American International Group, Inc.

70 Pine Street, New York, N.Y. 10270

NOTICE OF ANNUAL MEETING OF SHAREHOLDERS

TO BE HELD AUGUST 11, 2005

June 27, 2005

To the Shareholders of

 AMERICAN INTERNATIONAL GROUP, INC.:

      The Annual Meeting of Shareholders of AMERICAN INTERNATIONAL GROUP, INC. (“AIG”) will be held at the offices of AIG at 72 Wall Street, Eighth Floor, New York, New York, on Thursday, August 11, 2005, at 10:00 o’clock A.M., for the following purposes:

      Shareholders of record at the close of business on June 24, 2005 will be entitled to vote at the meeting. During the ten days prior to the meeting, a list of the shareholders will be available for inspection at the offices of AIG at 70 Pine Street, New York, New York.

            If you plan on attending the meeting, please remember to bring photo identification with you. If you cannot be present at the meeting, please sign the enclosed proxy card and return it at once in the accompanying postage prepaid envelope or vote your shares by telephone or over the Internet.

American International Group, Inc.

70 Pine Street, New York, N.Y. 10270

PROXY STATEMENT

June 27, 2005

      The enclosed proxy is solicited on behalf of the Board of Directors for use at the Annual Meeting of Shareholders of American International Group, Inc., a Delaware corporation (“AIG”), to be held on August 11, 2005, or at any adjournment thereof. It may be revoked at any time prior to its use. Proxies will be voted as specified and, unless otherwise specified, will be voted for the election of directors, for the ratification of the selection of PricewaterhouseCoopers LLP as AIG’s independent registered public accounting firm for 2005, and otherwise in accordance with the judgment of the persons voting the proxy on any other matter properly brought before the Annual Meeting. These proxy materials are being mailed to shareholders of AIG commencing on or about June 27, 2005.

      Only shareholders of record at the close of business on June 24, 2005 will be entitled to vote at the Annual Meeting. On that date, 2,595,066,648 shares (exclusive of shares held by AIG and certain subsidiaries) of common stock, par value $2.50 per share (“AIG Common Stock”), were outstanding, each such share of AIG Common Stock having one vote.

      Proxies marked as abstaining, and any proxies returned by brokers as “non-votes” on behalf of shares held in street name because beneficial owners’ discretion has been withheld as to one or more matters on the agenda for the Annual Meeting, will be treated as present for purposes of determining a quorum for the Annual Meeting. With respect to the election of directors, any shares not voted as a result of an abstention or a broker non-vote will have no impact on the vote. With respect to the ratification of the selection of PricewaterhouseCoopers LLP as AIG’s independent registered public accounting firm, a broker non-vote will have no impact on the vote while an abstention will effectively be treated as a vote against the proposal.

      Fifteen directors are to be elected at the meeting to hold office until the next annual election and until their successors are duly elected and qualified. It is the intention of the persons named in the accompanying form of proxy to vote for the election of the nominees listed below, all of whom are currently members of your Board of Directors. Frank J. Hoenemeyer is not standing for re-election, and Messrs. M.R. Greenberg and Howard I. Smith resigned from the Board of Directors in June 2005. It is not expected that any of the nominees will become unavailable for election as a director, but if any should prior to the meeting, proxies will be voted for such persons as the persons named in the accompanying form of proxy may determine in their discretion. Directors will be elected by a plurality of the votes cast. The nominees and certain information supplied by them to AIG are as follows:

      The principal occupation or affiliation of the nominees is shown in bold face type. Each of the directors who is also an executive officer of AIG has, for more than five years, occupied an executive position with AIG or companies that are now its subsidiaries, and, except as hereinafter noted, each other director has occupied an executive position with his company or organization listed above for at least five years. Mr. William Cohen served as United States Secretary of Defense from 1997 to January 2001. Mr. Hammerman served as Deputy Commissioner of Legal Matters for the New York City Police Department from 2002 through 2004. He was employed by Merrill Lynch & Co. from 1978 to 2002, with his final position being Vice Chairman. Mr. Holbrooke served as United States Ambassador to the United Nations from 1999 to 2001. Mr. Zarb served as Chairman and Chief Executive Officer of the National Association of Securities Dealers, Inc. from February 1997 until October 2000 and The Nasdaq Stock Market, Inc. from February 1997 until January 2001 and as Chairman of those organizations until September 2001.

