By:	/s/ N. Scott Gillis
	Name:	N. Scott Gillis		Name:	N. Scott Gillis
	Title:	Senior Vice President Chief Financial Officer		Title:	Senior Vice President Chief Financial Officer
AIG SECURITIES LENDING CORP., as AIG Agent
By:	/s/ Michael F. Thorp
	Name:	Michael F. Thorp
	Title:	Vice President

Schedule A to
Asset Purchase Agreement

DESIGNATED RMBS POOL

[Attached]

A	B	C	D	E	F	G	H	I	J	K	L
						Accrued
						Interest on			Post		Accrued
				Accrued	Designated	D. Purchase	Payment	Post 10/31/08	10/31/08	Post 10/31/08	Interest on
CUSIP	Security Name	Par	Market Value	Interest	Purchase Price	Price	Date	Principal	Interest	Total Cash	amount in K
	IMPAC SECD ASSET
45254TPX6	2004-3 CL 1A4	349,409.99	262,057.49	142.04	262,199.54	1,259.54	11/25/2008	4,176.01	1,029.83	5,205.83	10.12
	ACE SECS CORP 06-
004421US0	NC1 CL A-2C	64,406,000.00	52,001,404.40	24,751.58	52,026,155.98	249,920.65	11/25/2008	0.00	179,448.98	179,448.98	348.92
	ACE SECS CORP 05-
004427CA6	AG1 CL A-2C	20,850,622.31	19,251,379.58	8,175.18	19,259,554.76	92,518.09	11/25/2008	2,428,915.29	59,270.07	2,488,185.36	4,837.97
	ACE SECS CORP 06-
00442EAH8	NC3 CL A-2D	44,745,000.00	17,168,656.50	17,195.75	17,185,852.25	82,556.54	11/25/2008	0.00	124,669.20	124,669.20	242.40
	ACE SECS CORP 06-
00442PAF7	OP1 CL A-2D	42,758,000.00	17,603,468.60	16,622.17	17,620,090.77	84,642.51	11/25/2008	0.00	120,510.75	120,510.75	234.32
	ACE SECS H E 07-
00442UAC3	ASAP2 CL A-2B	14,000,000.00	7,550,200.00	5,333.61	7,555,533.61	36,294.89	11/25/2008	0.00	38,668.68	38,668.68	75.19
	ACE SECS CORP
00442UAD1	2007-ASP2 CL A2C	11,000,000.00	3,790,600.00	4,251.81	3,794,851.81	18,229.52	11/25/2008	0.00	30,825.59	30,825.59	59.94
	ADJUSTABLE RT MTG
007036JF4	05-3 8-A-3-2	8,130,000.00	6,090,183.00	3,232.80	6,093,415.80	29,271.25	11/25/2008	0.00	23,437.83	23,437.83	45.57
	ADJUSTABLE RT MTG
007036KP0	05-4 7-A-3-2	8,480,000.00	6,592,352.00	3,362.56	6,595,714.56	31,684.16	11/25/2008	0.00	24,378.53	24,378.53	47.40
	ADJUSTABLE RATE
007036QU3	MTG 05-8 7A31	23,611,631.80	20,339,059.63	9,179.02	20,348,238.65	97,747.85	11/25/2008	532,444.72	66,547.91	598,992.63	1,164.67
	ADJUSTABLE RATE
007036QV1	MTG 05-8 7A32	13,250,000.00	7,389,525.00	5,386.49	7,394,911.49	35,523.31	11/25/2008	0.00	39,052.07	39,052.07	75.93
	ADJUSTABLE RATE
007036UQ7	05-11 CL 5A1	20,458,035.89	15,012,106.74	8,021.25	15,020,127.99	72,152.94	11/25/2008	368,831.82	58,154.10	426,985.91	830.22
	ADJUSTABLE RATE
007037BH6	07-1 CL 5A22	11,156,000.00	2,064,975.60	4,324.50	2,069,300.10	9,940.40	11/25/2008	0.00	31,352.62	31,352.62	60.96
	ALTERNATIVE LN 06-
02146YAD8	OA9 CL 2A1B	4,151,706.96	1,992,819.34	5,680.05	1,998,499.39	9,600.29	11/20/2008	12,145.87	16,007.43	28,153.30	70.84
	ALTERNATIVE LN TR
02147CAF0	2006-OA8 2A3	33,750,000.00	15,734,250.00	12,932.81	15,747,182.81	75,645.53	11/25/2008	0.00	93,762.89	93,762.89	182.31
	ALTERNATIVE LN TR
02147DAB7	06 OA11 A-1B	214,332,679.30	98,593,032.48	82,131.09	98,675,163.57	474,010.82	11/25/2008	996,080.58	595,450.42	1,591,530.99	3,094.53
	ALTERNATIVE LN 07-
02150KAX7	OH1 CL A-1-B	17,000,000.00	7,342,300.00	6,533.19	7,348,833.19	35,301.96	11/25/2008	0.00	47,365.66	47,365.66	92.10
	ALTERNATIVE LN TR
02150KAY5	07-OH1 CL A1	11,203,000.00	2,625,983.20	4,392.51	2,630,375.71	12,635.67	11/25/2008	0.00	31,845.69	31,845.69	61.92
	ALTERNATIVE LN TR
02150KBB4	07-OH1 CL A2	7,000,000.00	2,280,600.00	2,729.03	2,283,329.03	10,968.54	11/25/2008	0.00	19,785.45	19,785.45	38.47
	ALTERNATIVE LN 07-
02150KBC2	OH1 CL A2C	4,949,000.00	773,528.70	1,962.42	775,491.12	3,725.27	11/25/2008	0.00	14,227.52	14,227.52	27.66
	AMERICAN HOME
026932AA1	MTG 2007-1 GA-1A	266,279,314.60	158,143,284.94	101,149.16	158,244,434.10	760,166.70	11/25/2008	357,776.61	733,331.39	1,091,108.00	2,121.52
	AMERICAN MTG 07-1
026932AB9	CL A1B	5,600,000.00	1,285,200.00	2,214.33	1,287,414.33	6,184.42	11/25/2008	0.00	16,053.92	16,053.92	31.21
	ASSET BKD SEC HM
04541GVJ8	EQ 06-HE1 A3	24,763,946.00	20,209,856.33	9,516.92	20,219,373.25	97,128.81	11/25/2008	501,731.23	68,997.68	570,728.91	1,109.71

A	B	C	D	E	F	G	H	I	J	K	L
						Accrued
						Interest on			Post		Accrued
				Accrued	Designated	D. Purchase	Payment	Post 10/31/08	10/31/08	Post 10/31/08	Interest on
CUSIP	Security Name	Par	Market Value	Interest	Purchase Price	Price	Date	Principal	Interest	Total Cash	amount in K
	ASET BACKED SECS
04541GWE8	2006-HE2 A3	4,769,352.77	3,900,853.63	1,827.59	3,902,681.22	18,747.50	11/25/2008	119,505.81	13,250.02	132,755.83	258.13
	ASSET BACKED 06-
04544QAE7	HE7 CL A-5	22,500,000.00	6,093,000.00	8,696.88	6,101,696.88	29,311.03	11/25/2008	0.00	63,052.34	63,052.34	122.60
	BCAP LLC TR 07-AA1
05530PAB8	P/T CL 1A2	30,000,000.00	11,655,000.00	11,395.83	11,666,395.83	56,042.45	11/25/2008	0.00	82,619.79	82,619.79	160.64
	BCAP LLC TR 07-AA1
05530PAC6	CL 1A3	102,579,000.00	50,171,388.90	39,991.56	50,211,380.46	241,202.92	11/25/2008	0.00	289,938.83	289,938.83	563.75
	BNC MTG LN TR SER
05569QAC8	07-2 CL A3	89,897,000.00	39,761,443.10	34,847.57	39,796,290.67	191,171.43	11/25/2008	0.00	252,644.91	252,644.91	491.24
	BANC AMER FDG 06
058933AA0	D CL 1-A-1	114,744,541.00	76,832,944.65	155,933.05	76,988,877.70	369,835.32	11/20/2008	2,135,215.11	439,447.65	2,574,662.75	6,478.50
	BANC AMER FDG 06
058933AB8	D 1-A-2	99,554,000.00	26,750,159.80	138,635.86	26,888,795.66	129,167.05	11/20/2008	0.00	390,701.07	390,701.07	983.10
	BANC AMER FDG
05946XQY2	CORP 05-A 5-A-1	8,259,057.60	6,238,892.11	11,551.78	6,250,443.89	30,025.57	11/20/2008	88,098.86	32,555.02	120,653.89	303.60
	BANC AMER FDG
05946XQZ9	CORP 05-A 5-A-2	3,749,808.60	3,075,593.01	5,256.24	3,080,849.26	14,799.63	11/20/2008	4,626.75	14,813.05	19,439.81	48.92
	BANC AMER FDG
05946XRH8	CORP 05-A 5M1	4,612,000.00	1,162,224.00	6,662.10	1,168,886.10	5,615.04	11/20/2008	0.00	18,775.00	18,775.00	47.24
	BANC AMER FDG
05946XRY1	CORP 05-B 3A1B	32,000,000.00	23,334,400.00	44,855.56	23,379,255.56	112,308.10	11/20/2008	0.00	126,411.10	126,411.10	318.08
	BANC AMER FDG
05950MAD2	2006 G P/T 2-A-3	220,999,000.00	139,715,567.80	300,328.43	140,015,896.23	672,601.36	11/20/2008	0.00	846,369.18	846,369.18	2,129.68
	BANC AMER FDG
05950MAE0	2006 G 2-A-4	144,814,000.00	71,422,264.80	202,106.04	71,624,370.84	344,065.57	11/20/2008	0.00	569,564.20	569,564.20	1,433.17
	BANC AMER FDG
05952DAQ1	2007- A 2A4	33,003,000.00	16,224,274.80	44,748.86	16,269,023.66	78,152.32	11/20/2008	0.00	126,110.44	126,110.44	317.33
	BANC AMER FDG 07-
05952GAD3	D CL 1-A-4	37,072,000.00	17,520,227.20	51,058.96	17,571,286.16	84,408.07	11/20/2008	0.00	143,893.42	143,893.42	362.07
	BEAR STEARNS ALT
073868AA9	06-6 CL 1A1	106,519,702.00	58,585,836.10	40,462.69	58,626,298.79	281,626.08	11/25/2008	2,674,653.99	293,354.52	2,968,008.51	5,770.92
	BEAR STEARNS ALT A
07386HA92	2006-1 I1A1	31,959,938.49	21,643,270.35	12,424.43	21,655,694.77	104,028.54	11/25/2008	584,558.61	90,077.09	674,635.70	1,311.74
	BEAR STEARNS ALT A
07386HH46	06-2 I-1A-1	64,450,190.80	43,671,449.29	24,911.79	43,696,361.08	209,906.39	11/25/2008	673,684.41	180,610.47	854,294.88	1,661.07
	BEAR STREANS ALT
07386HK26	2006-3 I-A-1	81,188,583.92	55,053,978.76	31,111.01	55,085,089.77	264,615.00	11/25/2008	1,577,973.46	225,554.86	1,803,528.32	3,506.74
	BEAR STEARNS ALT A
07386HNQ0	04-12 IA1	28,520,083.00	19,964,058.10	11,435.76	19,975,493.86	95,957.28	11/25/2008	649,853.39	82,909.27	732,762.66	1,424.77
	BEAR STEARNS ALT A
07386HSP7	05-4 IA1	27,827,620.91	20,052,583.63	10,756.15	20,063,339.78	96,379.27	11/25/2008	698,719.84	77,982.08	776,701.92	1,510.20
	BEAR STEARNS ALT
07386HUA7	05-E CL I-A-3	78,888,493.44	57,943,598.43	31,018.52	57,974,616.95	278,495.57	11/25/2008	1,151,076.80	224,884.25	1,375,961.05	2,675.38
	BEAR STEARNS ALT A
07386HVG3	05-7	109,200,196.70	75,959,656.82	42,815.58	76,002,472.40	365,096.88	11/25/2008	1,642,659.36	310,412.94	1,953,072.30	3,797.50

A	B	C	D	E	F	G	H	I	J	K	L
						Accrued
						Interest on			Post		Accrued
				Accrued	Designated	D. Purchase	Payment	Post 10/31/08	10/31/08	Post 10/31/08	Interest on
CUSIP	Security Name	Par	Market Value	Interest	Purchase Price	Price	Date	Principal	Interest	Total Cash	amount in K
	BEAR STEARNS ALT
07386HYW5	2005-10 I1A11	56,838,255.67	33,051,445.67	22,159.03	33,073,604.70	158,877.33	11/25/2008	1,551,658.16	160,652.94	1,712,311.10	3,329.37
	BEAR STEARNS 07-
07386RAB5	HE4 CL 1-A-2	62,309,000.00	34,805,807.40	23,876.46	34,829,683.86	167,313.09	11/25/2008	0.00	173,104.36	173,104.36	336.58
	BEAR STEARNS 07-
07386RAC3	HE4 CL 1-A-3	63,813,000.00	22,296,262.20	24,949.11	22,321,211.31	107,225.52	11/25/2008	0.00	180,881.05	180,881.05	351.70
	BEAR STEARNS ALT
07386XAA4	07-1 CL 1A1	49,390,192.02	27,139,910.51	18,761.41	27,158,671.93	130,463.47	11/25/2008	1,575,988.20	136,020.25	1,712,008.45	3,328.79
	BEAR STEARNS ALT
073871AA3	06 4 I1A1	68,655,206.67	46,424,650.75	26,079.44	46,450,730.19	223,137.70	11/25/2008	2,048,949.33	189,075.96	2,238,025.29	4,351.56
	BEAR STEARNS ALT A
073871AE5	06-4 I-3A-1	87,941,956.46	56,960,005.20	33,405.73	56,993,410.93	273,782.10	11/25/2008	1,422,317.00	242,191.54	1,664,508.54	3,236.43
	BEAR STEARNS ALT
073875AA4	06-7 CL 1A1	102,680,570.90	65,633,420.92	39,118.45	65,672,539.36	315,474.46	11/25/2008	2,103,943.23	283,608.73	2,387,551.96	4,642.30
	BEAR STEARNS ALT
07387QAA8	06-8 CL 1A1	9,360,688.31	6,077,894.92	3,555.76	6,081,450.68	29,213.77	11/25/2008	92,294.63	25,779.27	118,073.90	229.58
	BEAR STEARNS ALT
07387RAA6	07-3 CL 1-A-1	193,843,860.00	106,614,123.00	74,710.65	106,688,833.65	512,506.48	11/25/2008	2,010,186.23	541,652.24	2,551,838.47	4,961.73
	BEAR STEARNS ABS
07387UFE6	2006-IM1 A-2	34,443,229.81	26,283,628.67	13,236.72	26,296,865.39	126,323.57	11/25/2008	945,185.26	95,966.26	1,041,151.53	2,024.39
	BEAR STEARNS
07387UFW6	ASSET 2006-IM1 A3	36,391,000.00	11,270,292.70	14,308.74	11,284,601.44	54,208.40	11/25/2008	0.00	103,738.36	103,738.36	201.71
	BEAR STEARNS
07387UFY2	ASSET 06-IM1 A5	75,078,498.72	56,391,460.39	28,853.08	56,420,313.47	271,029.08	11/25/2008	1,996,679.61	209,184.86	2,205,864.47	4,289.03
	BEAR STEARNS
07401UAB9	2007-SV1 A2 144A	152,192,000.00	52,825,843.20	60,517.46	52,886,360.66	254,052.86	11/25/2008	0.00	438,751.57	438,751.57	853.10
	BEAR STEARNS
07401UAU7	2007-SV1 A-3 144A	20,949,815.31	8,608,279.11	8,167.52	8,616,446.63	41,391.26	11/25/2008	398,977.98	59,214.51	458,192.49	890.90
	BEAR STEARNS
07401WAA7	SECOND 07-1 CL 1A	34,139,664.96	22,935,026.92	13,082.13	22,948,109.05	110,236.98	11/25/2008	1,692,487.53	94,845.44	1,787,332.98	3,475.25
	BEAR STEARNS
07401WAP4	SECOND 2007-1 2A	69,742,314.59	38,358,273.02	26,957.34	38,385,230.37	184,393.05	11/25/2008	2,404,210.51	195,440.73	2,599,651.24	5,054.70
	BEAR STEARNS
07401WBA6	SECOND 2007-1 3A1	97,624,301.88	50,764,636.98	37,734.50	50,802,371.48	244,041.89	11/25/2008	4,258,910.71	274,570.94	4,533,481.65	8,814.79
	C BASS TR 2005-CB4
12489WLX0	CL AV-2	5,562,985.85	5,326,558.95	2,168.79	5,328,727.74	25,597.88	11/25/2008	856,313.47	15,723.75	872,037.22	1,695.57
	C BASS MTG LN 07-
1248RHAC1	CB6 CL A-3	24,179,000.00	7,923,458.30	9,345.86	7,932,804.16	38,107.21	11/25/2008	0.00	67,757.45	67,757.45	131.75
	CWABS INC 2005-
126670FC7	IM2 CL A4	11,000,000.00	4,335,100.00	4,410.69	4,339,510.69	20,845.92	11/25/2008	0.00	31,977.53	31,977.53	62.18
	CWABS INC 05-IM3
126670JD1	A-3	149,023,831.30	102,647,615.00	58,098.60	102,705,713.60	493,372.57	11/25/2008	4,437,920.93	421,214.83	4,859,135.76	9,447.98
	CWABS INC 2006-4
126670WT1	CL 2 A2	11,882,779.92	9,860,330.78	4,540.21	9,864,870.99	47,388.37	11/25/2008	362,157.40	32,916.54	395,073.94	768.17
	CWABS INC 05-IM1
1266733W0	CL A2	63,760,559.78	53,871,296.96	25,070.30	53,896,367.26	258,904.67	11/25/2008	2,225,786.37	181,759.66	2,407,546.03	4,681.17

A	B	C	D	E	F	G	H	I	J	K	L
						Accrued
						Interest on			Post		Accrued
				Accrued	Designated	D. Purchase	Payment	Post 10/31/08	10/31/08	Post 10/31/08	Interest on
CUSIP	Security Name	Par	Market Value	Interest	Purchase Price	Price	Date	Principal	Interest	Total Cash	amount in K
	CWALT INC 04-J5 CL
12667FNG6	2-A-3	12,058,374.51	9,733,519.90	5,036.05	9,738,555.95	46,781.59	11/25/2008	316,166.86	36,511.33	352,678.19	685.74
	CWALT INC 2005-44
12667G3U5	CL 2-A-2B	7,482,091.49	2,902,303.29	3,108.19	2,905,411.47	13,956.87	11/25/2008	54,874.10	22,534.35	77,408.45	150.51
	CWALT INC 2005-41
12667GS20	CL 2A2	4,593,129.35	1,515,732.69	1,836.61	1,517,569.30	7,290.02	11/25/2008	48,223.62	13,315.45	61,539.07	119.66
	CWHEQ INC 2005-L
126685BA3	CL A1	1,609,484.29	883,445.93	3,438.93	886,884.86	4,260.37	11/17/2008	399.63	6,238.59	6,638.22	18.98
	CWALT INC 2005-
12668A4S1	AR1 CL 2A3	81,275,000.00	50,366,117.50	32,589.02	50,398,706.52	242,102.79	11/25/2008	0.00	236,270.38	236,270.38	459.40
	CWALT ALT SER 06-
12668PAC6	OA17 CL 1A1C	50,162,000.00	27,679,391.60	68,474.61	27,747,866.21	133,293.81	11/20/2008	0.00	192,951.90	192,951.90	485.52
	CWALT ALT SER 06-
12668PAD4	OA17 CL 1A1D	14,093,000.00	3,447,147.80	19,668.54	3,466,816.34	16,653.72	11/20/2008	0.00	55,423.21	55,423.21	139.46
	CWMBS INC 2006-
126694A40	OA1 CL 2A2	7,075,845.24	2,094,450.19	9,918.47	2,104,368.66	10,108.86	11/20/2008	45,585.94	27,861.98	73,447.91	184.81
	CWMBS INC 05-7 2-
12669GNP2	A-1	1,647,892.76	1,048,059.80	980.15	1,049,039.95	5,039.33	11/25/2008	5,113.36	5,064.12	10,177.49	19.79
	CWMBS INC 05-1
12669GRQ6	CWHL P/T 2-A-1	8,934,642.72	5,094,533.28	3,522.98	5,098,056.26	24,489.79	11/25/2008	60,058.45	25,541.60	85,600.05	166.44
	CWABS ASSET
12669QAC3	BACKED CTFS TR	11,358,000.00	7,764,328.80	4,339.70	7,768,668.50	37,318.74	11/25/2008	0.00	31,462.84	31,462.84	61.18
	CWABS ASSET
12669QAD1	BACKED CTFS TR	47,554,000.00	21,004,601.80	18,486.62	21,023,088.42	100,989.66	11/25/2008	0.00	134,027.98	134,027.98	260.60
	CWABS ASSET BKD
12669WAF3	07-8 CTF 2-A-4	24,027,000.00	7,198,489.20	9,393.89	7,207,883.09	34,624.87	11/25/2008	0.00	68,105.70	68,105.70	132.42
	CWHEQ REVOLVING
12670HAB2	07-S3 CL A-2	186,657,706.20	78,396,236.60	72,770.58	78,469,007.18	376,945.49	11/25/2008	1,364,565.41	527,586.71	1,892,152.13	3,679.05
	CHASEFLEX TR SER
16165YAB8	07-M1 CL 1A2	36,000,000.00	18,000,000.00	20,932.50	18,020,932.50	86,568.05	11/25/2008	0.00	108,151.24	108,151.24	210.29
	CITIGROUP HELOC
172978AD0	TR 06 NCB1 2A3	27,500,000.00	11,000,000.00	58,055.56	11,058,055.56	53,120.13	11/17/2008	0.00	107,669.22	107,669.22	307.87
	CITIGROUP MTG 06-
17309SAD2	WFH4 CL A4	31,400,000.00	12,528,600.00	12,136.97	12,540,736.97	60,242.57	11/25/2008	0.00	87,993.05	87,993.05	171.09
	CITIGROUP MTG LN
17310RAB5	06 AR9 CL 1A2	20,000,000.00	9,662,000.00	7,619.44	9,669,619.44	46,450.43	11/25/2008	0.00	55,240.97	55,240.97	107.41
	CITIGROUP MTG SER
17311XAB1	07-AMC2 A3B	170,788,000.00	60,680,976.40	65,255.25	60,746,231.65	291,809.71	11/25/2008	0.00	473,100.55	473,100.55	919.88
	CITIGROUP MTG 07-
17312TAJ2	AHL2 CL A-3B	48,000,000.00	18,600,000.00	18,446.67	18,618,446.67	89,438.36	11/25/2008	0.00	133,738.33	133,738.33	260.04
	CITIGROUP MTG LN
17313BAD3	07-AMC4 A2C	36,285,000.00	18,146,128.50	13,823.58	18,159,952.08	87,235.87	11/25/2008	0.00	100,198.38	100,198.38	194.82
	CITIGROUP MTG LN
17313CAB5	07-WFHE3 A-2	125,723,000.00	65,526,827.60	47,757.28	65,574,584.88	315,003.91	11/25/2008	0.00	346,240.27	346,240.27	673.22
	CWABS ASSET BKD
23242FAC0	06-16 2A2	112,662,000.00	57,728,008.80	42,670.73	57,770,679.53	277,515.90	11/25/2008	0.00	309,362.81	309,362.81	601.52

A	B	C	D	E	F	G	H	I	J	K	L
						Accrued
						Interest on			Post		Accrued
				Accrued	Designated	D. Purchase	Payment	Post 10/31/08	10/31/08	Post 10/31/08	Interest on
CUSIP	Security Name	Par	Market Value	Interest	Purchase Price	Price	Date	Principal	Interest	Total Cash	amount in K
	CWALT ALT LN TR
23242GAC8	06-OA16 A-1C	160,300,000.00	98,408,170.00	61,426.07	98,469,596.07	473,023.32	11/25/2008	0.00	445,339.00	445,339.00	865.91
	CWALT ALT LN TR
23242GAD6	06-OA16 A 1-D	38,000,000.00	11,856,000.00	14,941.39	11,870,941.39	57,025.03	11/25/2008	0.00	108,325.07	108,325.07	210.62
	CWALT ALT SER 06-
23242GAR5	OA16 CL M9	51,732,000.00	25,369,372.80	20,168.30	25,389,541.10	121,965.01	11/25/2008	0.00	146,220.14	146,220.14	284.31
	CWALT ALT 06-0C8
232434AD2	2-A-2B	200,000,000.00	100,000,000.00	76,194.44	100,076,194.44	480,741.02	11/25/2008	0.00	552,409.72	552,409.72	1,074.09
	CWALT ALT LN TR
23243AAB2	2006 OA12 A-1B	89,209,000.00	49,457,469.60	121,776.48	49,579,246.08	238,166.30	11/20/2008	0.00	342,651.44	342,651.44	862.20
	CWALT ALT 2006-
23243AAC0	OA12 A-1C	10,000,000.00	1,665,000.00	13,925.69	1,678,925.69	8,065.14	11/20/2008	0.00	39,183.75	39,183.75	98.60
	CWALT ALT 06-OC7
23243VAC4	P/T 2-A-2	10,500,000.00	7,561,050.00	4,000.21	7,565,050.21	36,340.61	11/25/2008	0.00	29,001.51	29,001.51	56.39
	CWALT ALT P/T 06-
23244JAC0	OC11 CL 2A2A	24,000,000.00	16,029,600.00	9,143.33	16,038,743.33	77,046.11	11/25/2008	0.00	66,289.17	66,289.17	128.89
	DEUTSCHE ALT A 07-
25150MAC0	RAMP1 CL A2	87,099,000.00	68,799,500.10	32,988.75	68,832,488.85	330,654.07	11/25/2008	0.00	239,168.41	239,168.41	465.03
	DEUTSCHE ALT A
25150MAD8	2007 RAMP1 A3	40,896,000.00	18,816,249.60	15,898.32	18,832,147.92	90,464.93	11/25/2008	0.00	115,262.82	115,262.82	224.11
	DEUTSCHE ALT A 06-
25150RAD7	AR6 CL A4	99,400,000.00	62,005,720.00	37,868.64	62,043,588.64	298,041.89	11/25/2008	0.00	274,547.63	274,547.63	533.82
	DEUTSCHE ATL AT
25150VAC0	2007-AR3 1A3	45,223,089.89	26,301,749.08	17,278.99	26,319,028.07	126,430.03	11/25/2008	621,189.45	125,272.67	746,462.12	1,451.40
	DEUTSCHE ALT A
25150VAD8	2007-AR3 1A4	30,489,000.00	9,146,700.00	12,123.61	9,158,823.61	43,996.70	11/25/2008	0.00	87,896.19	87,896.19	170.90
	DEUTSCHE ALT A
25150VAL0	SECS 07-AR3 2A4	96,270,000.00	26,917,092.00	38,601.60	26,955,693.60	129,488.41	11/25/2008	0.00	279,861.57	279,861.57	544.16
	DEUTSCHE ALT A
25150VBA3	2007-AR3 2A2B	139,340,000.00	85,652,298.00	54,168.43	85,706,466.43	411,712.44	11/25/2008	0.00	392,721.08	392,721.08	763.60
	DEUTSCHE ALT A
251510NC3	SECS 06-AF1 IA4	125,388,000.00	47,145,888.00	49,580.51	47,195,468.51	226,715.23	11/25/2008	0.00	359,458.66	359,458.66	698.92
	DEUTSCHE ALT A
25151AAE1	2006 AR3 A-5	127,901,000.00	54,997,430.00	48,726.73	55,046,156.73	264,427.98	11/25/2008	0.00	353,268.78	353,268.78	686.89
	DEUTSCHE ALT A 07-
25151TAD2	BAR1 CL A4	73,020,000.00	19,357,602.00	28,386.53	19,385,988.53	93,125.44	11/25/2008	0.00	205,802.30	205,802.30	400.16
	DEUTSCHE ALT A 07-
25151UAD9	AR2 CL A4	11,889,223.50	8,318,889.68	4,483.23	8,323,372.91	39,983.40	11/25/2008	144,744.34	32,503.40	177,247.74	344.64
	DEUTSCHE ALT A 07-
25151UAE7	AR2 CL A5	9,436,000.00	2,406,180.00	3,610.58	2,409,790.58	11,576.03	11/25/2008	0.00	26,176.71	26,176.71	50.90
	DEUTSCHE ALT A 07-
25151UAF4	AR2 CL A6	5,548,267.97	2,437,908.95	2,101.41	2,440,010.35	11,721.20	11/25/2008	67,549.05	15,235.20	82,784.24	160.96
	DEUTSCHE ALT A 07-
25151UAG2	AR2 CL A7	4,309,000.00	296,028.30	1,664.59	297,692.89	1,430.04	11/25/2008	0.00	12,066.55	12,066.55	23.46
	DEUTSCHE ALT A 07-
25151YAB5	1 CL 1-A2	20,000,000.00	14,138,000.00	7,597.22	14,145,597.22	67,951.91	11/25/2008	0.00	55,079.86	55,079.86	107.10

A	B	C	D	E	F	G	H	I	J	K	L
						Accrued
						Interest on			Post		Accrued
				Accrued	Designated	D. Purchase	Payment	Post 10/31/08	10/31/08	Post 10/31/08	Interest on
CUSIP	Security Name	Par	Market Value	Interest	Purchase Price	Price	Date	Principal	Interest	Total Cash	amount in K
	DEUTSCHE ALT A 07-
25151YAC3	1 CL 1-A-3A	139,392,000.00	68,762,073.60	53,724.00	68,815,797.60	330,573.89	11/25/2008	0.00	389,499.00	389,499.00	757.33
	FBR SEC TR 2005-1
30246QAB9	BKD NT A-2	32,203,104.87	20,603,546.50	9,338.90	20,612,885.40	99,019.15	11/28/2008	299,992.10	96,501.97	396,494.07	634.89
	FIELDSTONE MTG
316599AE9	SER 06-3 CL 2A4	15,000,000.00	3,895,500.00	5,831.25	3,901,331.25	18,741.02	11/25/2008	0.00	42,276.56	42,276.56	82.20
	FIELDSTONE MTG
31659TDR3	05-2 CL 2-A-2	54,693,016.59	49,272,938.65	21,261.91	49,294,200.56	236,797.02	11/25/2008	5,889,440.43	154,148.85	6,043,589.28	11,751.00
	FIRST FRANKLIN 06-
320275AE0	FF16 CL 2A4	28,000,000.00	9,366,000.00	10,791.67	9,376,791.67	45,043.76	11/25/2008	0.00	78,239.58	78,239.58	152.13
	FIRST FRANKLIN 06-
32027EAF8	FF5 CL 2A4	25,000,000.00	7,087,500.00	9,718.75	7,097,218.75	34,093.26	11/25/2008	0.00	70,460.94	70,460.94	137.00
	FIRST FRANKLIN 05-
32027NVU2	FF9 CL A-3	58,813,053.04	48,044,383.03	23,124.97	48,067,507.99	230,904.29	11/25/2008	3,248,194.71	167,656.00	3,415,850.72	6,641.69
	FIRST FRANKLIN 06-
32027NZL8	FFH1 CL A-4	7,500,000.00	5,194,500.00	2,965.63	5,197,465.63	24,967.33	11/25/2008	0.00	21,500.78	21,500.78	41.81
	FIRST FRANKLIN 07-
32029GAD6	FF2 CL A2C	202,099,000.00	73,927,814.20	76,545.00	74,004,359.20	355,498.44	11/25/2008	0.00	554,951.22	554,951.22	1,079.03
	FIRST FRANKLIN 07-
32029GAE4	FF2 CL A2D	65,214,000.00	24,050,923.20	25,207.02	24,076,130.22	115,655.71	11/25/2008	0.00	182,750.91	182,750.91	355.34
	FIRST FRANKLIN 07
32029HAB8	FFC CL A2A	80,881,533.00	44,484,843.15	30,633.88	44,515,477.03	213,841.22	11/25/2008	3,072,638.47	222,095.64	3,294,734.10	6,406.20
	FIRST REP MTG LN
336161AT1	2000-FRB2 B1	608,345.54	517,397.88	1,415.42	518,813.30	2,492.25	11/17/2008	543.70	2,934.63	3,478.33	9.95
	GSAMP TR 2006 HE8
3622M8AD8	P/T CL A2C	85,335,000.00	40,687,728.00	32,510.26	40,720,238.26	195,609.84	11/25/2008	0.00	235,688.89	235,688.89	458.27
	GSAMP TR 2007 NC1
3622MGAD0	P/T CL A2C	136,365,000.00	54,777,820.50	51,648.24	54,829,468.74	263,387.06	11/25/2008	0.00	374,449.77	374,449.77	728.07
	GSAMP TR 2007 NC1
3622MGAE8	P/T CL A-2D	79,824,000.00	20,299,243.20	30,942.89	20,330,186.09	97,661.13	11/25/2008	0.00	224,335.93	224,335.93	436.19
	GSR MTG LN TR 07-
3622NAAD2	OA1 CL 2A2	74,739,000.00	38,079,520.50	29,054.79	38,108,575.29	183,064.07	11/25/2008	0.00	210,647.20	210,647.20	409.58
	GS MTG SECS CORP
362334AU8	06-FF3 CL A2B	79,739,451.58	59,142,751.24	30,644.31	59,173,395.55	284,254.20	11/25/2008	3,917,955.54	222,171.28	4,140,126.81	8,049.96
	GS MTG SECS CORP
362341D89	2005-15 2A3	114,715,000.00	50,910,517.00	45,997.53	50,956,514.53	244,782.36	11/25/2008	0.00	333,482.08	333,482.08	648.41
	GS MTG SECS CORP
362341L49	2005-WMC3 A2B	14,569,049.60	11,870,861.61	5,663.72	11,876,525.33	57,051.86	11/25/2008	704,292.84	41,020.54	745,313.38	1,449.17
	GS MTG 2005-FF8 CL
362341QP7	A2C	9,043,696.30	8,468,517.22	3,545.88	8,472,063.10	40,697.67	11/25/2008	1,205,434.47	25,707.65	1,231,142.12	2,393.80
	GS MTG SECS CORP
362341YD5	2005-F11 A2C	15,279,654.60	13,771,552.69	5,939.97	13,777,492.65	66,183.63	11/25/2008	1,351,454.58	43,064.75	1,394,519.33	2,711.47
	GSAA HM EQ TR
362381AS4	2006 12 A-2-A	35,021,000.00	16,701,514.90	13,264.20	16,714,779.10	80,293.62	11/25/2008	0.00	96,165.46	96,165.46	186.98
	GSAMP TR 2006 HE3
36244KAD7	P/T A-2C	51,980,000.00	33,651,852.00	19,745.18	33,671,597.18	161,749.93	11/25/2008	0.00	142,670.34	142,670.34	277.40

A	B	C	D	E	F	G	H	I	J	K	L
						Accrued
						Interest on			Post		Accrued
				Accrued	Designated	D. Purchase	Payment	Post 10/31/08	10/31/08	Post 10/31/08	Interest on
CUSIP	Security Name	Par	Market Value	Interest	Purchase Price	Price	Date	Principal	Interest	Total Cash	amount in K
	GE WMC MTG SECS
367910AC0	05-1 CL A2B	12,534,018.00	12,081,539.95	4,872.60	12,086,412.55	58,060.10	11/25/2008	2,463,580.35	35,326.35	2,498,906.70	4,858.81
	GREENPOINT MTG
39538AAC0	06-AR5 CL 1A2A1	34,500,000.00	19,430,400.00	13,143.54	19,443,543.54	93,401.92	11/25/2008	0.00	95,290.68	95,290.68	185.28
	GREENPOINT MTG
39538AAG1	06-AR5 CL A3A1	60,000,000.00	17,502,000.00	23,191.67	17,525,191.67	84,186.64	11/25/2008	0.00	168,139.58	168,139.58	326.93
	GREENPOINT MTG
39538BAB0	2003-AR6 1-A2A1	34,517,589.43	18,908,735.49	13,150.24	18,921,885.73	90,896.01	11/25/2008	0.00	95,339.26	95,339.26	185.38
	GREENPOINT MTG
39538BAC8	06-AR6 CL A2A2	24,171,000.00	13,226,371.20	9,154.77	13,235,525.97	63,580.16	11/25/2008	0.00	66,372.05	66,372.05	129.05
	GREENPOINT MTG
39538BAE4	2006-AR6 1-A3A	58,029,570.63	17,031,678.98	22,430.04	17,054,109.02	81,923.68	11/25/2008	0.00	162,617.80	162,617.80	316.19
	GREENPOINT MTG
39538CAC6	2006-AR7 1A2A1	34,500,000.00	18,033,150.00	13,162.71	18,046,312.71	86,689.97	11/25/2008	0.00	95,429.63	95,429.63	185.55
	GREENPOINT MTG
39538CAD4	06-AR7 CL 1A22	46,758,000.00	24,258,050.40	17,709.59	24,275,759.99	116,614.68	11/25/2008	0.00	128,394.55	128,394.55	249.65
	GREENPOINT MTG
39538CAE2	06-AR7 1-A3A1	60,000,000.00	16,080,000.00	23,225.00	16,103,225.00	77,355.87	11/25/2008	0.00	168,381.25	168,381.25	327.40
	GREENPOINT MTG
39538WBM9	2005-HY1 1-A1B	14,259,249.85	4,494,515.55	5,733.41	4,500,248.96	21,618.07	11/25/2008	0.00	41,567.20	41,567.20	80.82
	GREENPOINT MTG
39539FAC8	2006-AR4 A2-A	36,992,000.00	23,053,414.40	14,072.37	23,067,486.77	110,810.44	11/25/2008	0.00	102,024.71	102,024.71	198.37
	GREENPOINT MTG
39539FAE4	2006-AR4 A3-3	190,914,000.00	60,958,840.20	73,687.50	61,032,527.70	293,185.00	11/25/2008	0.00	534,234.38	534,234.38	1,038.75
	GREENPOINT MTG
39539HAC4	06-AR8 CL 1A2A	30,008,033.92	17,137,588.17	11,465.57	17,149,053.74	82,379.77	11/25/2008	0.00	83,125.38	83,125.38	161.63
	GREENPOINT MTG
39539HAD2	06-AR8 CL 1A3A	180,048,203.50	55,922,972.01	69,793.69	55,992,765.69	268,975.25	11/25/2008	0.00	506,004.22	506,004.22	983.86
	HSI ASSET 2005-NC1
40430HAD0	CL II A2	9,652,411.53	8,914,967.29	3,763.10	8,918,730.39	42,843.35	11/25/2008	802,424.56	27,282.48	829,707.03	1,613.26
	HSI SECUR 05-NC2
40430HBC1	CL 2-A-3	14,097,676.00	13,144,673.10	5,511.80	13,150,184.90	63,170.20	11/25/2008	1,559,281.16	39,960.55	1,599,241.71	3,109.53
	HSI ASSET SECURE
40430HBP2	05-NC2 CL 1A	15,886,405.39	14,553,535.98	6,211.14	14,559,747.12	69,941.39	11/25/2008	543,221.25	45,030.79	588,252.04	1,143.78
	HSI ASSET SECURE
40430HCA4	2005-OPT1 M1	33,491,000.00	7,826,846.70	13,689.45	7,840,536.15	37,663.98	11/25/2008	0.00	99,248.49	99,248.49	192.98
	HSI ASSET
	SECURITIZATION
40430HDD7	CORP	8,000,000.00	3,607,200.00	3,163.33	3,610,363.33	17,343.28	11/25/2008	0.00	22,932.33	22,932.33	44.59
	HSI ASSET SECURE
40430HER5	2006-NC1 2A	26,261,933.84	20,103,510.35	10,150.97	20,113,661.32	96,621.00	11/25/2008	837,890.19	72,985.54	910,875.73	1,771.08
	HSBC HOME EQUITY
40431FAA9	USA 07-1 A-S	28,563,652.04	18,220,753.64	39,078.65	18,259,832.28	87,715.67	11/20/2008	459,305.07	110,130.73	569,435.80	1,432.84
	HSBC HOME EQUITY
40431FAB7	LN TR 07-1 AM	17,852,282.30	11,405,823.16	24,642.35	11,430,465.51	54,909.10	11/20/2008	287,065.67	69,446.62	356,512.29	897.07
	HSBC HOME EQUITY
40431FAF8	07-1 CL A-2V	14,350,000.00	10,522,855.00	19,544.90	10,542,399.90	50,643.05	11/20/2008	0.00	55,081.08	55,081.08	138.60

