A variable interest entity (VIE) is a legal entity that does not have sufficient equity at risk to finance its activities without additional subordinated financial support or is structured such that equity investors lack the ability to make significant decisions relating to the entity's operations through voting rights and do not substantively participate in the gains and losses of the entity. Consolidation of a VIE by its primary beneficiary is not based on majority voting interest, but is based on other criteria discussed below.

While AIG enters into various arrangements with VIEs in the normal course of business, AIG's involvement with VIEs is primarily via its insurance companies as a passive investor in debt securities (rated and unrated) and equity interests issued by VIEs. In all instances, AIG consolidates the VIE when it determines it is the primary beneficiary. This analysis 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.

AIG's total off-balance sheet exposure associated with VIEs, primarily consisting of financial guarantees and commitments to real estate and investment funds, was $0.4 billion and $1.0 billion at June 30, 2011 and December 31, 2010, 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)		June 30, 2011		December 31, 2010		June 30, 2011		December 31, 2010		June 30, 2011		December 31, 2010

	AIA/ALICO SPVs	$	16.8	$	48.6	$	0.5	$	0.9	$	-	$	-
	Real estate and investment funds		2.1		3.8		0.9		1.2		0.1		0.1
	Commercial paper conduit		0.6		0.5		0.3		0.2		-		-
	Affordable housing partnerships		2.7		2.9		0.4		0.4		-		-
	Other		4.4		4.7		1.9		2.1		-		-
	VIEs of businesses held for sale		-		0.4		-		-		-		-

Total		$	26.6	$	60.9	$	4.0	$	4.8	$	0.1	$	0.1

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


(in billions)		Total VIE Assets		On-Balance Sheet		Off-Balance Sheet		Total

June 30, 2011
	Real estate and investment funds	$	18.6	$	2.3	$	0.3	$	2.6
	Affordable housing partnerships		0.6		0.6		-		0.6
	Maiden Lane Interests		33.4		7.7		-		7.7
	Other		1.8		0.1		-		0.1
	VIEs of businesses held for sale		0.2		0.2		-		0.2

Total		$	54.6	$	10.9	$	0.3	$	11.2

December 31, 2010
	Real estate and investment funds	$	18.5	$	2.5	$	0.3	$	2.8
	Affordable housing partnerships		0.6		0.6		-		0.6
	Maiden Lane Interests		40.1		7.6		-		7.6
	Other		1.6		0.1		0.5		0.6
	VIEs of businesses held for sale		2.0		0.4		0.1		0.5

Total		$	62.8	$	11.2	$	0.9	$	12.1

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

		Consolidated VIEs				Unconsolidated VIEs


(in billions)		June 30, 2011		December 31, 2010		June 30, 2011		December 31, 2010

Assets:
	Available for sale securities	$	0.5	$	3.3	$	-	$	-
	Trading securities		1.7		8.1		7.8		7.7
	Mortgage and other loans receivable		1.0		0.7		-		-
	Other invested assets		19.5		18.3		2.9		3.1
	Other asset accounts		3.9		30.1		-		0.1
	Assets held for sale		-		0.4		0.2		0.3

Total		$	26.6	$	60.9	$	10.9	$	11.2

Liabilities:
	Other long-term debt	$	2.2	$	2.6	$	-	$	-
	Other liability accounts		1.8		2.2		-		-

Total		$	4.0	$	4.8	$	-	$	-

See Notes 6, 7 and 11 to the Consolidated Financial Statements in AIG's 2010 Annual Report on Form 10-K for additional information on RMBS, CMBS, and other asset-backed securities.