Corporate Governance, Board of Directors and Committees

      AIG’s Board has established the AIG Corporate Governance Guidelines (the “Guidelines”), which are included as Appendix A to this Proxy Statement, to promote the effective functioning of the Board and its committees, to promote the interests of shareholders and to establish a common set of expectations for the governance of the organization. All of AIG’s corporate governance materials, including the Guidelines and Committee charters, as well as AIG’s Code of Conduct for employees, are published in the Corporate Governance section of AIG’s corporate website at www.aigcorporate.com. AIG’s Board regularly reviews

      In addition, AIG has adopted a Director, Executive Officer and Senior Financial Officer Code of Business Conduct and Ethics and a Code of Conduct for employees, which are available free of charge or through the Investor Information section of www.aigcorporate.com. Any amendment to AIG’s Director, Executive Officer and Senior Financial Officer Code of Business Conduct and Ethics and any waiver applicable to AIG’s directors, executive officers or senior financial officers will be posted on AIG’s website within the time period required by the Securities and Exchange Commission (“SEC”) and the NYSE.

      Using the Director Independence Standards, which are included as Appendix B to this Proxy Statement and which were last amended in March 2005 to conform to changes in NYSE rules, the Board, upon the recommendation of the Nominating and Corporate Governance Committee, determined that Mrs. Hills and Messrs. Aidinoff, Chia, Marshall Cohen, William Cohen, Feldstein, Hammerman, Holbrooke, Miles, Offit and Zarb are independent under the current NYSE listing standards.

      In making their independence determinations, the Nominating and Corporate Governance Committee and the Board reviewed the charitable contributions made by The Starr Foundation to the organizations with which the directors are affiliated. The Starr Foundation was established and principally funded by C.V. Starr and his estate.

      The Starr Foundation made contributions of $1,325,000 to the National Bureau of Economic Research (the “Bureau”) to establish the C.V. Starr Research Fund for International Economics (the “Research Fund”) in 2002. Mr. Feldstein is president and chief executive officer of the Bureau. These donations were made solely to establish the Research Fund, and Mr. Feldstein has advised the Nominating and Corporate Governance Committee that there is no present intention to seek additional funding for the Bureau from The Starr Foundation. The Board, upon the recommendation of the Nominating and Corporate Governance Committee, has determined that these contributions do not impair Mr. Feldstein’s independence for purposes of the NYSE listing standards.

      There were five regularly scheduled meetings of the Board during 2004 and seven meetings to date in 2005. All of the directors attended at least 75 percent of the aggregate of all meetings of the Board and of the committees of the Board on which they served. The non-management directors meet in executive session, without any management directors present, either before or after each regularly scheduled Board meeting. Mr. Zarb presides at these executive sessions.

      AIG has adopted policies on reporting of concerns regarding accounting and other matters and on communicating with non-management directors, which are available in the Corporate Governance section of www.aigcorporate.com.

Audit Committee

      The Audit Committee, which held 16 meetings during 2004 and 14 meetings to date in 2005, assists the Board’s oversight of AIG’s financial statements and compliance with legal and regulatory requirements, the qualifications and performance of AIG’s independent registered public accounting firm and the performance of AIG’s internal audit function. The Audit Committee is directly responsible for the appointment, compensation, retention and oversight of the work of AIG’s independent registered public accounting firm. Mr. Frank J. Hoenemeyer chaired the Audit Committee, which included Messrs. Aidinoff, Chia and Zarb and Mrs. Hills,