A	B	C	D	E	F	G	H	I	J	K	L
						Accrued
						Interest on			Post		Accrued
				Accrued	Designated	D. Purchase	Payment	Post 10/31/08	10/31/08	Post 10/31/08	Interest on
CUSIP	Security Name	Par	Market Value	Interest	Purchase Price	Price	Date	Principal	Interest	Total Cash	amount in K
	HSBC HOME EQUITY
40431FAH4	07-1 CL A-3V	17,100,000.00	9,232,290.00	23,603.94	9,255,893.94	44,463.00	11/20/2008	0.00	66,520.19	66,520.19	167.38
	HSBC HOME EQUITY
40431FAJ0	07-1 CL A-4	24,300,000.00	13,396,590.00	34,433.44	13,431,023.44	64,519.28	11/20/2008	0.00	97,039.69	97,039.69	244.18
	HSI ASSET SECUR
40431JAD5	07-OPT1 CL 2A3	28,466,000.00	10,976,489.60	10,781.50	10,987,271.10	52,780.10	11/25/2008	0.00	78,165.86	78,165.86	151.98
	HSI ASSET SECUR
40431JAF0	07-OPT1 CL M1	17,396,000.00	1,297,741.60	6,743.37	1,304,484.97	6,266.42	11/25/2008	0.00	48,889.40	48,889.40	95.06
	HSI ASSET SECUR
40431JAG8	07-OPT1 CL M2	6,000,000.00	627,000.00	2,352.50	629,352.50	3,023.25	11/25/2008	0.00	17,055.63	17,055.63	33.16
	HSI ASSET SECUR
40431RAD7	07-WF1 CL 2A3	58,647,000.00	30,549,222.30	22,342.88	30,571,565.18	146,858.16	11/25/2008	0.00	161,903.60	161,903.60	314.80
	HOME EQUITY MTG
43708DAA4	07-1 CL A	68,653,737.23	44,034,507.06	26,002.60	44,060,509.66	211,655.67	11/25/2008	2,972,762.17	188,518.88	3,161,281.05	6,146.72
	HOME EQUITY MTG
43709XAF8	06-E CL 2A-4	30,000,000.00	8,058,000.00	11,562.50	8,069,562.50	38,764.16	11/25/2008	0.00	83,828.12	83,828.12	162.99
	HOME EQUITY LN
43710XAC2	07-FRE1 2-AV-2	22,355,000.00	11,528,473.50	8,491.80	11,536,965.30	55,420.70	11/25/2008	0.00	61,565.51	61,565.51	119.71
	HOME EQUITY LN
43710XAD0	07-FRE1 2-AV-3	33,800,000.00	13,695,760.00	13,102.19	13,708,862.19	65,853.95	11/25/2008	0.00	94,990.91	94,990.91	184.70
	HOMEBANC MTG TR
43739EAB3	2004-1 CL II-A	27,888,892.26	17,570,002.12	19,144.56	17,589,146.69	84,493.86	11/25/2008	301,954.60	95,722.81	397,677.42	773.23
	HOMEBANC MTG TR
43739EAJ6	2004-2 A-1	49,590,638.34	33,746,429.39	19,994.67	33,766,424.06	162,205.46	11/25/2008	818,652.29	144,961.36	963,613.65	1,873.63
	HOMEBANC MTG TR
43739EAP2	2005-1 A-1	120,098,539.70	70,161,566.89	46,821.75	70,208,388.64	337,263.55	11/25/2008	1,418,958.97	339,457.69	1,758,416.66	3,419.02
	HOMEBANC MTG TR
43739EAQ0	2005-1 A-2	24,200,729.40	8,775,184.48	9,596.26	8,784,780.74	42,199.89	11/25/2008	285,930.55	69,572.90	355,503.45	691.23
	HOMEBANC MTG TR
43739EAZ0	05-2 CL A-1	6,103,285.75	1,490,422.38	2,352.31	1,492,774.69	7,170.92	11/25/2008	0.00	17,054.24	17,054.24	33.16
	HOMEBANC MTG TR
43739EBJ5	05-3 MTG A-1	124,448,294.20	72,180,010.64	48,379.27	72,228,389.91	346,967.13	11/25/2008	1,184,317.55	350,749.74	1,535,067.29	2,984.75
	HOMEBANC MTG TR
43739EBS5	05-4 P/T CL A1	98,027,384.42	68,619,169.09	38,434.90	68,657,604.00	329,813.97	11/25/2008	992,551.51	278,653.05	1,271,204.56	2,471.70
	HOMEBANC MTG TR
43739ECB1	2005-5 CL A1	191,954,046.00	119,510,589.04	75,048.70	119,585,637.74	574,459.51	11/25/2008	1,358,856.02	544,103.08	1,902,959.09	3,700.07
	HOMEBANC MTG TR
43739ECD7	2005-5 CL M1	13,009,400.00	1,738,055.84	5,418.78	1,743,474.62	8,375.22	11/25/2008	0.00	39,286.13	39,286.13	76.39
	HOMEBANC MTG TR
43739ECE5	2005-5 CL M2	9,506,800.00	1,164,583.00	3,991.54	1,168,574.54	5,613.54	11/25/2008	0.00	28,938.63	28,938.63	56.27
	HOMEBANC MTG TR
43739HAA8	06 2 P/T A-1	13,268,477.92	7,961,086.75	5,069.66	7,966,156.42	38,267.42	11/25/2008	196,651.49	36,755.07	233,406.55	453.83
	IXIS REAL ESTATE 07-
45073DAC2	HE1 CL A3	45,000,000.00	16,641,000.00	17,093.75	16,658,093.75	80,021.32	11/25/2008	0.00	123,764.94	123,764.94	240.65
	IXIS REAL ESTATE 07-
45073DAD0	HE1 CL A4	46,000,000.00	17,121,200.00	17,831.39	17,139,031.39	82,331.62	11/25/2008	0.00	129,105.71	129,105.71	251.03

A	B	C	D	E	F	G	H	I	J	K	L
						Accrued
						Interest on			Post		Accrued
				Accrued	Designated	D. Purchase	Payment	Post 10/31/08	10/31/08	Post 10/31/08	Interest on
CUSIP	Security Name	Par	Market Value	Interest	Purchase Price	Price	Date	Principal	Interest	Total Cash	amount in K
	IMPAC CMB TR 03-
45254NFY8	11 CL 1-A-1	5,407,749.31	4,321,332.47	2,414.71	4,323,747.18	20,770.20	11/25/2008	316,764.25	17,506.65	334,270.90	649.95
	IMPAC CMB TR 04-4
45254NHT7	1 A2	18,622,548.00	14,093,544.33	8,025.80	14,101,570.13	67,740.42	11/25/2008	146,361.14	58,127.71	204,488.85	397.60
	IMPAC CMB TR 04-5
45254NJH1	1 A2	34,708,564.00	24,795,798.12	13,917.17	24,809,715.29	119,179.67	11/25/2008	402,370.87	100,899.48	503,270.35	978.55
	IMPAC TR CMB 04-7
45254NKF3	1-A-1	26,768,116.04	19,273,043.55	11,893.22	19,284,936.77	92,640.02	11/25/2008	274,835.79	86,196.63	361,032.42	701.98
	IMPAC CMB TR 04-B
45254NKQ9	COLL CL A-1	13,470,875.60	9,430,960.01	5,955.25	9,436,915.26	45,332.58	11/25/2008	166,224.29	43,175.56	209,399.85	407.15
	IMPAC CMB TR
45254NKS5	2001-8 CL 2-A-2	9,985,702.00	6,191,135.24	4,458.89	6,195,594.13	29,762.09	11/25/2008	206,223.06	32,326.98	238,550.04	463.83
	IMPAC CMB TR 04-
45254NLL9	10 COLL 2A	1,070,584.25	721,573.78	463.77	722,037.56	3,468.49	11/25/2008	10,564.28	3,361.84	13,926.11	27.08
	IMPAC CMB TR 04-
45254NMB0	11 COLL CL 2A1	32,774,173.29	20,319,987.44	14,270.42	20,334,257.86	97,680.69	11/25/2008	237,406.44	103,460.56	340,867.00	662.77
	IMPAC CMB TR 05-1
45254NML8	1-A-1	18,754,484.00	10,817,586.37	7,332.48	10,824,918.85	52,000.20	11/25/2008	148,830.37	53,160.50	201,990.86	392.75
	IMPAC CMB TR
45254NMP9	2005-1 CL 2-A-2	10,041,060.92	5,905,147.93	3,981.56	5,909,129.49	28,385.98	11/25/2008	210,952.48	28,866.31	239,818.79	466.30
	IMPAC CMB TR 05-2
45254NMY0	B2 CL 1-A-1	52,906,250.90	28,283,681.73	20,684.87	28,304,366.61	135,967.10	11/25/2008	520,601.95	149,965.34	670,567.28	1,303.83
	IMPAC CMB TR
45254NNQ6	2005-3 COLL A-2	8,436,469.19	4,808,787.44	3,335.92	4,812,123.36	23,116.24	11/25/2008	77,945.46	24,185.42	102,130.88	198.58
	IMPAC CMB TR 05-4
45254NPA9	COLL 1-A-1A	47,604,979.94	28,672,479.42	18,665.12	28,691,144.54	137,825.09	11/25/2008	677,120.11	135,202.64	812,322.75	1,579.46
	IMPAC CMB TR 05-6
45254NQG5	CTF 1-A-1	10,920,656.83	6,349,269.88	4,257.54	6,353,527.42	30,520.76	11/25/2008	218,307.52	30,867.16	249,174.68	484.49
	IMPAC CMB TR
45254NRG4	2005-8 CL 1A	108,333,580.40	71,500,163.06	42,355.42	71,542,518.48	343,672.37	11/25/2008	1,636,283.29	307,048.16	1,943,331.45	3,778.57
	IMPAC SECS ASSET
45254TRU0	05-1 CL 5A3	23,960,909.20	21,679,830.64	9,421.30	21,689,251.94	104,189.74	11/25/2008	476,590.30	68,304.40	544,894.70	1,059.48
	IMPAC CMB TR
452550AA4	2007-A CL A 144A	144,772,079.60	81,738,316.14	56,441.00	81,794,757.15	392,921.56	11/25/2008	2,525,112.94	409,197.27	2,934,310.21	5,705.40
	IMPAC MTG P/T SER
452559AB3	07-1 CL A2	200,000,000.00	69,780,000.00	75,972.22	69,855,972.22	335,570.63	11/25/2008	0.00	550,798.61	550,798.61	1,070.96
	IMPAC MTG P/T SER
452559AC1	07-1 CL A3	97,972,000.00	47,986,685.60	38,086.62	48,024,772.22	230,699.00	11/25/2008	0.00	276,127.96	276,127.96	536.90
	IMPAC SECD ASSETS
45255RAX5	06-3 CL A6	190,000,000.00	45,600,000.00	73,018.06	45,673,018.06	219,401.76	11/25/2008	0.00	529,380.91	529,380.91	1,029.31
	IMPAC SECD ASSETS
45255RAZ0	06-3 CL A7	32,378,000.00	10,438,667.20	12,694.87	10,451,362.07	50,205.73	11/25/2008	0.00	92,037.84	92,037.84	178.96
	IMPAC SECD ASSET
452570AA2	07-2 CL 1A1A	8,041,681.01	6,688,266.10	3,010.05	6,691,276.14	32,143.22	11/25/2008	179,537.39	21,822.83	201,360.22	391.52
	IMPAC SECD ASSET
452570AB0	07-2 CL 1-A1	188,015,314.40	90,510,572.35	73,299.86	90,583,872.21	435,142.28	11/25/2008	78,998.30	531,423.98	610,422.28	1,186.89

A	B	C	D	E	F	G	H	I	J	K	L
						Accrued
						Interest on			Post		Accrued
				Accrued	Designated	D. Purchase	Payment	Post 10/31/08	10/31/08	Post 10/31/08	Interest on
CUSIP	Security Name	Par	Market Value	Interest	Purchase Price	Price	Date	Principal	Interest	Total Cash	amount in K
	IMPAC SECD TR 07-2
452570AC8	CL 1-A1-C	91,882,831.73	44,792,880.47	37,148.74	44,830,029.21	215,352.25	11/25/2008	38,606.36	269,328.36	307,934.72	598.74
	IMPAC SECD ASSETS
45257BAD2	06-4 CL A2C	56,131,000.00	29,339,673.70	21,945.66	29,361,619.36	141,045.88	11/25/2008	0.00	159,106.05	159,106.05	309.36
	IMPAC SECD ASSETS
45257EAB0	06-5 CL 1A1B	175,592,000.00	119,964,454.40	67,480.98	120,031,935.38	576,603.41	11/25/2008	0.00	489,237.11	489,237.11	951.26
	IMPAC SECD P/T 06-5
45257EAC8	CL 1A1C	18,816,000.00	6,585,600.00	7,377.44	6,592,977.44	31,671.02	11/25/2008	0.00	53,486.44	53,486.44	104.00
	IMPAC SECD ASSETS
45257VAB2	TR 07-3 1A1B	100,641,000.00	49,716,654.00	39,124.19	49,755,778.19	239,014.32	11/25/2008	0.00	283,650.37	283,650.37	551.52
	INDYMAC MBS INC
45660LW96	2005-AR31 5A1	62,338,255.86	31,811,211.97	24,580.32	31,835,792.29	152,931.19	11/25/2008	340,834.73	178,207.33	519,042.06	1,009.21
	INDYMAC INDX 06-
45661LAB4	AR27 P/T I-A-2	173,002,000.00	100,739,064.60	65,908.96	100,804,973.56	484,241.89	11/25/2008	0.00	477,839.93	477,839.93	929.10
	INDYMAC INDX 06-
45661LAC2	AR27 P/T I-A-3	12,425,000.00	6,463,485.00	4,871.64	6,468,356.64	31,072.37	11/25/2008	0.00	35,319.36	35,319.36	68.67
	INDYMAC RESI 07-L1
45668QAA8	CL A1	67,563,672.78	50,510,601.77	25,739.88	50,536,341.65	242,763.95	11/25/2008	1,276,727.20	186,614.15	1,463,341.35	2,845.28
	INDTMAC INDX MTG
45668RAB4	07-FLX2 A-1B	66,656,238.07	43,919,795.26	25,171.99	43,944,967.25	211,100.64	11/25/2008	147,957.71	118,077.84	266,035.55	517.27
	INDYMAC INDX 07-
45668RAC2	FLX2 CL A1C	17,171,480.85	6,288,196.29	6,580.02	6,294,776.30	30,238.53	11/25/2008	-16,595.16	47,705.12	31,109.96	60.49
	INDYMAC INDX MTG
45668WAB3	07-FLX1 CL A2	15,000,000.00	8,433,000.00	5,731.25	8,438,731.25	40,537.56	11/25/2008	0.00	41,551.56	41,551.56	80.79
	INDYMAC INDX MTG
45668WAC1	07-FLX1 CL A3	46,890,000.00	19,618,776.00	18,280.59	19,637,056.59	94,331.51	11/25/2008	0.00	132,534.26	132,534.26	257.70
	IXIS REAL ESTATE
46602UAC2	CAP 06-HE3 A3	150,000,000.00	64,680,000.00	56,812.50	64,736,812.50	310,979.46	11/25/2008	0.00	411,675.00	411,675.00	800.45
	J P MORGAN ALT LN
466287AC3	2007-A1 1A3A	11,025,000.00	6,275,430.00	4,175.72	6,279,605.72	30,165.66	11/25/2008	0.00	32,351.02	32,351.02	62.90
	J P MORGAN MTG
46628TAD3	06-WMC2 CL A4	70,305,000.00	32,994,136.50	26,628.02	33,020,764.52	158,623.50	11/25/2008	0.00	192,858.46	192,858.46	374.99
	J P MORGAN MTG
46629QAW6	ACQ 06-CH2 AV5	66,197,000.00	19,111,073.90	25,513.43	19,136,587.33	91,927.38	11/25/2008	0.00	184,934.24	184,934.24	359.58
	J P MORGAN MTG
46629TAE0	06-CH1 CL A5	20,000,000.00	7,400,000.00	7,752.78	7,407,752.78	35,584.99	11/25/2008	0.00	56,129.76	56,129.76	109.14
	J P MORGAN MTG
46631KAD7	07-CH5 CL A-4	40,000,000.00	22,800,000.00	15,194.44	22,815,194.44	109,598.49	11/25/2008	0.00	110,159.72	110,159.72	214.19
	LEHMAN XS TR 2006
525161AH8	GP4 3-2A2	81,618,141.69	50,554,276.96	31,003.56	50,585,280.52	242,999.04	11/25/2008	0.00	224,775.80	224,775.80	437.05
	LEHMAN XS TR 2006
525161AK1	GP4 P/T 3A3A	125,917,804.80	38,530,848.27	48,530.82	38,579,379.09	185,325.69	11/25/2008	0.00	351,848.45	351,848.45	684.13
	LEHMAN XS TR 05-8
525221DT1	CTF 1A3	47,274,000.00	27,716,746.20	18,955.56	27,735,701.76	133,235.38	11/25/2008	0.00	137,427.82	137,427.82	267.21
	LEHMAN XS TR 05-8
525221DU8	CTF 1A4	12,229,762.39	7,945,676.62	4,835.85	7,950,512.48	38,192.27	11/25/2008	282,860.54	35,059.93	317,920.47	618.16

A	B	C	D	E	F	G	H	I	J	K	L
						Accrued
						Interest on			Post		Accrued
				Accrued	Designated	D. Purchase	Payment	Post 10/31/08	10/31/08	Post 10/31/08	Interest on
CUSIP	Security Name	Par	Market Value	Interest	Purchase Price	Price	Date	Principal	Interest	Total Cash	amount in K
	LEHMAN XS TR
525221FP7	2005-10 CL IA3	29,823,522.70	27,461,499.70	11,627.03	27,473,126.73	131,974.03	11/25/2008	1,294,169.19	84,295.98	1,378,465.17	2,680.25
	LEHMAN XS TR
525221FQ5	2005-10 CL IA4	27,252,000.00	15,427,357.20	10,927.30	15,438,284.50	74,161.66	11/25/2008	0.00	79,222.89	79,222.89	154.04
	LEHMAN XS TR SER
525228AH5	2006 GP3	43,580,727.54	29,355,978.07	16,554.62	29,372,532.69	141,098.30	11/25/2008	0.00	120,021.02	120,021.02	233.37
	LEHMAN XS TR 06
525228AK8	GP3 CL 3A3A	75,244,756.02	25,613,314.95	29,000.58	25,642,315.53	123,179.27	11/25/2008	0.00	210,254.23	210,254.23	408.81
	LEHMAN XS TR 2006
52522HAE2	8 P/T 2-A3	59,148,184.20	36,760,596.48	22,468.09	36,783,064.58	176,696.65	11/25/2008	1,592,125.67	162,893.70	1,755,019.37	3,412.42
	LEHMAN XS 2006 8
52522HAF9	P/T 2-A4A	16,479,000.00	4,943,700.00	6,442.83	4,950,142.83	23,779.25	11/25/2008	0.00	46,710.53	46,710.53	90.82
	LEHMAN XS 2006
52522RAB6	GP1 A2-A	63,066,581.21	49,860,439.10	24,026.62	49,884,465.72	239,632.50	11/25/2008	0.00	174,192.96	174,192.96	338.70
	LEHMAN XS TR 2006
52523MAB6	15 CL A2	40,051,000.00	23,249,605.50	15,258.32	23,264,863.82	111,758.59	11/25/2008	0.00	110,622.82	110,622.82	215.09
	LEHMAN XS TR 2006
52523MAC4	15 CL A3	40,000,000.00	11,936,000.00	15,683.33	11,951,683.33	57,412.90	11/25/2008	0.00	113,704.16	113,704.16	221.08
	LEHMAN XS TR 06-
52523QAC5	20 P/T CL A3	71,981,000.00	19,190,134.60	27,982.61	19,218,117.21	92,319.03	11/25/2008	0.00	202,873.99	202,873.99	394.46
	LEHMAN XS TR 2007
525241AD7	1 P/T CL 1A4	36,228,000.00	7,397,757.60	14,043.38	7,411,800.98	35,604.44	11/25/2008	0.00	101,814.52	101,814.52	197.97
	LEHMAN XS TR 07-
52524TAB0	8H P/T CL A2	214,441,000.00	110,351,338.60	83,602.21	110,434,940.81	530,501.85	11/25/2008	0.00	606,115.99	606,115.99	1,178.52
	LEHMAN XS TR 07-
52524TAC8	8H P/T CL A3	94,535,000.00	30,875,131.00	37,380.71	30,912,511.71	148,495.98	11/25/2008	0.00	271,010.20	271,010.20	526.95
	LONG BEACH MTG
542512AD0	06-11 CL 2A3	105,000,000.00	34,293,000.00	40,002.08	34,333,002.08	164,927.16	11/25/2008	0.00	290,015.10	290,015.10	563.90
	LONG BEACH 05-
542514MW1	WL2 CL III-A1	2,550,565.12	2,416,660.45	974.53	2,417,634.98	11,613.71	11/25/2008	343,580.84	7,065.33	350,646.17	681.79
	MASTR ASSET BKD
55275RAE2	06-NC3 CL A-5	52,105,000.00	13,839,088.00	20,082.14	13,859,170.14	66,575.99	11/25/2008	0.00	145,595.48	145,595.48	283.09
	MASTR ADJ RT MTG
576433RJ7	04-9	9,059,473.48	8,631,866.33	3,783.59	8,635,649.92	41,483.50	11/25/2008	192,208.43	27,431.02	219,639.45	427.06
	MASTR ADJ RT MTGS
576433RP3	TR 2004-9	25,939.76	25,319.80	10.49	25,330.29	121.68	11/25/2008	1,696.35	76.04	1,772.38	3.45
	MASTR ASSET BKD
57645EAC4	2006-AM3 A-3	30,000,000.00	20,235,000.00	11,429.17	20,246,429.17	97,258.78	11/25/2008	0.00	82,861.46	82,861.46	161.11
	MERRILL LYNCH MTG
5899292T4	2003-F CL B1	1,092,672.81	208,809.77	702.73	209,512.50	1,006.45	11/25/2008	4,573.24	3,513.63	8,086.86	15.72
	MERRILL LYNCH MTG
59020UPA7	INVS 04-G A2	2,039,026.41	1,141,039.18	1,182.64	1,142,221.81	5,486.95	11/25/2008	11,129.78	5,913.18	17,042.96	33.14
	MERRILL LYNCH 05-
59020UZH1	A6 CTF 2-A-2	57,552,602.91	46,646,384.66	22,629.36	46,669,014.02	224,186.28	11/25/2008	1,789,667.12	164,062.89	1,953,730.01	3,798.78
	MERRILL LYNCH ALT
59023MAC4	07-A1 CL A2B	21,912,000.00	11,569,536.00	8,299.17	11,577,835.17	55,617.03	11/25/2008	0.00	60,168.98	60,168.98	116.99

A	B	C	D	E	F	G	H	I	J	K	L
						Accrued
						Interest on			Post		Accrued
				Accrued	Designated	D. Purchase	Payment	Post 10/31/08	10/31/08	Post 10/31/08	Interest on
CUSIP	Security Name	Par	Market Value	Interest	Purchase Price	Price	Date	Principal	Interest	Total Cash	amount in K
	MERRILL LYNCH 07-
59024VAG4	2 CL A-2C	54,210,000.00	22,573,044.00	20,712.74	22,593,756.74	108,534.76	11/25/2008	0.00	150,167.35	150,167.35	291.98
	MERRILL LYNCH 07-
59025CAD2	4 CL 2-A3	61,548,000.00	25,093,119.60	23,379.69	25,116,499.29	120,653.38	11/25/2008	0.00	169,502.76	169,502.76	329.58
	MERRILL LYNCH ALT
59025EAV8	07-OAR4 A1	107,428,610.40	61,524,365.18	41,882.24	61,566,247.41	295,748.86	11/25/2008	935,338.26	303,646.22	1,238,984.49	2,409.05
	MORGAN STANLEY
61744CVG8	ABS 2005-4 A2B	13,426,394.70	12,694,656.19	5,189.67	12,699,845.86	61,006.88	11/25/2008	1,612,792.81	37,625.14	1,650,417.95	3,209.03
	MORGAN STANLEY
61744CXL5	ABS 06-WMC1 A2B	37,132,077.50	34,005,556.57	14,270.06	34,019,826.64	163,422.74	11/25/2008	1,431,562.57	103,372.22	1,534,934.79	2,984.49
	MORGAN STANLEY
61746REV9	ABS 04-HE1 A4	939,550.20	592,292.45	378.82	592,671.27	2,847.04	11/25/2008	0.00	2,746.46	2,746.46	5.34
	MORGAN STANLEY
61748JAD9	MTG 06 9AR A-4	14,000,000.00	8,864,800.00	5,318.06	8,870,118.06	42,609.83	11/25/2008	0.00	38,555.90	38,555.90	74.97
	MORGAN STANLEY
61751TAC3	07-2AX CL 2A2	35,000,000.00	17,685,500.00	13,295.14	17,698,795.14	85,020.59	11/25/2008	0.00	96,389.76	96,389.76	187.42
	MORGAN STANLEY
61751TAD1	07-2AX CL 2A3	12,000,000.00	6,088,800.00	4,665.00	6,093,465.00	29,271.48	11/25/2008	0.00	33,821.25	33,821.25	65.76
	MORGAN STANLEY
61753KAC0	07-HE5 CL A-2B	29,500,000.00	19,933,150.00	11,271.46	19,944,421.46	95,808.01	11/25/2008	0.00	81,690.27	81,690.27	158.84
	MORGAN STANLEY
61753KAD8	07-HE5 CL A2C	77,000,000.00	33,964,700.00	30,019.31	33,994,719.31	163,302.13	11/25/2008	0.00	217,565.91	217,565.91	423.03
	MORGAN STANLEY
61755CAC6	07-HE6 CL A-3	68,000,000.00	30,205,600.00	25,981.67	30,231,581.67	145,224.96	11/25/2008	0.00	188,230.87	188,230.87	365.99
	MORTGAGE IT TR 05-
61913PAP7	1 CL 1-A-1	55,584,974.20	33,350,984.52	33,154.12	33,384,138.64	160,369.06	11/25/2008	1,158,812.47	165,770.60	1,324,583.08	2,575.49
	MORTGAGEIT TR 05-
61915RAB2	2 MTG CL 1A2	10,769,382.00	5,675,464.31	6,441.44	5,681,905.75	27,294.45	11/25/2008	133,276.59	32,207.18	165,483.78	321.76
	MORTGAGEIT TR 07-
61915YAD3	1 CL 2-A-1-3	68,643,103.64	42,991,175.81	26,379.93	43,017,555.74	206,645.58	11/25/2008	1,194,361.20	191,254.46	1,385,615.66	2,694.16
	MORTGAGEIT TR 07-
61915YAE1	1 CL 2-A-1-4	18,000,000.00	4,928,400.00	7,077.50	4,935,477.50	23,708.80	11/25/2008	0.00	51,311.88	51,311.88	99.77
	NATIONSTAR H E 07-
63860KAD4	C CL 2-AV-3	10,000,000.00	4,742,000.00	3,820.83	4,745,820.83	22,797.74	11/25/2008	0.00	27,701.04	27,701.04	53.86
	NATIONSTAR H E 07-
63860KAE2	C CL 2-AV-4	42,306,000.00	15,441,690.00	16,493.46	15,458,183.46	74,257.25	11/25/2008	0.00	119,577.61	119,577.61	232.50
	NEWCASTLE MTG
65106AAL7	SECS 06-1 CL A-3	150,000,000.00	111,000,000.00	57,312.50	111,057,312.50	533,491.56	11/25/2008	0.00	415,515.60	415,515.60	807.92
	NEWCASTLE MTG
65106AAM5	SECS 06-1 CL A-4	106,279,000.00	60,759,704.30	41,788.31	60,801,492.61	292,075.17	11/25/2008	0.00	302,965.29	302,965.29	589.08
	NOMURA ASSET
65535VNA2	CORP 05-AR4 VA1	9,376,940.80	8,441,122.11	3,645.29	8,444,767.39	40,566.55	11/25/2008	788,578.22	26,428.32	815,006.54	1,584.68
	NOMURA ASSET
65535VNB0	ACCEP 05-AR4 VA2	7,879,000.00	4,108,110.60	3,203.03	4,111,313.63	19,749.72	11/25/2008	0.00	23,221.98	23,221.98	45.15
	NOMURA ASSET
65535VPY8	ACCEP 05AR5 IIIA3	23,969,000.00	14,726,553.60	9,744.06	14,736,297.66	70,789.49	11/25/2008	0.00	70,644.47	70,644.47	137.36

A	B	C	D	E	F	G	H	I	J	K	L
						Accrued
						Interest on			Post		Accrued
				Accrued	Designated	D. Purchase	Payment	Post 10/31/08	10/31/08	Post 10/31/08	Interest on
CUSIP	Security Name	Par	Market Value	Interest	Purchase Price	Price	Date	Principal	Interest	Total Cash	amount in K
	NOMURA ASSET 05-
65535VQH4	AR5 CL 111-A-2	25,919,838.11	23,628,524.42	10,047.54	23,638,571.96	113,553.79	11/25/2008	1,192,851.74	72,844.65	1,265,696.39	2,460.99
	NOMURA ASSET
65535VRK6	ACCEP 2005-A4A1	57,312,057.26	33,493,166.26	22,407.42	33,515,573.69	161,000.44	11/25/2008	1,874,158.68	162,453.81	2,036,612.49	3,959.94
	NOMURA ASSET
65535VSF6	ACCEP 06-AR1 VA1	64,319,136.62	46,483,440.04	25,218.46	46,508,658.50	223,415.97	11/25/2008	1,587,677.96	182,833.84	1,770,511.80	3,442.54
	NOVASTAR MTG FDG
66988RAD9	TR 2006-6 2 A3	30,000,000.00	10,527,000.00	11,429.17	10,538,429.17	50,623.98	11/25/2008	0.00	82,861.46	82,861.46	161.11
	NOVASTAR MTG FDG
66988RAE7	06-6 CL A2D	45,475,000.00	16,020,842.50	17,526.82	16,038,369.32	77,044.32	11/25/2008	0.00	127,069.47	127,069.47	247.07
	OPTEUM MTG ACCEP
68383NAT0	CORP 05-2 AI3	10,000,000.00	5,500,000.00	3,976.39	5,503,976.39	26,439.73	11/25/2008	0.00	28,828.82	28,828.82	56.05
	OPTEUM MTG ACCEP
68383NBL6	05-3 CL A-1B	7,590,296.28	6,527,654.80	2,967.60	6,530,622.40	31,371.48	11/25/2008	181,867.47	21,515.06	203,382.54	395.45
	OPTEUM MTG ACCEP
68383NCC5	05-4 CL 1-A1B	68,915,219.05	51,858,702.34	27,097.08	51,885,799.42	249,246.41	11/25/2008	2,097,804.30	196,453.84	2,294,258.13	4,460.90
	OPTEUM MTG ACCEP
68383NCD3	05-4 CL 1-A1C	47,190,000.00	19,579,131.00	19,236.48	19,598,367.48	94,145.66	11/25/2008	0.00	139,464.47	139,464.47	271.17
	OPTEUM MTG ACCEP
68383NCX9	2005-5 1A1C	35,000,000.00	25,704,000.00	13,645.14	25,717,645.14	123,541.14	11/25/2008	0.00	98,927.26	98,927.26	192.35
	OPTEUM MTG ACCEP
68383NCY7	2005-5 1A1D	41,107,000.00	16,685,331.30	16,619.79	16,701,951.09	80,232.00	11/25/2008	0.00	120,493.47	120,493.47	234.28
	OPTEUM MTG ACCEP
68384CAB2	2006 2 A1B	124,269,000.00	55,921,050.00	47,204.96	55,968,254.96	268,857.50	11/25/2008	0.00	342,235.96	342,235.96	665.44
	OPTEUM MTG 2006
68384CAC0	2 P/T A1C	50,000,000.00	27,220,000.00	19,604.17	27,239,604.17	130,852.25	11/25/2008	0.00	142,130.21	142,130.21	276.35
	OPTION ONE MTG LN
68389BAP8	06-3 CL 2A4	30,000,000.00	9,786,000.00	11,595.83	9,797,595.83	47,065.20	11/25/2008	0.00	84,069.79	84,069.79	163.46
	OPTION ONE MTG LN
68389FJF2	TR 05-4 A3	23,285,581.50	20,160,656.46	9,104.02	20,169,760.48	96,890.49	11/25/2008	956,029.10	66,004.11	1,022,033.21	1,987.22
	OPTION ONE MTG
68402YAD8	07-CP1 CL 2A3	10,190,000.00	2,891,922.00	3,927.40	2,895,849.40	13,910.94	11/25/2008	0.00	28,473.62	28,473.62	55.36
	OPTION ONE MTG LN
68403KAC9	07-6 CL 2A3	10,000,000.00	3,617,000.00	3,820.83	3,620,820.83	17,393.52	11/25/2008	0.00	27,701.04	27,701.04	53.86
	OPTION ONE MTG
68403KAD7	07-6 CL 2A4	14,451,000.00	4,114,199.70	5,633.88	4,119,833.58	19,790.65	11/25/2008	0.00	40,845.65	40,845.65	79.42
	PHH ALTERNATIVE
69337BAA2	07-1 CL 1A1	171,008,798.30	107,222,516.53	64,959.59	107,287,476.13	515,382.21	11/25/2008	1,671,637.07	470,957.05	2,142,594.12	4,166.01
	PHH ALTERNATIVE
69337BAB0	07-1 CL 1A2	58,737,000.00	28,798,751.10	22,899.27	28,821,650.37	138,452.00	11/25/2008	0.00	166,019.72	166,019.72	322.80
	PHH ALT 2007 2 I-A-
69337HAA9	1	10,784,455.48	8,731,095.16	4,036.68	8,735,131.84	41,961.39	11/25/2008	84,675.13	29,265.94	113,941.07	221.54
	PHH ALTERNATIVE
69337MAA8	SER 07-3 CL A1	17,424,372.48	14,519,729.59	6,522.04	14,526,251.63	69,780.48	11/25/2008	276,400.20	47,284.79	323,684.99	629.36
	PHH
	ALTERNATIVEMTG
69337MAB6	07-3 CL A2	79,013,000.00	46,530,755.70	30,277.34	46,561,033.04	223,667.56	11/25/2008	0.00	219,510.73	219,510.73	426.81

A	B	C	D	E	F	G	H	I	J	K	L
						Accrued
						Interest on			Post		Accrued
				Accrued	Designated	D. Purchase	Payment	Post 10/31/08	10/31/08	Post 10/31/08	Interest on
CUSIP	Security Name	Par	Market Value	Interest	Purchase Price	Price	Date	Principal	Interest	Total Cash	amount in K
	POPULAR ABS INC
73316PGT1	2005-5 CL AV2B	6,587,835.62	6,333,545.17	2,575.66	6,336,120.83	30,437.14	11/25/2008	967,250.73	18,673.54	985,924.27	1,917.01
	POPULAR ABS MTG
73316TAC6	P/T 06-E CL A3	11,867,000.00	5,200,119.40	4,573.74	5,204,693.14	25,002.04	11/25/2008	0.00	33,159.61	33,159.61	64.47
	PUMA GLOBAL TR S1
74588VAA4	A 144A	1,529,505.76	1,290,306.35	10,332.77	1,300,639.12	6,247.95	11/10/2008	253,379.65	11,608.40	264,988.05	969.86
	RAAC SER 2006-SP2
74919PAC3	CL A-3	20,337,000.00	11,370,416.70	7,973.80	11,378,390.50	54,658.94	11/25/2008	0.00	57,810.04	57,810.04	112.40
	RAAC SER 06-SP4 CL
74919VAB2	A2	20,724,000.00	13,543,134.00	7,895.27	13,551,029.27	65,095.76	11/25/2008	0.00	57,240.70	57,240.70	111.30
	RAAC SER 06-SP4 CL
74919VAC0	A3	22,545,000.00	9,969,399.00	8,789.42	9,978,188.42	47,932.72	11/25/2008	0.00	63,723.28	63,723.28	123.90
	RASC SER 2007 KS1
74924SAC0	CL A3	35,455,000.00	20,627,719.00	13,428.58	20,641,147.58	99,154.91	11/25/2008	0.00	97,357.21	97,357.21	189.30
	RASC SER 07-KS3 TR
74924YAC7	AB CTF AI3	118,000,000.00	47,695,600.00	46,003.61	47,741,603.61	229,338.73	11/25/2008	0.00	333,526.18	333,526.18	648.50
	RALI SER 2006-QO5
75114HAD9	CL 2A1	56,136,299.80	29,752,238.89	21,511.12	29,773,750.01	143,025.65	11/25/2008	668,401.31	155,955.61	824,356.92	1,602.86
	RALI SER 2006 QO5
75114HAE7	CL 2A2	19,246,731.36	7,850,741.72	7,460.78	7,858,202.50	37,748.84	11/25/2008	229,166.17	54,090.67	283,256.83	550.76
	RALI SER 2006-QO8
75115FAD2	CL I-A3A	186,877,369.80	58,081,486.53	71,818.01	58,153,304.55	279,353.94	11/25/2008	0.00	520,680.58	520,680.58	1,012.40
	RAMP SER 2007-RS2
75157DAB0	P/T CL A2	55,000,000.00	21,477,500.00	21,625.69	21,499,125.69	103,276.43	11/25/2008	0.00	156,786.28	156,786.28	304.85
	RASC SER 06-KS9 P/T
75406YAC1	CL AI3	45,000,000.00	21,915,000.00	17,093.75	21,932,093.75	105,356.30	11/25/2008	0.00	123,929.69	123,929.69	240.97
	RESIDENTIAL ASST
76112BE30	05-SP2 CL AI2	6,631,935.65	6,416,397.74	2,615.01	6,419,012.75	30,835.33	11/25/2008	954,482.32	18,958.82	973,441.14	1,892.73
	RESIDENTIAL ASST
76112BH29	05-EFC5 CL A2	7,036,788.80	6,615,285.15	2,759.01	6,618,044.16	31,791.43	11/25/2008	360,118.85	20,002.81	380,121.65	739.10
	RESIDENTIAL ASSET
76112BLD0	05-RS3 AIA3	2,000,000.00	1,535,800.00	790.83	1,536,590.83	7,381.40	11/25/2008	0.00	5,733.54	5,733.54	11.15
	RESMAE MTG LN
76116RAE1	2006-1 CL A-2C	20,944,000.00	9,975,627.20	8,048.90	9,983,676.10	47,959.08	11/25/2008	0.00	58,354.49	58,354.49	113.46
	SECURITIZED ASSET
81377CAC2	06-NC3 A2C	15,949,000.00	5,615,642.90	6,200.17	5,621,843.07	27,005.93	11/25/2008	0.00	44,951.26	44,951.26	87.40
	SECURITIZED ASSET
81379EAB8	07-BR5 A2B	169,142,000.00	73,492,199.00	64,626.34	73,556,825.34	353,348.60	11/25/2008	0.00	468,540.96	468,540.96	911.02
	SOUNDVIEW HOME
83611MKY3	LN TR 2006-1 A4	14,076,000.00	9,043,830.00	5,565.89	9,049,395.89	43,471.04	11/25/2008	0.00	40,352.67	40,352.67	78.46
	SOUNDVIEW HOME
83611MPJ1	LN 06-OPT3 2A4	15,000,000.00	6,946,500.00	5,847.92	6,952,347.92	33,397.34	11/25/2008	0.00	42,397.39	42,397.39	82.44
	SOUNDVIEW HOME
83611XAC8	06-EQ2 CL A3	105,017,000.00	44,527,208.00	39,891.87	44,567,099.87	214,089.21	11/25/2008	0.00	289,216.09	289,216.09	562.34
	SOUNDVIEW HOME
83612KAD3	07-OPT3 CL 2A3	34,671,000.00	15,647,022.30	13,247.21	15,660,269.51	75,228.02	11/25/2008	0.00	96,042.28	96,042.28	186.74

A	B	C	D	E	F	G	H	I	J	K	L
						Accrued
						Interest on			Post		Accrued
				Accrued	Designated	D. Purchase	Payment	Post 10/31/08	10/31/08	Post 10/31/08	Interest on
CUSIP	Security Name	Par	Market Value	Interest	Purchase Price	Price	Date	Principal	Interest	Total Cash	amount in K
	SOUNDVIEW HOME
83612LAU3	LN 06-WF1 CL A4	100,000,000.00	28,480,000.00	39,319.44	28,519,319.44	136,999.68	11/25/2008	0.00	285,065.97	285,065.97	554.28
	SOUNDVIEW HOME
83612PAC4	LN 07-1 CL 2A2	13,560,000.00	7,458,000.00	5,105.72	7,463,105.72	35,850.89	11/25/2008	0.00	37,016.44	37,016.44	71.97
	SOUNDVIEW HOME
83612PAD2	07-1 CL 2A3	39,370,000.00	13,818,870.00	14,998.88	13,833,868.88	66,454.45	11/25/2008	0.00	108,741.85	108,741.85	211.43
	SOUNDVIEW HOME
83612PAE0	07-1 CL 2A4	29,764,000.00	8,539,291.60	11,603.83	8,550,895.43	41,076.36	11/25/2008	0.00	84,127.74	84,127.74	163.58
84751NAF1	SURF 2006-BC5 A2E	18,463,000.00	4,983,163.70	7,115.95	4,990,279.65	23,972.06	11/25/2008	0.00	51,590.62	51,590.62	100.31
	SPECIALTY
	UNDERWRITING 05-
84751PFC8	HB1	6,052,692.34	5,868,085.22	2,346.26	5,870,431.48	28,200.09	11/25/2008	405,438.62	17,010.35	422,448.97	821.40
	SPECIALTY
	UNDERWRIT 05-AB3
84751PJG5	A2C	20,841,000.00	10,280,865.30	8,379.82	10,289,245.12	49,426.96	11/25/2008	0.00	60,753.68	60,753.68	118.13
	STRUCTURED ASSET
863576EF7	2006-GEL1 A2	38,411,000.00	24,041,444.90	15,401.74	24,056,846.64	115,563.08	11/25/2008	0.00	111,662.64	111,662.64	217.11
	STRUCTURED ASSET
863576FF6	2006-WF1 A4	11,932,484.33	10,708,211.44	4,545.95	10,712,757.38	51,461.41	11/25/2008	605,934.30	32,958.10	638,892.40	1,242.25
	STRUCTURED ADJ RT
863579MH8	05-6VS A-2	2,033,511.12	2,014,192.76	792.79	2,014,985.55	9,679.49	11/25/2008	1,375,421.61	5,747.71	1,381,169.32	2,685.51
	STRUCTURED ADJ RT
863579NY0	MTG 05-8XS	47,513,426.09	41,175,135.05	18,682.02	41,193,817.06	197,884.80	11/25/2008	1,628,067.90	135,444.63	1,763,512.53	3,428.93
	STRUCTURED ASSET
86358ESY3	05-5 CL A3	9,209,028.00	8,064,345.82	3,569.78	8,067,915.60	38,756.25	11/25/2008	381,715.83	25,880.89	407,596.71	792.52
	STRUCTURED ASSET
86359BWS6	SECS 04-08 B1	45,667,446.13	5,069,086.52	19,833.63	5,088,920.15	24,445.90	11/25/2008	429,889.49	145,771.12	575,660.61	1,119.30
	STRUCTURED ASSET
86359DLJ4	05-WF3 CL A2	11,778,613.20	11,257,998.50	4,565.85	11,262,564.35	54,102.54	11/25/2008	438,432.35	33,007.96	471,440.32	916.66
	STRUCTURED ASSET
86359DVC8	2005-OPT1 A2	92,702,361.92	68,803,693.02	35,729.04	68,839,422.05	330,687.37	11/25/2008	4,306,745.68	259,035.51	4,565,781.18	8,877.59
	STRUCTURED ASSET
86359DVF1	2005-OPT1 M-1	14,385,000.00	3,056,812.50	5,943.80	3,062,756.30	14,712.72	11/25/2008	0.00	43,092.56	43,092.56	83.79
	STRUCTURED ASSET
86361HAP9	06-AR7 CL A11	9,943,000.00	2,624,952.00	3,931.63	2,628,883.63	12,628.50	11/25/2008	0.00	28,504.30	28,504.30	55.42
	STRUCTURED ASSET
86361NAB7	06-GEL4 CL A2	50,707,000.00	25,140,530.60	19,599.66	25,160,130.26	120,862.98	11/25/2008	0.00	142,097.56	142,097.56	276.29
	STRUCTURED ASSET
86362PAG0	07-BC1 CL M1	35,000,000.00	6,993,000.00	13,567.36	7,006,567.36	33,657.80	11/25/2008	0.00	98,363.37	98,363.37	191.26
	STRUCTURED ASSET
86362QAB9	07-GEL1 CL A2	10,000,000.00	4,247,000.00	3,831.94	4,250,831.94	20,419.93	11/25/2008	0.00	27,781.60	27,781.60	54.02
	STRUCTURED ASSET
86362QAC7	07-GEL1 CL A3	13,630,000.00	4,497,900.00	5,389.53	4,503,289.53	21,632.68	11/25/2008	0.00	39,074.09	39,074.09	75.97
	TERWIN MTG TR
88156PAY7	2006-7 II-A-2	18,000,000.00	10,036,800.00	6,857.50	10,043,657.50	48,247.22	11/25/2008	0.00	49,716.88	49,716.88	96.67
	TERWIN MTG TR
88156PAZ4	2006-7 II-A-3	57,300,000.00	14,726,100.00	22,466.38	14,748,566.38	70,848.43	11/25/2008	0.00	162,881.21	162,881.21	316.70

