A MESSAGE FROM THE PUBLISHER

The following is a statement distributed by AIG Australia to brokers. We have not altered this statement, so it has not been subjected to our normal standards of journalistic examination. We have charged a fee for the use of our website.

AIG Australia – Getting on with business 

I would like to take this opportunity to share with you some information that we see as critical to AIG Australia and which may assist you in your conversations with your clients.

Let me assure you, AIG Australia is in a strong position and we are focused on getting on with doing business. There are a number of reasons why we are in this strong position.

Firstly, AIG Australia's operations have separate capital from AIG Inc in the US. This is clearly illustrated in the information below.

Secondly, AIG Australia is well provisioned to cover all current and future liabilities. We exceed APRA's minimum capital adequacy requirements and we are in regular communication with the regulators.

If you have any further questions, please feel free to contact me by email at chris.townsend@aig.com.

Who are we?

AIG's general insurance business is conducted in Australia by a branch of American Home Assurance Company (AHAC) and we trade under the business name of AIG Australia. As at 17 September 2008 American Home Assurance Company's current Standard & Poor's financial strength rating is A+/Developing. AIG Australia is part of AIG's global franchise, American International Underwriters (AIU).

AIU is a profitable, pre-eminent business with a protected, highly regulated surplus. It will continue to defend its market position and profitably grow its business. AIU will continue to be a leader in the world markets.

• AIU currently has over $US4 billion in cash available.
• AIU entities' ratings still remain excellent and higher than many commercial insurance companies.
• AIU's ability to pay claims and its commitment to writing challenging risks is undiminished.
• AIU's capital position remains intact and available to underwrite policies and pay policyholders claims.
• AIU's operations include an employee base of 21,000, spanning over 80 countries, with 10 regional offices in major city centres.

What is the regulator's (APRA) role in ensuring AIG Australia meets its financial obligations?

AIG Australia is regulated by the Australian Prudential Regulation Authority (APRA). We maintain assets in Australia in excess of our liabilites in Australia as stipulated by the Prudential Regulation.

We are communicating with APRA on a regular basis and keeping them informed of developments as they arise. In fact, the Federal Treasurer has told Parliament that the Australian AIG operations are working within APRA's prudential regulations and that APRA is liaising with these businesses.

Section 28 of the Insurance Act requires all general insurers to maintain assets in Australia (excluding goodwill and other amounts excluded by this prudential standard) of a value that equals or exceeds the total amount of the general insurer's liabilities in Australia. This requirement is designed to ensure that the total value of assets held within the jurisdictional reach and the Australian courts is sufficient to meet the general insurer's liabilities in Australia for the purposes of subsection 116(3) of the Insurance Act 1973.

What are AIG Australia's assets?

AIG Australia exceeds APRA's minimum capital adequacy with net assets of $AUD260 million and an investment portfolio of $AUD725 million.

AHAC's investment portfolio is made up of more than 80% in fixed interest securities with the balance invested in equities, realty and cash.

Further information may be obtained at APRA's website: http://www.apra.gov.au/Statistics/General-Insurers-Statistics.cfm

We are well provisioned to cover our current and future liabilities.

Despite the recent events in New York AIG Australia's assets remain exactly the same. The liquidity of AIG Australia remains strong, as is our ability to pay claims. An indication of this dedication is to consider that in Australia, in 2007 we handled nearly 100,000 individual claims, paying in excess of $AUD225 million in settlements.

How do you distinguish yourself from HIH?

AIG Inc's current financial challenges are due to a short-term liquidity crisis in our non-insurance subsidiaries (Financial Products). AIG Australia's core insurance businesses have not in any way been a contributing factor to this financial situation. We continue to operate strongly and profitably.

APRA has robust supervision and regulatory controls. It prescribes specific requirements on capital adequacy. We exceed these requirements.

Prudential regulation covering the operations and conduct of general insurers like ourselves has been significantly strengthened over recent years following the HIH collapse. This has led to much more robust supervision and regulatory controls and risk management within Australia which are overseen by APRA.

Are you for sale?

AIG's General Insurance operations in the Australasian region (Australia, PNG and New Zealand) are categorically not for sale.

Both AIG's CEO, Ed Liddy, and AIU's CEO, Nic Walsh, have stated that there are absolutely no plans to sell this business and that the AIU business remains a core asset and a key part of AIG's future and success.

Can you pay claims/liabilities?

We are well provisioned to cover our current and future liabilities.

Despite recent events, AIG Australia's assets remain exactly the same. The liquidity of AIG Australia remains strong, as is our ability to pay claims.

We continue to write new business and are buoyed by the support and commitment shown by our staff, clients and partners and we look forward to your continued support.

What have the US regulators being saying?

"AIG's insurance companies are financially sound, with substantially more in assets than they need to pay all valid present and projected claims", Insurance Superintendent Eric Dinallo today reassured New York policyholders. (extract from press release issued from the New York State Insurance Dept - 22/9/08: http://www.ins.state.ny.us/press/2008/p0809222.htm)

What has the reaction been over the last week?

Our clients have expressed support and are staying with us. Many of our largest clients and brokers have strongly supported our position.

We've been encouraged by the many customers, brokers and business partners who have called to offer their support and encouragement over the last few telling days.

Indeed, such support is testament to the steadfast efforts of our 600+ staff around the country who continue to look after the needs of our customers everyday.

The uncertainty hanging over our parent company has been cleared and so now we focus on getting on with business here at AIG Australia.

We have a rejuvenated attitude and eagerness to getting on with business, building value for our customers and supporting the confidence that our broker and business partners have shown towards us over recent times.

Chris Townsend
CEO AIG Australasia