Nominating and Corporate Governance Committee

      Mr. Aidinoff chairs the Nominating and Corporate Governance Committee, which held five meetings in 2004 and six meetings to date in 2005 and which also included Messrs. Marshall Cohen and Zarb and Mrs. Hills, all of whom the Board has determined, upon the recommendation of the Nominating and Corporate Governance Committee, are independent under NYSE listing standards. The primary purposes of the Nominating and Corporate Governance Committee are to recommend individuals to the Board of Directors for nomination, election or appointment as members of the Board and its committees and to review on an ongoing basis the corporate governance principles and practices that should apply to AIG. In early 2005, the Nominating and Corporate Governance Committee nominated Mr. Hammerman to serve as a director, and the Board accepted the recommendation and elected him a director on March 7, 2005. Mr. Hammerman was initially identified by Mr. Greenberg as a potential nominee for director. Also in 2005, the Nominating and Corporate Governance Committee nominated Messrs. Miles and Offit to serve as directors, and the Board accepted the recommendation and elected them directors on April 21, 2005. Messrs. Miles and Offit were initially identified as potential nominees by Mr. Richard Beattie of Simpson Thacher & Bartlett LLP, counsel to the independent directors, and Mr. Zarb, respectively.

      The Nominating and Corporate Governance Committee will consider nominees recommended by the shareholders. The Guidelines include a listing of the characteristics that the Nominating and Corporate Governance Committee considers important for nominees for director. The Nominating and Corporate Governance Committee will evaluate shareholder nominees on the same basis as all other nominees. Shareholders who wish to submit nominees for director for consideration by the Nominating and Corporate Governance Committee for election at the 2006 Annual Meeting of Shareholders may do so by submitting in writing such nominees’ names, in compliance with the procedures described under “Shareholder Proposals For 2006 Annual Meeting” in this Proxy Statement.

Compensation Committee

      The Compensation Committee, which held six meetings during 2004 and seven meetings to date in 2005, oversees the administration of AIG’s compensation programs, establishes the compensation of the Chief Executive Officer and makes recommendations with respect to compensation programs applicable to senior executives and other employee compensation. Messrs. Marshall Cohen, William Cohen, Hoenemeyer and Holbrooke are the current members of the Compensation Committee, with Mr. Marshall Cohen serving as the Chairman. The Board has determined, upon the recommendation of the Nominating and Corporate Governance Committee, that all members of the Compensation Committee are independent under the NYSE listing standards.

Other Committees

      The principal function of the Executive Committee, which acted only by unanimous written consent in 2004 and 2005, is to act for the Board between Board meetings. In 2004, Messrs. Aidinoff, Greenberg, Hoenemeyer, Smith and Zarb and Mrs. Hills comprised the Executive Committee, with Mr. Zarb serving as the Chairman. On

      The Finance Committee, which oversees the financial affairs and investment activities of AIG and its subsidiaries, held 12 meetings during 2004 and four meetings to date in 2005. Ms. Futter and Messrs. Aidinoff (until May 2004), Chia, Feldstein, Greenberg (until March 2005), Hoenemeyer, Holbrooke, Smith (until March 2005), and Zarb served as members of the Finance Committee during 2004 and to date in 2005. The Finance Committee was chaired by Mr. Greenberg until March 2005 and is now chaired by Mr. Sullivan.

      On April 21, 2005, the Board established two new committees: the Regulatory, Compliance and Legal Committee and the Public Policy and Social Responsibility Committee. Current members of the Regulatory, Compliance and Legal Committee are Messrs. Hammerman, who serves as chairman, Aidinoff and Marshall Cohen and Ms. Futter. The Public Policy and Social Responsibility Committee is chaired by Mr. Holbrooke and includes Messrs. William Cohen, Feldstein and Miles.

      Mr. Zarb, in his capacity as Interim Chairman, serves as an ex officio member of all standing committees of the Board.