A	B	C	D	E	F	G	H	I	J	K	L
						Accrued
						Interest on			Post		Accrued
				Accrued	Designated	D. Purchase	Payment	Post 10/31/08	10/31/08	Post 10/31/08	Interest on
CUSIP	Security Name	Par	Market Value	Interest	Purchase Price	Price	Date	Principal	Interest	Total Cash	amount in K
	TERWIN MTG TR 07-
88157JAA2	2AL1 A1A	16,256,211.00	8,128,105.50	6,102.85	8,134,208.35	39,074.70	11/25/2008	530,909.55	44,245.68	575,155.23	1,118.32
	TERWIN MTG TR 07-
88157TAA0	3 SL CL A-1	206,498,017.24	21,785,540.82	81,652.76	21,867,193.58	105,044.53	11/25/2008	633,771.11	591,982.49	1,225,753.60	2,383.32
	THORNBURG MTG
885220DW0	SECS TR 04-3 A-1	4,680,527.10	2,983,836.03	2,791.74	2,986,627.77	14,347.01	11/25/2008	51,995.02	13,958.70	65,953.71	128.24
	THORNBURG MTG
88522XAC5	SECS 07-3 2A-1	58,183,311.10	45,580,805.92	22,489.47	45,603,295.38	219,066.83	11/25/2008	500,893.91	163,048.63	663,942.54	1,290.95
	WAMU ASSET BKD
93364EAC8	07-HE3 CL 2A2	14,000,000.00	8,932,000.00	5,333.61	8,937,333.61	42,932.72	11/25/2008	0.00	38,668.68	38,668.68	75.19
	WAMU ASSET BKD
93364EAD6	07-HE3 CL 2A3	39,000,000.00	16,325,400.00	15,161.25	16,340,561.25	78,495.97	11/25/2008	0.00	109,919.06	109,919.06	213.72
	WAMU ASSET BKD
93364EAE4	07-HE3 CL 2A4	12,000,000.00	3,322,800.00	4,731.67	3,327,531.67	15,984.63	11/25/2008	0.00	34,304.58	34,304.58	66.70
	WASHINGTON MUT
93934QAC2	06-HE4 CL 2A2	29,606,000.00	13,633,563.00	11,311.96	13,644,874.96	65,546.57	11/25/2008	0.00	82,011.70	82,011.70	159.46
	WASHINGTON MUT
93934XAC7	2006-HE5 II-A-2	25,000,000.00	11,787,500.00	9,552.08	11,797,052.08	56,670.09	11/25/2008	0.00	69,252.60	69,252.60	134.65
	WASHINGTON MUT
93936AAB7	07-HY1 CL A2A	45,400,000.00	20,838,600.00	25,868.54	20,864,468.54	100,227.69	11/25/2008	0.00	133,654.13	133,654.13	259.87
	WASHINGTON MUT
93936AAD3	P/T CL A-3A	42,000,000.00	19,395,600.00	24,421.25	19,420,021.25	93,288.93	11/25/2008	0.00	126,176.46	126,176.46	245.33
	WASHINGTON MUT
93936LAA5	P/T 07-OC2 A-1	14,909,959.80	11,179,487.86	5,564.31	11,185,052.17	53,730.19	11/25/2008	734,855.31	40,334.36	775,189.67	1,507.26
	WASHINGTON MUT
93936LAB3	P/T 07-OC2 A2	50,000,000.00	27,970,000.00	19,159.72	27,989,159.72	134,452.93	11/25/2008	0.00	138,884.17	138,884.17	270.04
	WELLS FARGO HM
9497EUAD9	EQTY 06-1 CL A4	3,000,000.00	1,721,700.00	1,162.92	1,722,862.92	8,276.20	11/25/2008	0.00	8,431.15	8,431.15	16.39
	WELLS FARGO 05-2
949920AK8	CL A2	5,560,400.60	5,396,368.78	2,173.96	5,398,542.74	25,933.25	11/25/2008	934,145.16	15,760.37	949,905.53	1,846.97
	ABFC 2006 OPT2 TR
00075XAG2	CL M1	13,466,000.00	2,468,317.80	5,249.87	2,473,567.67	11,882.40	11/25/2008	0.00	38,047.68	38,047.68	73.98
	ABFC 2006 OPT2 TR
00075XAH0	CL M2	12,000,000.00	1,159,200.00	4,731.67	1,163,931.67	5,591.24	11/25/2008	0.00	34,292.08	34,292.08	66.68
	AAMES MTG INVT TR
00252FCD1	05-3 A2 144A	35,658,000.00	27,185,659.20	13,941.29	27,199,600.49	130,660.08	11/25/2008	0.00	101,074.33	101,074.33	196.53
	AAMES MTG INVT TR
00252FCS8	05-4 2A3SS	42,482,404.30	38,981,854.19	16,751.05	38,998,605.23	187,339.55	11/25/2008	2,708,168.26	121,445.10	2,829,613.37	5,501.83
	ACCREDITED MTG LN
004375DC2	TR 05-2 A-2C	61,582,000.00	45,878,590.00	24,692.67	45,903,282.67	220,507.89	11/25/2008	0.00	179,021.86	179,021.86	348.09
	ACCREDITED MTG LN
004375DT5	05-3 A-2D	31,000,000.00	19,666,400.00	12,499.03	19,678,899.03	94,532.51	11/25/2008	0.00	90,649.17	90,649.17	176.26
	ACCREDITED MTG LN
004375EW7	TR 2006-1 A3	110,000,000.00	88,000,000.00	42,029.17	88,042,029.17	422,931.90	11/25/2008	0.00	304,711.46	304,711.46	592.47
	ACCREDITED MTG LN
004375FG1	TR 2006-1 A4	42,000,000.00	16,821,000.00	16,514.17	16,837,514.17	80,883.21	11/25/2008	0.00	119,727.71	119,727.71	232.80

A	B	C	D	E	F	G	H	I	J	K	L
						Accrued
						Interest on			Post		Accrued
				Accrued	Designated	D. Purchase	Payment	Post 10/31/08	10/31/08	Post 10/31/08	Interest on
CUSIP	Security Name	Par	Market Value	Interest	Purchase Price	Price	Date	Principal	Interest	Total Cash	amount in K
	ACCREDITED MTG LN
00437NAC6	TR 06 2 A-3	91,467,000.00	68,197,795.20	34,643.13	68,232,438.33	327,771.58	11/25/2008	0.00	251,162.67	251,162.67	488.35
	ACCREDITED MTG LN
00437NAD4	TR 06 2 A-4	50,000,000.00	20,000,000.00	19,548.61	20,019,548.61	96,168.91	11/25/2008	0.00	141,727.43	141,727.43	275.57
	ACCREDITED MTG LN
00438QAD6	07-1 CL A4	22,500,000.00	8,156,250.00	8,696.88	8,164,946.88	39,222.36	11/25/2008	0.00	63,052.34	63,052.34	122.60
	ACE SECS CORP
00441TAF0	HOME 06 HE3 M1	24,845,000.00	4,134,208.00	9,796.52	4,144,004.52	19,906.76	11/25/2008	0.00	71,024.78	71,024.78	138.10
	ACE SECS CORP 06
00441TAG8	HE3 CL M2	37,983,000.00	1,511,723.40	15,019.11	1,526,742.51	7,334.09	11/25/2008	0.00	108,888.56	108,888.56	211.72
	ACE SECS CORP HM
004421KJ1	EQ 05-SD1 A-1	1,622,689.83	1,534,577.77	659.67	1,535,237.44	7,374.90	11/25/2008	0.00	4,782.60	4,782.60	9.30
	ACE SECS CORP HM
004421PP2	EQ 05-HE4 A2C	34,761,730.33	32,338,837.72	14,131.61	32,352,969.33	155,415.58	11/25/2008	1,721,116.01	102,454.17	1,823,570.18	3,545.70
	ACE SECS CORP
004421UT8	HOME 06-NC1 A2D	67,164,000.00	31,258,125.60	26,781.65	31,284,907.25	150,284.87	11/25/2008	0.00	194,166.93	194,166.93	377.53
	ACE SECS CORP
004421VW0	2006-ASAP1 A2D	12,500,000.00	6,877,500.00	4,956.60	6,882,456.60	33,061.60	11/25/2008	0.00	35,935.33	35,935.33	69.87
	ACE SECS CORP
004421WP4	2006-HE1 A-2C	88,606,000.00	68,146,874.60	33,953.33	68,180,827.93	327,523.65	11/25/2008	0.00	246,161.62	246,161.62	478.63
	ACE SECS CORP HM
004421XE8	06-ASAP2 A2C	18,151,000.00	13,760,273.10	6,935.19	13,767,208.29	66,134.23	11/25/2008	0.00	50,280.16	50,280.16	97.76
	ACE SECS CORP
00442EAJ4	HOME 06-NC3 M-1	16,046,000.00	661,095.20	6,237.88	667,333.08	3,205.70	11/25/2008	0.00	45,224.65	45,224.65	87.93
	ACE SECS HOME
00442PAG5	EQTY 06-OP1 M1	7,000,000.00	1,634,500.00	2,752.36	1,637,252.36	7,864.95	11/25/2008	0.00	19,954.62	19,954.62	38.80
	AMERIQUEST MTG
03072SP41	SECS 05-R9 A2C	9,430,000.00	6,662,295.00	3,781.17	6,666,076.17	32,022.16	11/25/2008	0.00	27,413.47	27,413.47	53.30
	AMERIQUEST MTG
03072STX3	SECS 04-R8 A4	707,668.91	699,672.25	297.12	699,969.37	3,362.48	11/25/2008	0.00	2,154.14	2,154.14	4.19
	AMERIQUEST MTG
03072SXR1	SECS 05-R1 A-1B	3,245,954.32	2,630,845.98	1,283.50	2,632,129.48	12,644.09	11/25/2008	0.00	9,305.41	9,305.41	18.09
	AMERIQUEST MTG
03072SZW8	SECS 05-R3 A-3D	60,819,008.96	49,324,216.27	24,184.00	49,348,400.27	237,057.38	11/25/2008	759,617.18	175,334.02	934,951.20	1,817.90
	ARGENT SECS 04-W3
040104FW6	A3	6,898,995.32	3,587,477.57	2,812.30	3,590,289.87	17,246.85	11/25/2008	45,777.22	20,389.17	66,166.39	128.65
	ARGENT SECS INC
040104NC1	2005-W2 A2C	20,782,000.00	12,242,676.20	8,356.10	12,251,032.30	58,850.90	11/25/2008	0.00	60,581.69	60,581.69	117.79
	ARGENT SECS 05-W3
040104PA3	CL A2C	77,612,992.58	70,239,758.28	30,258.29	70,270,016.57	337,559.59	11/25/2008	6,310,538.50	219,372.59	6,529,911.08	12,696.60
	ARGENT SECS INC
040104RG8	2006-W1 CL A2D	43,000,000.00	20,781,900.00	17,002.92	20,798,902.92	99,912.73	11/25/2008	0.00	123,271.15	123,271.15	239.69
	ASSET BKD SECS
04541GRW4	CORP 05-HE4 A2B	1,354,924.58	1,260,079.86	546.30	1,260,626.16	6,055.73	11/25/2008	289,899.90	3,960.66	293,860.56	571.38
	ASSET BACKED EQ
04541GXD9	2006-HE3 M1	70,472,000.00	15,482,698.40	27,865.80	15,510,564.20	74,508.87	11/25/2008	0.00	202,027.07	202,027.07	392.82

A	B	C	D	E	F	G	H	I	J	K	L
						Accrued
						Interest on			Post		Accrued
				Accrued	Designated	D. Purchase	Payment	Post 10/31/08	10/31/08	Post 10/31/08	Interest on
CUSIP	Security Name	Par	Market Value	Interest	Purchase Price	Price	Date	Principal	Interest	Total Cash	amount in K
	ASSET BKD CTFS 06
045427AC5	8 2-A-3	175,000,000.00	105,000,000.00	66,475.69	105,066,475.69	504,713.08	11/25/2008	0.00	481,948.79	481,948.79	937.09
	ASSET BKD CTFS
045427AE1	2006 8 CTF M-1	38,000,000.00	5,130,000.00	14,856.94	5,144,856.94	24,714.61	11/25/2008	0.00	107,712.85	107,712.85	209.43
	ASSET BACKED SECS
04544TAC5	07-HE2 CL A3	20,998,000.00	12,107,446.80	7,976.32	12,115,423.12	58,199.46	11/25/2008	0.00	57,828.35	57,828.35	112.44
	ASSET BACKED SECS
04544TAD3	07-HE2 CL A4	30,073,000.00	11,226,250.90	11,657.46	11,237,908.36	53,984.10	11/25/2008	0.00	84,516.62	84,516.62	164.33
	BNC MTG LN TR 07-
05568QAD7	3 P/T CL A4	30,000,000.00	12,309,000.00	11,429.17	12,320,429.17	59,184.26	11/25/2008	0.00	82,861.46	82,861.46	161.11
	BNC MTG LN TR 07-
05569GAD8	2 CL A4	36,857,000.00	14,562,200.70	14,000.54	14,576,201.24	70,020.43	11/25/2008	0.00	101,503.92	101,503.92	197.36
	BASIC ABS 2006-1
06983NAB3	CL A2	15,702,338.30	12,090,800.49	6,017.05	12,096,817.54	58,110.09	11/25/2008	544,679.01	43,623.61	588,302.61	1,143.88
	BASIC ABS 2006-1
06983NAC1	CL A3	11,386,000.00	5,653,149.00	4,514.87	5,657,663.87	27,178.00	11/25/2008	0.00	32,732.77	32,732.77	63.64
	BAYVIEW FINL MTG
07324FAG5	P/T CL 2-A1	2,663,361.70	2,332,305.84	785.69	2,333,091.53	11,207.59	11/28/2008	126,614.58	8,118.81	134,733.39	215.74
	BAYVIEW FINL SECS
07325NCW0	2006-A 2A3	45,101,000.00	30,389,053.80	13,492.72	30,402,546.52	146,046.23	11/28/2008	0.00	139,424.73	139,424.73	223.25
	BAYVIEW FINL SECS
07325NDR0	2006-B 2-A2	9,402,348.35	9,020,613.01	2,695.34	9,023,308.35	43,345.72	11/28/2008	524,606.59	27,851.84	552,458.43	884.62
	BAYVIEW FINL LLC
07325NDS8	2006-B 2-A3	19,873,000.00	11,419,025.80	5,862.54	11,424,888.34	54,882.31	11/28/2008	0.00	60,579.53	60,579.53	97.00
	BEAR STEARNS BKD
073852AB1	07-HE3 CL 1A2	53,601,000.00	29,893,277.70	20,599.16	29,913,876.86	143,698.79	11/25/2008	0.00	149,343.92	149,343.92	290.38
	BEAR STEARNS 07-
073852AC9	HE3 CL 1-A-3	32,461,000.00	10,669,930.70	12,655.28	10,682,585.98	51,316.47	11/25/2008	0.00	91,750.79	91,750.79	178.40
	BEAR STEARNS BKD
073859AB6	07-HE5 CL 1A2	27,092,000.00	16,691,381.20	10,351.40	16,701,732.60	80,230.95	11/25/2008	0.00	75,047.66	75,047.66	145.92
	BEAR STEARNS AST
073859AC4	07-HE5 CL 1A3	32,856,000.00	13,681,238.40	12,772.77	13,694,011.17	65,782.61	11/25/2008	0.00	92,602.56	92,602.56	180.05
	BEAR STEARNS
073877AB8	ASSET BKD 05-SD1	15,505,201.80	14,002,747.75	6,131.02	14,008,878.76	67,295.15	11/25/2008	147,487.41	44,449.86	191,937.27	373.20
	BEAR STEARNS
073877AC6	ASSET 05-SD1 1A3	38,723,000.00	27,024,781.70	15,741.98	27,040,523.68	129,895.92	11/25/2008	0.00	114,129.32	114,129.32	221.91
	BEAR STEARNS
073877BQ4	ASSET 05-SD2 IIA1	24,452,045.49	19,449,156.98	9,750.25	19,458,907.24	93,475.73	11/25/2008	1,125,550.89	70,689.34	1,196,240.23	2,325.94
	BEAR STEARNS
073877CC4	ASSET 05-2 CL A-3	3,765,951.37	3,625,481.38	1,530.96	3,627,012.35	17,423.26	11/25/2008	116,501.86	11,099.48	127,601.35	248.10
	BEAR STEARNS
073877CY6	ASSET 05-SD3 IIA1	24,695,626.28	19,524,362.14	9,957.14	19,534,319.28	93,837.99	11/25/2008	142,578.37	72,189.26	214,767.63	417.59
	BEAR STEARNS
073877EF5	ASSET 05-SD4 IIA1	24,188,451.62	19,844,205.71	9,833.28	19,854,038.99	95,373.84	11/25/2008	838,047.87	71,291.26	909,339.13	1,768.10
	BEAR STEARNS
0738793L0	ASSET 05-HE11 A2	24,220,941.60	21,096,440.13	9,442.80	21,105,882.94	101,387.39	11/25/2008	1,025,394.32	68,460.31	1,093,854.62	2,126.86

A	B	C	D	E	F	G	H	I	J	K	L
						Accrued
						Interest on			Post		Accrued
				Accrued	Designated	D. Purchase	Payment	Post 10/31/08	10/31/08	Post 10/31/08	Interest on
CUSIP	Security Name	Par	Market Value	Interest	Purchase Price	Price	Date	Principal	Interest	Total Cash	amount in K
	BEAR STEARNS
0738793M8	ASSET 05-HE11 A3	13,553,000.00	9,199,776.40	5,419.32	9,205,195.72	44,219.46	11/25/2008	0.00	39,290.05	39,290.05	76.39
	BEAR STEARNS
0738796N3	ASSET 06-HE1 1A3	14,565,000.00	10,523,212.50	5,807.79	10,529,020.29	50,578.78	11/25/2008	0.00	42,106.50	42,106.50	81.87
	BEAR STEARNS
073879D88	ASSET BKD 05-TC2	40,535,767.32	35,233,688.95	15,803.32	35,249,492.27	169,329.75	11/25/2008	0.00	114,574.04	114,574.04	222.77
	BEAR STEARNS
073879J41	ASSET 05-HE8 A-2	16,806,002.66	16,505,175.21	6,570.68	16,511,745.89	79,318.30	11/25/2008	2,967,736.25	47,637.43	3,015,373.68	5,863.02
	BEAR STEARNS
073879VF2	ASSET 05-TC1 M-1	1,800,000.00	1,077,300.00	739.75	1,078,039.75	5,178.63	11/25/2008	0.00	5,363.19	5,363.19	10.43
	BEAR STEARNS
073879W95	ASSET 05-HE10 A-2	8,112,515.60	7,753,942.41	3,198.81	7,757,141.22	37,263.37	11/25/2008	807,436.66	23,191.37	830,628.03	1,615.05
	BEAR STEARNS
07387UBQ3	ASSET 06-HE1 2A3	3,810,000.00	2,567,178.00	1,527.70	2,568,705.70	12,339.42	11/25/2008	0.00	11,075.86	11,075.86	21.54
	BEAR STEARNS
07387UEJ6	2006-HE2 I-A-2	29,844,000.00	25,522,588.80	11,469.22	25,534,058.02	122,659.23	11/25/2008	0.00	83,151.81	83,151.81	161.68
	BEAR STEARNS
07387UEK3	2006-HE2 CL IA3	14,310,000.00	7,720,245.00	5,690.21	7,725,935.21	37,113.46	11/25/2008	0.00	41,254.04	41,254.04	80.21
	BEAR STEARNS
07387UHQ7	ASSET 06-HE3 A2	69,953,748.57	60,258,159.02	26,728.16	60,284,887.18	289,593.53	11/25/2008	2,065,894.46	193,779.17	2,259,673.62	4,393.65
	BEAR STEARNS
07388CAB6	ASSET 06 HE5 IA2	11,862,000.00	9,253,546.20	4,519.09	9,258,065.29	44,473.43	11/25/2008	0.00	32,763.42	32,763.42	63.70
	BEAR STEARNS ABS
07388EAA4	2006 SD2 A-1	5,999,698.20	4,222,587.59	2,425.71	4,225,013.30	20,295.91	11/25/2008	62,889.10	17,586.41	80,475.50	156.47
	BEAR STEARNS
07388EAJ5	ASSET 06-SD2 A2	8,542,852.40	7,072,627.50	3,283.07	7,075,910.57	33,990.91	11/25/2008	180,118.82	23,802.23	203,921.05	396.50
	BEAR STEARNS 07-
07389UAP4	HE1 CL 21A2	50,325,000.00	24,025,155.00	19,116.51	24,044,271.51	115,502.67	11/25/2008	0.00	138,594.70	138,594.70	269.48
	C BASS MTG LN
12465MAE4	2006-CB9 M-1	28,281,000.00	5,483,685.90	11,025.66	5,494,711.56	26,395.22	11/25/2008	0.00	79,936.05	79,936.05	155.43
	C BASS TR 05-CB4
12489WMD3	MTG CL M-1	7,000,000.00	4,375,000.00	2,861.25	4,377,861.25	21,030.15	11/25/2008	0.00	20,744.06	20,744.06	40.33
	C BASS TR 2005-CB5
12489WMZ4	M-1	6,000,000.00	2,296,200.00	2,439.17	2,298,639.17	11,042.09	11/25/2008	0.00	17,683.96	17,683.96	34.38
	C BASS TR 06 CB3
12489WQY3	CL M-1	14,000,000.00	2,616,600.00	5,566.94	2,622,166.94	12,596.23	11/25/2008	0.00	40,311.45	40,311.45	78.38
	C BASS TR 2006-CB3
12489WQZ0	CTF CL M2	8,000,000.00	3,440,000.00	3,190.00	3,443,190.00	16,540.22	11/25/2008	0.00	23,099.48	23,099.48	44.91
	C BASS TR 2006-CB3
12489WRA4	CTF M3	2,100,000.00	66,360.00	842.04	67,202.04	322.82	11/25/2008	0.00	6,097.41	6,097.41	11.86
	CWABS ASSET BKD
12666CAF0	06-23 CL M1	20,000,000.00	1,344,000.00	7,797.22	1,351,797.22	6,493.70	11/25/2008	0.00	56,529.86	56,529.86	109.92
	CWABS ABC 2006 10
12666PAU8	3-AV-3	68,697,000.00	45,429,326.10	26,095.32	45,455,421.42	218,356.48	11/25/2008	0.00	189,191.06	189,191.06	367.86
	CWABS ABC 2006 9
12666RAU4	3-AV-3	47,812,000.00	27,138,091.20	18,108.80	27,156,200.00	130,451.60	11/25/2008	0.00	131,288.76	131,288.76	255.27

A	B	C	D	E	F	G	H	I	J	K	L
						Accrued
						Interest on			Post		Accrued
				Accrued	Designated	D. Purchase	Payment	Post 10/31/08	10/31/08	Post 10/31/08	Interest on
CUSIP	Security Name	Par	Market Value	Interest	Purchase Price	Price	Date	Principal	Interest	Total Cash	amount in K
	CWABS ABC 2006 9
12666RAW0	MV-1	15,622,000.00	2,961,931.20	6,107.77	2,968,038.97	14,257.72	11/25/2008	0.00	44,281.32	44,281.32	86.10
	CWABS ASSET BKD
12666TAJ5	2006 11 3-AV-2	135,000,000.00	92,812,500.00	51,281.25	92,863,781.25	446,094.39	11/25/2008	0.00	371,789.06	371,789.06	722.90
	CWABS ASSET BKD
12666TAL0	2006 MV-1	33,100,000.00	4,326,170.00	12,977.96	4,339,147.96	20,844.18	11/25/2008	0.00	94,090.20	94,090.20	182.95
	CWABS INC 2005-
126670KM9	AB4 CL 2A3	82,043,716.35	57,922,863.74	31,985.65	57,954,849.40	278,400.61	11/25/2008	2,180,670.09	231,895.99	2,412,566.08	4,690.93
	CWABS INC 2005-16
126670PF9	CL 4AV3	50,000,000.00	40,395,000.00	19,493.06	40,414,493.06	194,141.12	11/25/2008	0.00	141,324.65	141,324.65	274.79
	CWABS INC 2005-16
126670PG7	CL 4AV4	71,308,000.00	32,438,009.20	28,592.53	32,466,601.73	155,961.44	11/25/2008	0.00	207,295.82	207,295.82	403.06
	CWABS INC 05-AB5
126670QB7	2-A-2	21,133,327.02	13,349,922.68	8,286.03	13,358,208.70	64,169.50	11/25/2008	199,672.59	60,073.68	259,746.27	505.04
	CWABS INC 2005-
126670QC5	AB5 CL 2A3	61,792,000.00	16,547,897.60	24,776.88	16,572,674.48	79,610.99	11/25/2008	0.00	179,632.35	179,632.35	349.27
	CWABS INC 05-17 4-
126670RB6	AV-2	107,584,464.80	82,797,004.11	42,062.54	82,839,066.65	397,938.17	11/25/2008	2,460,455.06	304,953.40	2,765,408.46	5,376.99
	CWABS INC 2006-1
126670TV0	CL AV3	12,542,000.00	6,901,862.60	4,959.32	6,906,821.92	33,178.65	11/25/2008	0.00	35,955.04	35,955.04	69.91
	CWABS INC 2006-
126670XP8	BC1 CL 2-A-1	24,226,864.01	22,019,796.70	9,256.68	22,029,053.38	105,822.07	11/25/2008	1,606,864.39	67,110.94	1,673,975.33	3,254.84
	CWABS INC 2006-5
126670YG7	CL 2A2	22,855,430.42	17,212,424.65	8,732.68	17,221,157.33	82,726.13	11/25/2008	574,575.31	63,311.92	637,887.23	1,240.29
	CWABS INC 06-6
126670ZL5	ASSET BKD 2-A-2	68,244,632.00	50,869,548.69	26,075.14	50,895,623.83	244,489.85	11/25/2008	1,337,620.71	189,044.74	1,526,665.45	2,968.41
	CWABS INC 2006-6
126670ZM3	CL 2A3	25,000,000.00	12,500,000.00	9,829.86	12,509,829.86	60,094.10	11/25/2008	0.00	71,266.49	71,266.49	138.57
	CWABS INC 2006-
126670ZN1	ASSET BKD CL M1	10,000,000.00	1,030,000.00	3,976.39	1,033,976.39	4,966.96	11/25/2008	0.00	28,828.82	28,828.82	56.05
	CWABS INC 03-BC3
126671B47	CL A-2	247,956.63	191,323.34	106.86	191,430.20	919.58	11/25/2008	0.00	774.75	774.75	1.51
126671ZJ8	CWABS INC 03-D A	374,654.51	162,749.92	802.59	163,552.51	785.67	11/17/2008	7,741.72	1,664.79	9,406.51	26.90
	CWABS INC 05-7 CL
1266732E1	3-AV-2	291,782.47	289,068.89	113.75	289,182.65	1,389.16	11/25/2008	291,782.36	824.72	292,607.08	568.94
	CWABS INC 2005-9
1266736Q0	CL 2A4	62,579,529.17	55,645,717.34	24,605.92	55,670,323.26	267,426.32	11/25/2008	3,299,185.36	178,392.95	3,477,578.31	6,761.72
	CWABS INC 2004-6
126673AZ5	CL 2-A-2	2,635,894.00	2,616,388.38	1,048.13	2,617,436.52	12,573.51	11/25/2008	0.00	7,598.97	7,598.97	14.78
	CWABS INC 05-3
126673B43	BKD CL MV-1	52,710,000.00	49,315,476.00	21,545.21	49,337,021.21	237,002.72	11/25/2008	0.00	156,202.79	156,202.79	303.72
	CWABS INC 04-J
126673HC9	REVOLVING 2-A	5,207,097.00	3,684,541.84	9,136.70	3,693,678.54	17,743.51	11/17/2008	29,127.07	18,844.45	47,971.51	137.17
	CWABS ASSET BKD
12667LAF9	06-21 CL M1	26,100,000.00	2,497,770.00	10,117.38	2,507,887.38	12,047.26	11/25/2008	0.00	73,350.97	73,350.97	142.62
	CWABS ASSET BKD
12667TAD7	06-25 CL 2A3	200,000,000.00	80,980,000.00	76,194.44	81,056,194.44	389,373.69	11/25/2008	0.00	552,409.72	552,409.72	1,074.09

A	B	C	D	E	F	G	H	I	J	K	L
						Accrued
						Interest on			Post		Accrued
				Accrued	Designated	D. Purchase	Payment	Post 10/31/08	10/31/08	Post 10/31/08	Interest on
CUSIP	Security Name	Par	Market Value	Interest	Purchase Price	Price	Date	Principal	Interest	Total Cash	amount in K
	CWABS ASSET BKD
12667TAF2	06-25 CL M1	40,000,000.00	3,440,000.00	15,594.44	3,455,594.44	16,599.81	11/25/2008	0.00	113,059.72	113,059.72	219.83
	CWHEQ HOME EQTY
126682AA1	07-A P/T CL A	85,513,769.67	56,618,666.90	177,868.64	56,796,535.54	272,836.36	11/17/2008	2,761,578.05	369,009.74	3,130,587.79	8,951.52
	CWHEQ INC 05-E CL
126685AH9	2-A	75,051,282.87	37,022,797.84	159,442.28	37,182,240.12	178,614.19	11/17/2008	1,545,052.62	330,741.63	1,875,794.25	5,363.60
	CWHEQ INC 2005-M
126685BW5	CL A4	95,000,000.00	36,432,500.00	206,466.67	36,638,966.67	176,004.44	11/17/2008	0.00	428,232.29	428,232.29	1,224.48
	CWHEQ INC 06-C CL
126685DJ2	2A	62,158,755.00	36,052,077.90	130,947.78	36,183,025.68	173,814.21	11/17/2008	1,661,180.85	265,697.08	1,926,877.93	5,509.67
	CWALT INC 2006-
12668BRF2	OC2 CL 2-A-2	93,048,000.00	78,653,474.40	35,758.86	78,689,233.26	378,003.40	11/25/2008	0.00	259,251.76	259,251.76	504.08
	CWABS ASSET BKD
12668HAD2	06-26 CL 2A3	164,548,000.00	63,663,621.20	62,688.22	63,726,309.42	306,125.26	11/25/2008	0.00	454,489.57	454,489.57	883.70
	CWABS ASSET BKD
12668KAC7	07-5 CL 2A2	35,000,000.00	23,520,000.00	13,334.03	23,533,334.03	113,048.25	11/25/2008	0.00	96,671.70	96,671.70	187.97
	CWABS ASSET BKD
12668KAD5	07-5 CL 2-A-3	143,352,000.00	57,541,492.80	55,409.53	57,596,902.33	276,681.12	11/25/2008	0.00	401,719.10	401,719.10	781.09
	CWABS ASSET BKD
12668TAF1	2007-BC1 M-1	9,375,000.00	1,821,562.50	3,654.95	1,825,217.45	8,767.89	11/25/2008	0.00	26,498.37	26,498.37	51.52
	CWHEQ HOME
	EQUITY 06-S10 CL
12668YAB9	A2	160,000,000.00	89,600,000.00	61,844.44	89,661,844.44	430,713.09	11/25/2008	0.00	448,372.22	448,372.22	871.80
	CWHEQ HOME
	EQUITY 06-S10 CL
12668YAC7	A3	100,000,000.00	40,000,000.00	39,763.89	40,039,763.89	192,341.02	11/25/2008	0.00	288,288.19	288,288.19	560.54
	CWABS ASSET BKD
12669LAC4	07-6 CL 2-A-2	49,897,000.00	32,617,668.90	19,009.37	32,636,678.27	156,778.44	11/25/2008	0.00	137,817.94	137,817.94	267.97
	CWABS ASSET BKD
12669LAD2	07-6 CL 2-A-3	92,794,000.00	36,022,630.80	35,867.46	36,058,498.26	173,216.01	11/25/2008	0.00	260,039.08	260,039.08	505.61
	CWABS ASSET BKD
12669VAD0	07-7 CL 2-A-3	62,461,000.00	40,599,650.00	24,212.31	40,623,862.31	195,146.88	11/25/2008	0.00	175,539.27	175,539.27	341.31
	CWABS ASSET BKD
12669WAE6	07-8 CL 2-A-3	50,000,000.00	13,925,000.00	19,159.72	13,944,159.72	66,984.26	11/25/2008	0.00	138,907.98	138,907.98	270.09
	CWHEQ HOME EQTY
12670BAL3	07-S2 CL A4V	36,989,220.56	18,494,610.28	14,872.75	18,509,483.03	88,914.93	11/25/2008	207,485.36	107,827.43	315,312.79	613.09
	CWHEQ REVOLVING
12670CAA5	07-C CL A	96,800,214.28	45,234,740.13	202,635.12	45,437,375.25	218,269.79	11/17/2008	2,393,982.15	420,375.10	2,814,357.25	8,047.30
	CARRINGTON MTG
144531CX6	LN TR 05-NC3 A2	4,824,369.95	4,389,694.22	1,907.64	4,391,601.85	21,096.16	11/25/2008	125,775.17	13,830.36	139,605.53	271.45
	CARRINGTON MTG
144531EB2	2005-FRE1 CL A3	59,674,163.43	55,288,112.42	23,264.64	55,311,377.05	265,702.03	11/25/2008	1,356,577.25	168,668.61	1,525,245.86	2,965.65
	CARRINGTON MTG
144531EW6	2006-NC1 A-3	98,500,000.00	74,318,250.00	37,963.54	74,356,213.54	357,188.66	11/25/2008	0.00	275,235.68	275,235.68	535.16
	CARRINGTON MTG
144531EX4	LN 2006-NC1 A4	40,745,000.00	20,922,557.50	16,156.52	20,938,714.02	100,584.35	11/25/2008	0.00	117,134.80	117,134.80	227.75

A	B	C	D	E	F	G	H	I	J	K	L
						Accrued
						Interest on			Post		Accrued
				Accrued	Designated	D. Purchase	Payment	Post 10/31/08	10/31/08	Post 10/31/08	Interest on
CUSIP	Security Name	Par	Market Value	Interest	Purchase Price	Price	Date	Principal	Interest	Total Cash	amount in K
	CARRINGTON MTG
144531FL9	LN 06-OPT1 A3	44,853,715.68	40,996,296.13	17,137.86	41,013,433.99	197,018.28	11/25/2008	1,480,834.26	124,249.47	1,605,083.73	3,120.88
	CARRINGTON MTG
14453MAC8	SE 06-NC4 CL A3	108,721,000.00	56,752,362.00	41,298.88	56,793,660.88	272,822.55	11/25/2008	0.00	299,416.88	299,416.88	582.18
	CARRINGTON MTG
14454EAA9	07-HE1 CL A-1	15,667,848.50	13,699,966.73	5,847.15	13,705,813.88	65,839.30	11/25/2008	167,457.60	42,391.87	209,849.47	408.03
	CARRINGTON MTG
14454EAC5	LN 07-HE1 CL A3	42,820,000.00	21,589,844.00	16,408.39	21,606,252.39	103,791.03	11/25/2008	0.00	118,960.80	118,960.80	231.30
	CARRINGTON MTG
14454EAD3	07-HE1 CL A-4	19,963,000.00	8,548,156.60	7,871.52	8,556,028.12	41,101.02	11/25/2008	0.00	57,068.53	57,068.53	110.96
	C BASS 2006 CB6 TR
14986PAC7	CTF A-II-2	25,000,000.00	22,907,500.00	9,302.08	22,916,802.08	110,086.59	11/25/2008	0.00	67,405.43	67,405.43	131.06
	CENTEX HOME EQTY
152314JW1	LN TR 04-B M2	7,500,000.00	6,631,500.00	3,132.29	6,634,632.29	31,871.11	11/25/2008	79,184.11	22,709.11	101,893.22	198.12
	CENTEX HOME EQ LN
15231AAC0	TR 06-A AV-3	55,500,000.00	42,945,900.00	21,082.29	42,966,982.29	206,402.64	11/25/2008	0.00	152,846.61	152,846.61	297.19
	CHASE FDG LN
161542DN2	ACQUISITION 04AQ1	15,140,405.00	9,939,675.88	6,155.00	9,945,830.88	47,777.29	11/25/2008	0.00	44,623.74	44,623.74	86.77
	CHASE FDG MTG LN
161546HZ2	2004-1 CL 2A2	1,064,969.34	886,693.47	412.82	887,106.30	4,261.44	11/25/2008	30,861.71	3,190.29	34,052.00	66.21
	CITIGROUP MTG TR
17307GCU0	03-HEA A	23,070,939.78	19,005,840.19	9,327.71	19,015,167.90	91,344.11	11/25/2008	421,359.41	67,625.89	488,985.30	950.77
	CITIGROUP MTG LN
17307GCZ9	03-HE4 A 144A	15,984,577.20	14,295,007.39	6,515.94	14,301,523.33	68,700.94	11/25/2008	371,588.96	47,231.37	418,820.33	814.34
	CITIGROUP MTG LN
17307GGP7	04-HE1 144A	15,179,979.92	12,641,887.28	6,053.02	12,647,940.29	60,757.54	11/25/2008	0.00	43,884.37	43,884.37	85.33
	CITIGROUP MTG LN
17307GP44	TR 05-HE4 A2C	28,775,909.53	25,754,439.03	11,282.55	25,765,721.58	123,772.09	11/25/2008	406,261.40	0.00	406,261.40	789.92
	CITIGROUP MTG SER
17311BAB9	07-AMC1 CLA2	114,517,000.00	49,505,699.10	43,373.31	49,549,072.41	238,021.36	11/25/2008	0.00	314,456.53	314,456.53	611.42
	CITIGROUP MTG SER
17311BAC7	07-AMC1 CLA3	11,405,000.00	2,876,341.00	4,408.35	2,880,749.35	13,838.40	11/25/2008	0.00	31,960.53	31,960.53	62.14
	CITIGROUP MTG SER
17312GAB7	07-A CL A-3B	32,151,000.00	12,227,025.30	12,248.64	12,239,273.94	58,794.41	11/25/2008	0.00	88,802.63	88,802.63	172.67
	CREDIT SUISSE FIRST
225470TY9	BOSTON MTG	16,025,910.85	12,372,003.18	6,354.72	12,378,357.90	59,462.54	11/25/2008	430,445.75	46,071.71	476,517.46	926.53
	CREDIT SUISSE FIRST
2254W0LE3	05-HF1 A1	30,758,993.92	6,570,121.10	12,025.91	6,582,147.01	31,618.99	11/25/2008	471,925.40	87,187.88	559,113.28	1,087.13
	CWABS ASSET ABC1
23242NAB5	CTF A-2	65,000,000.00	35,529,000.00	24,690.97	35,553,690.97	170,791.04	11/25/2008	0.00	179,009.55	179,009.55	348.06
	CWHEQ HM EQ 06-G
23243JAB3	P/T 2-A	90,392,570.69	51,930,531.86	189,221.78	52,119,753.64	250,370.27	11/17/2008	3,296,708.98	392,548.57	3,689,257.55	10,548.97
	CWABS ASSET BKD
23245CAF7	07-1 CL M1	51,000,000.00	3,809,700.00	19,769.58	3,829,469.58	18,395.81	11/25/2008	0.00	143,329.48	143,329.48	278.69
	CWABS ASSET BKD
23246BAJ0	2007-10 2-A-3	103,206,000.00	41,653,941.60	39,433.29	41,693,374.89	200,284.55	11/25/2008	0.00	285,891.37	285,891.37	555.88

