American International Group, Inc. 2009 Annual Report American International Group, Inc. (AIG) is a leading international insurance organization with operations in more than 130 countries and jurisdictions. AIG companies serve com- mercial, institutional, and individual customers through one of the most extensive worldwide property casualty networks of any insurer. In addition, AIG companies are leading providers of life insurance and retirement services around the world. AIG common stock is listed on the New York Stock Exchange, as well as the stock exchanges in Ireland and Tokyo. Chairman’s Johnson, George Miles, and Morris Offi t, Message represents a collective vote of confi dence in the company, its many talented people, Harvey Golub and its strategy going forward, and a Non-Executive personal willingness to deal with one of Chairman of the Board the most complicated restructurings in business history. They have been working extraordinarily hard and will continue to do so under very challenging conditions. I thank them all for their support. During the year, Stephen Bollenbach, n behalf of AIG’s Board of Martin Feldstein, James Orr, Virginia Directors, I am pleased to be Rometty, Michael Sutton, Edmund Tse, able to report to you that and Ed Liddy retired after a period of O the company and the Board have time spent dealing with the liquidity crisis made substantial progress over the past and the initial work on the government year in addressing and resolving a number bailout. We thank them for their service. of the critical issues facing the company. Most notably, in 2008, Ed Liddy joined the In addition to the positive developments company as Chairman and Chief Execu- concerning AIG that Bob Benmosche tive Offi cer as a public service and did so discusses in his letter, including reorganiz- at the behest of the U.S. Department of ing and restructuring across the company, the Treasury. He worked tirelessly to put the Board has undertaken a number of together a strategic plan, large elements of measures to improve governance and over- which are in place today and represent a sight of the company, and put in place new solid foundation on which we are building. initiatives designed to increase the possibil- Ed deserves our thanks for a job well done ity of creating value for the shareholders under extreme public pressure and diffi cult after paying back the Federal Reserve circumstances. Bank of New York (FRBNY) and the U.S. The workload required of the Board is Department of the Treasury. as high as I’ve ever seen in any company AIG today has a Board with new, and is likely to continue for some time. very experienced people. It represents a Accordingly, we plan to add several new wealth of talent available to help AIG move directors to help. Sadly, I must also note forward. These new additions include the retirement of Dennis Dammerman for Laurette Koellner, retired President of personal health reasons. Dennis has been Boeing International; Christopher Lynch, an extraordinary director, and his wisdom former KPMG and knowledge have been invaluable to his Our goal is to fully repay the U.S. gov- National Partner in fellow directors. He has been a marvelous ernment for its fi nancial assistance, Charge–Financial colleague, and we will all miss him. and move forward to help ensure our Services; Arthur The company has also strengthened its remaining businesses are thriving and Martinez, former senior management team, which now con- profi table as soon as is practicable. Chairman of the sists of both longtime, experienced AIG in- Board, President, siders as well as seasoned newcomers who and Chief Executive Offi cer of recognize the promise of our institution. Sears, Roebuck and Co.; Steve Miller, This team is focused on building successful former Chairman and CEO of Delphi businesses for AIG, creating value through Corporation; and Doug Steenland, former the sale of some businesses and strengthen- President and Chief Executive Offi cer of ing the company’s capital structure. Northwest Airlines Corporation; as well as Among the new leaders of our company Bob Benmosche and me. Their willingness is Peter Hancock, Executive Vice Presi- to serve on AIG’s Board, along with dent, Finance, Risk, and Investments. Peter Dennis Dammerman, Suzanne Nora AIG 2009 Annual Report 1 spent 20 years at J.P. Morgan, and is known repay the U.S. government for its fi nancial for his expertise in fi nance and mortgage assistance, and move forward to help instruments. He now oversees Finance, ensure our remaining businesses are thriv- Risk, Audit, Investments, Strategic Plan- ing and profi table as soon as is practicable. ning, and AIG Financial Products Corp. Achieving these objectives will not Thomas Russo has joined us as Executive be simple or easy. First, we will need the Vice President, Legal, Compliance, Regu- continued