Ownership of Certain Securities

      The only persons who, to the knowledge of AIG, own in excess of five percent of the Common Stock of AIG are FMR Corp., 82 Devonshire Street, Boston, Massachusetts 02109, which filed a Schedule 13G on February 14, 2005, with respect to the 161,203,013 shares of AIG Common Stock held by it, and Starr International Company, Inc. (“SICO”). According to the Schedule 13G filed by FMR Corp., it is the parent company of various entities (collectively, “Fidelity”) that provide investment advisory and management services to the Fidelity Group of mutual funds. The FMR Corp. Schedule 13G states that Fidelity is the beneficial owner of an aggregate of 5.672 percent of the outstanding AIG Common Stock, 147,737,387 shares, as a result of providing these services to the funds, and that Fidelity International Limited, which operates as an entity separate from FMR Corp. and Fidelity, is the beneficial owner of 6,949,031 shares of AIG Common Stock. At March 31, 2005, SICO (which has executive offices at Clifton House, Lower Fitzwilliam Street, Dublin 2, Ireland) held 310,905,397 shares, or 11.98 percent, of the outstanding AIG Common Stock. The Starr Foundation and C.V. Starr & Co., Inc. (“Starr”) (both having executive offices at 345 Park Avenue, New York, New York) held 50,529,531 shares and 47,337,246 shares (including 18,644,278 shares held by the C.V. Starr & Co., Inc. Trust), or 1.95 percent and 1.82 percent, respectively, of the outstanding AIG Common Stock on that date.

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      At March 31, 2005, Mr. Greenberg and Mr. Tizzio owned 56,250 shares and 87,068 shares, respectively, of Transatlantic common stock and the named individuals also held options which may be exercised within 60 days with respect to shares of Transatlantic and 21st Century Insurance Group (“21st Century”) as follows: Transatlantic common stock, $1.00 par value per share: Greenberg— 137,500 shares, Smith— 29,374 shares and Tizzio— 54,686 shares; 21st Century common stock, without par value: Smith— 36,000 shares.

Section 16(a) Beneficial Ownership Reporting Compliance

      Section 16(a) of the Securities Exchange Act of 1934, as amended, requires directors, executive officers, and ten percent holders of AIG Common Stock to file reports concerning their ownership of AIG equity securities. Based solely on the review of the Forms 3, 4 and 5 furnished to AIG and certain representations made to AIG, AIG believes that the only filing deficiencies under Section 16(a) by its directors, executive officers, and ten percent holders during 2004 were: one late report filed by Mr. Steven J. Bensinger, an executive officer, reporting the purchase of 24 shares on March 5, 2004; one late report filed by Mr. Axel I. Freudmann, an executive officer, reporting three sales involving an aggregate of 15,331 shares on December 2, 2004, December 21, 2004 and December 22, 2004; three late reports filed by Mr. Greenberg reflecting

Compensation of Directors and Executive Officers

Compensation of Directors

      Directors who are employees of AIG or its subsidiaries do not receive fees for service on the Board or the committees of the Board. Each other director of AIG currently receives director’s fees of $40,000 per year, plus $1,500 for each Board meeting attended. An annual fee of $5,000 is paid to each member of each committee of the Board. Members of each committee also receive $1,500 for each committee meeting attended. Directors who are not employees of AIG or its subsidiaries are granted 500 shares of AIG Common Stock annually, receipt of which is deferred until retirement from the Board, pursuant to the AIG Director Stock Plan. In addition, under the AIG Amended and Restated 1999 Stock Option Plan, non-management directors receive annually an option which vests after one year and is exercisable for nine years thereafter to purchase 2,500 shares of AIG Common Stock at an option price equal to the fair market value of AIG Common Stock on the date of grant, which is the date of the Annual Meeting of Shareholders. Receipt of shares upon exercise of these options may be deferred at the election of the director. Certain directors who are not employees of AIG also serve as directors of various subsidiaries of AIG and receive fees for meeting attendance.

Summary Compensation Table

      The following Summary Compensation Table sets forth the compensation for (i) the persons who during 2004 served as AIG’s chief executive officer or were among AIG’s four other most highly compensated executive officers (based on annual salary and bonus) and (ii) certain other current or former executive officers of AIG.

      The persons named in the Summary Compensation Table also had positions with, and received payments from, Starr and SICO during 2004. These payments are described below under the heading “Payments and Benefits Provided by Starr and SICO.”