A	B	C	D	E	F	G	H	I	J	K	L
						Accrued
						Interest on			Post		Accrued
				Accrued	Designated	D. Purchase	Payment	Post 10/31/08	10/31/08	Post 10/31/08	Interest on
CUSIP	Security Name	Par	Market Value	Interest	Purchase Price	Price	Date	Principal	Interest	Total Cash	amount in K
	CWABS ASSET BKD
23246LAD1	2007-BC3 2-A-3	25,000,000.00	9,992,500.00	9,552.08	10,002,052.08	48,047.36	11/25/2008	0.00	69,252.60	69,252.60	134.65
	CWABS ASSET BKD
23247LAC2	07-11 CL 2-A-3	106,697,000.00	33,726,921.70	40,885.70	33,767,807.40	162,212.10	11/25/2008	0.00	296,421.31	296,421.31	576.35
	EQUIFIRST MTG LN
29445FAT5	TR 04-1 2A2	1,822,892.76	1,799,924.31	704.60	1,800,628.91	8,649.77	11/25/2008	0.00	5,108.34	5,108.34	9.93
	FFMLT TR 2006 FF6
31561EAC9	06-FF6 A-3	64,915,000.00	39,344,981.50	24,658.68	39,369,640.18	189,121.91	11/25/2008	0.00	178,775.46	178,775.46	347.61
	FIELDSTONE MTG
31659TEG6	INVT 05-3 2A2	97,002,214.80	78,077,082.69	37,925.17	78,115,007.86	375,244.97	11/25/2008	4,365,587.52	274,957.49	4,640,545.02	9,022.96
	FIELDSTONE MTG
31659TEY7	INVT 2006-1 A2	129,549,713.60	92,887,144.65	49,642.73	92,936,787.38	446,445.09	11/25/2008	4,570,918.51	359,909.76	4,930,828.28	9,587.38
	FIRST FRANKLIN
320276AE8	MTG 06 FF9 IIA3	121,946,000.00	44,876,128.00	46,322.54	44,922,450.54	215,796.22	11/25/2008	0.00	335,838.44	335,838.44	653.00
	FIRST FRANKLIN
320277AE6	MTG 06 FF7 IIA3	68,000,000.00	38,086,800.00	25,755.00	38,112,555.00	183,083.19	11/25/2008	0.00	186,723.75	186,723.75	363.06
	FIRST FRANKLIN
320278AC8	MTG 06 FF8 IIA3	15,000,000.00	11,250,000.00	5,681.25	11,255,681.25	54,069.48	11/25/2008	0.00	41,189.06	41,189.06	80.09
	FIRST FRANKLIN
32027LAG0	MTG 06 FF14 M1	10,000,000.00	734,000.00	3,909.72	737,909.72	3,544.73	11/25/2008	0.00	28,345.49	28,345.49	55.11
	FIRST FRANKLIN
32027NA27	MTG 2006-FF2 A4	53,508,000.00	35,668,432.80	20,563.42	35,688,996.22	171,441.02	11/25/2008	0.00	149,084.81	149,084.81	289.88
	FIRST FRANKLIN
32027NA35	MTG 2006-FF2 A5	15,397,000.00	4,737,656.90	6,088.23	4,743,745.13	22,787.77	11/25/2008	0.00	44,139.67	44,139.67	85.82
	FIRST FRANKLIN
32027NA43	MTG 06-FF2 M1	29,710,000.00	2,953,174.00	12,044.93	2,965,218.93	14,244.17	11/25/2008	0.00	87,325.74	87,325.74	169.79
	FIRST FRANKLIN
32027NKU4	MTG 04-FF5 M3C	24,934,385.09	16,967,849.05	10,413.57	16,978,262.62	81,559.33	11/25/2008	0.00	75,498.37	75,498.37	146.80
	FIRST FRANKLIN
32027NMD0	MTG 04-FFH3 IA2	34,639,904.85	33,036,077.26	14,659.42	33,050,736.67	158,767.48	11/25/2008	0.00	106,280.76	106,280.76	206.65
	FIRST FRANKLIN
32027NMH1	MTG 04-FF10 A-3	17,112,172.75	14,008,024.61	7,222.76	14,015,247.38	67,325.74	11/25/2008	309,627.38	52,365.03	361,992.41	703.85
	FIRST FRANKLIN 05-
32027NQF1	FF1 A1B 144A	3,082,119.05	2,465,695.24	1,249.54	2,466,944.78	11,850.59	11/25/2008	0.00	9,044.46	9,044.46	17.59
	FIRST FRANKLIN
32027NRA1	MTG 05-FF4 IIA3	396,302.54	394,241.77	153.18	394,394.95	1,894.57	11/25/2008	288,325.47	1,110.57	289,436.04	562.77
	FIRST FRANKLIN
32027NUJ8	2005-FF7 CL A4	17,212,354.90	15,589,229.83	6,691.30	15,595,921.14	74,918.91	11/25/2008	1,034,445.88	48,511.95	1,082,957.83	2,105.68
	FIRST FRANKLIN
32027NYP0	MTG 06-FF1 IIA3	130,466,000.00	85,220,391.20	50,718.66	85,271,109.86	409,621.09	11/25/2008	0.00	367,599.84	367,599.84	714.75
	FIRST FRANKLIN
32027NYQ8	MTG 06-FF1 IIA4	16,041,000.00	6,665,035.50	6,414.17	6,671,449.67	32,047.98	11/25/2008	0.00	46,488.78	46,488.78	90.39
	FIRST FRANKLIN
32028HAD5	MTG 06 FF10 A4	28,031,000.00	15,966,457.60	10,616.74	15,977,074.34	76,749.87	11/25/2008	0.00	76,971.37	76,971.37	149.66
	FIRST FRANKLIN 06-
32028PAG0	FF11 CL M1	24,000,000.00	1,380,000.00	9,356.67	1,389,356.67	6,674.12	11/25/2008	0.00	67,783.88	67,783.88	131.80

A	B	C	D	E	F	G	H	I	J	K	L
						Accrued
						Interest on			Post		Accrued
				Accrued	Designated	D. Purchase	Payment	Post 10/31/08	10/31/08	Post 10/31/08	Interest on
CUSIP	Security Name	Par	Market Value	Interest	Purchase Price	Price	Date	Principal	Interest	Total Cash	amount in K
	FIRST FRANKLIN SER
32028TAF4	07-F F1 M	9,900,000.00	1,191,960.00	3,837.63	1,195,797.63	5,744.31	11/25/2008	0.00	27,822.78	27,822.78	54.10
	FIRST FRANKLIN 06-
32029AAF4	FF18 CL M1	29,500,000.00	4,127,050.00	11,435.35	4,138,485.35	19,880.25	11/25/2008	0.00	82,906.27	82,906.27	161.20
	FIRST FRANKLIN SER
32029GAF1	FF2 CL M1	32,000,000.00	1,152,000.00	12,404.44	1,164,404.44	5,593.51	11/25/2008	0.00	89,932.22	89,932.22	174.86
	FIRST FRANKLIN 07-
32029GAG9	FF2 CL M2	34,851,000.00	1,055,985.30	13,703.22	1,069,688.52	5,138.52	11/25/2008	0.00	99,348.34	99,348.34	193.17
	FIRST NLC TR 05-1
32113JAA3	MTG BKD CL A	50,688,510.48	34,011,990.53	19,648.84	34,031,639.37	163,479.49	11/25/2008	388,067.98	142,454.03	530,522.01	1,031.53
	GMACM HOME EQ LN
361856CK1	03 HE1 CL A 3	82,451,865.89	37,144,565.58	32,419.62	37,176,985.20	178,588.94	11/25/2008	2,100,172.81	235,042.20	2,335,215.01	4,540.53
	GMACM HOME
	EQUITY TR 04-HE1
361856CV7	A3	64,016,711.25	28,749,905.02	24,673.11	28,774,578.13	138,225.88	11/25/2008	1,311,231.97	178,880.02	1,490,112.00	2,897.34
	GMACM HOME
	EQUITY LN 04-HE3
361856DL8	A3	107,320,000.00	96,255,308.00	41,601.41	96,296,909.41	462,586.28	11/25/2008	0.00	301,610.20	301,610.20	586.44
	GMACM HOME
361856DP9	EQUITY 04-HE4 A-3	84,330,766.26	48,397,426.76	33,064.69	48,430,491.44	232,647.97	11/25/2008	1,696,519.62	239,718.96	1,936,238.58	3,764.77
	GMACM HM EQ LN
361856EC7	TR 05-HE7 CL A3	8,855,036.53	4,036,125.65	3,383.36	4,039,509.01	19,404.79	11/25/2008	146,594.86	24,529.37	171,124.24	332.73
	GMACM HOME EQ LN
361856EJ2	TR 05-HE3 A-3	170,886,447.80	98,755,278.18	66,432.11	98,821,710.29	474,714.79	11/25/2008	1,634,567.36	481,632.69	2,116,200.06	4,114.69
	GSAA HOME EQ TR
362246AA8	2007-S1 A-1	112,782,166.20	11,278,216.62	42,966.87	11,321,183.49	54,384.14	11/25/2008	539,593.79	310,693.84	850,287.62	1,653.28
	GS MTG SECS CORP
36228F5W2	04-SEA A2A	16,011,151.00	15,770,983.74	6,313.29	15,777,297.02	75,790.19	11/25/2008	829,305.34	45,771.32	875,076.65	1,701.48
	GSAMP TR 06-HE8
3622M8AF3	P/T CL M1	45,700,000.00	9,368,500.00	17,816.65	9,386,316.65	45,089.52	11/25/2008	0.00	129,164.96	129,164.96	251.15
	GSAMP TR 07 NC1
3622MGAF5	M -1	59,000,000.00	5,540,100.00	22,936.25	5,563,036.25	26,723.44	11/25/2008	0.00	166,287.82	166,287.82	323.33
	GS MTG SECS CORP
362334AA2	2006-2 2A4	18,946,000.00	13,256,516.20	7,512.62	13,264,028.82	63,717.08	11/25/2008	0.00	54,399.32	54,399.32	105.77
	GS MTG SECS CORP
362334BS2	2006-3 A-3	75,366,000.00	36,160,606.80	29,800.97	36,190,407.77	173,849.67	11/25/2008	0.00	216,051.18	216,051.18	420.08
	GS MTG SECS CORP
362334LG7	GSAMP 06-HE2	45,222,109.83	36,177,687.86	17,278.61	36,194,966.48	173,871.57	11/25/2008	1,199,637.82	125,269.96	1,324,907.78	2,576.12
	GS MTG SECS CORP
3623412K4	2005-KS1 M1	5,849,781.47	43,873.36	2,417.10	46,290.46	222.37	11/25/2008	0.00	17,523.95	17,523.95	34.07
	GS MTG SECS CORP
3623414S5	2006-HE1 A2D	13,102,000.00	7,681,702.60	5,195.31	7,686,897.91	36,925.94	11/25/2008	0.00	37,606.19	37,606.19	73.12
	GS MTG SECS CORP
3623415R6	2006-2 2A2	43,046,000.00	38,793,055.20	16,638.47	38,809,693.67	186,432.07	11/25/2008	0.00	120,480.26	120,480.26	234.26
	GS MTG SECS CORP
362341CT4	05-8 CL A-3	33,732,000.00	18,626,810.40	13,825.44	18,640,635.84	89,544.95	11/25/2008	0.00	100,234.40	100,234.40	194.89

A	B	C	D	E	F	G	H	I	J	K	L
						Accrued
						Interest on			Post		Accrued
				Accrued	Designated	D. Purchase	Payment	Post 10/31/08	10/31/08	Post 10/31/08	Interest on
CUSIP	Security Name	Par	Market Value	Interest	Purchase Price	Price	Date	Principal	Interest	Total Cash	amount in K
	GS MTG SECS CORP
362341QF9	05-11 CL 3A1	62,182,982.16	41,283,281.86	24,380.91	41,307,662.77	198,431.69	11/25/2008	911,915.54	176,761.60	1,088,677.14	2,116.80
	GS MTG SECS CORP
362341Z44	2006-1 CL A3	100,000,000.00	45,490,000.00	39,875.00	45,529,875.00	218,714.14	11/25/2008	0.00	289,093.75	289,093.75	562.11
	GS MTG SECS CORP
362341ZV4	2005-14 2A3	83,800,000.00	38,715,600.00	33,601.47	38,749,201.47	186,141.48	11/25/2008	0.00	243,610.67	243,610.67	473.67
	GSAMP TR 2006 SD2
362405AB8	CL A-2 144 A	16,227,000.00	11,035,982.70	6,272.19	11,042,254.89	53,044.23	11/25/2008	0.00	45,473.35	45,473.35	88.42
	GSR TR MTG BKD NT
36245HAA9	07-HEL1 A	74,185,489.80	42,849,538.91	155,624.67	43,005,163.58	206,586.05	11/17/2008	2,082,854.61	322,845.98	2,405,700.58	6,878.80
	GE WMC MTG SECS
367910AD8	05-1 CL A-2C	10,000,000.00	7,851,000.00	4,020.83	7,855,020.83	37,733.56	11/25/2008	0.00	29,151.04	29,151.04	56.68
	GMACM HOME
	EQUITY 06-HE4 CL
38012UAB5	A2	1,616,821.24	930,318.94	610.57	930,929.52	4,471.95	11/25/2008	28,362.55	4,478.76	32,841.31	63.86
	GMACM HOME
	EQUITY 06-HE4 CL
38012UAC3	A3	63,249,148.52	36,393,560.06	24,166.45	36,417,726.50	174,941.65	11/25/2008	1,109,527.20	175,206.73	1,284,733.93	2,498.00
	GREENPOINT HOME
395385AQ0	EQ LN 04-1 A	1,437,595.75	897,347.27	594.01	897,941.27	4,313.49	11/25/2008	62,133.93	4,306.55	66,440.48	129.19
	GREENPOINT MTG
39539BAB9	06-HE1 AC	99,875,766.20	46,841,734.35	220,843.35	47,062,577.70	226,076.86	11/12/2008	3,007,326.79	376,732.78	3,384,059.56	11,611.55
	HSBC HOME EQ LN
40430GAA8	TR 05-1 CL A	59,439,987.25	47,682,757.77	82,955.93	47,765,713.70	229,454.55	11/20/2008	504,627.37	233,784.77	738,412.15	1,858.03
	HSBC HOME EQ LN
40430GAC4	TR 05-2 CL A-1	40,480,052.26	31,930,665.22	56,247.59	31,986,912.82	153,657.13	11/20/2008	65,944.15	158,515.91	224,460.06	564.80
	HSBC HOME EQUITY
40430GAF7	05-2 CL M-2	739,024.23	460,559.90	1,076.56	461,636.46	2,217.59	11/20/2008	1,203.91	3,033.95	4,237.86	10.66
	HSBC HOME EQUITY
40430GAG5	2005-3 CL A1	27,719,195.18	21,493,463.94	38,431.51	21,531,895.45	103,433.84	11/20/2008	243,192.30	108,306.98	351,499.28	884.46
	HSI ASSET SEC 06-
40430HFL7	OPT3 III-A-3	20,000,000.00	14,970,000.00	7,641.67	14,977,641.67	71,948.85	11/25/2008	0.00	55,373.04	55,373.04	107.67
	HSI ASSET SEC 2006-
40430HFP8	OPT3 M-2	7,000,000.00	1,544,900.00	2,806.81	1,547,706.81	7,434.80	11/25/2008	0.00	20,338.67	20,338.67	39.55
	HSI ASSET SEC 06
40430KAH4	OPT 4 M -1	29,000,000.00	7,096,300.00	11,499.31	7,107,799.31	34,144.09	11/25/2008	0.00	83,369.96	83,369.96	162.10
	HSI ASSET SEC 2006
40430MAD9	WMC1 A-3	100,000,000.00	38,460,000.00	37,875.00	38,497,875.00	184,934.17	11/25/2008	0.00	274,711.63	274,711.63	534.14
	HSBC HOME EQUITY
40430VAH0	LN 2006-4 M1	49,680,000.00	11,411,496.00	68,879.25	11,480,375.25	55,148.85	11/20/2008	0.00	194,114.25	194,114.25	488.44
	HSBC HOME EQ 06-4
40430VAJ6	CL M2	21,500,000.00	4,467,700.00	29,940.24	4,497,640.24	21,605.54	11/20/2008	0.00	84,377.05	84,377.05	212.31
	HSBC HOME EQ LN
40430WAA3	2006 1 A-1	53,274,436.30	47,339,664.10	72,234.96	47,411,899.05	227,754.91	11/20/2008	817,115.80	203,571.20	1,020,687.00	2,568.30
	HSBC HOME EQ LN
40430WAB1	USA 06-1 A-2	34,095,639.23	22,168,984.63	46,438.73	22,215,423.36	106,717.34	11/20/2008	522,954.11	130,872.77	653,826.88	1,645.19

A	B	C	D	E	F	G	H	I	J	K	L
						Accrued
						Interest on			Post		Accrued
				Accrued	Designated	D. Purchase	Payment	Post 10/31/08	10/31/08	Post 10/31/08	Interest on
CUSIP	Security Name	Par	Market Value	Interest	Purchase Price	Price	Date	Principal	Interest	Total Cash	amount in K
	HSBC HOME EQ LN
40430WAC9	USA 06-1 M-1	22,444,520.01	8,284,272.34	31,255.55	8,315,527.89	39,945.72	11/20/2008	344,250.89	88,083.80	432,334.69	1,087.86
	HSBC HOME EQ LN
40430WAD7	2006-1 M-2	15,982,330.89	4,524,597.87	22,354.18	4,546,952.05	21,842.42	11/20/2008	179,216.58	62,998.11	242,214.69	609.47
	HSBC HM EQ LN TR
40430XAG8	06 3 CL A-4	68,000,000.00	28,199,600.00	93,863.61	28,293,463.61	135,914.73	11/20/2008	0.00	264,524.72	264,524.72	665.61
	HSBC HOME EQTY
40430XAH6	06-3 CL M1	18,000,000.00	4,086,000.00	24,956.25	4,110,956.25	19,748.01	11/20/2008	0.00	70,331.25	70,331.25	176.97
	HSBC HOME EQUITY
40430XAJ2	06-3 CL M2	10,000,000.00	6,530,000.00	13,986.81	6,543,986.81	31,435.68	11/20/2008	0.00	39,417.36	39,417.36	99.18
	HSBC HM EQ 2006 2
40430YAB7	CL A-2	47,054,690.07	27,352,891.34	64,089.14	27,416,980.48	131,704.32	11/20/2008	802,044.87	180,614.80	982,659.67	2,472.62
	HSBC HOME EQUITY
40430YAC5	LN 06-2 M1	32,661,490.75	11,526,240.09	45,383.60	11,571,623.68	55,587.19	11/20/2008	556,713.50	127,899.20	684,612.69	1,722.66
	HSBC HM EQ TR 06
40430YAD3	2 CL M-2	22,143,383.56	5,817,066.86	30,903.86	5,847,970.72	28,092.19	11/20/2008	377,432.88	87,092.68	464,525.56	1,168.86
	HSBC HOME EQUITY
40431FAK7	LN TR 07-1 M1	20,200,000.00	4,446,020.00	28,747.13	4,474,767.13	21,495.66	11/20/2008	0.00	81,014.63	81,014.63	203.85
	HSBC HOME EQUITY
40431FAL5	07-1 CL M-2	20,000,000.00	2,798,000.00	29,073.61	2,827,073.61	13,580.55	11/20/2008	0.00	81,934.72	81,934.72	206.17
	HSBC HOME EQUITY
40431MAA4	LN TR 07-2 AS	37,413,642.35	24,038,265.21	51,072.22	24,089,337.43	115,719.15	11/20/2008	769,532.75	143,930.80	913,463.55	2,298.50
	HSBC HOME EQUITY
40431MAB2	LN TR 07-2 AM	37,413,641.00	24,086,902.08	51,643.82	24,138,545.89	115,955.54	11/20/2008	769,532.75	145,541.65	915,074.40	2,302.56
	HSBC HOME EQUITY
40431MAF3	LN TR07-2 A2V	12,000,000.00	9,073,200.00	16,270.83	9,089,470.83	43,663.55	11/20/2008	0.00	45,854.17	45,854.17	115.38
	HSBC HOME EQUITY
40431MAH9	07-2 CL A-3V	10,000,000.00	5,710,000.00	13,742.36	5,723,742.36	27,495.43	11/20/2008	0.00	38,728.47	38,728.47	97.45
	HSBC HOME EQUITY
40431MAJ5	LN TR 07-2 A4	30,000,000.00	10,659,000.00	41,960.42	10,700,960.42	51,404.74	11/20/2008	0.00	118,252.08	118,252.08	297.55
	HSBC HOME EQUITY
40431MAK2	07-2 CL M-1	8,000,000.00	1,761,600.00	11,213.89	1,772,813.89	8,516.15	11/20/2008	0.00	31,602.78	31,602.78	79.52
	HSBC HOME EQUITY
40431MAL0	LN TR 07-2 M2	5,000,000.00	1,052,000.00	7,100.35	1,059,100.35	5,087.65	11/20/2008	0.00	20,010.07	20,010.07	50.35
	HOME EQUITY ASSET
437084HK5	TR 05-1 A-2	337,094.28	267,989.95	132.54	268,122.50	1,287.99	11/25/2008	337,094.28	960.94	338,055.22	657.31
	HOME EQUITY ASSET
437084VR4	06-4 CL M-1	41,000,000.00	9,032,300.00	16,303.19	9,048,603.19	43,467.23	11/25/2008	0.00	118,198.16	118,198.16	229.82
	HOME EQUITY MTG
43709KAA7	SER 06 2B CL A	76,905,503.59	45,174,292.81	29,298.86	45,203,591.67	217,146.75	11/25/2008	3,228,700.57	212,416.74	3,441,117.31	6,690.82
	HOME EQUITY MTG
43710DAC6	07-2 CL 2A2	35,513,661.15	19,532,513.63	13,648.10	19,546,161.73	93,894.87	11/25/2008	515,381.07	98,948.71	614,329.78	1,194.49
	HOME EQUITY MTG
43710DAD4	07-2 CL 2A3	15,783,849.40	10,160,063.86	6,241.20	10,166,305.06	48,836.39	11/25/2008	229,058.25	45,248.68	274,306.93	533.36
	HOME EQUITY MTG
43710DAE2	07-2 CL 2A-4	7,102,732.23	4,591,916.39	2,950.59	4,594,866.98	22,072.59	11/25/2008	103,076.21	21,391.80	124,468.02	242.01

A	B	C	D	E	F	G	H	I	J	K	L
						Accrued
						Interest on			Post		Accrued
				Accrued	Designated	D. Purchase	Payment	Post 10/31/08	10/31/08	Post 10/31/08	Interest on
CUSIP	Security Name	Par	Market Value	Interest	Purchase Price	Price	Date	Principal	Interest	Total Cash	amount in K
	HOME EQUITY MTG
43710EAD2	07-B CL 2A2	66,167,000.00	44,020,905.10	25,134.27	44,046,039.37	211,586.16	11/25/2008	0.00	182,223.46	182,223.46	354.31
	HOME EQUITY MTG
43710EAE0	07-B CL 2A3	32,651,000.00	12,929,796.00	12,547.96	12,942,343.96	62,171.78	11/25/2008	0.00	90,972.71	90,972.71	176.89
	HOME LN MTG LN TR
43718RAA1	2004-2 CL A	2,598,332.22	2,004,093.64	5,667.25	2,009,760.89	9,654.39	11/17/2008	79,643.43	11,688.71	91,332.14	261.15
	HOME LN MTG LN TR
43718RAC7	2005-1 CL A2	2,335,544.00	2,285,096.25	4,992.87	2,290,089.12	11,001.02	11/17/2008	189,758.37	10,356.68	200,115.05	572.20
	HOME LN MTG LN TR
43718RAD5	2005-1 CL A3	29,250,000.00	19,032,975.00	63,960.00	19,096,935.00	91,736.90	11/17/2008	0.00	132,654.84	132,654.84	379.31
	HOUSEHOLD HOME
441917AZ4	EQ LN TR 04-1 A	21,554,267.88	17,282,211.99	30,476.84	17,312,688.82	83,165.83	11/20/2008	114,686.50	85,889.25	200,575.75	504.70
	IXIS REAL ESTATE
45071KDE1	2006-HE1 A-4	24,000,000.00	12,432,000.00	9,490.00	12,441,490.00	59,765.81	11/25/2008	0.00	68,694.05	68,694.05	133.57
	IMPAC CMB TR
45254NPU5	2005-5 CL A-1	64,068,644.00	42,925,991.48	25,476.18	42,951,467.66	206,328.11	11/25/2008	907,621.90	184,702.34	1,092,324.24	2,123.89
	IMPAC SECD P/T
45256VAA5	2006 2 1-A1-1	133,881,086.00	77,758,134.75	51,153.73	77,809,288.48	373,776.37	11/25/2008	1,845,355.18	370,864.56	2,216,219.74	4,309.16
	INDYMAC HM EQ 06
45661DAA4	HE2 CL A	64,549,486.80	36,606,013.96	18,235.23	36,624,249.19	175,933.74	11/28/2008	1,398,056.53	188,430.71	1,586,487.24	2,540.36
	IRWIN WHOLE LN
464187CP6	HM EQ 05-B 1A-1	4,954,746.99	4,613,860.40	1,931.66	4,615,792.06	22,173.11	11/25/2008	0.00	14,004.55	14,004.55	27.23
	JP MORGAN MTG
46625SAD8	ACQ TR 06 HE2 A4	15,844,000.00	12,946,132.40	5,994.88	12,952,127.28	62,218.78	11/25/2008	0.00	43,462.88	43,462.88	84.51
	JP MORGAN MTG 05-
46626LBF6	WMC1 A3	31,007,085.46	29,838,118.34	12,122.91	29,850,241.25	143,393.10	11/25/2008	7,939,978.87	87,745.27	8,027,724.13	15,608.91
	JP MORGAN MTG
46626LHT0	2006-WMC1 CL A4	120,200,000.00	82,457,200.00	45,926.42	82,503,126.42	396,324.39	11/25/2008	0.00	332,180.67	332,180.67	645.88
	J P MORGAN MTG 06
46628RAG0	M-2	17,500,000.00	2,268,000.00	6,900.35	2,274,900.35	10,928.05	11/25/2008	0.00	50,001.39	50,001.39	97.22
	J P MORGAN MTG
46629KAG4	06-WMC3 CL M1	16,306,000.00	500,594.20	6,357.08	506,951.28	2,435.27	11/25/2008	0.00	46,088.80	46,088.80	89.61
	J P MORGAN MTG
46630BAF3	06-WMC4 CL A-5	80,000,000.00	29,696,000.00	30,833.33	29,726,833.33	142,800.28	11/25/2008	0.00	223,410.88	223,410.88	434.39
	J P MORGAN MTG
46630CAD6	07-CH4 CL A-4	20,000,000.00	8,330,000.00	7,597.22	8,337,597.22	40,051.73	11/25/2008	0.00	55,079.86	55,079.86	107.10
	J P MORGAN MTG
46630KAT3	07-HE1 CL AV-3	38,300,000.00	11,570,430.00	14,676.35	11,585,106.35	55,651.95	11/25/2008	0.00	106,403.52	106,403.52	206.89
	LEHMAN XS TR 05-3
525221AB3	1-A-2	21,430,759.51	20,609,961.42	8,426.46	20,618,387.88	99,045.58	11/25/2008	2,099,027.63	61,091.80	2,160,119.43	4,200.08
	LEHMAN XS TR 05-3
525221AC1	1-A3	66,923,000.00	51,396,864.00	27,354.78	51,424,218.78	247,029.09	11/25/2008	0.00	198,322.13	198,322.13	385.61
	LEHMAN XS TR
525221BZ9	2005-4 CTF 1A2	4,122,143.10	3,893,364.16	1,616.22	3,894,980.38	18,710.51	11/25/2008	385,257.16	11,717.62	396,974.78	771.87
	LEHMAN XS TR
525221CA3	2005-4 CTF 1A3	61,532,000.00	44,044,605.60	25,014.47	44,069,620.07	211,699.44	11/25/2008	0.00	181,354.89	181,354.89	352.62

A	B	C	D	E	F	G	H	I	J	K	L
						Accrued
						Interest on			Post		Accrued
				Accrued	Designated	D. Purchase	Payment	Post 10/31/08	10/31/08	Post 10/31/08	Interest on
CUSIP	Security Name	Par	Market Value	Interest	Purchase Price	Price	Date	Principal	Interest	Total Cash	amount in K
	LEHMAN XS TR 05-4
525221CB1	MTG P/T 1-A4	10,415,918.35	7,425,508.19	4,095.48	7,429,603.67	35,689.96	11/25/2008	335,162.34	29,692.24	364,854.58	709.41
	LEHMAN XS TR
525221CV7	2005-6 CL 1A3	26,695,505.99	24,714,699.45	10,437.20	24,725,136.65	118,773.38	11/25/2008	1,072,970.55	75,669.71	1,148,640.26	2,233.39
	LEHMAN XS TR
525221CW5	2005-6 CL 1A4	27,342,000.00	17,364,904.20	11,054.52	17,375,958.72	83,469.76	11/25/2008	0.00	80,145.29	80,145.29	155.83
	LEHMAN XS TR
525221JJ7	2006-3 CL A3	22,658,000.00	8,299,625.40	8,959.35	8,308,584.75	39,912.36	11/25/2008	0.00	64,955.29	64,955.29	126.30
	LEHMAN XS TR 06-7
52522EAD1	2-A2	100,571,228.70	66,889,924.21	38,314.84	66,928,239.05	321,506.53	11/25/2008	530,345.79	277,782.62	808,128.41	1,571.30
	LEHMAN XS TR 06-7
52522EAE9	2-A2A	28,812,000.00	8,355,480.00	11,328.72	8,366,808.72	40,192.06	11/25/2008	0.00	82,133.21	82,133.21	159.70
	LEHMAN XS TR 2006
52522WAB5	11 P/T 1-A2	231,092,000.00	155,316,933.20	87,782.86	155,404,716.06	746,525.40	11/25/2008	0.00	636,425.76	636,425.76	1,237.45
	LEHMAN XS TR 2006
52522WAC3	11 P/T 1-A3	64,586,000.00	18,891,405.00	25,323.09	18,916,728.09	90,871.23	11/25/2008	0.00	183,592.43	183,592.43	356.97
	LEHMAN XS TR
525237AB9	2007-10H I-A2	142,759,000.00	71,593,638.50	55,180.32	71,648,818.82	344,183.01	11/25/2008	0.00	400,057.31	400,057.31	777.86
	LEHMAN XS TR
525237AC7	2007-10H I-A3	68,738,000.00	19,390,989.80	27,027.40	19,418,017.20	93,279.30	11/25/2008	0.00	195,948.65	195,948.65	381.00
	LEHMAN XS P/T
52523DAB6	2006 9 A1B	237,471,000.00	130,609,050.00	90,206.00	130,699,256.00	627,846.55	11/25/2008	0.00	653,993.48	653,993.48	1,271.61
	LEHMAN XS TR MTG
52523DAC4	06 9 A1C	71,637,000.00	20,502,509.40	28,008.08	20,530,517.48	98,623.47	11/25/2008	0.00	203,058.56	203,058.56	394.82
	LEHMAN XS TR 06-
52523LAB8	13 P/T 1-A2	168,620,000.00	92,741,000.00	64,239.54	92,805,239.54	445,813.17	11/25/2008	0.00	465,736.64	465,736.64	905.57
	LEHMAN XS TR 06-
52523LAC6	13 P/T 1-A3	41,552,000.00	11,954,510.40	16,384.18	11,970,894.58	57,505.18	11/25/2008	0.00	118,785.34	118,785.34	230.96
	LEHMAN XS TR 2006
52523QAB7	20 P/T CL A2	106,006,000.00	58,239,696.40	40,385.34	58,280,081.74	279,962.94	11/25/2008	0.00	292,793.77	292,793.77	569.30
	LEHMAN XS TR
52523YAB0	2006-19 CL A2	94,066,000.00	52,187,816.80	35,836.53	52,223,653.33	250,869.37	11/25/2008	0.00	259,814.90	259,814.90	505.18
	LEHMAN XS TR 07-3
525245AG1	P/T CL 2A2	79,771,000.00	40,683,210.00	30,301.90	40,713,511.90	195,577.53	11/25/2008	0.00	219,688.78	219,688.78	427.16
	LEHMAN XS TR 07-3
525245AH9	P/T CL 2A3	40,805,000.00	11,074,477.00	15,862.94	11,090,339.94	53,275.22	11/25/2008	0.00	115,006.34	115,006.34	223.62
	LEHMAN XS TR 2007
525249AA6	11 CL A1	7,633,149.72	5,880,578.54	2,874.09	5,883,452.64	28,262.64	11/25/2008	215,893.05	20,837.17	236,730.22	460.29
	LEHMAN XS TR 07-
525249AB4	11 CL A2	102,112,000.00	36,198,704.00	39,355.67	36,238,059.67	174,078.58	11/25/2008	0.00	285,328.58	285,328.58	554.79
	LEHMAN XS TR 07-
525249AC2	11 CL A3	46,653,000.00	12,279,069.60	18,240.03	12,297,309.63	59,073.20	11/25/2008	0.00	132,240.20	132,240.20	257.12
	LEHMAN XS TR SER
52524MAC3	07-9 CL 1-A2	91,102,000.00	35,329,355.60	35,517.13	35,364,872.73	169,884.01	11/25/2008	0.00	257,499.17	257,499.17	500.67
	LEHMAN XS TR SER
52524MAD1	07-9 CL 1A3	45,184,000.00	10,179,955.20	17,866.51	10,197,821.71	48,987.79	11/25/2008	0.00	129,532.17	129,532.17	251.86

A	B	C	D	E	F	G	H	I	J	K	L
						Accrued
						Interest on			Post		Accrued
				Accrued	Designated	D. Purchase	Payment	Post 10/31/08	10/31/08	Post 10/31/08	Interest on
CUSIP	Security Name	Par	Market Value	Interest	Purchase Price	Price	Date	Principal	Interest	Total Cash	amount in K
	LONG BEACH MTG
542512AF5	06-11 CL M-1	48,750,000.00	1,564,875.00	18,951.56	1,583,826.56	7,608.31	11/25/2008	0.00	137,398.83	137,398.83	267.15
	LONG BEACH MTG
54251PAD9	LN 06 5 IIA3	80,000,000.00	44,000,000.00	30,300.00	44,030,300.00	211,510.55	11/25/2008	0.00	219,675.00	219,675.00	427.13
	MASTR ASSET BKD
55275BAF4	06-NC2 CL M1	24,073,000.00	3,129,490.00	9,385.13	3,138,875.13	15,078.37	11/25/2008	0.00	68,042.17	68,042.17	132.30
	MSDWCC HELOC TR
55353WAA4	03-1	9,157,461.31	5,455,099.70	3,590.49	5,458,690.19	26,222.18	11/25/2008	147,299.52	26,031.04	173,330.56	337.02
	MASTR ASSET BKD
57643LMN3	TR 05-NC2 A-3	133,065,000.00	93,717,679.50	51,876.87	93,769,556.37	450,445.51	11/25/2008	0.00	376,107.30	376,107.30	731.29
	MASTR ASSET BKD
57643LQB5	2006-AM1 CL A3	22,409,000.00	15,780,417.80	8,587.00	15,789,004.80	75,846.43	11/25/2008	0.00	62,255.78	62,255.78	121.05
	MASTR ASSET BKD
57643LQT6	2006-HE1 CL A3	29,533,000.00	25,410,193.20	11,316.88	25,421,510.08	122,118.58	11/25/2008	601,979.23	82,047.39	684,026.62	1,330.00
	MASTR ASSET
	BACKED 06-WMC1
57643LRK4	A3	39,700,000.00	29,330,360.00	15,168.71	29,345,528.71	140,968.58	11/25/2008	0.00	109,973.13	109,973.13	213.83
	MASTR ABS 2006
57644UAE5	HE2 A-3	16,760,000.00	8,582,796.00	6,347.85	8,589,143.85	41,260.10	11/25/2008	0.00	46,021.91	46,021.91	89.48
	MASTR ASSET BKD
57644UAG0	2006 HE2 M-1	5,670,000.00	247,779.00	2,216.81	249,995.81	1,200.92	11/25/2008	0.00	16,071.89	16,071.89	31.25
	MASTR ASSET BKD
57644UAH8	2006 HE2 M-2	5,656,000.00	438,340.00	2,230.19	440,570.19	2,116.39	11/25/2008	0.00	16,168.89	16,168.89	31.44
	MASTR ABS 2006
57645FAC1	AM2 P/T A-3	29,720,000.00	20,741,588.00	11,322.49	20,752,910.49	99,691.79	11/25/2008	0.00	82,088.09	82,088.09	159.61
	MASTR ABS 2006
57645FAD9	AM2 P/T M-1	18,615,000.00	4,599,766.50	7,340.00	4,607,106.50	22,131.39	11/25/2008	0.00	53,214.98	53,214.98	103.47
	MASTR ABS 2006
57645FAE7	AM2 P/T M-2	4,183,000.00	880,939.80	1,654.03	882,593.83	4,239.76	11/25/2008	0.00	11,991.70	11,991.70	23.32
	MASTR ABS 2006
57645FAF4	AM2 P/T M-3	3,501,000.00	447,427.80	1,392.13	448,819.93	2,156.02	11/25/2008	0.00	10,092.97	10,092.97	19.62
	MERRILL LYNCH MTG
59020U3C7	2006-HE1 A2C	28,655,000.00	22,835,169.50	11,012.28	22,846,181.78	109,747.35	11/25/2008	0.00	79,839.00	79,839.00	155.24
	MERRILL LYNCH MTG
59020U3D5	2006-HE1 A2D	19,554,000.00	10,506,364.20	7,753.70	10,514,117.90	50,507.19	11/25/2008	0.00	56,214.36	56,214.36	109.30
	MERRILL LYNCH MTG
59020US22	05-HE2 A2B	35,446,463.81	31,561,531.38	13,819.20	31,575,350.57	151,680.09	11/25/2008	3,132,828.14	100,189.18	3,233,017.32	6,286.20
	MERRILL LYNCH MTG
590212AC0	06 HE3 A3	93,192,000.00	41,013,799.20	35,296.47	41,049,095.67	197,189.59	11/25/2008	0.00	255,899.41	255,899.41	497.56
	MERRILL LYCH 06-
59022QAD4	HE5 CL A2C	117,353,000.00	49,839,819.10	44,447.45	49,884,266.55	239,631.55	11/25/2008	0.00	322,243.94	322,243.94	626.56
	MERRILL LYNCH MTG
59022QAF9	06-HE5 CL M1	50,235,000.00	7,198,675.50	19,640.49	7,218,315.99	34,674.99	11/25/2008	0.00	142,393.57	142,393.57	276.87
	MERRILL LYNCH 06-
59022QAG7	HE5 CL M2	41,918,000.00	1,794,090.40	16,575.08	1,810,665.48	8,697.98	11/25/2008	0.00	120,169.31	120,169.31	233.65
	MERRILL LYNCH 06-
59022VAF8	OPTI CL M1	49,884,000.00	8,495,245.20	19,503.26	8,514,748.46	40,902.72	11/25/2008	0.00	141,398.64	141,398.64	274.93

A	B	C	D	E	F	G	H	I	J	K	L
						Accrued
						Interest on			Post		Accrued
				Accrued	Designated	D. Purchase	Payment	Post 10/31/08	10/31/08	Post 10/31/08	Interest on
CUSIP	Security Name	Par	Market Value	Interest	Purchase Price	Price	Date	Principal	Interest	Total Cash	amount in K
	MERRILL LYNCH 06-
59022VAG6	OPT1 CL M2	35,826,000.00	1,597,839.60	14,166.20	1,612,005.80	7,743.67	11/25/2008	0.00	102,704.94	102,704.94	199.70
	MERRILL LYNCH 07-
59024UAD3	MLN1 CL A-2C	114,600,000.00	40,946,580.00	44,805.42	40,991,385.42	196,912.37	11/25/2008	0.00	324,839.27	324,839.27	631.61
	MORGAN STANLEY
61744CKG0	ABS 05-HE1 A1MZ	343,223.60	274,578.88	136.10	274,714.98	1,319.66	11/25/2008	0.00	986.71	986.71	1.92
	MORGAN STANLEY
61744CWX0	ABS 2006-1 A2C	55,000,000.00	37,939,000.00	21,931.25	37,960,931.25	182,354.82	11/25/2008	0.00	159,001.56	159,001.56	309.16
	MORGAN STANLEY
61744CXM3	ABS 06-WMC1 A2C	25,000,000.00	15,360,000.00	9,913.19	15,369,913.19	73,833.22	11/25/2008	0.00	71,811.09	71,811.09	139.63
	MORGAN STANLEY
61744CYP5	ABS CAP 06-2 A4	32,000,000.00	16,355,200.00	12,582.22	16,367,782.22	78,626.73	11/25/2008	0.00	91,221.11	91,221.11	177.37
	MORGAN STANLEY
617451EU9	CAP 06-HE2 A2C	145,000,000.00	115,492,500.00	55,402.08	115,547,902.08	555,063.23	11/25/2008	0.00	401,478.20	401,478.20	780.62
	MORGAN STANLEY
617487AC7	MTG 06-16AX 2A2	62,000,000.00	32,215,200.00	23,620.28	32,238,820.28	154,867.23	11/25/2008	0.00	171,247.02	171,247.02	332.97
	MORGAN STANLEY
61749HAD2	06 HE3 A-2C	40,000,000.00	20,000,000.00	15,194.44	20,015,194.44	96,147.99	11/25/2008	0.00	110,159.72	110,159.72	214.19
	MORGAN STANLEY
61749QAD2	IXIS RE 06 1 A3	43,255,000.00	32,748,360.50	16,382.83	32,764,743.33	157,393.64	11/25/2008	0.00	118,589.69	118,589.69	230.58
	MORGAN STANLEY
617505AE2	07-NC1 CL A2D	17,385,000.00	4,958,202.00	6,719.79	4,964,921.79	23,850.24	11/25/2008	0.00	48,718.44	48,718.44	94.73
	MORGAN STANLEY
61751GAC1	07-5AX CL 2A2	7,000,000.00	3,681,300.00	2,651.25	3,683,951.25	17,696.78	11/25/2008	0.00	19,221.56	19,221.56	37.37
	MORGAN STANLEY
61751GAD9	07-5AX CL 2A3	10,100,000.00	5,330,780.00	3,915.15	5,334,695.15	25,626.54	11/25/2008	0.00	28,384.86	28,384.86	55.19
	MORGAN STANLEY
61753NAE0	07-NC2 CL A2C	57,000,000.00	25,627,200.00	22,285.42	25,649,485.42	123,213.72	11/25/2008	0.00	161,426.55	161,426.55	313.87
	MORGAN STANLEY
61753NAF7	07-NC2 CL A-2D	30,000,000.00	8,445,000.00	11,962.50	8,456,962.50	40,625.13	11/25/2008	0.00	86,651.51	86,651.51	168.48
	MORGAN STANLEY
61755AAC0	07-NC3 CL A-2B	52,980,000.00	33,727,068.00	20,007.31	33,747,075.31	162,112.51	11/25/2008	0.00	145,030.35	145,030.35	281.99
	MORGAN STANLEY
61755AAD8	07-NC3 CL A-2C	71,000,000.00	29,997,500.00	27,206.81	30,024,706.81	144,231.19	11/25/2008	0.00	197,218.56	197,218.56	383.47
	MORGAN STANLEY
61755AAE6	07-NC3 CL A-2D	26,000,000.00	7,480,200.00	10,165.28	7,490,365.28	35,981.84	11/25/2008	0.00	73,686.76	73,686.76	143.27
	MORGAN STANLEY
61755EAD0	07-NC4 CL A2C	46,000,000.00	16,100,000.00	17,524.72	16,117,524.72	77,424.56	11/25/2008	0.00	126,930.89	126,930.89	246.80
	NATIONSTAR HOME
63860FAD5	EQ 2006-B AV-4	59,274,000.00	30,964,737.60	23,306.21	30,988,043.81	148,858.82	11/25/2008	0.00	168,970.00	168,970.00	328.54
	NATIONSTAR HM
63860HAC3	EQTY 07-A CL AV3	35,000,000.00	19,281,500.00	13,256.25	19,294,756.25	92,687.19	11/25/2008	0.00	96,107.81	96,107.81	186.87
	NATIONSTAR HM
63860HAD1	EQTY 07-A CL AV4	39,000,000.00	13,856,700.00	15,117.92	13,871,817.92	66,636.75	11/25/2008	0.00	109,604.90	109,604.90	213.11
	NATIONSTAR HM
63860LAC4	EQTY 07-B 2AV2	58,395,000.00	38,978,662.50	22,311.76	39,000,974.26	187,350.93	11/25/2008	0.00	161,760.22	161,760.22	314.52