backing of the government latory Affairs and Government Affairs, and for some time, and reasonable fi nancial General Counsel. Tom, the former Chief market conditions within which we can Legal Offi cer of Lehman Brothers Hold- dispose of certain assets and recapitalize ings, is one of the most respected legal others. Most important, we must retain our minds and counselors in fi nancial services. talented employees and the huge amount Sandra Kapell, Vice President and of intellectual capital they have created Global Head of Talent Strategy and over decades. To do that, we will need to Performance Systems, came from MetLife, have a compensation system that pays for where she implemented powerful per- performance, to be sure, but pays competi- formance management systems. Michael tively in amount and composition. Cowan, Senior Vice President and Chief The Board recognizes the extraordinary Administrative Offi cer, brings extensive commitment and effort AIG people have administrative experience from Merrill made during this most diffi cult period. Lynch and now has oversight responsibili- Like millions of others, many of our em- ties for AIG’s operations and systems, cor- ployees lost a substantial portion of their porate administration, and the separation life’s savings through no fault of their own offi ce. Together with the many talented and have suffered the pain of watching a people who stayed through the crisis, these company in which they had great pride individuals bring additional experience and teeter on the edge of collapse. While insight that will greatly benefi t AIG. we can’t lose sight of the lessons of the The Board has been intently focused recent past, our focus as a Board is to deal on working with the FRBNY and the with the hand we have been dealt, repay U.S. Department of the Treasury, as well the government, and build a new AIG. as dealing with the pay guidelines and To the extent we succeed, we will rebuild a restrictions imposed by the Special Master, company we can all be proud of, one once who has ultimate authority over a number again composed of industry-leading of major compensation decisions. While businesses that provide valuable products we can pay the vast majority of people and services to our customers, secure jobs competitively, on occasion, these restric- for our employees, and an attractive return tions and his decisions have yielded out- to our shareholders. This is the task we comes that make little business sense. For face, and with the strong leadership of Bob example, in some cases, we are prevented and his management team, as well as the from providing market competitive efforts of our entire employee group, I compensation to retain some of our own have great confi dence that we will succeed. most experienced and best executives. This hurts the business and makes it harder to repay the taxpayers. All of our actions, as well as those of management, are aimed at restoring AIG Harvey Golub as a strong company with an effective February 26, 2010 governance system, solid businesses, and a risk profi le and capital structure in which our customers, regulators, employees, shareholders, and other stakeholders can have confi dence. Our goal is to fully 2 AIG 2009 Annual Report To Our great organization built over many years. Shareholders But nothing has impressed me more than observing fi rsthand the skilled and dedi- Robert H. Benmosche cated employee base of this company. It is President and only because of their hard work, experi- Chief Executive Offi cer ence, and depth of knowledge that we have succeeded in stabilizing our businesses and setting the strategies for moving forward. It is these strategies and achievements that I want to discuss in this letter. Before doing so, however, let me review uring this past year, AIG made our fi nancial performance in 2009. We substantial progress in refocusing operated under very diffi cult economic and our major businesses on growth market conditions, particularly in the fi rst D and profi tability, set in place the part of the year, and we are proud that framework for repaying U.S. taxpayers for we have started to recover. Business reten- their support of our company during its tion has improved. Employee retention has darkest days, and signifi cantly wound down improved. And revenues have improved. and de-risked the AIG Financial Products Overall, we reported losses totaling Corp. (AIGFP) derivatives portfolio. We $10.9 billion in 2009, compared with also revised our employee compensation losses of $99.3 billion in 2008, a substantial programs in order to motivate and reward improvement. AIG’s cadre of Let me spend a minute explaining The fundamental purpose of our outstanding profes- $5.2 billion of the pre-tax losses we sus- company is to serve our clients profes- sionals, who will tained in the fourth quarter.