Summary Compensation Table

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      In order to facilitate the performance of their management responsibilities, AIG provides to Messrs. Sullivan and Tse (and, before his retirement, provided to Mr. Greenberg) automobiles and drivers and to these individuals and other officers and employees the use of corporate aircraft, club memberships, recreational opportunities and clerical and investment management services. From time to time Starr also made a yacht owned by SICO available to AIG officers and employees. These facilities are provided for use for business purposes and the costs thereof incurred by AIG are considered ordinary and necessary business expenses. The incremental cost of any personal benefit these persons derive from the use of these facilities or from the services provided by AIG for 2004 has been included, under the column Other Annual Compensation, in the Summary Compensation Table. For prior years shown in the Summary Compensation Table, the incremental cost to AIG was de minimis or there was no incremental cost to AIG because these benefits were provided by Starr or SICO.

      In connection with the employment and relocation to New York of Mr. Frank G. Wisner, an executive officer, in 1997 AIG paid certain expenses involved with his purchase of a cooperative apartment and has provided credit support for his mortgage. During 2004, AIG continued to provide the mortgage loan to Mr. Sullivan that had been initiated in connection with his relocation from London to New York in 1996. The maximum amount of such loan outstanding during 2004 and at January 31, 2005 was $285,375 at an interest rate of 1.98 percent per annum. During January 2004, AIG continued to provide Mr. R. Kendall Nottingham, an executive officer, a mortgage loan with an effective annual interest rate of 2.30 percent per annum. The

      AIG maintains a policy of directors and officers liability insurance for itself, its directors and officers, its subsidiaries, and their directors and officers. The premium for the year ending May 24, 2005 was approximately $9.4 million. AIG has obtained coverage for the year ending May 24, 2006 at a premium of approximately $32.8 million.

Executive Employment Agreements

      On June 27, 2005, AIG entered into a definitive employment agreement with each of Messrs. Sullivan, Kanak and Bensinger. Under the employment agreements, Mr. Sullivan serves as AIG’s President and Chief Executive Officer, Mr. Kanak serves as AIG’s Executive Vice Chairman and Chief Operating Officer and Mr. Bensinger serves as AIG’s Executive Vice President and Chief Financial Officer. Each employment agreement is effective for a three-year term, commencing on March 14, 2005 (the “Effective Date”), unless earlier terminated as provided in the agreement, and, in each case, supersedes the respective letter of understanding dated March 16, 2005 delivered to each of the executives.

      Annual Base Salary. The annual base salaries for the executives are $1,000,000 for Mr. Sullivan, $800,000 for Mr. Kanak and $750,000 for Mr. Bensinger each of which is reviewed annually and may be increased by the Compensation Committee.

      Annual Non-Variable Compensation. AIG is obligated to make additional cash payments to each executive with respect to each of AIG’s 2005, 2006 and 2007 fiscal years. These payments are due no later than March 31 of the fiscal year following each of fiscal years 2005, 2006 and 2007. The payments are calculated by reducing from a specified dollar amount for the executive the amount of cash compensation received by the executive from certain other compensation arrangements. If the amount of this offset is equal to or greater than the specified dollar amount, no amount is due the executive under this provision of the employment agreement. The amount of the offset is the aggregate of amounts received by the executive with respect to the applicable fiscal year as (1) supplemental quarterly (or other periodic) interim cash bonuses paid by AIG, and (2) cash dividends paid on any common and preferred stock of Starr held by the executive. In addition, for Messrs. Sullivan and Kanak, the amount of the offset will include amounts received by the executive during 2005 in his capacities as a director of SICO and Starr. None of Messrs. Sullivan, Kanak or Bensinger continues to serve as an officer or director of SICO or Starr. Accordingly, no bonuses or directors fees are expected to be paid by either SICO or Starr to any of the executives going forward. The specified dollar amounts that are reduced by the offset described above are $1,125,000 for Mr. Sullivan, $1,000,000 for Mr. Kanak and $750,000 for Mr. Bensinger.

      Transition Payment. Each executive is entitled to a one-time transition cash payment, paid in four equal installments, on the following dates, unless the executive’s employment is terminated by AIG for “Cause” or by the executive without “Good Reason” (as such terms are defined in the employment agreements): (1) the date of signing of the employment agreement, and (2) the last day of each of the second, third and fourth fiscal quarters of AIG in 2005. The amount of the transition payment is: $4,875,000 for Mr. Sullivan, $1,100,000 for Mr. Kanak and $1,000,000 for Mr. Bensinger.