A	B	C	D	E	F	G	H	I	J	K	L
						Accrued
						Interest on			Post		Accrued
				Accrued	Designated	D. Purchase	Payment	Post 10/31/08	10/31/08	Post 10/31/08	Interest on
CUSIP	Security Name	Par	Market Value	Interest	Purchase Price	Price	Date	Principal	Interest	Total Cash	amount in K
	NATIONSTAR HM
63860LAD2	EQTY 07-B CL2AV3	28,708,000.00	13,383,669.60	11,192.13	13,394,861.73	64,345.57	11/25/2008	0.00	81,142.96	81,142.96	157.77
	NEW CENTY HOME
64352VKN0	EQUITY 05-2 A-1	12,677,260.83	10,809,900.31	5,083.23	10,814,983.54	51,952.48	11/25/2008	0.00	36,853.41	36,853.41	71.66
	NEW CENTY HM EQ
64352VLG4	LN TR 05-3 A2C	83,387,114.99	76,841,226.46	32,694.70	76,873,921.16	369,283.10	11/25/2008	5,113,670.24	237,036.57	5,350,706.80	10,403.78
	NEW CENTY HOME
64352VMS7	EQ 05-4 CL A-2B	19,534,503.99	16,809,440.68	7,659.15	16,817,099.84	80,785.14	11/25/2008	638,933.69	55,528.86	694,462.56	1,350.30
	NEW CENTY HOME
64352VNH0	EQ 05-B CL A2C	244,245,602.10	206,485,232.02	96,036.01	206,581,268.03	992,364.77	11/25/2008	8,081,754.09	696,261.11	8,778,015.20	17,067.75
	NEWCASTLE MTG 07-
65106FAC6	1 CL 2A2	27,683,000.00	13,963,305.20	10,515.70	13,973,820.90	67,126.74	11/25/2008	0.00	76,238.79	76,238.79	148.24
	NEWCASTLE MTG
65106FAD4	SECS 07-1 CL 2A3	34,007,000.00	13,531,385.30	13,182.44	13,544,567.74	65,064.72	11/25/2008	0.00	95,572.66	95,572.66	185.83
	NOMURA ASSET
65535VTP3	CORP 06S1 A2 144A	10,000,000.00	2,325,000.00	3,965.28	2,328,965.28	11,187.77	11/25/2008	0.00	28,748.26	28,748.26	55.90
	NOMURA HOME
65536HBA5	2005-HE1 CL 2A2	17,557,397.93	16,985,026.76	6,883.96	16,991,910.72	81,624.89	11/25/2008	3,010,906.00	49,908.73	3,060,814.73	5,951.37
	NOMURA HOME
65536MAC1	EQUITY 06 HE2 A3	26,000,000.00	21,036,600.00	9,905.28	21,046,505.28	101,102.15	11/25/2008	0.00	71,813.26	71,813.26	139.63
	NOMURA ASSET SER
65538NAB9	07-1 CL 2A3	42,972,000.00	21,971,583.60	16,753.11	21,988,336.71	105,626.47	11/25/2008	0.00	121,460.06	121,460.06	236.16
	NOMURA ASSET SER
65538NAC7	07-1 CL 2A3	41,602,000.00	21,375,107.60	16,681.25	21,391,788.85	102,760.81	11/25/2008	0.00	120,939.04	120,939.04	235.15
	NOVASTAR MTG FDS
669884AF5	SER 06 1 M-1	40,000,000.00	6,000,000.00	15,816.67	6,015,816.67	28,898.48	11/25/2008	0.00	114,670.84	114,670.84	222.96
	NOVASTAR MTG FDG
66988WAF3	2006 3 M-1	41,550,000.00	1,171,710.00	16,429.56	1,188,139.56	5,707.53	11/25/2008	0.00	119,114.33	119,114.33	231.60
	NOVASTAR MTG 06 4
66988XAC8	ABC A-2 C	72,382,000.00	24,877,693.40	27,414.68	24,905,108.08	119,637.91	11/25/2008	0.00	198,756.45	198,756.45	386.46
	OPTEUM MTG ACCEP
68383NAS2	05-2 CL AI2	16,394,634.75	15,581,460.87	6,336.98	15,587,797.85	74,879.88	11/25/2008	626,194.62	45,943.11	672,137.73	1,306.89
	OPTEUM MTG ACCEP
68383NDV2	2006- 1A1B	144,307,000.00	89,643,508.40	55,297.64	89,698,806.04	430,890.64	11/25/2008	0.00	400,907.89	400,907.89	779.52
	OPTEUM MTG ACCEP
68383NDW0	2006-1A1C	77,617,000.00	26,498,443.80	30,691.06	26,529,134.86	127,439.33	11/25/2008	0.00	222,510.15	222,510.15	432.64
	OPTION ONE MTG
68389BAE3	06-3 ABC M-2	23,500,000.00	799,000.00	9,266.18	808,266.18	3,882.71	11/25/2008	0.00	67,179.81	67,179.81	130.62
	OPTION ONE MTG LN
68389FGF5	05-1 A-1B	970,468.68	561,222.04	386.97	561,609.01	2,697.83	11/25/2008	0.00	2,805.56	2,805.56	5.46
	OPTION ONE MTG LN
68389FHB3	TR 05-2 M-1	8,200,000.00	4,346,000.00	3,369.97	4,349,369.97	20,893.29	11/25/2008	0.00	24,432.30	24,432.30	47.51
	OPTION ONE MTG LN
68389FJW5	TR 05-5 A-3	8,223,791.21	7,250,916.71	3,169.59	7,254,086.30	34,846.82	11/25/2008	294,026.08	22,979.50	317,005.58	616.38
	OWNITE MTG LN TR
69121PAR4	05-3 CL A-2B	17,240,325.72	16,521,404.14	6,721.33	16,528,125.47	79,396.98	11/25/2008	3,537,625.37	48,729.66	3,586,355.03	6,973.22

A	B	C	D	E	F	G	H	I	J	K	L
						Accrued
						Interest on			Post		Accrued
				Accrued	Designated	D. Purchase	Payment	Post 10/31/08	10/31/08	Post 10/31/08	Interest on
CUSIP	Security Name	Par	Market Value	Interest	Purchase Price	Price	Date	Principal	Interest	Total Cash	amount in K
	OWNIT MTG LN TR
69121PAV5	05-4 CL A2A2	56,532,608.19	52,219,170.19	22,165.49	52,241,335.68	250,954.32	11/25/2008	6,890,735.70	160,699.83	7,051,435.53	13,710.63
	OWNIT MTG LN TR
69121PAX1	05-4 CL A-3	12,000,000.00	8,865,600.00	4,945.00	8,870,545.00	42,611.88	11/25/2008	0.00	35,851.25	35,851.25	69.71
	OWNIT MTG LN TR
69121PBT9	2005-5 CL A2B	23,163,152.83	18,210,870.75	9,133.36	18,220,004.11	87,524.34	11/25/2008	2,168,008.98	66,216.86	2,234,225.84	4,344.17
	OWNIT MTG LN 06 4
69121QAD3	CL A2C	48,798,000.00	23,618,232.00	18,482.24	23,636,714.24	113,544.87	11/25/2008	0.00	133,996.28	133,996.28	260.54
	PARK PL SECS INC
70069FEW3	2004-WHQ2 A1D	5,755,206.89	4,731,931.10	2,352.44	4,734,283.55	22,742.31	11/25/2008	0.00	17,055.20	17,055.20	33.16
	PARK PL SECS INC
70069FEY9	2004-WHQ2 A2B	10,142,436.28	7,839,089.00	4,145.72	7,843,234.72	37,676.94	11/25/2008	0.00	30,056.48	30,056.48	58.44
	PARK PL SECS INC
70069FKC0	05-WCW1 A-3C	13,891,575.60	13,488,719.91	5,400.35	13,494,120.26	64,822.38	11/25/2008	1,698,085.41	39,152.54	1,737,237.95	3,377.84
	POPULAR ABS MTG
73316MAC1	06 C CL A3	24,187,000.00	19,862,364.40	9,187.70	19,871,552.10	95,457.97	11/25/2008	0.00	66,610.83	66,610.83	129.52
	POPULAR ABS MTG
73316NAB1	P/T 07-A CL A2	76,090,000.00	35,343,805.00	29,664.53	35,373,469.53	169,925.30	11/25/2008	0.00	215,067.86	215,067.86	418.17
	POPULAR ABS INC
73316PJV3	2006-A A-4	50,749,000.00	35,301,004.40	20,179.78	35,321,184.18	169,674.14	11/25/2008	0.00	146,303.38	146,303.38	284.47
	QUEST TR 2006-X1
748351AR4	A-2 A44A	25,000,000.00	17,977,500.00	9,579.86	17,987,079.86	86,405.43	11/25/2008	0.00	69,453.99	69,453.99	135.04
	QUEST TR 2006-X1
748351AS2	A-3 144A	6,365,000.00	2,546,000.00	2,509.75	2,548,509.75	12,242.40	11/25/2008	0.00	18,195.72	18,195.72	35.38
	RAAC SER 2006-SP2
74919PAB5	CL A-2	20,409,000.00	16,570,067.10	7,775.26	16,577,842.36	79,635.81	11/25/2008	0.00	56,370.65	56,370.65	109.61
	RAAC SER 2006 SP3
74919QAB3	P/T A-2	30,000,000.00	22,284,000.00	11,429.17	22,295,429.17	107,101.67	11/25/2008	0.00	82,861.46	82,861.46	161.11
	RAAC SER 2006-SP3
74919QAC1	P/T A-3	36,505,000.00	18,402,170.50	14,353.56	18,416,524.06	88,468.38	11/25/2008	0.00	104,063.33	104,063.33	202.34
	RASC SER 2006
74924QAC4	EMX5 CTF A-3	50,781,000.00	36,983,802.30	19,289.73	37,003,092.03	177,753.60	11/25/2008	0.00	139,850.52	139,850.52	271.92
	RAMP SER 2006-NC2
75156TAB6	P/T CL A2	13,971,554.60	12,209,741.56	5,353.82	12,215,095.39	58,678.26	11/25/2008	342,688.40	38,815.21	381,503.61	741.79
	RAMP SER 2006-RS4
75156WAC7	CL A3	61,680,000.00	47,919,192.00	23,498.37	47,942,690.37	230,304.70	11/25/2008	0.00	170,363.16	170,363.16	331.25
	RASC SER 2005-
753910AB4	KS12 CL A2	6,925,618.95	5,888,853.79	2,700.03	5,891,553.82	28,301.55	11/25/2008	280,561.39	19,575.21	300,136.60	583.58
	RASC SER 05 EMX
75405MAC8	CTF CL A-1-3	9,566,462.96	8,972,385.61	3,750.85	8,976,136.46	43,119.12	11/25/2008	915,775.62	27,193.67	942,969.29	1,833.49
	RASC SER 2006
754065AC4	EMX6 CTF A-3	40,860,000.00	25,619,220.00	15,475.73	25,634,695.73	123,142.67	11/25/2008	0.00	112,199.01	112,199.01	218.16
	RASC SER 2006
754065AD2	EMX6 ABC A4	39,011,000.00	10,653,904.10	15,295.56	10,669,199.66	51,252.17	11/25/2008	0.00	110,892.83	110,892.83	215.62
	RASC SER 2006 KS4
75406EAC5	P/T A-3	50,000,000.00	37,145,000.00	18,937.50	37,163,937.50	178,526.26	11/25/2008	0.00	137,296.87	137,296.87	266.96

A	B	C	D	E	F	G	H	I	J	K	L
						Accrued
						Interest on			Post		Accrued
				Accrued	Designated	D. Purchase	Payment	Post 10/31/08	10/31/08	Post 10/31/08	Interest on
CUSIP	Security Name	Par	Market Value	Interest	Purchase Price	Price	Date	Principal	Interest	Total Cash	amount in K
	RASC SER 2006 KS5
75406VAC7	CTF A-3	64,000,000.00	37,632,000.00	24,311.11	37,656,311.11	180,891.50	11/25/2008	0.00	176,255.56	176,255.56	342.71
	RASC SER 2006 KS6
75406WAC5	ABC A-3	30,000,000.00	18,033,000.00	11,362.50	18,044,362.50	86,680.61	11/25/2008	0.00	82,378.13	82,378.13	160.17
	RASC SER 2006 KS7
75406XAC3	A-3	25,000,000.00	15,800,000.00	9,468.75	15,809,468.75	75,944.74	11/25/2008	0.00	68,648.44	68,648.44	133.48
	RASC SER 2006-KS9
75406YAF4	CL M-1S	35,000,000.00	5,400,500.00	13,645.14	5,414,145.14	26,008.20	11/25/2008	0.00	98,927.26	98,927.26	192.35
	RENAISSANCE HOME
759676AB5	EQUITY LN	8,942,402.20	8,109,864.56	3,386.93	8,113,251.49	38,974.03	11/25/2008	82,953.26	24,555.28	107,508.54	209.04
	RENAISSANCE MTG
75970NAF4	05-2 HM EQ AV2	385,535.88	379,752.84	150.31	379,903.15	1,824.96	11/25/2008	0.00	1,089.72	1,089.72	2.12
	RENAISSANCE HOME
759950GR3	2006-1 LN AV2	8,357,603.20	7,668,936.70	3,211.87	7,672,148.57	36,855.08	11/25/2008	176,109.62	23,286.08	199,395.70	387.70
	RENAISSANCE HOME
759950GS1	2006-1 AV-3	19,210,000.00	14,641,862.00	7,595.95	14,649,457.95	70,372.33	11/25/2008	0.00	55,070.67	55,070.67	107.08
	RESIDENTIAL ASSET
7609857J4	04-RS7 A2B2	26,858,397.46	22,786,664.41	10,709.79	22,797,374.19	109,512.89	11/25/2008	715,059.64	77,645.94	792,705.58	1,541.32
	RESIDENTIAL ASSET
76110W3P9	05-KS8 A-3	9,742,831.99	9,467,109.84	3,809.18	9,470,919.02	45,495.93	11/25/2008	1,173,165.60	27,616.53	1,200,782.13	2,334.77
	RESIDENTIAL 2005-
76110W6L5	ALH3 CL A2	21,336,067.21	19,321,942.47	8,294.40	19,330,236.86	92,857.63	11/25/2008	823,757.12	60,134.37	883,891.49	1,718.62
	RESIDENTIAL 2005-
76110W6M3	AHL3 CL A-3	20,805,000.00	10,240,221.00	8,319.11	10,248,540.11	49,231.42	11/25/2008	0.00	60,313.55	60,313.55	117.27
	RESIDENTIAL ASSET
76110WD52	SEC 04-RS8	1,039,062.77	672,273.61	440.88	672,714.49	3,231.55	11/25/2008	0.00	3,430.75	3,430.75	6.67
	RESIDENTIAL ASSET
76110WG26	04-KS10 AII2	1,932,460.60	1,317,358.39	783.45	1,318,141.84	6,332.02	11/25/2008	0.00	5,678.03	5,678.03	11.04
	RESIDENTIAL ASSET
76110WJ23	04-KS11 HE	257,660.87	170,468.43	104.17	170,572.61	819.39	11/25/2008	0.00	755.26	755.26	1.47
	RESIDENTIAL ASSET
76110WLD6	01-KS1 A II	2,499,787.53	1,794,597.47	1,035.68	1,795,633.14	8,625.77	11/25/2008	60,661.99	7,508.64	68,170.63	132.55
	RESIDENTIAL ASSET
76110WSK3	SECURITIES	3,492,916.60	2,715,742.66	1,489.83	2,717,232.48	13,052.91	11/25/2008	83,108.09	10,801.24	93,909.34	182.59
	RESIDENTIAL ASSET
76110WU53	05-KS4 A-4B	2,998,247.78	2,666,941.40	1,202.21	2,668,143.61	12,817.09	11/25/2008	0.00	8,716.05	8,716.05	16.95
	RESIDENTIAL ASSET
76110WUP9	SEC 03-KS9	3,752,096.00	2,629,468.88	1,625.39	2,631,094.26	12,639.12	11/25/2008	80,264.25	11,731.31	91,995.56	178.87
	RESIDENTIAL ASSET
76112B2C3	2006-RS2 A2	51,657,002.60	46,367,325.53	19,852.07	46,387,177.61	222,832.40	11/25/2008	1,549,915.31	143,927.53	1,693,842.84	3,293.47
	RESIDENTIAL ASSET
76112B2D1	2006-RS2 A3	80,007,000.00	32,002,800.00	31,636.10	32,034,436.10	153,885.42	11/25/2008	0.00	229,361.73	229,361.73	445.97
	RESIDENTIAL ASSET
76112BL81	2005-RS9 AI4	110,957,883.60	33,287,365.08	44,121.17	33,331,486.25	160,116.13	11/25/2008	1,614,192.56	319,878.48	1,934,071.04	3,760.56
	RESIDENTIAL ASSET
76112BPU8	2005-RS5 AI3	20,929,000.00	15,332,585.40	8,368.69	15,340,954.09	73,694.11	11/25/2008	0.00	60,673.03	60,673.03	117.97

A	B	C	D	E	F	G	H	I	J	K	L
						Accrued
						Interest on			Post		Accrued
				Accrued	Designated	D. Purchase	Payment	Post 10/31/08	10/31/08	Post 10/31/08	Interest on
CUSIP	Security Name	Par	Market Value	Interest	Purchase Price	Price	Date	Principal	Interest	Total Cash	amount in K
	RESIDENTIAL ASSET
76112BR77	05-EFC7 AI4	70,151,000.00	40,021,145.50	28,128.60	40,049,274.10	192,386.70	11/25/2008	0.00	203,932.37	203,932.37	396.52
	RESIDENTIAL ASSET
76112BT83	2006-RS1 AI2	56,295,224.00	40,419,970.83	21,822.22	40,441,793.05	194,272.26	11/25/2008	1,301,852.47	158,199.14	1,460,051.62	2,838.89
	RESIDENTIAL ASSET
76112BX21	2006-NC1 A3	16,044,500.00	7,006,633.15	6,344.26	7,012,977.41	33,688.59	11/25/2008	0.00	45,995.91	45,995.91	89.43
	RESIDENTIAL ASSET
76112BY87	2006-RZ1 A-2	57,035,693.26	48,081,089.42	21,855.76	48,102,945.18	231,074.52	11/25/2008	1,825,219.29	158,454.27	1,983,673.55	3,857.01
	RESIDENTIAL ASSET
76112BY95	2006-RZ1 A-3	49,479,000.00	28,915,527.60	19,564.82	28,935,092.42	138,996.95	11/25/2008	0.00	141,844.95	141,844.95	275.80
	RESIDENTIAL 05-
76112BYQ7	EFC3 CL AI2	2,823,722.34	2,725,456.80	1,107.13	2,726,563.94	13,097.73	11/25/2008	426,210.25	8,026.73	434,236.97	844.32
	RESIDENTIAL ASSET
76112BZF0	05-RS8 CL A2	82,500,532.66	65,637,423.78	32,530.42	65,669,954.20	315,462.04	11/25/2008	2,344,033.60	235,845.54	2,579,879.14	5,016.25
	RESIDENTIAL ASSET
76113ABZ3	06-EMX3 A-2	124,066,509.50	92,652,869.29	47,403.75	92,700,273.04	445,308.94	11/25/2008	4,348,285.61	343,677.16	4,691,962.76	9,122.94
	SG MTG SECS TR 06-
78420MAG4	OPT2 CL M1	18,701,000.00	3,240,883.30	7,270.01	3,248,153.31	15,603.32	11/25/2008	0.00	52,707.60	52,707.60	102.48
	SAACO SER 05-NC4
78514RAC9	CL A-3	28,481,000.00	23,602,204.70	11,578.32	23,613,783.02	113,434.71	11/25/2008	0.00	83,942.80	83,942.80	163.22
	SACO I TR 2005-10
785778ND9	CL IA	31,557,524.09	18,798,817.10	12,338.12	18,811,155.22	90,364.09	11/25/2008	878,343.93	89,451.34	967,795.26	1,881.76
	SACO I TR 2006-2 CL
785778PF2	1 A	29,699,425.23	19,120,489.96	11,413.65	19,131,903.62	91,904.88	11/25/2008	609,080.34	82,748.99	691,829.34	1,345.18
	SACO I TR 2006-2 CL
785778PG0	2 A1	22,827,716.27	5,453,541.42	8,772.82	5,462,314.24	26,239.59	11/25/2008	419,827.98	63,602.93	483,430.91	939.97
	SAXON ASSET SECS
805564PL9	TR 04-1 A	4,507,567.80	3,853,970.47	1,902.57	3,855,873.04	18,522.65	11/25/2008	0.00	13,793.63	13,793.63	26.82
	SAXON ASSET SECS
80556AAC1	TR 06-3 CL A3	111,000,000.00	57,942,000.00	42,287.92	57,984,287.92	278,542.02	11/25/2008	0.00	306,587.39	306,587.39	596.12
	SAXON ASSET SECS
80556UAF0	TR 2006-1 M-1	26,748,000.00	5,619,754.80	10,606.33	5,630,361.13	27,046.85	11/25/2008	0.00	76,895.86	76,895.86	149.51
	SAXON ASSET 06-2
80556XAG2	CL M-1	9,500,000.00	2,241,050.00	3,745.90	2,244,795.90	10,783.44	11/25/2008	0.00	27,149.86	27,149.86	52.79
	SECURITZED ASSET
81375HAC3	BKD 06 NC1 A3	45,000,000.00	20,061,000.00	17,643.75	20,078,643.75	96,452.78	11/25/2008	0.00	127,841.63	127,841.63	248.57
	SECURITIZED ASSET
81375WAS5	04-D01 A-2	1,978,707.84	1,113,814.64	797.80	1,114,612.45	5,354.32	11/25/2008	0.00	5,784.08	5,784.08	11.25
	SECURITIZED ASSET
81376WAB1	06 CB5 A-2	9,600,000.00	8,984,640.00	3,593.33	8,988,233.33	43,177.23	11/25/2008	0.00	26,040.98	26,040.98	50.63
	SECURITIZED ASSET
81378GAE8	07-NC2 CL M1	10,000,000.00	2,152,000.00	3,876.39	2,155,876.39	10,356.29	11/25/2008	0.00	28,103.82	28,103.82	54.64
	SMART HOME 05-1A
83169RAA1	CL M1 144A	3,811,976.90	3,596,600.21	1,592.03	3,598,192.23	17,284.82	11/25/2008	150,160.47	11,542.23	161,702.70	314.41
	SMART HOME
83170GAA2	CREDIT 2006-1 LLC	22,000,000.00	11,000,000.00	8,845.83	11,008,845.83	52,883.74	11/25/2008	0.00	64,132.20	64,132.20	124.70

A	B	C	D	E	F	G	H	I	J	K	L
						Accrued
						Interest on			Post		Accrued
				Accrued	Designated	D. Purchase	Payment	Post 10/31/08	10/31/08	Post 10/31/08	Interest on
CUSIP	Security Name	Par	Market Value	Interest	Purchase Price	Price	Date	Principal	Interest	Total Cash	amount in K
	SMART HOME
83170GAC8	CREDIT 2006-1 LLC	14,000,000.00	6,300,000.00	5,660.28	6,305,660.28	30,290.82	11/25/2008	0.00	41,037.08	41,037.08	79.79
	SOUNVIEW HOME LN
83611MGE2	TR 05-OPT2 A4	5,872,773.37	5,784,094.49	2,315.67	5,786,410.16	27,796.47	11/25/2008	3,790,959.74	16,788.59	3,807,748.33	7,403.69
	SOUNDVIEW HOME
83611MGT9	LN 2005-OPT3 A5	51,418,000.00	26,943,032.00	20,788.58	26,963,820.58	129,527.45	11/25/2008	0.00	150,717.23	150,717.23	293.05
	SOUNDVIEW HOME
83611MJH2	LN 05-OPT4 2A3	56,650,000.00	43,433,555.00	22,148.58	43,455,703.58	208,750.34	11/25/2008	0.00	160,577.18	160,577.18	312.22
	SOUNDVIEW HOME
83611MMM7	LN 2006-OPT2 M1	25,000,000.00	5,817,500.00	9,885.42	5,827,385.42	27,993.30	11/25/2008	0.00	71,669.27	71,669.27	139.35
	SOUNDVIEW HM LN
83611MPK8	TR 06-OPT3 M-1	85,000,000.00	21,088,500.00	33,704.86	21,122,204.86	101,465.79	11/25/2008	0.00	244,360.24	244,360.24	475.13
	SOUNDVIEW HM LN
83611YAF9	TR 06 OPT4 M-1	15,000,000.00	3,231,000.00	5,897.92	3,236,897.92	15,549.25	11/25/2008	0.00	42,759.90	42,759.90	83.14
	SOUNDVIEW HM LN
83612CAF6	06 OPT5 M-1	60,000,000.00	12,702,000.00	23,391.67	12,725,391.67	61,129.60	11/25/2008	0.00	169,589.58	169,589.58	329.75
	SOUNDVIEW HOME
83612CAG4	LN TR 06 OPT5	68,500,000.00	5,260,800.00	26,933.82	5,287,733.82	25,400.95	11/25/2008	0.00	195,270.19	195,270.19	379.68
	SOUNDVIEW HOME
83612HAC2	LN TR 2006-3 A3	65,000,000.00	46,618,000.00	24,690.97	46,642,690.97	224,059.83	11/25/2008	0.00	178,258.98	178,258.98	346.60
	SOUNDVIEW HM LN
83612JAE4	TR 06-EQ1 M-1	47,271,000.00	10,078,177.20	18,429.12	10,096,606.32	48,501.57	11/25/2008	0.00	133,611.15	133,611.15	259.79
	SOUNDVIEW HM LN
83612QAC2	TR 07 NS1 A-3	85,880,000.00	34,935,984.00	33,004.16	34,968,988.16	167,982.28	11/25/2008	0.00	239,280.17	239,280.17	465.25
	SPECIALTY
	UNDERWRITING 04-
84751PDZ9	BC4	3,315,600.00	2,101,427.28	1,347.88	2,102,775.16	10,101.21	11/25/2008	0.00	9,764.03	9,764.03	18.98
	SPECIALTY
	UNDERWRIT 06-BC1
84751PKA6	A2C	34,000,000.00	27,142,200.00	13,066.39	27,155,266.39	130,447.11	11/25/2008	0.00	94,731.32	94,731.32	184.19
	SPECIALTY
	UNDERWRIT 06 AB1
84751PKW8	A4	78,735,000.00	25,392,037.50	31,133.13	25,423,170.63	122,126.56	11/25/2008	0.00	225,715.20	225,715.20	438.87
	STRUCTURED ASSET
863576DE1	05-WF4 CL A4	43,616,000.00	30,160,464.00	17,537.27	30,178,001.27	144,967.57	11/25/2008	0.00	127,145.18	127,145.18	247.22
	STRUCTURED ASSET
86358EA89	2006-1 CL A3	70,000,000.00	50,785,000.00	26,901.39	50,811,901.39	244,087.67	11/25/2008	0.00	195,035.07	195,035.07	379.22
	STRUCTURED ASSET
86358EC87	2006-BNC1 A4	28,623,000.00	25,537,440.60	10,968.17	25,548,408.77	122,728.17	11/25/2008	0.00	79,519.27	79,519.27	154.62
	STRUCTURED ASSET
86358EE69	INVT 06-2 A-3	75,000,000.00	50,182,500.00	28,656.25	50,211,156.25	241,201.84	11/25/2008	0.00	207,757.81	207,757.81	403.96
	STRUCTURED ASSET
86358EE85	INVT 06-2 M-1	74,875,000.00	1,909,312.50	29,690.02	1,939,002.52	9,314.48	11/25/2008	0.00	215,252.63	215,252.63	418.53
	STRUCTURED ASSET
86358EKH8	INVT 04-7 A7	56,409,690.65	44,416,990.42	23,057.46	44,440,047.88	213,478.88	11/25/2008	0.00	167,166.59	167,166.59	325.03
	STRUCTURED ASSET
86358EKJ4	INVT 04-7 A8	17,500,000.00	13,314,000.00	7,503.13	13,321,503.13	63,993.17	11/25/2008	0.00	54,397.66	54,397.66	105.77

A	B	C	D	E	F	G	H	I	J	K	L
						Accrued
						Interest on			Post		Accrued
				Accrued	Designated	D. Purchase	Payment	Post 10/31/08	10/31/08	Post 10/31/08	Interest on
CUSIP	Security Name	Par	Market Value	Interest	Purchase Price	Price	Date	Principal	Interest	Total Cash	amount in K
	STRUCTURED ASSET
86358ELS3	INVT 04-8 A8	10,256,786.36	6,965,383.62	4,283.63	6,969,667.25	33,480.54	11/25/2008	0.00	31,056.34	31,056.34	60.39
	STRUCTURED ASSET
86358EQU3	INVT 05-2 A1	10,870,528.00	9,645,419.49	4,250.07	9,649,669.57	46,354.60	11/25/2008	841,992.14	30,813.04	872,805.18	1,697.06
	STRUCTURED ASSET
86358EVK9	05-HE2 CL A2	21,298,700.42	21,149,609.52	8,327.20	21,157,936.72	101,637.44	11/25/2008	3,742,478.28	60,372.20	3,802,850.48	7,394.17
	STRUCTURED ASSET
86358EWV4	05-HE3 A-4	64,868,409.68	61,475,791.85	25,289.67	61,501,081.52	295,435.82	11/25/2008	7,385,116.17	183,350.11	7,568,466.28	14,715.94
	STRUCTURED ASSET
86358EXN1	05-8 P/T A3	119,007,231.00	116,496,178.43	46,528.52	116,542,706.95	559,842.03	11/25/2008	10,255,853.40	337,331.79	10,593,185.19	20,597.12
	STRUCTURED ASSET
86358EXP6	2005-8 CL A4	149,906,000.00	90,603,186.40	60,274.70	90,663,461.10	435,524.60	11/25/2008	0.00	436,991.61	436,991.61	849.68
	STRUCTURED ASSET
86358EXS0	2005-8 M-3	13,000,000.00	1,093,300.00	5,458.19	1,098,758.19	5,278.16	11/25/2008	0.00	39,571.91	39,571.91	76.94
	STRUCTURED ASSET
86358EYC4	2005-9 CL A3	187,493,000.00	101,846,197.60	75,387.81	101,921,585.41	489,605.82	11/25/2008	0.00	546,561.63	546,561.63	1,062.72
	STRUCTURED ASSET
86358EYS9	2005-9 CL A6	76,324,257.00	67,195,875.86	29,925.47	67,225,801.33	322,935.94	11/25/2008	5,394,517.67	216,959.65	5,611,477.32	10,910.82
	STRUCTURED ASSET
86358EYX8	INVT 05-10 A5	63,078,541.00	54,474,628.01	24,802.13	54,499,430.14	261,801.64	11/25/2008	2,929,975.27	179,815.46	3,109,790.73	6,046.60
	STRUCTURED ASSET
86358EZR0	2005-11 CL A5	79,218,542.00	65,688,015.03	31,236.31	65,719,251.34	315,698.85	11/25/2008	4,397,578.99	226,463.26	4,624,042.25	8,990.87
	STRUCTURED ASSET
86358GAG6	06 BNC2 M1	22,652,000.00	618,399.60	9,007.32	627,406.92	3,013.91	11/25/2008	0.00	65,303.04	65,303.04	126.97
	STRUCTURED ASSET
86359DAW7	SECS05-GEL2 A	6,238,258.20	5,313,748.33	2,452.85	5,316,201.18	25,537.70	11/25/2008	113,294.93	17,783.15	131,078.09	254.86
	STRUCTURED ASSET
86359RAD8	06 BC4 CL A4	50,880,000.00	19,909,344.00	19,383.87	19,928,727.87	95,732.63	11/25/2008	0.00	140,533.03	140,533.03	273.25
	STRUCTURED ASSET
86359RAF3	06 BC4 CL M1	36,488,000.00	4,312,881.60	14,184.71	4,327,066.31	20,786.14	11/25/2008	0.00	102,839.15	102,839.15	199.96
	STRUCTURED ASSET
86359UAG4	2006-OPT1 M-1	10,995,000.00	2,587,123.50	4,347.61	2,591,471.11	12,448.78	11/25/2008	0.00	31,520.14	31,520.14	61.29
	STRUCTURED ASSET
86360CAB2	06-GEL2 144A	63,673,000.00	34,860,967.50	25,177.37	34,886,144.87	167,584.32	11/25/2008	0.00	182,535.90	182,535.90	354.92
	STRUCTURED AST
86360DAE4	06-11 A3 144A	47,974,643.00	16,604,023.94	4,412.67	16,608,436.61	79,782.78	12/1/2008	0.00	141,205.36	141,205.36	177.65
	STRUCTURED ASSET
86360WAD4	06-4 CL A4	120,163,000.00	60,393,923.80	45,511.74	60,439,435.54	290,335.94	11/25/2008	0.00	329,960.09	329,960.09	641.57
	STRUCTURED ASSET
86360WAF9	2006 4 P/T M1	157,794,000.00	4,497,129.00	61,868.40	4,558,997.40	21,900.28	11/25/2008	0.00	448,545.88	448,545.88	872.14
	STRUCTURED ASSET
86360XAB6	06-GE3 144A	40,894,000.00	21,882,379.40	15,852.10	21,898,231.50	105,193.63	11/25/2008	0.00	114,927.76	114,927.76	223.46
	STRUCTURED ASSET
86361CAD7	06-WI A4 144A	11,801,000.00	6,069,254.30	4,469.63	6,073,723.93	29,176.65	11/25/2008	0.00	32,404.81	32,404.81	63.01
	STRUCTURED ASSET
86361KAF4	06-BNC3 M-1	155,716,000.00	8,190,661.60	61,053.65	8,251,715.25	39,639.18	11/25/2008	0.00	442,638.95	442,638.95	860.66

A	B	C	D	E	F	G	H	I	J	K	L
						Accrued
						Interest on			Post		Accrued
				Accrued	Designated	D. Purchase	Payment	Post 10/31/08	10/31/08	Post 10/31/08	Interest on
CUSIP	Security Name	Par	Market Value	Interest	Purchase Price	Price	Date	Principal	Interest	Total Cash	amount in K
	STRUC ASSSET07-
86363MAA9	GEL2 A1 1G 144A	31,207,158.50	23,489,628.20	11,819.71	23,501,447.91	112,895.08	11/25/2008	607,261.61	85,692.91	692,954.51	1,347.36
	STRUC ASSET SEC07-
86363MAB7	GEL2 A2 144A	49,025,000.00	24,512,500.00	19,494.25	24,531,994.25	117,845.57	11/25/2008	0.00	141,333.29	141,333.29	274.80
	TERWIN MTG TR 06-
8815612F0	5 I-A2B 144A	27,699,000.00	17,120,751.90	10,675.66	17,131,427.56	82,295.10	11/25/2008	0.00	77,398.51	77,398.51	150.49
	TERWIN MTG TR
881561F25	2005-18ALT CL A2	75,873,000.00	54,355,417.20	29,664.24	54,385,081.44	261,252.33	11/25/2008	0.00	215,065.71	215,065.71	418.17
	TERWIN MTG TR
881561F33	2005-18ALT CL A3	56,920,000.00	38,477,920.00	22,949.83	38,500,869.83	184,948.55	11/25/2008	0.00	166,386.25	166,386.25	323.52
	TERWIN MTG TR
881561L93	2006-1ABS 1A2	36,807,164.98	32,191,546.49	14,431.48	32,205,977.97	154,709.47	11/25/2008	1,397,936.26	104,628.20	1,502,564.46	2,921.55
	TERWIN MTG TR 04-
881561LR3	19HE CL A-1	3,948,605.13	2,855,631.23	1,592.06	2,857,223.29	13,725.39	11/25/2008	0.00	11,542.40	11,542.40	22.44
	TERWIN MTG TR
881561M27	2006-1ABS 1A3	12,178,000.00	6,152,325.60	4,923.63	6,157,249.23	29,577.89	11/25/2008	0.00	35,696.34	35,696.34	69.41
	TERWIN MTG TR 04-
881561PM0	23 HELOC CL A	16,026,002.01	7,702,096.57	34,473.71	7,736,570.28	37,164.55	11/17/2008	9,589.87	71,506.02	81,095.89	231.88
	TERWIN MTG TR 05-
881561TN4	7SL CTF A-1	10,204,455.63	6,939,029.83	4,001.00	6,943,030.83	33,352.58	11/25/2008	492,468.22	29,007.23	521,475.45	1,013.94
	TERWIN MTG TR 05-
881561UF9	8HE	2,494,908.99	2,479,191.06	975.44	2,480,166.50	11,914.10	11/25/2008	2,006,105.44	7,071.94	2,013,177.38	3,914.37
	TERWIN MTG TR
881561UY8	TMTS 05-10HE A1B	16,424,848.08	15,478,776.83	6,476.41	15,485,253.24	74,387.29	11/25/2008	856,775.40	46,953.96	903,729.36	1,757.19
	TERWIN MTG TR 05-
881561WB6	12ALT CL AV-2	6,475,484.61	5,379,832.61	2,567.71	5,382,400.32	25,855.71	11/25/2008	71,896.84	18,615.90	90,512.74	175.99
	TERWIN MTG TR 05-
881561XP4	14HE AV-2	17,239,887.59	11,876,558.56	6,778.63	11,883,337.19	57,084.58	11/25/2008	350,398.37	49,145.05	399,543.42	776.86
	TERWIN MTG 06-5
881561Z56	CTF A-2 144A	41,999,000.00	23,452,241.60	16,187.11	23,468,428.71	112,736.46	11/25/2008	0.00	117,356.58	117,356.58	228.19
	TERWIN MTG TR
881561ZF4	2005-16HE CL AV2	32,643,753.22	27,283,648.94	12,871.61	27,296,520.55	131,125.66	11/25/2008	1,858,498.93	93,319.20	1,951,818.13	3,795.07
	TERWIN MTG TR 07-
88157GAB6	1SL CL A2	29,460,000.00	2,822,268.00	11,452.58	2,833,720.58	13,612.49	11/25/2008	0.00	83,031.19	83,031.19	161.44
	TRUMAN CAP MTG
897896AW6	LN 04-2 A1 144A	8,456,222.76	7,944,621.28	3,437.69	7,948,058.97	38,180.49	11/25/2008	138,145.22	24,923.25	163,068.47	317.07
	WAMU MTG PASS
92925CES7	THRU 06-GE1 2A3	16,111,000.00	13,120,798.40	6,155.74	13,126,954.14	63,058.61	11/25/2008	0.00	44,629.15	44,629.15	86.78
	WACHOVIA MTG LN
92978EAB0	06 AMN1 A2	50,000,000.00	21,750,000.00	18,937.50	21,768,937.50	104,572.53	11/25/2008	0.00	137,262.90	137,262.90	266.89
	WAMU ASSET BKD
93363XAD5	07-HE4 CL 2A3	16,711,000.00	6,876,576.50	6,366.43	6,882,942.93	33,063.94	11/25/2008	0.00	46,156.60	46,156.60	89.75
	WELLS FARGO HOME
9497EBAD1	EQ 06-3 M-1	36,550,000.00	7,595,090.00	14,168.20	7,609,258.20	36,552.97	11/25/2008	0.00	102,719.46	102,719.46	199.73
	WELLS FARGO 05-3
9497ENAM5	CL AI1A	3,582,338.10	3,330,141.50	1,404.58	3,331,546.07	16,003.91	11/25/2008	314,866.20	10,183.18	325,049.37	632.02

A	B	C	D	E	F	G	H	I	J	K	L
						Accrued
						Interest on			Post		Accrued
				Accrued	Designated	D. Purchase	Payment	Post 10/31/08	10/31/08	Post 10/31/08	Interest on
CUSIP	Security Name	Par	Market Value	Interest	Purchase Price	Price	Date	Principal	Interest	Total Cash	amount in K
	WELLS FARGO HM
9497EUAH0	EQ 06-1 M-1	10,000,000.00	2,531,000.00	3,909.72	2,534,909.72	12,177.07	11/25/2008	0.00	28,345.49	28,345.49	55.11
	WELLS FARGO HM
9497EUAJ6	EQ 06 1 CL M -2	7,242,000.00	1,595,412.60	2,847.51	1,598,260.11	7,677.64	11/25/2008	0.00	20,644.48	20,644.48	40.14
	OPTION ONE MTG
68400XAK6	ACCEP 02 1 144A	1,354,805.60	1,307,929.33	543.24	1,308,472.57	6,285.58	11/25/2008	12,598.45	3,938.49	16,536.94	32.15
	CWALT INC 2006-
12668BJU8	OC1 2-A-3A	148,305,000.00	61,146,151.50	58,971.84	61,205,123.34	294,014.11	11/25/2008	0.00	427,545.81	427,545.81	831.31
	BEAR STEARNS ALT A
073873AA9	06 5 I-1A-1	103,290,519.30	66,952,914.61	39,350.82	66,992,265.43	321,814.10	11/25/2008	2,436,195.00	285,293.43	2,721,488.44	5,291.59
	DEUTSCHE ALT A 07-
25151TAB6	BAR1 CL A2	9,000,000.00	7,354,800.00	3,388.75	7,358,188.75	35,346.90	11/25/2008	0.00	24,568.44	24,568.44	47.77
	TBW MORTGAGE
872227AC7	BKD 07-2 CL A-2A	80,004,000.00	51,730,586.40	30,568.20	51,761,154.60	248,647.65	11/25/2008	0.00	221,609.90	221,609.90	430.89
		39,256,535,182.10	20,838,293,516.50	18,272,043.83	20,856,565,560.34	100,189,726.81		348,219,856.02	113,322,670.99	461,542,527.01	926,311.78

Schedule B
to
Asset Purchase Agreement

SELLERS

	Jurisdiction of
Seller	Organization
Seller 1: American General Life Insurance Company	Texas
Seller 2: American General Life and Accident Insurance Company	Tennessee
Seller 3: The United States Life Insurance Company in the City of New York	New York
Seller 4: AIG Life Insurance Company	Delaware
Seller 5: American International Life Assurance Company of New York	New York
Seller 6: American Life Insurance Company	Delaware
Seller 7: AIG Annuity Insurance Company	Texas
Seller 8: The Variable Annuity Life Insurance Company	Texas
Seller 9: SunAmerica Life Insurance Company	Arizona
Seller 10: First SunAmerica Life Insurance Company	New York
Seller 11: AIG SunAmerica Life Assurance Company	Arizona

Schedule C
to
Asset Purchase Agreement

NOTICE INFORMATION

EACH SELLER PARTY

[Name of Seller]

c/o American International Group, Inc.

