AIG Second Quarter 2008 Economic Capital - August 2008 Update

1) American International Group (AIG) uses an economic capital model to estimate the capital required to cover unexpected losses within a target confidence level and time horizon. Economic capital is compared to available capital which is the difference between the market value of assets and liabilities. 2) AIG uses economic capital to manage risk appetite, assess business performance on a risk-adjusted basis, allocate capital, engage in mergers and acquisitions, and develop risk retention strategies. 3) As of June 2008, AIG believed its economic capital model confirmed its ability to meet consolidated obligations at the confidence level, though volatile markets made it difficult to determine a stable measure of excess capital.