      Long-Term and Equity-Based Incentives. Each executive is eligible to participate in AIG’s long-term incentive and equity-based compensation plans on the basis determined by the Compensation Committee, and the executive is entitled to the specific awards described below.

      Annual Cash Bonus. Each executive may receive an annual cash bonus, as determined in the discretion of the Compensation Committee, based on the performance of AIG and the executive. For each of the 2006 and 2007 fiscal years, the executive is eligible for an annual cash bonus based on the attainment of targets established by the Compensation Committee, which, together with the target value of any long-term or equity-based award in respect of such year, will equal the executive’s Target Total Incentive, described above.

      Employee Benefits and Perquisites. During the employment term, each executive is entitled to participate in AIG’s employee benefit and perquisite plans (other than severance and change-in-control plans) on the same basis as other senior executives of AIG. AIG has also agreed to negotiate in good faith with Mr. Bensinger to determine, prior to January 1, 2006, the nature of Mr. Bensinger’s participation in AIG’s Supplemental Executive Retirement Plan.

      Severance Payments and Benefits. If the executive’s employment is terminated by AIG without “Cause” or by the executive for “Good Reason,” the executive is entitled to the following payments and benefits, subject to the executive’s execution of a release of claims against AIG and its directors, officers and affiliates and continued compliance with restrictive covenants set forth in the employment agreement and described below:

      The payments and benefits described above cease if, after the executive’s termination of employment and before the payments and benefits are due, the Board determines that grounds existed on or prior to the date of termination, including prior to the Effective Date, for AIG to terminate the executive’s employment for “Cause.” Severance payments are not included in the calculation of a pension benefit, and the executive is not entitled to

      Payment Schedule for Severance, Pro Rata Bonus. If necessary to avoid the application of Section 409A of the Internal Revenue Code (the “Code”) to amounts payable to the executive in connection with a termination of employment, the executive will not receive any amounts until the first scheduled payroll date that occurs more than six months following termination of employment (the “First Payment Date”) and, on the First Payment Date, AIG will pay the executive the sum of all amounts that would have been payable in respect of the period preceding the First Payment Date but for the delay imposed on account of Section 409A of the Code.

      Gross-Up for “Golden Parachute” Excise Taxes and for Tax Equalization. To the extent any amounts payable to the executive, whether under the employment agreements or otherwise, are subject to any “golden parachute” excise taxes under Section 4999 of the Code, AIG will “gross up” such amounts in an amount equal to the excise taxes imposed, including any income taxes and excise taxes imposed on the “gross up” payments, and any interests and penalties associated with such excise taxes. In the case of Mr. Kanak, AIG will also “gross up” the excess of (i) any Japanese tax liability imposed on his income from AIG due to his being reassigned to the Far East in 2005, in respect of his employment with AIG prior to January 1, 2004, over (ii) the hypothetical federal income tax liability to which he would have been subject on such income had he resided in the United States.

      Restrictive Covenants. Each executive is bound by the following covenants during the employment agreement term and at all times following termination except as otherwise described below:

      Indemnification and Legal Fees. AIG has agreed to indemnify each executive to the fullest extent permitted by the laws of Delaware for acts or omissions made in their service to AIG. Each executive is entitled to full reimbursement of their reasonable legal fees incurred in connection with disputes arising under the employment agreement if the executive substantially prevails in any such dispute.

      The following table summarizes information with respect to grants of options to purchase AIG Common Stock during 2004 to the individuals named in the Summary Compensation Table, to all executive officers of AIG as a group, to all directors who are not executive officers of AIG as a group, and to all employees other than executive officers as a group.