70 Pine Street, New York, New York 10270

Attention: General Counsel

Fax: (212) 425-2175

Telephone: (212) 770-7000

with a copy to:

Sullivan & Cromwell LLP

125 Broad Street, New York, New York 10004

Attention: Robert W. Reeder III, Michael M. Wiseman

                  and Benjamin R. Weber

Telephone: (212) 558-4000

BUYER

Federal Reserve Bank of New York

33 Liberty Street New York, New York 10045

Attention: William Walsh, Assistant Vice President

Telecopy: (212) 720-5686

Telephone: (212) 720-7743

E-mail: william.walsh@ny.frb.org

with copies to:

Federal Reserve Bank of New York

33 Liberty Street New York, New York 10045

Attention: Joyce M. Hansen, Deputy General Counsel and Senior Vice President

Telecopy: (212) 720-1756

Telephone: (212) 720-5024

E-mail: joyce.hansen@ny.frb.org

Davis Polk & Wardwell

450 Lexington Avenue, New York, New York 10017

Attention: Marshall S. Huebner and Robert L. Heckart

Telephone: (212) 450-4000

EXHIBIT A
to
Asset Purchase Agreement

CASH PURCHASE PRICE ADJUSTMENT AMOUNT
CERTIFICATE

Date:                     ,          

Pursuant to Section 1.02 [(b)][(c)]] of the Asset Purchase Agreement dated as of December      , 2008 (as amended, modified or supplemented from time to time, the “Asset Purchase Agreement”; the terms defined therein being used herein as therein defined) among the Sellers named therein, AIG Securities Lending Corp. (the “AIG Agent”), Maiden Lane II and Federal Reserve Bank of New York, the AIG Agent hereby certifies as follows:

1. Set forth on Annex A hereto is a true and correct revised description of the cash flows on each Designated RMBS Issue identified therewith from and including October 31, 2008 to and excluding the Closing Date.

2. The amounts set forth in columns I, J and L of Schedule A attached to the execution copies of the Asset Purchase Agreement delivered on the Closing Date are revised as set forth in columns I, J and L of the Annex A hereto.

3. Each Seller’s portion of the [final] [revised final] Cash Purchase Price Adjustment Amount is set forth on Annex B hereto.

4. The amount by which the [final][revised final] Cash Purchase Price Adjustment Amount differs from the [estimated Cash Purchase Price Adjustment Amount] [prior final Cash Purchase Price Adjustment Amount set forth in the Cash Purchase Price Adjustment Amount Certificate dated as of           ,           ] is $          .

[signature page follows]

IN WITNESS WHEREOF, the undersigned has caused this Certificate to be executed in its name and behalf by its duly authorized representative as of the date first above-written.

AIG SECURITIES LENDING CORP., as AIG Agent
By:
	Name:
	Title:

Annex A to
Cash Purchase Price
Adjustment Amount
Certificate

CASH PURCHASE PRICE ADJUSTMENT AMOUNT

A CUSIP	B Security Name	I Post 10/31/2008 Principal	J Post 10/31/2008 Interest	L Accrued Interest on amounts in columns I and J	Cash Purchase Price Adjustment Amount (I+J+L)
Total

Annex B
to
Cash Purchase Price
Adjustment Amount
Certificate

Cash Purchase Price Adjustment Amount for each Seller

Date:                 

Seller	Seller’s Participation Percentage		Cash Purchase Price Adjustment Amount for each Seller(1)			Amount by which the [final] [revised final] Cash Purchase Price Adjustment Amount exceeds (is less than) the [estimated] [prior final] Cash Purchase Price Adjustment Amount
Seller 1	[	]%	$	[	]	$	[	]
Seller 2	[	]%	$	[	]	$	[	]
Seller 3	[	]%	$	[	]	$	[	]
Seller 4	[	]%	$	[	]	$	[	]
Seller 5	[	]%	$	[	]	$	[	]
Seller 6	[	]%	$	[	]	$	[	]
Seller 7	[	]%	$	[	]	$	[	]
Seller 8	[	]%	$	[	]	$	[	]

(1)For each Seller: the product of (x) such Seller’s Participation Percentage as set forth in the second column of this table and (y) the Cash Purchase Price Adjustment Amount for the RMBS Pool as set forth in the last column of Annex A.

Seller	Seller’s Participation Percentage		Cash Purchase Price Adjustment Amount for each Seller(1)			Amount by which the [final] [revised final] Cash Purchase Price Adjustment Amount exceeds (is less than) the [estimated] [prior final] Cash Purchase Price Adjustment Amount
Seller 9	[	]%	$	[	]	$	[	]
Seller 10	[	]%	$	[	]	$	[	]
Seller 11	[	]%	$	[	]	$	[	]

EXHIBIT B

to

Asset Purchase Agreement

[letterhead of Sullivan & Cromwell LLP]

December 12, 2008

Maiden Lane II LLC,

c/o Federal Reserve Bank of New York,

33 Liberty Street,

New York, New York  10045.

Federal Reserve Bank of New York,

as Controlling Party (as defined herein),

33 Liberty Street,

New York, New York  10045.

Gentlemen and Ladies:

In connection with the execution and delivery of the Asset Purchase Agreement, dated as of December 12, 2008 (the “Asset Purchase Agreement”), among The United States Life Insurance Company in the City of New York (“US Life”), American International Life Assurance Company of New York (“AILAC”), First SunAmerica Life Insurance Company (“First SunAmerica” and, together with US Life and AILAC, the “New York Sellers”), American General Life Insurance Company (“AGLIC”), American General Life and Accident Insurance Company (“AGLAIC”), AIG Life Insurance Company (“AIG Life”), AIG Annuity Insurance Company (“AIG Annuity”), The Variable Annuity Life Insurance Company (“VALIC”), AIG SunAmerica Life Assurance Company (“AIG SunAmerica”), American Life Insurance Company (“ALIC”) and SunAmerica Life Insurance Company (“SunAmerica Life” and, together with the New York Sellers, AGLIC, AGLAIC, AIG Life, AIG Annuity, VALIC, AIG SunAmerica and ALIC, the “Sellers”), as sellers, AIG Securities Lending Corp., as agent (“AIG Agent”), American International Group, Inc. (“AIG”), Maiden Lane II LLC, as buyer (the “Buyer”), and the Federal Reserve Bank of New York, as controlling party (the “Controlling Party”), we, as counsel to AIG, have examined each of the following:

(i)            the Asset Purchase Agreement;

(ii)           the Security Agreement, dated as of December 12, 2008 (the “Security Agreement”), among the Buyer, the Federal Reserve Bank of New York, as senior lender, the Controlling Party, the Sellers and The Bank of New York Mellon, as collateral agent (“Collateral Agent”); and

(iii)          such certificates and other documents, and such questions of law, as we have considered necessary or appropriate for the purposes of this opinion.

Upon the basis of such examination, and subject to the qualifications, limitations and assumptions set forth herein, it is our opinion that:

(1)           Each of the New York Sellers is an existing insurance company in good standing under the laws of the State of New York, with corporate power and authority to execute and deliver each of the Asset Purchase Agreement and the Security Agreement and to perform its obligations under each of the Asset Purchase Agreement and the Security Agreement.

(2)           AIG is an existing corporation in good standing under the General Corporation Law of the State of Delaware, with corporate power and authority to execute and deliver the Asset Purchase Agreement and to perform its obligations under the Asset Purchase Agreement.

(3)           Each of the Asset Purchase Agreement and the Security Agreement has been duly authorized, executed and delivered by each of the New York Sellers.

(4)           The Asset Purchase Agreement has been duly authorized, executed and delivered by AIG.

(5)           Each of the Asset Purchase Agreement and the Security Agreement constitutes a valid and legally binding obligation of each of the Sellers, enforceable against each

Seller in accordance with its terms, subject to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar laws of general applicability relating to or affecting creditors’ rights and to general equity principles. In rendering the opinion in this paragraph (5), we are expressing no opinion as to the creation, perfection or priority of any liens, security interests or collateral assignments purportedly granted pursuant to either the Asset Purchase Agreement or the Security Agreement.

(6)           The Asset Purchase Agreement constitutes a valid and legally binding obligation of each of AIG and AIG Agent, enforceable against each of AIG and AIG Agent in accordance with its terms, subject to bankruptcy, insolvency, fraudulent. transfer, reorganization, moratorium and similar laws of general applicability relating to or affecting creditors’ rights and to general equity principles. In rendering the opinion in this paragraph (6), we are expressing no opinion as to the creation, perfection or priority of any liens, security interests or collateral assignments purportedly granted pursuant to either the Asset Purchase Agreement or the Security Agreement.

(7)           The execution and delivery of each of the Asset Purchase Agreement and the Security Agreement by US Life do not, and the performance of its obligations thereunder in accordance with its terms will not, violate (i) the Charter of US Life, dated December 31, 2003, or (ii) the Bylaws of US Life, as amended and restated July 25, 2002.

(8)           The execution and delivery of each of the Asset Purchase Agreement and the Security Agreement by AILAC do not, and the performance of its obligations thereunder in accordance with its terms will not, violate (i) the Declaration of Intention and Charter of AILAC, dated March 5, 1962, as amended by the Certificate of Amendment of the Certificate of Incorporation, dated February 4, 1972, as further amended by the Certificate of Amendment of

the Certificate of Incorporation, dated January 18, 1985, as further amended by the Certificate of Amendment of the Certificate of Incorporation, dated June 1, 1987, as further amended by the Certificate of Amendment of the Certificate of Incorporation, dated March 22, 1989, and as further amended by the Certificate of Amendment of the Certificate of Incorporation, dated June 27, 1991, or (ii) the Bylaws of AILAC, as amended and restated July 25, 2002.

(9)           The execution and delivery of each of the Asset Purchase Agreement and the Security Agreement by First SunAmerica do not, and the performance of its obligations thereunder in accordance with its terms will not, violate (i) the Amended and Restated Certificate of Incorporation of First SunAmerica, dated October 27, 1997, as amended by the Certificate of Amendment of the Amended and Restated Charter of First SunAmerica, dated May 30, 2003, or (ii) the Bylaws of First SunAmerica, as amended January 1, 1996.

(10)         The execution and delivery of the Asset Purchase Agreement by AIG do not, and the performance of its obligations thereunder in accordance with its terms will not, violate the (i) Restated Certificate of Incorporation of AIG, dated June 2, 1995, as amended by the Certificate of Amendment of Certificate of Incorporation of AIG, dated May 26, 1998, as further amended by the Certificate of Merger of SunAmerica Inc. with and into AIG, dated December 30, 1998, as further amended by the Certificate of Amendment of Certificate of Incorporation, dated June 5, 2000, or (ii) the By-Laws of AIG, as amended June 15, 2008.

The opinions expressed herein are subject to the following qualifications, limitations and assumptions, which we have not independently verified:

(a)           Except as expressly stated in paragraphs (1), (2), (3), (4), (5) and (6) above, we have assumed that each of the parties to each of the Asset Purchase Agreement and the Security Agreement has been duly incorporated, formed or organized, as appropriate, is

validly existing under the laws of its jurisdiction of formation or organization, has the corporate, limited liability company, partnership or other organizational power to enter into and perform all obligations under each of the Asset Purchase Agreement and the Security Agreement, and that each of the Asset Purchase Agreement and the Security Agreement has been duly authorized, executed and delivered by all persons and entities that are parties thereto and constitutes a valid and legally binding agreement of all persons and entities that are parties thereto.

(b)           As contemplated by the qualifications set forth in paragraphs (5) and (6) above, in rendering the foregoing opinions, we are expressing no opinion herein as to Federal or state laws relating to fraudulent transfers.

(c)           In rendering the opinions expressed in paragraphs (5) and (6), we have assumed that the Buyer, the Controlling Party and each of the other parties to the Asset Purchase Agreement or the Security Agreement shall not exercise its discretion under the Asset Purchase Agreement or the Security Agreement, including without limitation the discretion of the Controlling Party to make certain amendments to or affecting the Asset Purchase Agreement or any other Transaction Document (as defined in the Asset Purchase Agreement), unreasonably, in bad faith or in a manner inconsistent with the obligations of good faith and fair dealing.

(d)           In connection with our opinions set forth in paragraphs (5) and (6) above, we have assumed that the execution, delivery and performance by each Seller, AIG and AIG Agent of each of the Asset Purchase Agreement and the Security Agreement will comply with each law applicable to any Seller, AIG or AIG Agent and with each requirement or restriction imposed by any court or governmental body having jurisdiction over any Seller, AIG or AIG Agent and will not result in a default under or a breach of any agreement or instrument then binding upon any Seller, AIG or AIG Agent.

(e)           In rendering the opinions expressed in paragraphs (5) and (6), we express no view with respect to the validity, binding effect or enforceability of any provision in the Asset Purchase Agreement or the Security Agreement that purports to provide indemnification of any person for any claims, damages, liabilities or expenses resulting from violation by such person of any applicable securities laws or from the consequences of the gross negligence or willful misconduct of such person.

(f)            The opinions in paragraphs (5) and (6) are subject to the possibility that principles of public policy and/or statutory construction might be applied or construed to prohibit or limit the transfer of environmental liability from one person or entity to any other. We note, with regard to this further qualification, that although the considerable majority of the courts that have considered the enforceability of environmental indemnities under the Comprehensive Environmental Response, Compensation and Liability Act, 42 U.S.C. §§ 9601 et seq. and other state or federal environmental statutes have found such indemnities to be enforceable, a number of courts have held that such agreements are not enforceable.

(g)           No opinion is expressed herein as to the validity, binding effect or enforceability of any disclaimers or waiver set forth in the Asset Purchase Agreement or the Security Agreement to the extent such disclaimers or waivers may not be given under applicable law.

(h)           Our opinions in paragraph (1) with respect to the existence and good standing of each of the New York Sellers is based solely and exclusively upon certificates of good standing issued by the State of New York Insurance Department and previously provided to you and your counsel.

(i)            No opinion is expressed herein as to the validity, binding effect or enforceability of any provision of the Asset Purchase Agreement that by its terms purports to be governed by the laws of the State of Delaware.

(j)            No opinion is expressed herein with respect to the ownership of or state of title to any real or personal property, including without limitation any of the RMBS Issues (as defined in the Asset Purchase Agreement).

(k)           No opinion is expressed as to enforceability of any provision that purports to limit the bringing of any action or proceeding to the courts specified in such provision.

The opinions expressed herein are limited to the laws of the State of New York and the General Corporation Law of the State of Delaware, and we are expressing no opinion as to the effect or requirements of the laws of any other jurisdiction.

We have assumed that you and the Controlling Party have complied with all Federal and/or state laws and regulations arising out of the transaction reflected in the Asset Purchase Agreement and the Security Agreement or your or the Controlling Party’s status with respect thereto and will continue to do so.

With your approval, we have relied as to certain matters on information obtained from public officials, officers of each New York Seller, AIG Agent and AIG and other sources believed by us to be responsible and have assumed that the signatures on all documents examined by us are genuine, an assumption which we have not independently verified.

The opinions expressed herein are rendered on and as of the date hereof, and we assume no obligation to advise you or any other person as to any legal development or factual matters arising subsequent to the date hereof that might affect the opinions expressed herein.

This opinion is being delivered to you by us as counsel to AIG, is solely for your benefit and may not be relied upon by, or delivered or disclosed to, any other person or entity without our prior written consent.

Very truly yours,

SULLIVAN & CROMWELL LLP

EXHIBIT C

to

Asset Purchase Agreement

[letterhead of Richards Layton & Finger]

December 12, 2008

To Each of the Persons Listed
on Schedule A Attached Hereto

Re:AIG Life Insurance Company

Ladies and Gentlemen:

We have acted as special Delaware counsel for AIG Life Insurance Company, a Delaware corporation (“AIG Life”), in connection with the matters set forth herein. At your request, this opinion is being furnished to you.

For purposes of giving the opinions hereinafter set forth, our examination of documents has been limited to the examination of originals or copies of the following:

(a)           The Certificate of Domestication of AIG Life, as filed in the office of the Secretary of State of the State of Delaware (the “Secretary of State”) on December 23, 1991, together with the Certificate of Incorporation of AIG Life, dated December 6, 1991, as filed in the office of the Secretary of State on December 23, 1991, as amended and restated by the Restated Certificate of Incorporation of AIG Life, dated December 6, 1991, as filed in the office of the Secretary of State of the State on December 23, 1991, as modified by the Certificate of Change of Location of Registered Office and/or Registered Agent, dated August 3, 1994, as filed in the office of the Secretary of State on August 19, 1994, as amended by the Certificate of Amendment of Certificate of Incorporation of AIG Life, dated December 3, 2001, as filed in the office of the Secretary of State on December 3, 2001, as further modified by the Certificate of Designation of Series A Preferred Stock of AIG Life, dated December 7, 2001, as filed in the office of the Secretary of State on December 7, 2001, and as further modified by the Certificate of Change of Location of Registered Office and of Registered Agent, dated July 24, 2002, as filed in the office of the Secretary of State on August 12, 2002 (as so amended and restated, the “Certificate of Incorporation”);

(b)           The Amended and Restated By-Laws of AIG Life, adopted as of April 27, 2005 (the “Bylaws”);

(c)           A copy of the Certificate of Authority of AIG Life from the Department of Insurance of the State of Delaware (the “Department of Insurance”), dated October 26, 1994;

(d)           Certificates of an officer of AIG Life, dated as of the date hereof (the “Officer’s Certificates”);

(e)           The Asset Purchase Agreement, dated as of December 12, 2008 (the “Asset Purchase Agreement”), among American General Life Insurance Company, American General Life and Accident Insurance Company, The United States Life Insurance Company in the City of New York, AIG Life, American International Life Assurance Company of New York, American Life Insurance Company, AIG Annuity Insurance Company, The Variable Annuity Life Insurance Company, SunAmerica Life Insurance Company, First SunAmerica Life Insurance Company, and AIG SunAmerica Life Assurance Company (collectively, the “Sellers”), AIG Securities Lending Corp., as agent of the Sellers, American International Group, Inc., Maiden Lane II LLC, a Delaware limited liability company (“ML II”), as buyer, and Federal Reserve Bank: of New York (“FRBNY”), in its capacity as Controlling Party (as defined therein);

(f)            The Security Agreement, dated as of December 12, 2008 (the “Security Agreement”), among ML II, FRBNY, as senior lender and controlling party, the Sellers, and The Bank of New York Mellon, as collateral agent;

(g) The resolutions of the Board of Directors of AIG Life (the “Board”) adopted at a meeting of the Board held on December 10, 2008;

(h) A Certificate of Compliance/Good Standing for AIG Life, obtained from the Department of Insurance; and

(i) A Good Standing Certificate for AIG Life, dated December 12, 2008, obtained from the Secretary of State.

Initially capitalized terms used herein and not otherwise defined are used as defined in the Asset Purchase Agreement. The Asset Purchase Agreement and the Security Agreement are hereinafter referred to jointly as the “Transaction Documents.”

For purposes of this opinion, we have not reviewed any documents other than the documents listed in paragraphs (a) through (i) above. In particular, we have not reviewed any document (other than the documents listed in paragraphs (a) through (i) above) that is referred to in or incorporated by reference into any document reviewed by us. We have assumed that there exists no provision in any document that we have not reviewed that is inconsistent with the opinions stated herein. We have conducted no independent factual investigation of our own but rather have relied solely upon the foregoing documents, the statements and information set forth therein and the additional matters recited or assumed herein, all of which we have assumed to be true, complete and accurate in all material respects.

With respect to all documents examined by us, we have assumed that (i) all signatures on documents examined by us are genuine, (ii) all documents submitted to us as originals are authentic, and (iii) all documents submitted to us as copies conform with the original copies of those documents.

For purposes of this opinion, we have assumed (i) except to the extent set forth in paragraph 1 below, the due organization, due formation or due creation, as the case may be, and

valid existence in good standing of each party to the documents examined by us under the laws of the jurisdiction governing its organization, formation or creation, (ii) the legal capacity of natural persons who are signatories to the documents examined by us, (iii) except to the extent set forth in paragraph 2 below, that each of the parties to the documents examined by us has the power and authority to execute and deliver, and to perform its obligations under, such documents, (iv) that any amendment or restatement of any document reviewed by us has been accomplished in accordance with, and was permitted by, the relevant provisions of said document prior to its amendment or restatement from time to time, (v) except to the extent set forth in paragraphs 3 and 4 below, the due authorization, execution and delivery by all parties thereto of all documents examined by us, (vi) that each of the documents examined by us constitutes a legal, valid and binding agreement of the parties thereto, and is enforceable against the parties thereto, in accordance with its terms, (vii) that Section 203 of the General Corporation Law of the State of Delaware (the “General Corporation Law”) is not applicable to AIG Life pursuant to subsection (b)(4) thereof, and (viii) that neither ML II nor FRBNY is an “affiliate” of AIG Life for purposes of Chapter 50 of the Delaware Insurance Code.

This opinion is limited to the laws of the State of Delaware (excluding the securities and blue sky laws of the State of Delaware), and we have not considered and express no opinion on the laws of any other jurisdiction, including New York laws and United States federal laws (including United States federal bankruptcy law) and rules and regulations relating thereto. Our opinions are rendered only with respect to Delaware laws and rules, regulations and orders thereunder that are currently in effect.

Based upon the foregoing, and upon our examination of such questions of law and statutes of the State of Delaware as we have considered necessary or appropriate, and subject to the assumptions, qualifications, limitations and exceptions set forth herein, we are of the opinion that:

1.             AIG Life is duly incorporated, validly existing and in good standing as a corporation under the General Corporation Law.

2.             AIG Life has all necessary corporate power and authority under the Certificate of Incorporation, the Bylaws and the General Corporation Law to execute and deliver, and to perform its obligations under, the Transaction Documents.

3.             The execution and delivery of the Transaction Documents by AIG Life, and the performance by AIG Life of its obligations thereunder, have been duly authorized by all necessary corporate action on the part of AIG Life under the Certificate of Incorporation, the Bylaws and the General Corporation Law.

4.             AIG Life has duly executed and delivered the Transaction Documents under the Certificate of Incorporation, the Bylaws and the General Corporation Law.

5.             The execution and delivery by AIG Life of the Transaction Documents, and the performance by AIG Life of its obligations thereunder, do not violate (i) the Certificate of Incorporation, (ii) the Bylaws or (iii) any Delaware law, rule or regulation.

6.             No authorization, approval, consent or order of any Delaware court or Delaware governmental authority is required to be obtained by AIG Life solely in connection with the execution and delivery by AIG Life of the Transaction Documents, or the performance by AIG Life of its obligations thereunder, except for filings that may be required under the Uniform Commercial Code as in effect in the State of Delaware (the “Delaware UCC”) and as noted in qualification F below.

The opinions expressed above are subject to the following additional assumptions, qualifications, limitations and exceptions:

A.            We express no opinion with respect to any provision in the Transaction Documents purporting to prohibit, restrict or condition the assignment of the Transaction Documents, to the extent that any such provision may be limited by the operation of Sections 9-401, 9-6 or 9-408 of the Delaware UCC.

B.            We express no opinion with respect to any provision of the Transaction Documents that permits, by implication or otherwise, the collection of attorneys’ fees in excess of the limitation of 10 Del. C. § 3912, which statutory limitation permits reasonable attorneys’ fees not to exceed twenty percent (20%) of the amounts adjudged as principal and interest.

C.            We express no opinion as to (i) purported waivers of any statutory or other rights, court rules and defenses to obligations where such waivers (A) are against public policy or (B) constitute waivers of rights which by law, regulation or judicial decision may not otherwise be waived, or (ii) any right or obligation to the extent that the same may be varied by course of dealing or performance.

D.            We express no opinion with respect to any provision of the Transaction Documents (i) that purports or would operate to render ineffective any waiver or modification not in writing or (ii) to the effect that the failure to exercise or delay in exercising rights or remedies will not operate as a waiver of any such rights or remedies.

E.             The opinion expressed in paragraph 4 above is based solely upon our review of the incumbency certifications contained in the Officer’s Certificates.

F.             We note that under Delaware Insurance Regulation 306, entitled “Disclosure of Material Transactions” (“Regulation 306”), every insurer domiciled in the State of Delaware is required to file a report with the Insurance Commissioner of the State of Delaware (the “Commissioner”) disclosing material dispositions of assets within fifteen (15) days after the end of the calendar month in which any such material disposition occurs. Regulation 306 defines a material disposition as one that is non-recurring and not in the ordinary course of business and involves more than five percent (5%) of the reporting insurer’s total admitted assets as reported in its most recent statutory statement filed with the Department of Insurance. As a result, with respect to the opinions expressed in paragraphs 5 and 6 above, if the Transactions constitute a material disposition of assets by AIG Life, AIG Life will be required to timely file a report with the Commissioner complying with Regulation 306.

G.            The opinions expressed above are subject to the effect of (i) bankruptcy, insolvency, moratorium, receivership, reorganization, liquidation, fraudulent conveyance and transfer and other similar laws relating to or affecting the rights and remedies of creditors generally, (ii) principles of equity (regardless of whether considered and applied in a proceeding in equity or at law), (iii) the effect of applicable public policy with respect to provisions relating to indemnification, exculpation or contribution, and (iv) judicial imposition of an implied covenant of good faith and fair dealing.

We understand that you will rely as to matters of Delaware law upon this opinion in connection with the transactions contemplated by the Transaction Documents. In connection with the foregoing, we hereby consent to your relying as to matters of Delaware law upon this opinion, subject to the understanding that the opinions rendered herein are given on the date hereof and such opinions are rendered only with respect to facts existing on the date hereof and laws, rules and regulations currently in effect. Except as stated above, without our prior written consent, this opinion may not be furnished or quoted to, or relied upon by, any other person or entity for any purpose.

	Very truly yours,
WAY/EL

Schedule A

Federal Reserve Bank of New York

Maiden Lane II LLC

[letterhead of Richards Layton & Finger]

December 12, 2008

To Each of the Persons Listed
on Schedule A Attached Hereto

Re:AIG Securities Lending Corp.

Ladies and Gentlemen:

We have acted as special Delaware counsel for AIG Securities Lending Corp., a Delaware corporation (formerly known as AIG Global Securities Lending Corp.) (“AIG SLC”), in connection with the matters set forth herein. At your request, this opinion is being furnished to you.

For purposes of giving the opinions hereinafter set forth, our examination of documents has been limited to the examination of originals or copies of the following:

(a)           The Certificate of Incorporation of AIG SLC, dated February 24, 1998, as filed in the office of the Secretary of State of the State of Delaware (the “Secretary of State”) on February 24, 1998, as amended by the Certificate of Amendment thereto, dated November 19, 2007, as filed in the office of the Secretary of State on November 19, 2007 (as so amended, the “Certificate of Incorporation”);

(b)           The By-Laws of AIG SLC (the “Bylaws”);

(c)           A Certificate of an officer of AIG SLC, dated as of the date hereof (the “Officer’s Certificate”);

(d)           The Asset Purchase Agreement, dated as of December 12, 2008 (the “Asset Purchase Agreement”), among American General Life Insurance Company, American General Life and Accident Insurance Company, The United States Life Insurance Company in the City of New York, AIG Life Insurance Company, a Delaware domiciled stock insurance company (“AIG Life”), American International Life Assurance Company of New York, American Life Insurance Company, a Delaware domiciled stock insurance company (“ALICO” and, together with AIG Life, the “Delaware Sellers”), AIG Annuity Insurance Company, The Variable Annuity Life Insurance Company, SunAmerica Life Insurance Company, First SunAmerica Life Insurance Company, and AIG SunAmerica Life Insurance Company (collectively, the “Sellers”), AIG SLC, as agent of the Sellers, American International Group, Inc., Maiden Lane II LLC, a Delaware limited liability company, as buyer, and Federal Reserve Bank of New York, in its capacity as Controlling Party (as defined therein);

(e)           The unanimous written consent of the Board of Directors of AIG SLC, dated December 11, 2008; and

(f)            A Good Standing Certificate for AIG SLC, dated December 12, 2008, obtained from the Secretary of State.

Initially capitalized terms used herein and not otherwise defined are used as defined in the Asset Purchase Agreement.

For purposes of this opinion, we have not reviewed any documents other than the documents listed in paragraphs (a) through (f) above. In particular, we have not reviewed any document (other than the documents listed in paragraphs (a) through (f) above) that is referred to in or incorporated by reference into any document reviewed by us. We have assumed that there exists no provision in any document that we have not reviewed that is inconsistent with the opinions stated herein. We have conducted no independent factual investigation of our own but rather have relied solely upon the foregoing documents, the statements and information set forth therein and the additional matters recited or assumed herein, all of which we have assumed to be true, complete and accurate in all material respects.

With respect to all documents examined by us, we have assumed that (i) all signatures on documents examined by us are genuine, (ii) all documents submitted to us as originals are authentic, and (iii) all documents submitted to us as copies conform with the original copies of those documents.

For purposes of this opinion, we have assumed (i) except to the extent set forth in paragraph 1 below, the due organization, due formation or due creation, as the case may be, and valid existence in good standing of each party to the documents examined by us under the laws of the jurisdiction governing its organization, formation or creation, (ii) the legal capacity of natural persons who are signatories to the documents examined by us, (iii) except to the extent set forth in paragraph 2 below, that each of the parties to the documents examined by us has the power and authority to execute and deliver, and to perform its obligations under, such documents, (iv) that any amendment or restatement of any document reviewed by us has been accomplished in accordance with, and was permitted by, the relevant provisions of said document prior to its amendment or restatement from time to time, (v) except to the extent set forth in paragraphs 3 and 4 below, the due authorization, execution and delivery by all parties thereto of all documents examined by us, (vi) except as set forth in paragraph 7 below, that each of the documents examined by us constitutes a legal, valid and binding agreement of the parties thereto, and is enforceable against the parties thereto, in accordance with its terms, (vii) that Section 203 of the General Corporation Law of the State of Delaware (the “General Corporation Law”) is not applicable to AIG SLC pursuant to subsection (b)(4) thereof, (viii) that AIG SLC derives no income from or connected with sources within the State of Delaware and has no assets, activities (other than the maintenance of a registered office and registered agent in the State of Delaware and the filing of documents with the Secretary of State) or employees in the State of Delaware, and (ix) that the application of the laws of the State of Delaware to the Asset Purchase Agreement to the extent set forth therein would not be contrary to a fundamental policy of a jurisdiction (other than the State of Delaware) which (a) would be the jurisdiction of applicable law in the absence of an effective choice of law, and (b) has a materially greater interest than the State of Delaware in the determination of a particular issue relating to the Asset Purchase Agreement.

This opinion is limited to the laws of the State of Delaware (excluding the insurance, securities and blue sky laws of the State of Delaware), and we have not considered

and express no opinion on the laws of any other jurisdiction, including New York laws and United States federal laws (including United States federal bankruptcy law) and rules and regulations relating thereto. Our opinions are rendered only with respect to Delaware laws and rules, regulations and orders thereunder that are currently in effect.

Based upon the foregoing, and upon our examination of such questions of law and statutes of the State of Delaware as we have considered necessary or appropriate, and subject to the assumptions, qualifications, limitations and exceptions set forth herein, we are of the opinion that:

1.             AIG SLC is duly incorporated, validly existing and in good standing as a corporation under the General Corporation Law.

2.             AIG SLC has all necessary corporate power and authority under the Certificate of Incorporation, the Bylaws and the General Corporation Law to execute and deliver, and to perform its obligations under, the Asset Purchase Agreement.

3.             The execution and delivery of the Asset Purchase Agreement by AIG SLC, and the performance by AIG SLC of its obligations thereunder, have been duly authorized by all necessary corporate action on the part of AIG SLC under the Certificate of Incorporation, the Bylaws and the General Corporation Law.

4.             AIG SLC has duly executed and delivered the Asset Purchase Agreement under the Certificate ofIncorporation, the Bylaws and the General Corporation Law.

5.             The execution and delivery by AIG SLC of the Asset Purchase Agreement, and the performance by AIG SLC of its obligations thereunder, do not violate (i) the Certificate of Incorporation, (ii) the Bylaws or’(iii) any Delaware law, rule or regulation.

6.             No authorization, approval, consent or order of any Delaware court or Delaware governmental authority is required to be obtained by AIG SLC solely in connection with the execution and delivery by AIG SLC of the Asset Purchase Agreement, or the performance by AIG SLC of its obligations thereunder, except for filings that may be required under the Uniform Commercial Code as in effect in the State of Delaware (the “Delaware UCC”).

7. The Asset Purchase Agreement, to the extent it is governed by the laws of the State of Delaware, constitutes a valid and binding obligation of the Delaware Sellers, and is enforceable against the Delaware Sellers, in accordance with its terms.

The opinions expressed above are subject to the following additional assumptions, qualifications, limitations and exceptions:

A. We express no opinion with respect to any provision in the Asset Purchase Agreement purporting to prohibit, restrict or condition the assignment of the Asset Purchase Agreement, to the extent that any such provision may be limited by the operation of Sections 9-401, 9-406 or 9-408 of the Delaware DCC.

B.            We express no opinion with respect to any provision of the Asset Purchase Agreement that permits, by implication or otherwise, the collection of attorneys’ fees in excess of the limitation of 10 Del. C. § 3912, which statutory limitation permits reasonable attorneys’ fees not to exceed twenty percent (20%) of the amounts adjudged as principal and interest.

C.            We express no opinion as to (i) purported waivers of any statutory or other rights, court rules and defenses to obligations where such waivers (A) are against public policy or (B) constitute waivers of rights which by law, regulation or judicial decision may not otherwise be waived, or (ii) any right or obligation to the extent that the same may be varied by course of dealing or performance.

D.            We express no opinion with respect to any provision of the Asset Purchase Agreement (i) that purports or would operate to render ineffective any waiver or modification not in writing or (ii) to the effect that the failure to exercise or delay in exercising rights or remedies will not operate as a waiver of any such rights or remedies.

E.             The opinion expressed in paragraph 4 above is based solely upon our review of the incumbency certifications contained in the Officer’s Certificate.

F.             The opinions expressed above are subject to the effect of (i) bankruptcy, insolvency, moratorium, receivership, reorganization, liquidation, fraudulent conveyance and transfer and other similar laws relating to or affecting the rights and remedies of creditors generally, (ii) principles of equity (regardless of whether considered and applied in a proceeding in equity or at law), (iii) the effect of applicable public policy with respect to provisions relating to indemnification, exculpation or contribution, and (iv) judicial imposition of an implied covenant of good faith and fair dealing.

We understand that you will rely as to matters of Delaware law upon this opinion in connection with the transactions contemplated by the Asset Purchase Agreement. In connection with the foregoing, we hereby consent to your relying as to matters of Delaware law upon this opinion, subject to the understanding that the opinions rendered herein are given on the date hereof and such opinions are rendered only with respect to facts existing on the date hereof and laws, rules and regulations currently in effect. Except as stated above, without our prior written consent, this opinion may not be furnished or quoted to, or relied upon by, any other person or entity for any purpose.

	Very truly yours,
WAY/EL

Schedule A

Federal Reserve Bank of New York

Maiden Lane II LLC

[letterhead of Richards Layton & Finger]

December 12, 2008

To Each of the Persons Listed
on Schedule A Attached Hereto

Re:American Life Insurance Company

Ladies and Gentlemen:

We have acted as special Delaware counsel for American Life Insurance Company, a Delaware corporation (formerly known as Asia Life Insurance Company) (“ALICO”), in connection with the matters set forth herein.  At your request, this opinion is being furnished to you.

For purposes of giving the opinions hereinafter set forth, our examination of documents has been limited to the examination of originals or copies of the following:

(a)           The Certificate of Incorporation of ALICO, dated June 24, 1921, as filed in the office of the Secretary of State of the State of Delaware (the “Secretary of State”) on August 18, 1921, as amended by three Certificates of Amendment thereto, each dated April 21, 1931, each as filed in the office of the Secretary of State on June 2, 1931, as further amended by a Certificate of Amendment thereto, dated February 10, 1951, as filed in the office of the Secretary of State on February 16, 1951, as further amended by a Certificate of Amendment thereto, dated December 23, 1953, as filed in the office of the Secretary of State on December 24, 1953, as further amended by a Certificate of Amendment thereto, dated August 5, 1955, as filed in the office of the Secretary of State on August 11, 1955, as further amended by a Certificate of Amendment thereto, dated December 18, 1962, as filed in the office of the Secretary of State on December 20, 1962, as further amended by a Certificate of Amendment thereto, dated November 1, 1971, as filed in the office of the Secretary of State on November 3, 1971, as modified by a Certificate of Change of Location of Registered Office and/or Registered Agent of ALICO, dated October 7, 1985, as filed in the office of the Secretary of State on October 16, 1985, as amended and restated by the Amended and Restated Certificate of Incorporation of ALICO, dated June 2, 1994, as filed in the office of the Secretary of State on June 3, 1994, and as further amended by the Certificate of Amendment thereto, dated April 30, 2006, as filed in the office of the Secretary of State on May 25, 2006 (as so amended and restated, the “Certificate of Incorporation”);

(b)           The Amended and Restated By-Laws of ALICO, adopted as of April 18, 2008 (the “Bylaws”);

(c)           A copy of the Certificate of Authority of ALICO from the Department of Insurance of the State of Delaware (the “Department of Insurance”), dated May 10, 2002;

(d)           Certificates of an officer of ALICO, dated as of the date hereof (the “Officer’s Certificates”);

(e)           The Asset Purchase Agreement, dated as of December 12, 2008 (the “Asset Purchase Agreement”), among American General Life Insurance Company, American General Life and Accident Insurance Company, The United States Life Insurance Company in the City of New York, AIG Life Insurance Company, American International Life Assurance Company of New York, ALICO, AIG Annuity Insurance Company, The Variable Annuity Life Insurance Company, SunAmerica Life Insurance Company, First SunAmerica Life Insurance Company, and AIG SunAmerica Life Assurance Company (collectively, the “Sellers”), AIG Securities Lending Corp., as agent of the Sellers, American International Group, Inc., Maiden Lane II LLC, a Delaware limited liability company (“ML II”), as buyer, and Federal Reserve Bank of New York (“FRBNY”), in its capacity as Controlling Party (as defined therein);

(f)            The Security Agreement, dated as of December 12, 2008 (the “Security Agreement”), among ML II, FRBNY, as senior lender and controlling party, the Sellers, and The Bank of New York Mellon, as collateral agent;

(g)           The unanimous written consent of the Board of Directors of ALICO, dated December 12, 2008;

(h)           A Certificate of Compliance/Good Standing for ALICO, obtained from the Department of Insurance; and

(i)            A Good Standing Certificate for ALICO, dated December 12, 2008, obtained from the Secretary of State.

Initially capitalized terms used herein and not otherwise defined are used as defined in the Asset Purchase Agreement. The Asset Purchase Agreement and the Security Agreement are hereinafter referred to jointly as the “Transaction Documents.”

For purposes of this opinion, we have not reviewed any documents other than the documents listed in paragraphs (a) through (i) above. In particular, we have not reviewed any document (other than the documents listed in paragraphs (a) through (i) above) that is referred to in or incorporated by reference into any document reviewed by us. We have assumed that there exists no provision in any document that we have not reviewed that is inconsistent with the opinions stated herein. We have conducted no independent factual investigation of our own but rather have relied solely upon the foregoing documents, the statements and information set forth therein and the additional matters recited or assumed herein, all of which we have assumed to be true, complete and accurate in all material respects.

With respect to all documents examined by us, we have assumed that (i) all signatures on documents examined by us are genuine, (ii) all documents submitted to us as originals are authentic, and (iii) all documents submitted to us as copies conform with the original copies of those documents.

For purposes of this opinion, we have assumed (i) except to the extent set forth in paragraph 1 below, the due organization, due formation or due creation, as the case may be, and valid existence in good standing of each party to the documents examined by us under the laws

of the jurisdiction governing its organization, formation or creation, (ii) the legal capacity of natural persons who are signatories to the documents examined by us, (iii) except to the extent set forth in paragraph 2 below, that each of the parties to the documents examined by us has the power and authority to execute and deliver, and to perform its obligations under, such documents, (iv) that any amendment or restatement of any document reviewed by us has been accomplished in accordance with, and was permitted by, the relevant provisions of said document prior to its amendment or restatement from time to time, (v) except to the extent set forth in paragraphs 3 and 4 below, the due authorization, execution and delivery by all parties thereto of all documents examined by us, (vi) that each of the documents examined by us constitutes a legal, valid and binding agreement of the parties thereto, and is enforceable against the parties thereto, in accordance with its terms, (vii) that Section 203 of the General Corporation Law of the State of Delaware (the “General Corporation Law”) is not applicable to ALICO pursuant to subsection (b)(4) thereof, and (viii) that neither ML II nor FRBNY is an “affiliate” of ALICO for purposes of Chapter 50 of the Delaware Insurance Code.

This opinion is limited to the laws of the State of Delaware (excluding the securities and blue sky laws of the State of Delaware), and we have not considered and express no opinion on the laws of any other jurisdiction, including New York laws and United States federal laws (including United States federal bankruptcy law) and rules and regulations relating thereto. Our opinions are rendered only with respect to Delaware laws and rules, regulations and orders thereunder that are currently in effect.

Based upon the foregoing, and upon our examination of such questions of law and statutes of the State of Delaware as we have considered necessary or appropriate, and subject to the assumptions, qualifications, limitations and exceptions set forth herein, we are of the opinion that:

1.             ALICO is duly incorporated, validly existing and in good standing as a corporation under the General Corporation Law.

2.             ALICO has all necessary corporate power and authority under the Certificate of Incorporation, the Bylaws and the General Corporation Law to execute and deliver, and to perform its obligations under, the Transaction Documents.

3.             The execution and delivery of the Transaction Documents by ALICO, and the performance by ALICO of its obligations thereunder, have been duly authorized by all necessary corporate action on the part of ALICO under the Certificate of Incorporation, the Bylaws and the General Corporation Law.

4.             ALICO has duly executed and delivered the Transaction Documents under the Certificate of Incorporation, the Bylaws and the General Corporation Law.

5.             The execution and delivery by ALICO of the Transaction Documents, and the performance by ALICO of its obligations thereunder, do not violate (i) the Certificate of Incorporation, (ii) the Bylaws or (iii) any Delaware law, rule or regulation.

6.             No authorization, approval, consent or order of any Delaware court or Delaware governmental authority is required to be obtained by ALICO solely in connection with the execution and delivery by ALICO of the Transaction Documents, or the performance by ALICO of its obligations thereunder, except for filings that may be required under the Uniform Commercial Code as in effect in the State of Delaware (the “Delaware UCC”) and as noted in qualification F below.

The opinions expressed above are subject to the following additional assumptions, qualifications, limitations and exceptions:

A.            We express no opinion with respect to any provision in the Transaction Documents purporting to prohibit, restrict or condition the assignment of the Transaction Documents, to the extent that any such provision may be limited by the operation of Sections 9-401, 9-406 or 9-408 of the Delaware UCC.