Option Grants in 2004

      Messrs. Greenberg, Smith and Tizzio were granted options to purchase 16,000 shares, 8,000 shares and 8,000 shares, respectively, of common stock of Transatlantic at an exercise price of $60.34 per share (the fair market value of Transatlantic common stock on the date of grant) on December 2, 2004 as compensation for services to Transatlantic. These grants provide that 25 percent of the options granted become exercisable on each anniversary date in each of the successive four years and that the options expire ten years from the date of grant. In addition, Mr. Greenberg received $75,000 in director’s fees in each of 2004, 2003 and 2002, Mr. Smith received

      Mr. Smith and Mr. Robert M. Sandler, an executive officer, were each granted options to purchase 4,000 shares of common stock of 21st Century at a price of $12.87 per share (the fair market value of 21st Century common stock on the date of grant) on May 26, 2004 as compensation for services to 21st Century. These options became exercisable on May 26, 2005 and expire ten years from the date of grant. Mr. Sandler and Mr. Bensinger were each granted options to purchase 4,000 shares of common stock of 21st Century at a price of $13.61 per share (the fair market value of 21st Century common stock on the date of grant) on May 25, 2005 as compensation for services to 21st Century. These options become exercisable on May 25, 2006 and expire ten years from the date of grant.

      The following table summarizes information with respect to the exercise of options to purchase AIG Common Stock during 2004 by the individuals named in the Summary Compensation Table and the unexercised options to purchase AIG Common Stock held by such individuals at December 31, 2004.

Aggregated Option Exercises during the Year Ended December 31, 2004

and December 31, 2004 Option Values

Long-Term Incentive Plans

      As discussed in the notes to the Summary Compensation Table, since 1975 SICO has provided a series of two-year Deferred Compensation Profit Participation Plans to senior AIG employees. AIG has authorized the creation of a 2005-2006 Deferred Compensation Profit Participation Plan (the “2005-2006 Plan”) that will be modeled on the SICO Plan with respect to the 2003-2004 period, except that the 2005-2006 Plan will be administered by AIG and its costs will be borne directly by AIG. Shares will be issued pursuant to the Amended and Restated 2002 Stock Incentive Plan to satisfy obligations under this plan. AIG has determined the number of units that will be granted to each AIG employee under the 2005-2006 Plan. However, the documentation for the new 2005-2006 Plan has not been finalized or approved and formal awards have not yet been issued.

Long-Term Incentive Plans

      The following table provides information as of December 31, 2004, regarding equity compensation plans under which equity securities of AIG are authorized for issuance:

Pension Benefits

      The executives named in the Summary Compensation Table participate in a series of tax qualified and non-qualified retirement plans that provide retirement benefits to designated executives and key employees. Under the plans, annual retirement benefits, not to exceed 60 percent of Average Final Compensation, accrue at a rate of 2.4 percent of Average Final Compensation for each year of service or fraction thereof for each full month of active employment. The benefit payable under the plans is reduced by payments from Social Security and any payments from a qualified pension plan of a prior employer. Certain of the plans allow participants over the age of 70¹/2 the option to commence their benefits while still employed. The benefit cannot commence until at least one year after the date of such election.

Estimated Annual Pension at Age 65

      The respective years of credited service for the individuals named in the Summary Compensation Table through December 31, 2004 are as follows: Sullivan— 25.4 years; Kanak— 12.5 years; Wintrob— 4.5 years; Scott— 10.33; Tizzio— 36.67 years; Tse— 43.5 years; Moor— 19.75 years; Neuger— 9.33 years; Smith— 20.3 years. For purposes of the plans, Average Final Compensation is the average pensionable salary of a participant during the three consecutive years in the last ten years of his credited service affording the highest such average, or during all of the years of his credited service if less than three years. Pensionable salary includes the regular salary paid by AIG and its subsidiaries and does not include amounts attributable to supplementary bonuses or overtime pay. For such named individuals, pensionable salary during 2004 was as follows: Sullivan— $675,962; Kanak— $655,000; Wintrob— $650,000; Scott— $525,000; Tizzio— $654,700; Tse— $661,156; Moor— $551,298; Neuger— $621,154; Smith— $631,154.

      Mr. Martin has accrued an estimated annual benefit payable upon retirement at normal retirement age at 65 from all applicable AIG and AGC plans of $203,381.

      Mr. Greenberg elected to commence his retirement plan benefits under the qualified plan on January 1, 1996 at the age of 70¹/2 and under the non-qualified plans on October 1, 2004. His total annual benefit from the retirement plans reflecting 45 years of employment is $1,637,532 payable in the form of a 100 percent joint and survivor annuity.