B.            We express no opinion with respect to any provision of the Transaction Documents that permits, by implication or otherwise, the collection of attorneys’ fees in excess of the limitation of 10 Del. C. § 3912, which statutory limitation permits reasonable attorneys’ fees not to exceed twenty percent (20%) of the amounts adjudged as principal and interest.

C.            We express no opinion as to (i) purported waivers of any statutory or other rights, court rules and defenses to obligations where such waivers (A) are against public policy or (B) constitute waivers of rights which by law, regulation or judicial decision may not otherwise be waived, or (ii) any right or obligation to the extent that the same may be varied by course of dealing or performance.

D.            We express no opinion with respect to any provision of the Transaction Documents (i) that purports or would operate to render ineffective any waiver or modification not in writing or (ii) to the effect that the failure to exercise or delay in exercising rights or remedies will not operate as a waiver of any such rights or remedies.

E.             The opinion expressed in paragraph 4 above is based solely upon our review of the incumbency certifications contained in the Officer’s Certificates.

F.             We note that under Delaware Insurance Regulation 306, entitled “Disclosure of Material Transactions” (“Regulation 306”), every insurer domiciled in the State of Delaware is required to file a report with the Insurance Commissioner of the State of Delaware (the “Commissioner”) disclosing material dispositions of assets within fifteen (15) days after the end of the calendar month in which any such material disposition occurs. Regulation 306 defines a material disposition as one that is non-recurring and not in the ordinary course of business and involves more than five percent (5%) of the reporting insurer’s total admitted assets as reported in its most recent statutory statement filed with the Department of Insurance. As a result, with respect to the opinions expressed in paragraphs 5 and 6 above, if the Transactions constitute a material disposition of assets by ALICO, ALICO will be required to timely file a report with the Commissioner complying with Regulation 306.

G.            The opinions expressed above are subject to the effect of (i) bankruptcy, insolvency, moratorium, receivership, reorganization, liquidation, fraudulent conveyance and transfer and other similar laws relating to or affecting the rights and remedies of creditors generally, (ii) principles of equity (regardless of whether considered and applied in a proceeding in equity or at law), (iii) the effect of applicable public policy with respect to provisions relating to indemnification, exculpation or contribution, and (iv) judicial imposition of an implied covenant of good faith and fair dealing.

We understand that you will rely as to matters of Delaware law upon this opinion in connection with the transactions contemplated by the Transaction Documents.  In connection with the foregoing, we hereby consent to your relying as to matters of Delaware law upon this opinion, subject to the understanding that the opinions rendered herein are given on the date hereof and such opinions are rendered only with respect to facts existing on the date hereof and laws, rules and regulations currently in effect. Except as stated above, without our prior written consent, this opinion may not be furnished or quoted to, or relied upon by, any other person or entity for any purpose.

	Very truly yours,
WAY/EL

Schedule A

Federal Reserve Bank of New York

Maiden Lane II LLC

EXHIBIT D

to

Asset Purchase Agreement

[letterhead of Bass, Berry & Sims PLC]

December 12, 2008

Maiden Lane II LLC,
c/o Federal Reserve Bank of New York
FRBNY Investment Support Office
33 Liberty Street,
New York, New York 10045

Federal Reserve Bank of New York
33 Liberty Street,
New York, New York 10045

Re:American General Life and Accident Insurance Company;
ML II Corporate Matters Opinion

Ladies and Gentlemen:

We have acted as special Tennessee counsel to American General Life and Accident Insurance Company, a Tennessee insurance company (the “Company”), as one of the Sellers in connection with the sale by the Company to Maiden Lane II LLC, a Delaware limited liability company (the “Buyer”), pursuant to that certain Asset Purchase Agreement, dated as of December 12, 2008 (the “Closing Date”) among the Company and the other Sellers, the Buyer, AIG Securities Lending Corp. as AIG Agent, and the Federal Reserve Bank of New York as Controlling Party (the “Asset Purchase Agreement”), whereby the Company sells and transfers to the Buyer and the Buyer purchases from the Company all of the Buyer’s share of each Residential Mortgage-Backed Securities Issue (“RMBS Issue”) in exchange for payment by the Buyer to the Company of its share of the Cash Purchase Price, the Fixed Deferred Purchase Price and the Variable Deferred Purchase Price, all as set forth in the Opinion Documents. The Buyer’s obligations to the Company and the other Sellers with respect to the Fixed Deferred Purchase Price and the Variable Deferred Purchase Price are secured pursuant to a Security Agreement dated the Closing Date among the Buyer as Borrower, the Federal Reserve Bank of New York as Senior Lender and Controlling Party, the Company and the other Sellers, and The Bank of New York Mellon as Collateral Agent (the “Security Agreement”; together with the Asset Purchase Agreement, the “Opinion Documents”).

Capitalized terms used herein and not otherwise defined shall have the meanings set forth in the APA.

The opinions expressed herein are provided pursuant to Section 5.02(a) of the APA. In order to provide the opinions set forth herein, we have examined and are familiar with, among other things, the following:

a.Fully executed copies of the Opinion Documents;

b.A fully executed copy of a Certificate of Existence for the Company issued by the Secretary of State of Tennessee and dated December 8, 2008 (the “Certificate of Existence”);

c.A copy of the Company’s Charter certified by the Secretary of State of Tennessee on December 8,2008, and a copy of the Company’s By-Laws restated as of April 27, 2005 and certified by an Assistant Secretary of the Company on December 11, 2008; and

d.A Certificate of Compliance issued by the Commissioner of Commerce and Insurance of the State of Tennessee to the Company dated December 11, 2008 (the “Certificate of Compliance”).

We have also examined such certificates and other documents and instruments and have researched such questions of law and examined such government records in Tennessee as we have reasonably considered necessary or appropriate for the purpose of delivering this Opinion. For purposes of the opinions expressed below, we have assumed for parties other than the Company that the Opinion Documents have been duly authorized, executed and delivered by the parties thereto. We have assumed the genuineness of all signatures, the authenticity of all documents submitted to us as originals, the conformity to original documents of all documents submitted to us as certified, photostatic or electronic copies and the authenticity of the originals of such latter documents. As to any facts material to the opinions expressed herein that were not independently established or verified, we have relied upon oral or written statements and representations of officers and other representatives of the Company and others, including without limitation, representations and warranties as to factual matters contained in the Opinion Documents. We have engaged in research to the extent deemed appropriate in the circumstance.

Based on the foregoing, and subject to the assumptions, qualifications and exceptions set forth herein, we express the following opinions:

1.The Company is duly incorporated, validly existing and in good standing under the laws of the State of Tennessee.

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2.The Company has all requisite power and authority to execute, deliver and perform its obligations under the Opinion Documents, and the Company has duly executed and delivered the Opinion Documents.

3.No material consent, approval, authorization or order of, or filing or registration with, any court or governmental authority or agency of the State of Tennessee is required in connection with the due authorization, execution and delivery by the Company of the Opinion Documents, and such execution, delivery and do not (a) result in a violation of any Tennessee statute, rule or regulation that in our experience is normally applicable to general business corporations or insurance companies in relation to transactions of the type contemplated by the Opinion Documents, or (b) contravene the Charter or By-Laws of the Company.

The foregoing opinions are subject to and expressly limited by the following assumptions, qualifications and limitations, in addition to those previously set forth:

(i)The opinion that the Company is duly incorporated, validly existing and in good standing under the laws of the State of Tennessee is based solely upon the Certificate of Existence and the Certificate of Compliance.

(ii)We express no opinion with respect to whether the Opinion Documents will conflict with or constitute a violation under any contract or agreement to which the Company is a party or which is binding upon it or its assets.

This Opinion is limited to the application of the internal laws of the State of Tennessee (and we express no opinion as to matters that are or that may purport to be governed by the laws of any other jurisdiction) and to the matters set forth in this letter, and no other opinions should be inferred beyond the matters herein expressly stated.

This Opinion is rendered as of the date hereof, and we assume no obligation to advise you of any change hereafter occurring in circumstances touching or concerning the transaction which is the subject of this Opinion, including any changes in law or fact (or the effect thereon on the opinions expressed herein) that hereafter may come to our attention.

The opinions expressed in this letter are solely for your benefit and may not be relied upon by any person other than an addressee without our prior written approval. These opinions are not to be used, circulated or quoted in any manner or otherwise used or relied on for any purpose or by any other person or entity without, in each instance, our express written consent.

Very truly yours,

3

[letterhead of Greenberg Traurig, LLP]

December 12, 2008

Maiden Lane II LLC
c/o Federal Reserve Bank of New York
33 Liberty Street
New York, New York 10045

Federal Reserve Bank of New York
33 Liberty Street
New York, New York 10045

Re:Asset Purchase Agreement Among the Sellers Party Thereto, AIG

Securities Lending Corp., as AIG Agent, American International Group, 

Inc., Maiden Lane II LLC, and The Federal Reserve Bank of New York

Ladies and Gentlemen:

We have acted as special counsel to American General Life Insurance Company (“American General”), AIG Annuity Insurance Company (“AIG Annuity”), The Variable Annuity Life Insurance Company (“Variable Annuity,” and together with American General and AIG Annuity, the “Texas Seller Parties”), each a stock property and casualty insurance company domiciled in the State of Texas and a wholly-owned subsidiary of American International Group, Inc. (“AIG”) in connection with the transactions associated with the sale of certain assets (the “Transactions”) pursuant to that certain Asset Purchase Agreement, dated as of December 12, 2008, by and among The United States Life Insurance Company in the City of New York, a New York-domiciled insurance company; American International Life Assurance Company of New York, a New York-domiciled insurance company; First SunAmerica Life Insurance Company, a New York-domiciled insurance company; American General; American General Life and Accident Insurance Company, a Tennessee-domiciled insurance company; AIG Life Insurance Company, a Delaware-domiciled insurance company; AIG Annuity; Variable Annuity; AIG Sun America Life Assurance Company, an Arizona-domiciled insurance company; American Life Insurance Company, a Delaware-domiciled insurance company; and SunAmerica Life Insurance Company, an Arizona-domiciled insurance company, AIG Securities Lending Corp. as AIG Agent, AIG, Maiden Lane II LLC, a Delaware limited liability company (“ML II”), as purchaser, and The Federal Reserve Bank of New York (“FRBNY”), as controlling party (the “Asset Purchase Agreement”). This opinion is rendered at the request of the Texas Seller Parties pursuant to Section 5.02 (a)(iii) of the Asset Purchase Agreement. All capitalized terms used in this letter, without definition, have the meanings assigned to them in the Asset Purchase Agreement.

In connection with this letter, we have examined executed originals or copies of executed originals of the Asset Purchase Agreement and the Security Agreement dated December 12, 2008 among ML II, FRBNY, the Seller Parties, and The Bank of New York Mellon (the “Security Agreement”). In addition, we have examined the following documents (collectively, the “Due Diligence Documents”):

(a)a secretary’s certificate of each of the Texas Seller Parties (the “Secretary’s Certificates”), substantially in the form attached hereto as Schedule 1, certifying, among other things:

i.a certified copy of each of the Texas Seller Parties’ articles of incorporation, as amended (the “Articles of Incorporation”);

ii.a copy of each of the Texas Seller Parties’ bylaws, as amended (together, with the Articles of Incorporation, the “Organizational Documents”);

iii.a copy of the board resolutions of the board of directors of each of the Texas Seller Parties regarding the Asset Purchase Agreement; and

(b)various existence, good standing, qualification to do business, and similar certificates from public offices of certain jurisdictions, all as listed on Schedule 2 attached hereto (the “Good Standing Certificates”).

We have examined originals or certified copies of such corporate records of the Texas Seller Parties and other certificates and documents of officials of the Texas Seller Parties, public officials, and others as we have deemed appropriate for purposes of this letter. As to various questions of fact relevant to this letter, we have relied, without independent investigation, upon the Due Diligence Documents and certificates of public officials, certificates of officers of the Texas Seller Parties, and representations and warranties of the Texas Seller Parties in the Asset Purchase Agreement, all of which we assume to be true, correct, and complete. We have made no investigation or review of any matters relating to the Texas Seller Parties or any other person other than as expressly listed herein. We wish to inform you that our knowledge is necessarily limited due to the limited scope of our review.

In addition, we have made no inquiry of the Texas Seller Parties or any other person regarding, and no review of, any judgments, orders, decrees, franchises, licenses, certificates, permits, or other public records or agreements to which the Texas Seller Parties are a party other than (1) the Secretary’s Certificates, and (2) the Good Standing Certificates, and our “knowledge” of any such matters is accordingly limited.

We have assumed the genuineness of all signatures, the authenticity of all documents submitted to us as originals, and the conformity to authentic original documents of all copies submitted to us as conformed, certified, or reproduced copies. We have also assumed the legal capacity of natural persons, the corporate or other power and due authorization of each person

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not a natural person other than the Texas Seller Parties to execute and deliver the Asset Purchase Agreement and the Security Agreement to consummate the Transactions contemplated by the Asset Purchase Agreement and the Security Agreement, due execution and delivery of the Asset Purchase Agreement and the Security Agreement by all parties thereto other than the Texas Seller Parties, and that the Asset Purchase Agreement and the Security Agreement constitutes the legal, valid, and binding obligation of each party thereto other than the Texas Seller Parties, enforceable against such party in accordance with its terms.

Based upon the foregoing and subject to the assumptions, exceptions, qualifications, and limitations set forth hereinafter, we are of the opinion that:

1.Based solely on the Good Standing Certificates, each of the Texas Seller Parties is a stock property and casualty insurance company in good standing under the laws of the State of Texas, the jurisdiction of its organization. Each of the Texas Seller Parties has the corporate power to enter into the Asset Purchase Agreement and the Security Agreement.

2.The execution and delivery of the Asset Purchase Agreement and the Security Agreement by the Texas Seller Parties and the performance by the Texas Seller Parties of the Transactions contemplated thereby have been duly authorized by all necessary corporate action on the part of each of the Texas Seller Parties provided however such authority is conditioned on AIG’s capital contribution being consummated simultaneously herewith.

3.Each of the Texas Seller Parties has duly executed the Asset Purchase Agreement and the Security Agreement to which it is a party.

4.The execution and delivery of the Asset Purchase Agreement and the Security Agreement by the Texas Seller Parties does not, and the performance by the Texas Seller Parties of the Transactions contemplated by the Asset Purchase Agreement and the Security Agreement will not, result in any violation, breach, or result in a default of the Organizational Documents.

5.No authorization or approval or other action by, and no notice to or filing with, any governmental authority or regulatory body (each, a “Filing”) is required under the Texas Insurance Code for the execution and delivery of the Asset Purchase Agreement and the Security Agreement by the Texas Seller Parties and the performance by each of the Texas Seller Parties of the Transactions contemplated by the Asset Purchase Agreement and the Security Agreement, except those which have already been obtained and are in full force and effect, and except (i) Filings necessary in order to obtain and maintain perfection of Liens, (ii) routine Filings necessary in connection with the conduct of each of the Texas Seller Parties’ business, (iii) Filings necessary in connection with the exercise of remedies under the Asset Purchase Agreement, (iv) Filings required under federal

3

and state securities laws as contemplated by the Asset Purchase Agreement, (v) Filings related to environmental matters, ERISA matters, taxes, and intellectual property, and (vi) Filings required to maintain corporate and similar standing and existence. With respect to Filings which have already been obtained and are in full force and effect, including but not limited to Filings that may be required under Chapter 823 of the Texas Insurance Code, we have relied solely upon representations made to us by email correspondence from the staff of the Texas Department of Insurance as to such staff’s review of the Transactions, without further independent review or investigation. We further have assumed that neither the U.S. Government nor any political subdivision (including without limitation FRBNY) is a “controlling party” of the Texas Seller Parties, as such term is used and defined in Texas Insurance Code Chapter 823.

The opinions and other matters in this letter are qualified in their entirety and subject to the following:

A.We express no opinion as to the laws of any jurisdiction other than the laws of the state of Texas. We have made no special investigation or review of any published constitutions, treaties, laws, rules or regulations, or judicial or administrative decisions (“Laws”), other than a review of the laws of the state of Texas. We make no review of (a) Laws of any counties, cities, towns, municipalities, and special political subdivisions and any agencies thereof; (b) zoning, land use, building, and construction Laws; (c) Federal Reserve Board margin regulations; (d) any antifraud, environmental, labor, tax, insurance, antitrust, securities, or intellectual property Laws; and (e) any Laws that may be applicable to the Texas Seller Parties by virtue of the particular nature of the businesses conducted by them or any goods or services provided by them or property owned or leased by them, other than the Texas Insurance Code.

B.This letter and the matters addressed herein are as of the date hereof or such earlier date as is specified herein, and we undertake no, and hereby disclaim any, obligation to advise you of any change in any matter set forth herein, whether based on a change in the law, a change in any fact relating to the Texas Seller Parties or any other person, or any other circumstance. This opinion letter is limited to the matters expressly stated herein and no opinions are to be inferred or may be implied beyond the opinions expressly set forth herein.

C.The opinions expressed in the first sentence of paragraph 1 herein are given solely on the basis of the Good Standing Certificates set forth in Schedule 2 hereto and speak only as of the dates indicated in Schedule 2 rather than the date hereof. Such opinions are limited to the meaning ascribed to such certificates by each applicable state agency and applicable law.

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D.The matters expressed in this letter are subject to and qualified and limited by (i) applicable bankruptcy, insolvency, fraudulent transfer and conveyance, reorganization, moratorium, and similar laws affecting creditors’ rights and remedies generally; (ii) general principles of equity, including principles of commercial reasonableness, good faith, and fair dealing (regardless of whether enforcement is sought in a proceeding at law or in equity); (iii) commercial reasonableness and unconscionability and an implied covenant of good faith and fair dealing; (iv) the power of the courts to award damages in lieu of equitable remedies; and (v) securities Laws and public policy underlying such Laws with respect to rights to indemnification and contribution.

E.We express no opinion with respect to the fairness of the Asset Purchase Agreement, the Security Agreement, or any other matter, and in rendering the opinions expressed herein, we have assumed, with your consent, that a court of competent jurisdiction would find all such matters were entirely fair. We have assumed that no fraud, dishonesty, forgery, coercion, duress, or breach of fiduciary duty exists or will exist with respect to any of the matters relevant to the opinions expressed in this letter.

F.We express no opinion as to (i) the compliance of the transactions contemplated by the Asset Purchase Agreement and the Security Agreement with any regulations or governmental requirements applicable to any party other than the Texas Seller Parties; (ii) the financial condition or solvency of the Texas Seller Parties; (iii) the ability (financial or otherwise) of the Texas Seller Parties or any other party to meet their respective obligations under the Asset Purchase Agreement or the Security Agreement; (iv) the compliance of the Asset Purchase Agreement or the Security Agreement, or the Transactions contemplated thereby with, or the effect of any of the foregoing with respect to, the antifraud provisions of the federal and state securities laws, rules, and regulations; (v) the value of any security provided to secure the payment of obligations contemplated by the Asset Purchase Agreement or the Security Agreement; and (vi) the conformity of the Asset Purchase Agreement to any term sheet or commitment letter.

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G.This letter is solely for your benefit, and no other Persons shall be entitled to rely upon this letter. Without our prior written consent, this letter may not be quoted in whole or in part or otherwise referred to in any document and may not be furnished or otherwise disclosed to or used by any other Person, except for (i) delivery of copies hereof to counsel for the addressees hereof, (ii) inclusion of copies hereof in a closing file, and (iii) use hereof in any legal proceeding arising out of the Transactions contemplated by the Asset Purchase Agreement and the Security Agreement filed by an addressee hereof against this law firm or in which any addressee hereof is a defendant.

Very truly yours,

GREENBERG TRAURIG, LLP

6

Schedule 1

SECRETARY’S CERTIFICATE

As of December 12, 2008

I,                     , certify that I am the duly elected, qualified, and acting Secretary of                               , a stock property and casualty insurance company domiciled in the State of Texas (the “Company”), and that, as such, I am familiar with the facts herein certified and am duly authorized to certify the same and do hereby certify as follows:

1.Attached hereto as Annex 1 is a true, correct, and complete copy of the Articles of Incorporation of the Company as approved by the Commissioner of Insurance for the State of Texas on                                                      ,                             , as amended (the “Articles of Incorporation”), which Articles of Incorporation have not been modified or amended, except as reflected therein, and which remain in full force and effect as of the date hereof.

2.Attached as Annex 2 is a true, correct, and complete copy of the certificate of authority for the Company, certified by the Commissioner of Insurance for the State of Texas.

3.Attached hereto as Annex 3 is a true, correct, and complete copy of the Bylaws of the Company, as amended (the “Bylaws”), which Bylaws have not been modified or amended, except as reflected therein, and which remain in full force and effect as of the date hereof.

4.Attached as Annex 4 is a true, correct, and complete copy of the resolutions of the Company’s Board of Directors approving the Transactions and the Transaction Documents. Such resolutions have not been rescinded or modified in any way and are in full force and effect as of the date hereof.

5.I have examined on Annex 5 the signatures of the Company’s officers signing the Asset Purchase Agreement, dated as of                                  , 2008, by and between                        (the “Asset Purchase Agreement”), and the exhibits and Transaction Documents delivered in connection therewith, and such signatures are their true signatures. As of the date hereof (and the date of such signatures), such officers are duly appointed, qualified, and acting officers of the Company, holding the office specified beside their names.

6.This Secretary’s Certificate is being delivered on the Company’s behalf pursuant to Section      of the Asset Purchase Agreement.

7.This Secretary’s Certificate is made with the intent that Greenberg Traurig may rely hereon for purposes of the opinion letter to be rendered pursuant to Section                of the Asset Purchase Agreement.

8.Undefined capitalized terms used herein are defined in the Asset Purchase Agreement.

IN WITNESS WHEREOF, I have duly executed this Secretary’s Certificate as of the date first written above.

By:
	Secretary

Schedule 2

Good Standing Certificates

(a)Current Certificate of Authority for each of the Texas Seller Parties, certified by the Commissioner of Insurance of the Texas Department of Insurance, dated December 10, 2008; and

(b)Charter Documents for each of the Texas Seller Parties, certified by the Commissioner of Insurance of the Texas Department of Insurance, dated December 10, 2008.

[letterhead of Low & Childers, P.C.]

December 18, 2008

To Each of the Persons Listed
on Schedule A Attached Hereto

Re:AIG SunAmerica Life Assurance Company

Ladies and Gentlemen:

We have acted as special Arizona counsel for AIG SunAmerica Life Assurance Company, an Arizona corporation (“AIG SunAmerica”), in connection with the matters set forth herein. At your request, this opinion is being furnished to you.

For purposes of giving the opinions hereinafter set forth, our examination of documents has been limited to the examination of originals or copies of the following:

(a)Certified copy of the Amended and Restated Articles of Incorporation and Articles of Domestication of Anchor National Life Insurance Company, as filed in the office of the Arizona Corporation Commission on December 26, 1995; a certified copy of the Amended and Restated Articles of Incorporation of Anchor National Life Insurance Company (changing the name of the company to SunAmerica National Life Insurance Company), as filed in the office of the Arizona Corporation Commission on October 5, 2001; a certified copy of the Amended and Restated Articles of Incorporation of SunAmerica National Life Insurance Company (changing the name of the company to AIG SunAmerica Life Assurance Company), as filed in the office of the Arizona Corporation Commission on January 24, 2002; a certified copy of the Articles of Amendment to the Amended and Restated Articles of Incorporation, as filed in the office of the Arizona Corporation Commission on October 10, 2002; a certified copy of the Amended and Restated Articles of Incorporation, as filed in the office of the Arizona Corporation Commission on September 29, 2006;

(b)The Amended and Restated Bylaws of AIG SunAmerica Life Assurance Company, effective August 21, 2006;

(c)A certified copy of the Certificate of Authority from the Department of Insurance of the State of Arizona, dated February 28, 2003;

(d)Certificate of an Officer of AIG SunAmerica dated as of December 18, 2008, attached hereto as Exhibit A (the “Officer’s Certificate”);

(e)The Asset Purchase Agreement, dated as of December 12, 2008 (the “Asset Purchase Agreement”), among American General Life Insurance Company, American General Life and Accident Insurance Company, The United States Life Insurance Company in the City of New York, AIG Life, American International Life Assurance Company of  New York, American Life Insurance Company, AIG Annuity Insurance Company, The Variable Annuity Life Insurance Company, SunAmerica Life Insurance Company, First SunAmerica Life Insurance Company, and AIG SunAmerica Life Assurance Company (collectively, the “Sellers”), AIG Securities Lending Corp., as agent of the Sellers, Maiden Lane II LLC, a Delaware limited liability company (“ML II”), as buyer, and Federal Reserve Bank of New York (“FRBNY”), in its capacity as Controlling Party (as defined therein);

(f)The Security Agreement dated December 12, 2008 (the “Security Agreement”) among ML II, as borrower, the Sellers, as junior secured creditors, FRBNY, as Controlling Party and Senior Lender, and the Bank of New York Mellon (“BNYM”), as collateral agent;

(g)The Unanimous Written Consent of the Board of Directors of AIG SunAmerica, dated December 12, 2008;

(h)Certificate of Compliance for AIG SunAmerica from the Arizona Department of Insurance; and

(i)A Certificate of Compliance/Good Standing for AIG SunAmerica, dated December 9, 2008.

For purposes of this opinion, we have not reviewed any documents other than the documents listed in paragraphs (a) through (i) above. In particular, we have not reviewed any document (other than the documents listed in paragraphs (a) through (i) above) that is referred to in or incorporated by reference into any document reviewed by us. We have assumed that there exists no provision in any document that we have not reviewed that is inconsistent with the opinions stated herein. We have conducted no independent factual investigation of our own but rather have relied solely upon the foregoing documents, the statements and information set forth therein and the additional matters recited or assumed herein, all of which we have assumed to be true, complete and accurate in all material respects.

With respect to all documents examined by us, we have assumed that (i) all signatures on documents examined by us are genuine, (ii) all documents submitted to us as originals are authentic, and (iii) all documents submitted to us as copies conform with the original copies of those documents.

2

For purposes of this opinion, we have assumed (i) except to the extent set forth in paragraph 1 below, the due organization, due formation or due creation, as the case may be, and valid existence in good standing of each party to the documents examined by us under the laws of the jurisdiction governing its organization, formation or creation, (ii) the legal capacity of natural persons who are signatories to the documents examined by us, (iii) except to the extent set forth in paragraph 2 below, that each of the parties to the documents examined by us has the power and authority to execute and deliver, and to perform its obligations under, such documents, (iv) that any amendment or restatement of any document reviewed by us has been accomplished in accordance with, and was permitted by, the relevant provisions of said document prior to its amendment or restatement from time to time, (v) except to the extent set forth in paragraph 3 below, the due authorization, execution and delivery by all parties thereto of all documents examined by us, (vi) that each of the documents examined by us constitutes a legal, valid and binding agreement of the parties thereto, and is enforceable against the parties thereto, in accordance with its terms, and (vii) that neither ML II nor FRBNY is an “affiliate” of AIG SunAmerica for purposes of the Arizona Holding Company Act, A.R.S. § 20-481, et seq.

This opinion is limited to the laws of the State of Arizona (excluding the securities and blue sky laws of the State of Arizona), and we have not considered and express no opinion on the laws of any other jurisdiction, including New York laws and United States federal laws (including United States federal bankruptcy law) and rules and regulations relating thereto. Our opinions are rendered only with respect to Arizona laws and rules, regulations and orders thereunder that are currently in effect.

Based upon the foregoing, and upon our examination of such questions of law and statutes of the State of Arizona as we have considered necessary or appropriate, and subject to .the assumptions, qualifications, limitations and exceptions set forth herein, we are of the opinion that:

1.AIG SunAmerica is duly incorporated, validly existing and in good standing as a corporation under the Arizona Corporation Law.

2.AIG SunAmerica has all necessary corporate power and authority under the Articles of Incorporation, the Bylaws and the Arizona Corporation Law to execute and deliver, and to perform its obligations under, the Asset Purchase Agreement and Security Agreement.

3.The execution and delivery of the Asset Purchase Agreement and Security Agreement by AIG SunAmerica, and the performance by AIG SunAmerica of its obligations thereunder, have been duly authorized by all necessary corporate action on the part of AIG SunAmerica under the Articles of Incorporation, the Bylaws and the Arizona Corporation Law.

4.AIG SunAmerica has duly executed and delivered the Asset Purchase Agreement and Security Agreement under the Articles of Incorporation, the Bylaws and the Arizona Corporation Law.

3

5.The execution and delivery by AIG SunAmerica of the Asset Purchase Agreement and Security Agreement, and the performance by AIG SunAmerica of its obligations thereunder, do not violate (i) the Articles of Incorporation, (ii) the Bylaws or (iii) any Arizona law, rule or regulation.

6.No authorization, approval, consent or order of any Arizona court or Arizona governmental authority is required to be obtained by AIG SunAmerica solely in connection with the execution and delivery by AIG SunAmerica of the Asset Purchase Agreement or Security Agreement, or the performance by AIG SunAmerica of its obligations thereunder, except for filings that may be required under the Uniform Commercial Code as in effect in the State of Arizona (the “Arizona UCC”) and as noted in qualification F below.

The opinions expressed above are subject to the following additional assumptions, qualifications, limitations and exceptions:

A.We express no opinion with respect to any provision in the Asset Purchase Agreement or Security Agreement purporting to prohibit, restrict or condition the assignment of the Asset Purchase Agreement or Security Agreement, to the extent that any such provision may be limited by the operation of the Arizona UCC.

B.We express no opinion as to (i) purported waivers of any statutory or other rights, court rules and defenses to obligations where such waivers (A) are against public policy or (B) constitute waivers of rights which by law, regulation or judicial decision may not otherwise be waived, or (ii) any right or obligation to the extent that the same may be varied by course of dealing or performance.

C.We express no opinion with respect to any provision of the Asset Purchase Agreement or Security Agreement (i) that purports or would operate to render ineffective any waiver or modification not in writing or (ii) to the effect that the failure to exercise or delay in exercising rights or remedies will not operate as a waiver of any such rights or remedies.

D.The opinion expressed in paragraph 4 above is based solely upon our review of the incumbency certifications contained in the Officer’s Certificate.

E.We note that under A.R.S. § 20-517, every insurer domiciled in the State of Arizona is required to file a report with the Director of the Arizona Department of Insurance (the “Director”) disclosing material dispositions of assets within fifteen (15) days after the end of the calendar month in which any such material disposition occurs. Pursuant to AR.S. § 20-518(F), a material disposition is one that is non-recurring and not in the ordinary course of business and involves more than five percent (5%) of the reporting insurer’s total admitted assets as reported in its most recent statutory statement filed with the Department of Insurance. As a result, with respect to the opinions expressed in paragraphs 5 and 6 above, if the Transactions constitute a

4

material disposition of assets by AIG SunAmerica, AIG SunAmerica will be required to timely file a report with the Commissioner complying with A.R.S. § 20-517.

F.The opinions expressed above are subject to the effect of (i) bankruptcy, insolvency, moratorium, receivership, reorganization, liquidation, fraudulent conveyance and transfer and other similar laws relating to or affecting the rights and remedies of creditors generally, (ii) principles of equity (regardless of whether considered and applied in a proceeding in equity or at law), (iii) the effect of applicable public policy with respect to provisions relating to indemnification, exculpation or contribution, and (iv) judicial imposition of an implied covenant of good faith and fair dealing.

We understand that you will rely as to matters of Arizona law upon this opinion in connection with the transactions contemplated by the Asset Purchase Agreement and Security Agreement. In connection with the foregoing, we hereby consent to your relying as to matters of Arizona law upon this opinion, subject to the understanding that the opinions rendered herein are given on the date hereof and such opinions are rendered only with respect to facts existing on the date hereof and laws, rules and regulations currently in effect. Except as stated above, without our prior written consent, this opinion may not be furnished or quoted to, or relied upon by, any other person or entity for any purpose.

Very truly yours,

/s/ J. Michael Low

J. Michael Low

For the Firm

[letterhead of Low & Childers, P.C.]

December 18, 2008

To Each of the Persons Listed
on Schedule A Attached Hereto

Re:SunAmerica Life Insurance Company

Ladies and Gentlemen:

We have acted as special Arizona counsel for SunAmerica Life Insurance Company, an Arizona corporation (“SunAmerica”), in connection with the matters set forth herein. At your request, this opinion is being furnished to you.

For purposes of giving the opinions hereinafter set forth, our examination of documents has been limited to the examination of originals or copies of the following:

(a)Certified copy of the Amended and Restated Articles of Incorporation and Articles of Domestication of Sun Life Insurance Company of America, as filed in the office of the Arizona Corporation Commission on June 27, 1994; a certified copy of the Article of Amendment to the Articles of Incorporation of Sun Life Insurance Company of America (changing the name of the company to SunAmerica Life Insurance Company), as filed in the office of the Arizona Corporation Commission on July 7, 1995; a certified copy of the Articles of Merger of Ford Life Insurance Company, a Michigan corporation into SunAmerica Life Insurance Company, an Arizona Company, as filed in the office of the Arizona Corporation Commission on December 26, 1996 and effective December 31, 1996; a certified copy of the Articles of Merger of Calamerica Life Insurance Company, a California corporation into SunAmerica Life Insurance Company, an Arizona corporation, as filed in the office of the Arizona Corporation Commission on October 12, 1999, effective November 1, 1999; and a certified copy of the Amended and Restated Articles of Incorporation, as filed in the office of the Arizona Corporation Commission on September 29, 2006;

(b)The Amended and Restated Bylaws of SunAmerica, effective August 21, 2006;

(c)A certified copy of the Certificate of Authority of SunAmerica from the Department of Insurance of the State of Arizona, dated July 7, 1995;

(d)Certificate of an Officer of SunAmerica dated as of December 12, 2008, attached hereto as Exhibit A (the “Officer’s Certificate”);

(e)The Asset Purchase Agreement, dated as of December 12, 2008 (the “Asset Purchase Agreement”), among American General Life Insurance Company, American General Life and Accident Insurance Company, The United States Life Insurance Company in the City of New York, AIG Life, American International Life Assurance Company of New York, American Life Insurance Company, AIG Annuity Insurance Company, The Variable Annuity Life Insurance Company, SunAmerica Life Insurance Company, First SunAmerica Life Insurance Company, and AIG SunAmerica Life Assurance Company (collectively, the “Sellers”), AIG Securities Lending Corp., as agent of the Sellers, Maiden Lane II LLC, a Delaware limited liability company (“ML II”), as buyer, and Federal Reserve Bank of New York (“FRBNY”), in its capacity as Controlling Party (as defined therein);

(f)The Security Agreement dated December 12, 2008 (the “Security Agreement”) among ML II, as borrower, the Sellers, as junior secured creditors, FRBNY, as Controlling Party and Senior Lender, and the Bank of New York Mellon (“BNYM”), as collateral agent;

(g)The Unanimous Written Consent of the Board of Directors of SunAmerica, dated December 12, 2008;

(h)Certificate of Compliance for SunAmerica from the Arizona Department of Insurance;

(i)A Certificate of Compliance/Good Standing for SunAmerica, obtained from the Arizona Corporation Commission, dated December 9, 2008.

For purposes of this opinion, we have not reviewed any documents other than the documents listed in paragraphs (a) through (i) above. In particular, we have not reviewed any document (other than the documents listed in paragraphs (a) through (i) above) that is referred to in or incorporated by reference into any document reviewed by us. We have assumed that there exists no provision. in any document that we have not reviewed that is inconsistent with the opinions stated herein. We have conducted no independent factual investigation of our own but rather have relied solely upon the foregoing documents, the statements and information set forth therein and the additional matters recited or assumed herein, all of which we have assumed to be true, complete and accurate in all material respects.

With respect to all documents examined by us, we have assumed that (i) all signatures on documents examined by us are genuine, (ii) all documents submitted to us as originals are authentic, and (iii) all documents submitted to us as copies conform with the original copies of those documents.

For purposes of this opinion, we have assumed (i) except to the extent set forth in paragraph 1 below, the due organization, due formation or due creation, as the case may be, and valid existence in good standing of each party to the documents examined by us under the laws

2

of the jurisdiction governing its organization, formation or creation, (ii) the legal capacity of natural persons who are signatories to the documents examined by us, (iii) except to the extent set forth in paragraph 2 below, that each of the parties to the documents examined by us has the power and authority to execute and deliver, and to perform its obligations under, such documents, (iv) that any amendment or restatement of any document reviewed by us has been accomplished in accordance with, and was permitted by, the relevant provisions of said document prior to its amendment or restatement from time to time, (v) except to the extent set forth in paragraph 3 below, the due authorization, execution and delivery by all parties thereto of all documents examined by us, (vi) that each of the documents examined by us constitutes a legal, valid and binding agreement of the parties thereto, and is enforceable against the parties thereto, in accordance with its terms, and (vii) that neither ML II nor FRBNY is an “affiliate” of SunAmerica for purposes of the Arizona Holding Company Act, A.R.S. § 20-481, et seq.

This opinion is limited to the laws of the State of Arizona (excluding the securities and blue sky laws of the State of Arizona), and we have not considered and express no opinion on the laws of any other jurisdiction, including New York laws and United States federal laws (including United States federal bankruptcy law) and rules and regulations relating thereto. Our opinions are rendered only with respect to Arizona laws and rules, regulations and orders thereunder that are currently in effect.

Based upon the foregoing, and upon our examination of such questions of law and statutes of the State of Arizona as we have considered necessary or appropriate, and subject to the assumptions, qualifications, limitations and exceptions set forth herein, we are of the opinion that:

1.SunAmerica is duly incorporated, validly existing and in good standing as a corporation under the Arizona Corporation Law.

2.SunAmerica has all necessary corporate power and authority under the Articles of Incorporation, the Bylaws and the Arizona Corporation Law to execute and deliver, and to perform its obligations under, the Asset Purchase Agreement, and the Security Agreement.

3.The execution and delivery of the Asset Purchase Agreement and Security Agreement by SunAmerica, and the performance by SunAmerica of its obligations thereunder, have been duly authorized by all necessary corporate action on the part of SunAmerica under the Articles of Incorporation, the Bylaws and the Arizona Corporation Law.

4.SunAmerica has duly executed and delivered the Asset Purchase Agreement and Security Agreement under the Articles of Incorporation, the Bylaws and the Arizona Corporation Law.

5.The execution and delivery by SunAmerica of the Asset Purchase Agreement and Security Agreement, and the performance by SunAmerica of its obligations thereunder, do not violate (i) the Articles of Incorporation, (ii) the Bylaws or (iii) any Arizona law, rule or regulation.

3

6.No authorization, approval, consent or order of any Arizona court or Arizona governmental authority is required to be obtained by SunAmerica solely in connection with the execution and delivery by SunAmerica of the Asset Purchase Agreement or Security Agreement, or the performance by SunAmerica of its obligations thereunder, except for filings that may be required under the Uniform Commercial Code as in effect in the State of Arizona (the “Arizona UCC”) and as noted in qualification F below.

The opinions expressed above are subject to the following additional assumptions, qualifications, limitations and exceptions:

A.We express no opinion with respect to any provision in the Asset Purchase Agreement or Security Agreement purporting to prohibit, restrict or condition the assignment of the Asset Purchase Agreement or Security Agreement, to the extent that any such provision may be limited by the operation of the Arizona UCC.

B.We express no opinion as to (i) purported waivers of any statutory or other rights, court rules and defenses to obligations where such waivers (A) are against public policy or (B) constitute waivers of rights which by law, regulation or judicial decision may not otherwise be waived, or (ii) any right or obligation to the extent that the same may be varied by course of dealing or performance.

C.We express no opinion with respect to any provision of the Asset Purchase Agreement or Security Agreement (i) that purports or would operate to render ineffective any waiver or modification not in writing or (ii) to the effect that the failure to exercise or delay in exercising rights or remedies will not operate as a waiver of any such rights or remedies.

D.The opinion expressed in paragraph 4 above is based solely upon our review of the incumbency certifications contained in the Officer’s Certificate.

E.We note that under A.R.S. § 20-517, every insurer domiciled in the State of Arizona is required to file a report with the Director of the Arizona Department of Insurance (the “Director”) disclosing material dispositions of assets within fifteen (15) days after the end of the calendar month in which any such. material disposition occurs. Pursuant to A.R.S. § 20-518(F), a material disposition is one that is non-recurring and not in the ordinary course of business and involves more than five percent (5%) of the reporting insurer’s total admitted assets as reported in its most recent statutory statement filed with the Department of Insurance. As a result, with respect to the opinions expressed in paragraphs 5 and 6 above, if the Transactions constitute a material disposition of assets by SunAmerica, SunAmerica will be required to timely file a report with the Commissioner complying with AR.S. § 20-517.

F.The opinions expressed above are subject to the effect of (i) bankruptcy, insolvency, moratorium, receivership, reorganization, liquidation, fraudulent conveyance and transfer and other similar laws relating to or affecting the rights and remedies of creditors generally, (ii) principles of equity (regardless of whether considered and applied in a proceeding in equity or at law), (iii) the effect of applicable public policy with respect to provisions relating

4

to indemnification, exculpation or contribution, and (iv) judicial imposition of an implied covenant of good faith and fair dealing.

We understand that you will rely as to matters of Arizona law upon this opinion in connection with the transactions contemplated by the Asset Purchase Agreement and Security Agreement.  In connection with the foregoing, we hereby consent to your relying as to matters of Arizona law upon this opinion, subject to the understanding that the opinions rendered herein are given on the date hereof and such opinions are rendered only with respect to facts existing on the date hereof and laws, rules and regulations currently in effect. Except as stated above, without our prior written consent, this opinion may not be furnished or quoted to, or relied upon by, any other person or entity for any purpose.

Very truly yours,

/s/ J. Michael Low

J. Michael Low

For the Firm

JML/md

5

EXHIBIT E

to

Asset Purchase Agreement

[letterhead of AIG Annuity Insurance Company]

December 12, 2008

Maiden Lane II LLC and
Federal Reserve Bank of New York
33 Liberty Street,
New York, New York 10045

Ladies and Gentlemen:

I am Jim Coppedge, Senior Vice President and General Counsel of AIG Annuity Insurance Company, a Texas corporation (the “Company”), and, as such, I am generally familiar with the corporate affairs of the Company.