Executive Severance Plan

      The Compensation Committee of the AIG Board of Directors has approved the terms of an executive severance plan, which provides severance payments and benefits to a select group of AIG’s senior executives (other than Messrs. Sullivan, Kanak and Bensinger during the time their employment agreements are in effect). The executive severance plan is effective as of June 27, 2005 and will remain in effect until the third anniversary of such date. Executives who hold positions that are designated as “senior partners” or “partners” for purposes of eligibility to participate in any deferred compensation profit participation program of AIG, or similar or successor positions, and who are selected for participation by AIG’s Chief Executive Officer are eligible to participate.

      Under the executive severance plan, if a participant’s employment is terminated for reasons other than the participant’s death, disability, retirement, voluntary termination for any reason or termination by AIG for “Cause” (as defined in executive severance plan), the participant shall receive severance equal to (i) the participant’s annual base salary as of the date of termination plus the average of the aggregate annual and supplemental quarterly cash bonuses received by the participant during each of the three fiscal years

      Severance is paid in equal installments over a number of months equal to the six- to 24-month severance multiple described above, in accordance with AIG’s normal payroll practices, but, in the discretion of the Compensation Committee, it may be paid in a lump sum following termination of employment. If required to avoid the application of Section 409A of the Code, however, severance payments will not commence until the first payroll period after six months following the date of termination, in which case the first payment will include amounts payable in respect of the preceding six months.

      In addition, a participant who is entitled to severance is also entitled to continue to participate in AIG’s life and health insurance benefit arrangements until the earlier of the expiration of the severance period and the date a participant is eligible to receive replacement coverage from a subsequent employer, after which time COBRA coverage shall apply. The participant will be required to pay the costs of the continued coverage during the severance period on the same basis as when the employee was actively employed.

      Participants who are eligible for severance are also entitled to additional service and age credit in respect of the number of months in the severance period, under AIG’s employee pension plans (except for under any tax-qualified plan), for purposes of benefit accrual, matching contributions, vesting and eligibility for retirement. No severance payments due under the executive severance plan are included in the calculation of a pension benefit, and no participant is entitled to receive any payments pursuant to any non-qualified AIG pension plan until the date the participant has ceased receiving severance under the executive severance plan.

      To receive severance, a participant must sign a release of claims against AIG, and an agreement to be bound by non-competition and non-solicitation covenants until the earlier of the first anniversary of termination of employment or the end of the severance period and non-disparagement and confidentiality covenants indefinitely (the violation of which will result in the cessation of any remaining severance payments and benefits).

Relationships with Starr and SICO

      A number of senior AIG executives, including the individuals named in the Summary Compensation Table, have historically held positions with, and received compensation from, Starr and SICO. Both companies own substantial amounts of AIG Common Stock and have had other relationships with AIG. For example, from time to time, Starr has offered members of AIG’s senior management the opportunity to purchase shares of its common stock and, since 1975, SICO has provided benefits under the SICO Plans to certain senior AIG employees. Consistent with AIG’s traditional presentation, the amount of AIG Common Stock beneficially owned by Starr and SICO and the amount of Starr and SICO voting stock beneficially owned by AIG’s directors and executive officers is discussed under “Ownership of Certain Securities,” awards allocated under the SICO Plans are reflected in the Summary Compensation Table and other transactions between AIG, on the one hand, and Starr and SICO, on the other hand, are discussed under “Certain Transactions.”

      AIG is currently in the process of unwinding and resolving various relationships with Starr and SICO. As a result, AIG’s executive officers no longer serve as officers or directors of SICO and Starr or their subsidiaries.

          Payments and Benefits Provided by Starr and SICO

      AIG intends to provide new or enhanced compensation opportunities to AIG employees in order to reflect the compensation and benefits previously provided by Starr and SICO. AIG is providing the following information to give a historical perspective of the payments made by Starr and SICO to AIG executive officers, including the executives named in the Summary Compensation Table. This table does not include the allocation of awards under the SICO Plans, because they are included in the Summary Compensation Table or

Summary of Salary, Bonus and Directors Fees Paid by Starr and SICO*