In connection with the execution and delivery of (i) that certain Asset Purchase Agreement, dated as of December 12, 2008 (the “Asset Purchase Agreement”), among the Company and the other sellers named therein, as sellers (together with the Company, the “Sellers”), AIG Securities Lending Corp., as agent, American International Group, Inc., Maiden Lane II LLC, as buyer (the “Buyer”), and Federal Reserve Bank of New York, as controlling party (the “Controlling Party”), and (ii) that certain Security Agreement, dated as of December 12, 2008 (the “Security Agreement”), among the Buyer, the Controlling Party, the Sellers and The Bank of New York Mellon, I have examined such corporate records and other documents, and reviewed such questions of law, as I have deemed necessary or appropriate for purposes of this opinions, and on the basis of such knowledge, examination and review, it is my opinion that:

(1)           The Company is an existing corporation in good standing under the laws of the State of Texas with corporate power and authority to execute and deliver each of the Asset Purchase Agreement and the Security Agreement and to perform its obligations under each of the Asset Purchase Agreement and the Security Agreement.

(2)           Each of the Asset Purchase Agreement and the Security Agreement has been duly authorized, executed and delivered by the Company.

(3)           The execution and delivery of the each of the Asset Purchase Agreement and the Security Agreement do not, and the performance of its obligations thereunder in accordance with its terms will not, (i) violate the Federal laws of the United States or the laws of

the State of Texas or the certificate of incorporation or bylaws of the Company or (ii) result in or require the creation or imposition of any lien on any assets of the Company; provided, however, that with respect to the opinion expressed in paragraph (i) above, I express no opinion with respect to Federal or state securities laws, other antifraud laws or fraudulent transfer laws.

(4)           All regulatory consents and approvals required to be obtained by the Company on or prior to the date hereof under the Federal laws of the United States or the laws of the State of Texas for the execution and delivery by the Company of each of the Asset Purchase Agreement and the Security Agreement have been obtained; provided, however, that I express no view in this paragraph with respect to Federal or state securities laws or matters relating to the title or ownership of, liens or security interests in, or the transfer of, property.

(5)           To my knowledge, there is no claim, action, suit, proceeding or investigation pending or threatened against the Company which in any manner challenges or seeks to prevent, enjoin, alter or materially delay the consummation of the transactions contemplated by the Asset Purchase Agreement and the Security Agreement.

The foregoing opinion is limited to the Federal laws of the United States and the laws of the State of Texas, and I am expressing no opinion as to the effect or requirements of the laws of any other jurisdiction.

I have relied as to certain matters on information obtained from public officials, officers of the Company and other sources believed by me to be responsible, and I have assumed that the signatures on all documents reviewed by me are genuine, an assumption that I have not independently verified.

The opinions set forth herein are given as of the date hereof and I assume no obligation to advise you or any other person as to any legal development or factual matters arising subsequent to the date hereof that might affect the opinions expressed herein.

This opinion is being delivered to you as the Buyer in connection with the transactions contemplated by the Asset Purchase Agreement and the Security Agreement and may not be relied upon by any other person or for any other purpose without my prior written consent.

Very truly yours,

/s/ Jim Coppedge

2

[letterhead of American General Life Companies, LLC]

December 12, 2008

Maiden Lane II LLC,
c/o Federal Reserve Bank of New York,
33 Liberty Street,
New York, New York 10045

Ladies and Gentlemen:

I am Kyle L. Jennings, Executive Vice President, General Counsel and Secretary of AIG Life Insurance Company, a life insurance company domiciled in the State of Delaware (the “Company”), and, as such, I am generally familiar with the corporate affairs of the Company.

In connection with the execution and delivery of (i) that certain Asset Purchase Agreement, dated as of December 12, 2008 (the “Asset Purchase Agreement”), among the Company and the other sellers named therein, as sellers (together with the Company, the “Sellers”), AIG Securities Lending Corp., as agent, American International Group, Inc., Maiden Lane II LLC, as buyer (the “Buyer”), and Federal Reserve Bank of New York, as controlling party (the “Controlling Party”), and (ii) that certain Security Agreement, dated as of December 12, 2008 (the “Security Agreement”), among the Buyer, the Controlling Party, the Sellers and The Bank of New York Mellon, I have examined such corporate records and other documents, and reviewed such questions of law, as I have deemed necessary or appropriate for purposes of this opinions, and on the basis of such knowledge, examination and review, it is my opinion that:

(1)           The Company is an existing corporation in good standing under the laws of the State of Delaware with corporate power and authority to execute and deliver each of the Asset Purchase Agreement and the Security Agreement and to perform its obligations under each of the Asset Purchase Agreement and the Security Agreement.

(2)           Each of the Asset Purchase Agreement and the Security Agreement has been duly authorized, executed and delivered by the Company.

(3)           The execution and delivery of the each of the Asset Purchase Agreement and the Security Agreement do not, and the performance of its obligations thereunder in accordance with its terms will not, (i) violate the Federal laws of the United States or the laws of the State of Delaware or the certificate of incorporation or bylaws of the Company or (ii) result in or require the creation or imposition of any lien on any assets of the Company; provided,

however, that with respect to the opinion expressed in paragraph (i) above, I express no opinion with respect to Federal or state securities laws, other antifraud laws or fraudulent transfer laws.

(4)           All regulatory consents and approvals required to be obtained by the Company on or prior to the date hereof under the Federal laws of the United States or the laws of the State of Delaware for the execution and delivery by the Company of each of the Asset Purchase Agreement and the Security Agreement have been obtained; provided, however, that I express no view in this paragraph with respect to Federal or state securities laws or matters relating to the title or ownership of, liens or security interests in, or the transfer of, property.

(5)           To my knowledge, there is no claim, action, suit, proceeding or investigation pending or threatened against the Company which in any manner challenges or seeks to prevent, enjoin, alter or materially delay the consummation of the transactions contemplated by the Asset Purchase Agreement and the Security Agreement.

The foregoing opinion is limited to the Federal laws of the United States and the laws of the State of Delaware, and I am expressing no opinion as to the effect or requirements of the laws of any other jurisdiction.

I have relied as to certain matters on information obtained from public officials, officers of the Company and other sources believed by me to be responsible, and I have assumed that the signatures on all documents reviewed by me are genuine, an assumption that I have not independently verified.

The opinions set forth herein are given as of the date hereof and I assume no obligation to advise you or any other person as to any legal development or factual matters arising subsequent to the date hereof that might affect the opinions expressed herein.

This opinion is being delivered to you as the Buyer in connection with the transactions contemplated by the Asset Purchase Agreement and the Security Agreement and may not be relied upon by any other person or for any other purpose without my prior written consent.

Very truly yours

/s/Kyle L. Jennings

Kyle L. Jennings

Executive Vice President

General Counsel & Secretary

[letterhead of AIG Retirement Services, Inc.]

December 12, 2008

Federal Reserve Bank of New York
33 Liberty Street,
New York, New York 10045

Maiden Lane II LLC,
c/o Federal Reserve Bank of New York
33 Liberty Street,
New York, New York 10045

Ladies and Gentlemen:

I am Christine A. Nixon, General Counsel of AIG Retirement Services, Inc., a Delaware Company, the indirect parent of AIG SunAmerica Life Assurance Company, an Arizona company (the Company”), and, as such, I am generally familiar with the corporate affairs of the Company.

In connection with the execution and delivery of (i) that certain Asset Purchase Agreement, dated as of December 12, 2008 (the “Asset Purchase Agreement”), among the Company and the other sellers named therein, as sellers (together with the Company, the “Sellers”), AIG Securities Lending Corp., as agent, American International Group, Inc., Maiden Lane II LLC, as buyer (the “Buyer”), and Federal Reserve Bank of New York, as controlling party (the “Controlling Party”), and (ii) that certain Security Agreement, dated as of December 12, 2008 (the “Security Agreement”), among the Buyer, the Controlling Party, the Sellers and The Bank of New York Mellon, I have examined such corporate records and other documents, and reviewed such questions of law, as I have deemed necessary or appropriate for purposes of this opinions, and on the basis of such knowledge, examination and review, it is my opinion that:

(1)           The Company is an existing corporation in good standing under the laws of the State of Arizona with corporate power and authority to execute and deliver each of the Asset Purchase Agreement and the Security Agreement and to perform its obligations under each of the Asset Purchase Agreement and the Security Agreement.

(2)           Each of the Asset Purchase Agreement and the Security Agreement has been duly authorized, executed and delivered by the Company.

(3)           The execution and delivery of each of the Asset Purchase Agreement and the Security Agreement do not, and the performance of its obligations thereunder in accordance

with its terms will not, (i) violate the Federal laws of the United States or the laws of the State of Arizona or the certificate of incorporation or bylaws of the Company or (ii) result in or require the creation or imposition of any lien on any assets of the Company; provided, however, that with respect to the opinion expressed in paragraph (i) above, I express no opinion with respect to Federal or state securities laws, other antifraud laws or fraudulent transfer laws.

(4)           All regulatory consents and approvals required to be obtained by the Company on or prior to the date hereof under the Federal laws of the United States or the laws of the State of Arizona for the execution and delivery by the Company of each of the Asset Purchase Agreement and the Security Agreement have been obtained; provided, however, that I express no view in this paragraph with respect to Federal or state securities laws or matters relating to the title or ownership of, liens or security interests in, or the transfer of, property.

(5)           To my knowledge, there is no claim, action, suit, proceeding or investigation pending or threatened against the Company which in any manner challenges or seeks to prevent, enjoin, alter or materially delay the consummation of the transactions contemplated by the Asset Purchase Agreement and the Security Agreement.

The foregoing opinion is limited to the Federal laws of the United States and the laws of the State of California, and I am expressing no opinion as to the effect or requirements of the laws of any other jurisdiction.

I have relied as to certain matters on information obtained from public officials, officers of the Company and other sources believed by me to be responsible, and I have assumed that the signatures on all documents reviewed by me are genuine, an assumption that I have not independently verified.

The opinions set forth herein are given as of the date hereof and I assume no obligation to advise you or any other person as to any legal development or factual matters arising subsequent to the date hereof that might affect the opinions expressed herein.

This opinion is being delivered to Maiden Lane II LLC as the Buyer and the Federal Reserve Bank of New York as Controlling Party in connection with the transactions contemplated by the Asset Purchase Agreement and the Security Agreement and may not be relied upon by any other person or for any other purpose without my prior written consent.

Very truly yours,

/s/ Christine A. Nixon

[letterhead of American General Life Companies, LLC]

December 12, 2008

Maiden Lane II LLC,
c/o Federal Reserve Bank of New York,
33 Liberty Street,
New York, New York 10045

Ladies and Gentlemen:

I am Kyle L. Jennings, Executive Vice President, General Counsel and Secretary of American General Life and Accident Insurance Company, a life insurance company domiciled in the State of Tennessee (the “Company”), and, as such, I am generally familiar with the corporate affairs of the Company.

In connection with the execution and delivery of (i) that certain Asset Purchase Agreement, dated as of December 12, 2008 (the “Asset Purchase Agreement”), among the Company and the other sellers named therein, as sellers (together with the Company, the “Sellers”), AIG Securities Lending Corp., as agent, American International Group, Inc., Maiden Lane II LLC, as buyer (the “Buyer”), and Federal Reserve Bank of New York, as controlling party (the “Controlling Party”), and (ii) that certain Security Agreement, dated as of December 12, 2008 (the “Security Agreement”), among the Buyer, the Controlling Party, the Sellers and The Bank of New York Mellon, I have examined such corporate records and other documents, and reviewed such questions of law, as I have deemed necessary or appropriate for purposes of this opinions, and on the basis of such knowledge, examination and review, it is my opinion that:

(1)           The Company is an existing corporation in good standing under the laws of the State of Tennessee with corporate power and authority to execute and deliver each of the Asset Purchase Agreement and the Security Agreement and to perform its obligations under each of the Asset Purchase Agreement and the Security Agreement.

(2)           Each of the Asset Purchase Agreement and the Security Agreement has been duly authorized, executed and delivered by the Company.

(3)           The execution and delivery of the each of the Asset Purchase Agreement and the Security Agreement do not, and the performance of its obligations thereunder in accordance with its terms will not, (i) violate the Federal laws of the United States or the laws of the State of Tennessee or the certificate of incorporation or bylaws of the Company or (ii) result in or require the creation or imposition of any lien on any assets of the Company; provided,

however, that with respect to the opinion expressed in paragraph (i) above, I express no opinion with respect to Federal or state securities laws, other antifraud laws or fraudulent transfer laws.

(4)           All regulatory consents and approvals required to be obtained by the Company on or prior to the date hereof under the Federal laws of the United States or the laws of the State of Tennessee for the execution and delivery by the Company of each of the Asset Purchase Agreement and the Security Agreement have been obtained; provided, however, that I express no view in this paragraph with respect to Federal or state securities laws or matters relating to the title or ownership of, liens or security interests in, or the transfer of, property.

(5)           To my knowledge, there is no claim, action, suit, proceeding or investigation pending or threatened against the Company which in any manner challenges or seeks to prevent, enjoin, alter or materially delay the consummation of the transactions contemplated by the Asset Purchase Agreement and the Security Agreement.

The foregoing opinion is limited to the Federal laws of the United States and the laws of the State of Tennessee, and I am expressing no opinion as to the effect or requirements of the laws of any other jurisdiction.

I have relied as to certain matters on information obtained from public officials, officers of the Company and other sources believed by me to be responsible, and I have assumed that the signatures on all documents reviewed by me are genuine, an assumption that I have not independently verified.

The opinions set forth herein are given as of the date hereof and I assume no obligation to advise you or any other person as to any legal development or factual matters arising subsequent to the date hereof that might affect the opinions expressed herein.

This opinion is being delivered to you as the Buyer in connection with the transactions contemplated by the Asset Purchase Agreement and the Security Agreement and may not be relied upon by any other person or for any other purpose without my prior written consent.

Very truly yours,

/s/ Kyle L. Jennings

Kyle L. Jennings

Executive Vice President

General Counsel & Secretary

[letterhead of American General Life Companies, LLC]

December 12, 2008

Maiden Lane II LLC,
c/o Federal Reserve Bank of New York,
33 Liberty Street,
New York, New York 10045

Ladies and Gentlemen:

I am Kyle L. Jennings, Executive Vice President, General Counsel and Secretary of American General Life Insurance Company, a life insurance company domiciled in the State of Texas (the “Company”), and, as such, I am generally familiar with the corporate affairs of the Company.

In connection with the execution and delivery of (i) that certain Asset Purchase Agreement, dated as of December 12, 2008 (the “Asset Purchase Agreement”), among the Company and the other sellers named therein, as sellers (together with the Company, the “Sellers”), AIG Securities Lending Corp., as agent, American International Group, Inc., Maiden Lane II LLC, as buyer (the “Buyer”), and Federal Reserve Bank of New York, as controlling party (the “Controlling Party”), and (ii) that certain Security Agreement, dated as of December 12, 2008 (the “Security Agreement”), among the Buyer, the Controlling Party, the Sellers and The Bank of New York Mellon, I have examined such corporate records and other documents, and reviewed such questions of law, as I have deemed necessary or appropriate for purposes of this opinions, and on the basis of such knowledge, examination and review, it is my opinion that:

(1)The Company is an existing corporation in good standing under the laws of the State of Texas with corporate power and authority to execute and deliver each of the Asset Purchase Agreement and the Security Agreement and to perform its obligations under each of the Asset Purchase Agreement and the Security Agreement.

(2)Each of the Asset Purchase Agreement and the Security Agreement has been duly authorized, executed and delivered by the Company.

(3)The execution and delivery of the each of the Asset Purchase Agreement and the Security Agreement do not, and the performance of its obligations thereunder in accordance with its terms will not, (i) violate the Federal laws of the United States or the laws of the State of Texas or the certificate of incorporation or bylaws of the Company or (ii) result in or require the creation or imposition of any lien on any assets of the Company; provided, however,

that with respect to the opinion expressed in paragraph (i) above, I express no opinion with respect to Federal or state securities laws, other antifraud laws or fraudulent transfer laws.

(4)All regulatory consents and approvals required to be obtained by the Company on or prior to the date hereof under the Federal laws of the United States or the laws of the State of Texas for the execution and delivery by the Company of each of the Asset Purchase Agreement and the Security Agreement have been obtained; provided, however, that I express no view in this paragraph with respect to Federal or state securities laws or matters relating to the title or ownership of, liens or security interests in, or the transfer of, property.

(5)To my knowledge, there is no claim, action, suit, proceeding or investigation pending or threatened against the Company which in any manner challenges or seeks to prevent, enjoin, alter or materially delay the consummation of the transactions contemplated by the Asset Purchase Agreement and the Security Agreement.

The foregoing opinion is limited to the Federal laws of the United States and the laws of the State of Texas, and I am expressing no opinion as to the effect or requirements of the laws of any other jurisdiction.

I have relied as to certain matters on information obtained from public officials, officers of the Company and other sources believed by me to be responsible, and I have assumed that the signatures on all documents reviewed by me are genuine, an assumption that I have not independently verified.

The opinions set forth herein are given as of the date hereof and I assume no obligation to advise you or any other person as to any legal development or factual matters arising subsequent to the date hereof that might affect the opinions expressed herein.

This opinion is being delivered to you as the Buyer in connection with the transactions contemplated by the Asset Purchase Agreement and the Security Agreement and may not be relied upon by any other person or for any other purpose without my prior written consent.

Very truly yours,

/s/ Kyle L. Jennings

Kyle L. Jennings

Executive Vice President

General Counsel & Secretary

[letterhead of American General Life Companies, LLC]

December 12, 2008

Maiden Lane II LLC,
c/o Federal Reserve Bank of New York,
33 Liberty Street,
New York, New York 10045

Ladies and Gentlemen:

I am Kyle L. Jennings, Executive Vice President, General Counsel and Secretary of American International Life Assurance Company of New York, a life insurance company domiciled in the State of New York (the “Company”), and, as such, I am generally familiar with the corporate affairs of the Company.

In connection with the execution and delivery of (i) that certain Asset Purchase Agreement, dated as of December 12, 2008 (the “Asset Purchase Agreement”), among the Company and the other sellers named therein, as sellers (together with the Company, the “Sellers”), AIG Securities Lending Corp., as agent, American International Group, Inc., Maiden Lane II LLC, as buyer (the “Buyer”), and Federal Reserve Bank of New York, as controlling party (the “Controlling Party”), and (ii) that certain Security Agreement, dated as of December 12, 2008 (the “Security Agreement”), among the Buyer, the Controlling Party, the Sellers and The Bank of New York Mellon, I have examined such corporate records and other documents, and reviewed such questions of law, as I have deemed necessary or appropriate for purposes of this opinions, and on the basis of such knowledge, examination and review, it is my opinion that:

(1)The Company is an existing corporation in good standing under the laws of the State of New York with corporate power and authority to execute and deliver each of the Asset Purchase Agreement and the Security Agreement and to perform its obligations under each of the Asset Purchase Agreement and the Security Agreement.

(2)Each of the Asset Purchase Agreement and the Security Agreement has been duly authorized, executed and delivered by the Company.

(3)The execution and delivery of the each of the Asset Purchase Agreement and the Security Agreement do not, and the performance of its obligations thereunder in accordance with its terms will not, (i) violate the Federal laws of the United States or the laws of the State of New York or the certificate of incorporation or bylaws of the Company or (ii) result in or require the creation or imposition of any lien on any assets of the Company; provided,

however, that with respect to the opinion expressed in paragraph (i) above, I express no opinion with respect to Federal or state securities laws, other antifraud laws or fraudulent transfer laws.

(4)All regulatory consents and approvals required to be obtained by the Company on or prior to the date hereof under the Federal laws of the United States or the laws of the State of New York for the execution and delivery by the Company of each of the Asset Purchase Agreement and the Security Agreement have been obtained; provided, however, that I express no view in this paragraph with respect to Federal or state securities laws or matters relating to the title or ownership of, liens or security interests in, or the transfer of, property.

(5)To my knowledge, there is no claim, action, suit, proceeding or investigation pending or threatened against the Company which in any manner challenges or seeks to prevent, enjoin, alter or materially delay the consummation of the transactions contemplated by the Asset Purchase Agreement and the Security Agreement.

The foregoing opinion is limited to the Federal laws of the United States and the laws of the State of New York, and I am expressing no opinion as to the effect or requirements of the laws of any other jurisdiction.

I have relied as to certain matters on information obtained from public officials, officers of the Company and other sources believed by me to be responsible, and I have assumed that the signatures on all documents reviewed by me are genuine, an assumption that I have not independently verified.

The opinions set forth herein are given as of the date hereof and I assume no obligation to advise you or any other person as to any legal development or factual matters arising subsequent to the date hereof that might affect the opinions expressed herein.

This opinion is being delivered to you as the Buyer in connection with the transactions contemplated by the Asset Purchase Agreement and the Security Agreement and may not be relied upon by any other person or for any other purpose without my prior written consent.

Very truly yours,

/s/ Kyle L. Jennings

Kyle L. Jennings

Executive Vice President

General Counsel & Secretary

[letterhead of American Life Insurance Company]

December 12, 2008

Maiden Lane II LLC,
c/o Federal Reserve Bank of New York,
33 Liberty Street,
New York, New York 10045

Ladies and Gentlemen:

I am Laura C. Classen, International Counsel of American Life Insurance Company, a Life insurance domiciled in the State of Delaware (the Company”), and, as such, I am generally familiar with the corporate affairs of the Company.

In connection with the execution and delivery of (i) that certain Asset Purchase Agreement, dated as of December 12, 2008 (the “Asset Purchase Agreement”), among the Company and the other sellers named therein, as sellers (together with the Company, the “Sellers”), AIG Securities Lending Corp., as agent, American International Group, Inc., Maiden Lane II LLC, as buyer (the “Buyer”), and Federal Reserve Bank of New York, as controlling party (the “Controlling Party”), and (ii) that certain Security Agreement, dated as of December 12, 2008 (the “Security Agreement”), among the Buyer, the Controlling Party, the Sellers and The Bank of New York Mellon, I have examined such corporate records and other documents, and reviewed such questions of law, as I have deemed necessary or appropriate for purposes of this opinions, and on the basis of such knowledge, examination and review, it is my opinion that:

The Company is an existing corporation in good standing under the laws of the State of Delaware with corporate power and authority to execute and deliver each of the Asset Purchase Agreement and the Security Agreement and to perform its obligations under each of the Asset Purchase Agreement and the Security Agreements.

Each of the Asset Purchase Agreement and the Security Agreement has been duly authorized, executed and delivered by the Company.

The execution and delivery of the each of the Asset Purchase Agreement and the Security Agreement do not, and the performance of its obligations thereunder in accordance with its terms will not, (i) violate the Federal laws of the United States or the laws of the State of Delaware or the certificate of incorporation or bylaws of the Company or (ii) result in or require the creation or imposition of any lien on any assets of the Company; provided, however, that with respect to the opinion expressed in paragraph (i) above, I express no opinion with respect to Federal or state securities laws, other antifraud laws or fraudulent transfer laws.

All regulatory consents and approvals required to be obtained by the Company on or prior to the date hereof under the Federal laws of the United States or the laws of the State of Delaware or the execution and delivery by the Company of each of the Asset Purchase Agreement and the Security Agreement have been obtained; provided, however, that I express no view in this paragraph with respect to Federal or state securities laws or matters relating to the title or ownership of, liens or security interests in, or the transfer of, property.

(5)To my knowledge, there is no claim, action, suit, proceeding or investigation pending or threatened against the Company which in any manner challenges or seeks to prevent, enjoin, alter or materially delay the consummation of the transactions contemplated by the Asset Purchase Agreement and the Security Agreement.

The foregoing opinion is limited to the Federal laws of the United States and the laws of the State of Delaware, and I am expressing no opinion as to the effect or requirements of the laws of any other jurisdiction.

I have relied as to certain matters on information obtained from public officials, officers of the Company and other sources believed by me to be responsible, and I have assumed that the signatures on all documents reviewed by me are genuine, an assumption that I have not independently verified.

The opinions set forth herein are given as of the date hereof and I assume no obligation to advise you or any other person as to any legal development or factual matters arising subsequent to the date hereof that might affect the opinions expressed herein.

This opinion is being delivered to you as the Buyer in connection with the transactions contemplated by the Asset Purchase Agreement and the Security Agreement and may not be relied upon by any other person or for any other purpose without my prior written consent.

Very truly yours,

/s/ Laura C. Classen

Laura C. Classen

International Counsel

[letterhead of AIG Retirement Services, Inc.]

December 12, 2008

Federal Reserve Bank of New York
33 Liberty Street,
New York, New York 10045

Maiden Lane II LLC,
c/o Federal Reserve Bank of New York
33 Liberty Street,
New York, New York 10045

Ladies and Gentlemen:

I am Christine A. Nixon, General Counsel of AIG Retirement Services, Inc., a Delaware Company, the indirect parent of First SunAmerica Life Insurance Company, a New York company (the Company”), and, as such, I am generally familiar with the corporate affairs of the Company.

In connection with the execution and delivery of (i) that certain Asset Purchase Agreement, dated as of December 12, 2008 (the “Asset Purchase Agreement”), among the Company and the other sellers named therein, as sellers (together with the Company, the “Sellers”), AIG Securities Lending Corp., as agent, American International Group, Inc., Maiden Lane II LLC, as buyer (the “Buyer”), and Federal Reserve Bank of New York, as controlling party (the “Controlling Party”), and (ii) that certain Security Agreement, dated as of December 12, 2008 (the “Security Agreement”), among the Buyer, the Controlling Party, the Sellers and The Bank of New York Mellon, I have examined such corporate records and other documents, and reviewed such questions of law, as I have deemed necessary or appropriate for purposes of this opinions, and on the basis of such knowledge, examination and review, it is my opinion that:

(1)The Company is an existing corporation in good standing under the laws of the State of New York with corporate power and authority to execute and deliver each of the Asset Purchase Agreement and the Security Agreement and to perform its obligations under each of the Asset Purchase Agreement and the Security Agreement.

(2)Each of the Asset Purchase Agreement and the Security Agreement has been duly authorized, executed and delivered by the Company.

(3)The execution and delivery of each of the Asset Purchase Agreement and the Security Agreement do not, and the performance of its obligations thereunder in accordance

with its terms will not, (i) violate the Federal laws of the United States or the laws of the State of New York or the certificate of incorporation or bylaws of the Company or (ii) result in or require the creation or imposition of any lien on any assets of the Company; provided, however, that with respect to the opinion expressed in paragraph (i) above, I express no opinion with respect to Federal or state securities laws, other antifraud laws or fraudulent transfer laws.

(4)All regulatory consents and approvals required to be obtained by the Company on or prior to the date hereof under the Federal laws of the United States or the laws of the State of New York for the execution and delivery by the Company of each of the Asset Purchase Agreement and the Security Agreement have been obtained; provided, however, that I express no view in this paragraph with respect to Federal or state securities laws or matters relating to the title or ownership of, liens or security interests in, or the transfer of, property.

(5)To my knowledge, there is no claim, action, suit, proceeding or investigation pending or threatened against the Company which in any manner challenges or seeks to prevent, enjoin, alter or materially delay the consummation of the transactions contemplated by the Asset Purchase Agreement and the Security Agreement.

The foregoing opinion is limited to the Federal laws of the United States and the laws of the State of California, and I am expressing no opinion as to the effect or requirements of the laws of any other jurisdiction.

I have relied as to certain matters on information obtained from public officials, officers of the Company and other sources believed by me to be responsible, and I have assumed that the signatures on all documents reviewed by me are genuine, an assumption that I have not independently verified.

The opinions set forth herein are given as of the date hereof and I assume no obligation to advise you or any other person as to any legal development or factual matters arising subsequent to the date hereof that might affect the opinions expressed herein.

This opinion is being delivered to Maiden Lane II LLC as the Buyer and the Federal Reserve Bank of New York as Controlling Party in connection with the transactions contemplated by the Asset Purchase Agreement and the Security Agreement and may not be relied upon by any other person or for any other purpose without my prior written consent.

Very truly yours,

/s/ Christine A. Nixon

[letterhead of American General Life Companies, LLC]

December 12, 2008

Federal Reserve Bank of New York
33 Liberty Street,
New York, New York 10045

Maiden Lane II LLC,
c/o Federal Reserve Bank of New York
33 Liberty Street,
New York, New York 10045

Ladies and Gentlemen:

I am Christine A. Nixon, General Counsel of AIG Retirement Services, Inc., a Delaware Company, the parent of SunAmerica Life Insurance Company, an Arizona company (the Company”), and, as such, I am generally familiar with the corporate affairs of the Company.

In connection with the execution and delivery of (i) that certain Asset Purchase Agreement, dated as of December 12, 2008 (the “Asset Purchase Agreement”), among the Company and the other sellers named therein, as sellers (together with the Company, the “Sellers”), AIG Securities Lending Corp., as agent, American International Group, Inc., Maiden Lane II LLC, as buyer (the “Buyer”), and Federal Reserve Bank of New York, as controlling party (the “Controlling Party”), and (ii) that certain Security Agreement, dated as of December 12, 2008 (the “Security Agreement”), among the Buyer, the Controlling Party, the Sellers and The Bank of New York Mellon, I have examined such corporate records and other documents, and reviewed such questions of law, as I have deemed necessary or appropriate for purposes of this opinions, and on the basis of such knowledge, examination and review, it is my opinion that:

(1)The Company is an existing corporation in good standing under the laws of the State of Arizona with corporate power and authority to execute and deliver each of the Asset Purchase Agreement and the Security Agreement and to perform its obligations under each of the Asset Purchase Agreement and the Security Agreement.

(2)Each of the Asset Purchase Agreement and the Security Agreement has been duly authorized, executed and delivered by the Company.

(3)The execution and delivery of each of the Asset Purchase Agreement and the Security Agreement do not, and the performance of its obligations thereunder in accordance with its terms will not, (i) violate the Federal laws of the United States or the laws of the State of

Arizona or the certificate of incorporation or bylaws of the Company or (ii) result in or require the creation or imposition of any lien on any assets of the Company; provided, however, that with respect to the opinion expressed in paragraph (i) above, I express no opinion with respect to Federal or state securities laws, other antifraud laws or fraudulent transfer laws.

(4)All regulatory consents and approvals required to be obtained by the Company on or prior to the date hereof under the Federal laws of the United States or the laws of the State of Arizona for the execution and delivery by the Company of each of the Asset Purchase Agreement and the Security Agreement have been obtained; provided, however, that I express no view in this paragraph with respect to Federal or state securities laws or matters relating to the title or ownership of, liens or security interests in, or the transfer of, property.

(5)To my knowledge, there is no claim, action, suit, proceeding or investigation pending or threatened against the Company which in any manner challenges or seeks to prevent, enjoin, alter or materially delay the consummation of the transactions contemplated by the Asset Purchase Agreement and the Security Agreement.

The foregoing opinion is limited to the Federal laws of the United States and the laws of the State of California, and I am expressing no opinion as to the effect or requirements of the laws of any other jurisdiction.

I have relied as to certain matters on information obtained from public officials, officers of the Company and other sources believed by me to be responsible, and I have assumed that the signatures on all documents reviewed by me are genuine, an assumption that I have not independently verified.

The opinions set forth herein are given as of the date hereof and I assume no obligation to advise you or any other person as to any legal development or factual matters arising subsequent to the date hereof that might affect the opinions expressed herein.

This opinion is being delivery to Maiden Lane II LLC as the Buyer and the Federal Reserve Bank of New York as Controlling Party in connection with the transactions contemplated by the Asset Purchase Agreement and the Security Agreement and may not be relied upon by any other person or for any other purpose without my prior written consent.

Very truly yours,

/s/ Christine A. Nixon

[letterhead of American General Life Companies, LLC]

December 12, 2008

Maiden Lane II LLC,
c/o Federal Reserve Bank of New York,
33 Liberty Street,
New York, New York 10045

Ladies and Gentlemen:

I am Kyle L. Jennings, Executive Vice President, General Counsel and Secretary of The United States Life Insurance Company in the City of New York, a life insurance company domiciled in the State of New York (the “Company”), and, as such, I am generally familiar with the corporate affairs of the Company.

In connection with the execution and delivery of (i) that certain Asset Purchase Agreement, dated as of December 12, 2008 (the “Asset Purchase Agreement”), among the Company and the other sellers named therein, as sellers (together with the Company, the “Sellers”), AIG Securities Lending Corp., as agent, American International Group, Inc., Maiden Lane II LLC, as buyer (the “Buyer”), and Federal Reserve Bank of New York, as controlling party (the “Controlling Party”), and (ii) that certain Security Agreement, dated as of December 12, 2008 (the “Security Agreement”), among the Buyer, the Controlling Party, the Sellers and The Bank of New York Mellon, I have examined such corporate records and other documents, and reviewed such questions of law, as I have deemed necessary or appropriate for purposes of this opinions, and on the basis of such knowledge, examination and review, it is my opinion that:

(1)The Company is an existing corporation in good standing under the laws of the State of New York with corporate power and authority to execute and deliver each of the Asset Purchase Agreement and the Security Agreement and to perform its obligations under each of the Asset Purchase Agreement and the Security Agreement.

(2)Each of the Asset Purchase Agreement and the Security Agreement has been duly authorized, executed and delivered by the Company.

(3)The execution and delivery of the each of the Asset Purchase Agreement and the Security Agreement do not, and the performance of its obligations thereunder in accordance with its terms will not, (i) violate the Federal laws of the United States or the laws of the State of New York or the certificate of incorporation or bylaws of the Company or (ii) result in or require the creation or imposition of any lien on any assets of the Company; provided,

however, that with respect to the opinion expressed in paragraph (i) above, I express no opinion with respect to Federal or state securities laws, other antifraud laws or fraudulent transfer laws.

(4)All regulatory consents and approvals required to be obtained by the Company on or prior to the date hereof under the Federal laws of the United States or the laws of the State of New York for the execution and delivery by the Company of each of the Asset Purchase Agreement and the Security Agreement have been obtained; provided, however, that I express no view in this paragraph with respect to Federal or state securities laws or matters relating to the title or ownership of, liens or security interests in, or the transfer of, property.

(5)To my knowledge, there is no claim, action, suit, proceeding or investigation pending or threatened against the Company which in any manner challenges or seeks to prevent, enjoin, alter or materially delay the consummation of the transactions contemplated by the Asset Purchase Agreement and the Security Agreement.

The foregoing opinion is limited to the Federal laws of the United States and the laws of the State of New York, and I am expressing no opinion as to the effect or requirements of the laws of any other jurisdiction.

I have relied as to certain matters on information obtained from public officials, officers of the Company and other sources believed by me to be responsible, and I have assumed that the signatures on all documents reviewed by me are genuine, an assumption that I have not independently verified.

The opinions set forth herein are given as of the date hereof and I assume no obligation to advise you or any other person as to any legal development or factual matters arising subsequent to the date hereof that might affect the opinions expressed herein.

This opinion is being delivered to you as the Buyer in connection with the transactions contemplated by the Asset Purchase Agreement and the Security Agreement and may not be relied upon by any other person or for any other purpose without my prior written consent.

Very truly yours,

/s/ Kyle L. Jennings

Kyle L. Jennings

Executive Vice President

General Counsel & Secretary

[letterhead of AIG Annuity Insurance Company]

December 12, 2008

Maiden Lane II LLC and
Federal Reserve Bank of New York
33 Liberty Street,
New York, New York 10045

Ladies and Gentlemen:

I am Jim Coppedge, Senior Vice President and General Counsel of The Variable Annuity Life Insurance Company, a Texas corporation (the “Company”), and, as such, I am generally familiar with the corporate affairs of the Company.

In connection with the execution and delivery of (i) that certain Asset Purchase Agreement, dated as of December 12, 2008 (the “Asset Purchase Agreement”), among the Company and the other sellers named therein, as sellers (together with the Company, the “Sellers”), AIG Securities Lending Corp., as agent, American International Group, Inc., Maiden Lane II LLC, as buyer (the “Buyer”), and Federal Reserve Bank of New York, as controlling party (the “Controlling Party”), and (ii) that certain Security Agreement, dated as of December 12, 2008 (the “Security Agreement”), among the Buyer, the Controlling Party, the Sellers and The Bank of New York Mellon, I have examined such corporate records and other documents, and reviewed such questions of law, as I have deemed necessary or appropriate for purposes of this opinions, and on the basis of such knowledge, examination and review, it is my opinion that:

(1)The Company is an existing corporation in good standing under the laws of the State of Texas with corporate power and authority to execute and deliver each of the Asset Purchase Agreement and the Security Agreement and to perform its obligations under each of the Asset Purchase Agreement and the Security Agreement.

(2)Each of the Asset Purchase Agreement and the Security Agreement has been duly authorized, executed and delivered by the Company.

(3)The execution and delivery of the each of the Asset Purchase Agreement and the Security Agreement do not, and the performance of its obligations thereunder in accordance with its terms will not, (i) violate the Federal laws of the United States or the laws of the State of Texas or the certificate of incorporation or bylaws of the Company or (ii) result in or require the creation or imposition of any lien on any assets of the Company; provided, however, that with respect to the opinion expressed in paragraph (i) above, I express no opinion with respect to Federal or state securities laws, other antifraud laws or fraudulent transfer laws.

(4)All regulatory consents and approvals required to be obtained by the Company on or prior to the date hereof under the Federal laws of the United States or the laws of the State of Texas for the execution and delivery by the Company of each of the Asset Purchase Agreement and the Security Agreement have been obtained; provided, however, that I express no view in this paragraph with respect to Federal or state securities laws or matters relating to the title or ownership of, liens or security interests in, or the transfer of, property.

(5)To my knowledge, there is no claim, action, suit, proceeding or investigation pending or threatened against the Company which in any manner challenges or seeks to prevent, enjoin, alter or materially delay the consummation of the transactions contemplated by the Asset Purchase Agreement and the Security Agreement.

The foregoing opinion is limited to the Federal laws of the United States and the laws of the State of Texas, and I am expressing no opinion as to the effect or requirements of the laws of any other jurisdiction.

I have relied as to certain matters on information obtained from public officials, officers of the Company and other sources believed by me to be responsible, and I have assumed that the signatures on all documents reviewed by me are genuine, an assumption that I have not independently verified.

The opinions set forth herein are given as of the date hereof and I assume no obligation to advise you or any other person as to any legal development or factual matters arising subsequent to the date hereof that might affect the opinions expressed herein.

This opinion is being delivered to you as the Buyer in connection with the transactions contemplated by the Asset Purchase Agreement and the Security Agreement and may not be relied upon by any other person or for any other purpose without my prior written consent.

Very truly yours,

/s/ Jim Coppedge

EX-12

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American International Group, Inc., and Subsidiaries

Exhibit 12

Computation of Ratios of Earnings to Fixed Charges

Three Months Ended March 31, (in millions, except ratios)		2010		2009
Earnings:
	Pre-tax income (loss)(a):	$	834	$	(6,548	)
	Add – Fixed charges		2,128		3,182
Adjusted Pre-tax income (loss)			2,962		(3,366	)
Fixed charges:
	Interest expense	$	1,843	$	2,794
	Portion of rent expense representing interest		61		87
	Interest credited to policy and contract holders		224		301
Total fixed charges		$	2,128	$	3,182
	Preferred stock dividend requirements	$	-	$	1,012
Total fixed charges and preferred stock dividend requirements		$	2,128	$	4,194
Total fixed charges, excluding interest credited to policy and contract holders		$	1,904	$	2,881
Ratio of earnings to fixed charges:
	Ratio		1.39		n/a
	Coverage deficiency		n/a		(6,548	)
Ratio of earnings to fixed charges and preferred stock dividends:
	Ratio		1.39		n/a
	Coverage deficiency		n/a		(7,560	)
Ratio of earnings to fixed charges, excluding interest credited to policy and contract holders(b) :
	Ratio		1.56		n/a
	Coverage deficiency		n/a		(6,247	)

(a)

From continuing operations, excluding undistributed earnings (loss) from equity method investments and capitalized interest.

(b)

The Ratio of earnings to fixed charges excluding interest credited to policy and contract holders removes interest credited to guaranteed investment contract (GIC) policyholders and guaranteed investment agreement (GIA) contract holders. Such interest expenses are also removed from earnings used in this calculation. GICs and GIAs are entered into by AIG's insurance subsidiaries, principally SunAmerica Life Insurance Company and AIG Financial Products Corp. and its subsidiaries, respectively. The proceeds from GICs and GIAs are invested in a diversified portfolio of securities, primarily investment grade bonds. The assets acquired yield rates greater than the rates on the related policyholders obligation or contract, with the intent of earning a profit from the spread.

181

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Computation of Ratios of Earnings to Fixed Charges

EX-31

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American International Group, Inc., and Subsidiaries

Exhibit 31

CERTIFICATIONS

I, Robert H. Benmosche, certify that:

    1. I have reviewed this Quarterly Report on Form 10-Q of American International Group, Inc.;

    2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

    3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

    4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

    (a)  Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

    (b)  Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

    (c)  Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

    (d)  Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

    5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

    (a)  All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

    (b)  Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date: May 7, 2010

/s/ ROBERT H. BENMOSCHE

Robert H. Benmosche
President and Chief Executive Officer

182

American International Group, Inc., and Subsidiaries

CERTIFICATIONS

I, David L. Herzog, certify that:

    1. I have reviewed this Quarterly Report on Form 10-Q of American International Group, Inc.;

    2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

    3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

    4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

    (a)  Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

    (b)  Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

    (c)  Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

    (d)  Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

    5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

    (a)  All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

    (b)  Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date: May 7, 2010

/s/ DAVID L. HERZOG

David L. Herzog
Executive Vice President
and Chief Financial Officer

183

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CERTIFICATIONS
CERTIFICATIONS

EX-32

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American International Group, Inc., and Subsidiaries

Exhibit 32

CERTIFICATION

    In connection with this Quarterly Report on Form 10-Q of American International Group, Inc. (the "Company") for the quarter ended March 31, 2010, as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Robert H. Benmosche, President and Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, that to my knowledge:

    (1)  The Report fully complies with the requirements of Section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934; and

    (2)  The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: May 7, 2010

/s/ ROBERT H. BENMOSCHE

Robert H. Benmosche
President and Chief Executive Officer

    The foregoing certification is being furnished solely pursuant to 18 U.S.C. Section 1350 and is not being filed as part of the Report or as a separate disclosure document.

184

American International Group, Inc., and Subsidiaries

CERTIFICATION

    In connection with this Quarterly Report on Form 10-Q of American International Group, Inc. (the "Company") for the quarter ended March 31, 2010, as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, David L. Herzog, Executive Vice President and Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, that to my knowledge:

    (1)  The Report fully complies with the requirements of Section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934; and

    (2)  The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: May 7, 2010

/s/ DAVID L. HERZOG

David L. Herzog
Executive Vice President and
Chief Financial Officer

    The foregoing certification is being furnished solely pursuant to 18 U.S.C. Section 1350 and is not being filed as part of the Report or as a separate disclosure document.

185

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CERTIFICATION
CERTIFICATION