DEPARTMENT OF THE TREASURY

WASHINGTON, D.C. 20220

October 2, 2009

Compensation and Management Resources Committee

American International Group, Inc.

70 Pine Street, 27th Floor

New York, New York 10270

VIA ELECTRONIC MAIL AND U.S. MAIL

Re: Proposed Compensation Payments and

Structure for Robert H. Benmosche

To The Members ofthe Compensation and Management Resources Committee:

Pursuant to Section 30.l6(a)(3) ofthe Department ofthe Treasury's Interim Final

Rule regarding TARP Standards for Compensation and Corporate Governance (the "Rule"), the

Special Master for TARP Executive Compensation (the "Special Master") is required to

determine whether the compensation structure for each senior executive officer of a recipient of

exceptional assistance under the Troubled Asset Relief Program (the "TARP"), including the

amounts payable or potentially payable under such compensation structure, will or may result in

payments that are inconsistent with the purposes ofsection III ofthe Emergency Economic

Stabilization Act of 2008, as amended by the American Recovery and Reinvestment Act of2009

("EESA"), or TARP, or are otherwise contrary to the public interest. The Special Master is

required to consider certain principles set forth in Section 30.16(b) ofthe Rule in making these

determinations. In addition, the Rule requires that the Special Master issue a determination

within sixty days ofthe receipt of a substantially complete submission.

American International Group, Inc. (the "Company"), has requested approval of a

proposed letter agreement, attached as AnnexA, between the Company and Robert H.

Benmosche, providing for the appointment of Mr. Benrnosche to the position ofPresident and

Chief Executive Officer and setting forth certain proposed compensation arrangements for Mr.

Benmosche (the "Letter Agreement"). The Company has provided the Office ofthe Special

Master with a detailed review ofthe compensation Mr. Benmosche received when he previously

served as the Chief Executive Officer of another public company. The Company has also

provided the Office ofthe Special Master with a detailed comparative analysis describing the

compensation arrangements of persons in similar positions at similar entities that are similarly

situated. The Company's submission with respect to the Letter Agreement is now substantially

complete for purposes ofthe Rule, and the Office ofthe Special Master has completed its review

and analysis ofthe proposed compensation structure set forth therein.
In detennining whether to award any annuallong-tenn, perfonnance-based

incentive award pursuant to the Letter Agreement, the Company's Compensation and

Management Resources Committee (the "Committee") must evaluate Mr. Benmosche's

perfonnance against specified objective perfonnance criteria that the Committee has developed

and reviewed in consultation with the Office ofthe Special Master. This evaluation will be

disclosed to shareholders in, and certified by the Committee as part of, the Company's securities

filings. In addition, the Committee has retained discretion to reduce (but not to increase) the

amount of any incentive award on the basis ofits overall evaluation ofMr. Benmosche'sand/or

the Company's perfonnance (notwithstanding full or partial satisfaction ofthe perfonnance

criteria).

I have reviewed the Letter Agreement in light ofthe principles set forth in Section

30.I6(b) ofthe Rule. Pursuant to the authority vested in me as the Special Master for TARP

Executive Compensation, and in accordance with Section 30.I6(a)(3) ofthe Rule, I hereby

detennine that the compensation structure set forth in the Letter Agreement, including the

amounts payable or potentially payable under such compensation structure, will not result in

payments that are inconsistent with the purposes ofsection I I I ofEESA or TARP, or are

otherwise contrary to the public interest.

In particular, I note the following:

• That the total compensation package is detennined by the Special Master

to be appropriate when compared to the total compensation packages of

other applicable Presidents and Chief Executive Officers ofsimilarly

situated companies.

• That the stock salary issued to Mr. Benmosche in 2009 is detennined to be

perfonnance based because the value ofsuch stock salary will be

detennined by the value ofthe Company's stock over the long tenn, and

cannot be sold until the 5th anniversary ofthe Effective Date ofthis Letter

Agreement (August 10,2014).

• That the annual long-term incentive award contemplated by this Letter

Agreement is also detennined to be perfonnance based and, except in case

of disability or death, will not vest unless Mr. Benmosche continues to

provide services to the company for two years following the grant date of

the award, and will be subject to an annual performance assessment as

detennined by the Company's Compensation and Management Resources

Committee on the basis of objective perfonnance metrics developed in

consultation with the Office ofthe Special Master.

• That any and all incentive compensation paid to Mr. Benmosche will be

subject to recovery or "clawback" ifthe payments were based on

materially inaccurate financial statements or any other materially

inaccurate perfonnance metrics.
• That any annual long-term incentive award made pursuant to this Letter

Agreement will be subject to formal review and approval by the Office of

the Special Master.

The foregoing determination is limited to the compensation structure set forth in

the Letter Agreement and shall not be relied upon with respect to any other employee. In

addition, for the avoidance of doubt, this determination shall be limited, with respect to stock

salary, to grants ofshares in the Company, and shall not constitute, or be construed to constitute,

the approval ofthe Special Master required under section 4 ofthe Letter Agreement with respect

to the use of alternative forms of compensation. The determination is limited to the authority

vested in me by Section 30.I6(a)(3) ofthe Rule, and shall not constitute, or be construed to

constitute, the judgment ofthe Office ofthe Special Master or the Department ofthe Treasury

with respect to the compliance ofthe proposed compensation structure or any other

compensation structure for the subject employee with any other provision ofthe Rule.

Moreover, my evaluation and determination have relied upon, and are qualified in their entirety

by, the accuracy ofthe materials submitted by the Company to the Office ofthe Special Master,

and the absence of any material misstatement or omission in such materials.

I look forward to working with you further as we move forward with the process

ofreviewing compensation structures for certain other employees ofthe Company.

Kenn th R. Feinberg

Office ofthe Special Master for

TARP Executive Compensation

cc: Ms. Anastasia D. Kelly

Mr. Andrew 1. Kaslow

Marc R. Trevino, Esq.
ANNEXA

PROPOSED LETTER AGREEMENT

August 16, 2009

Dear Bob:

I am pleased to confirm the terms of your employment with American International

Group, Inc.

1. Effective Date. August 10, 2009.

2. Position. On the Effective Date, you will begin to serve as President and Chief

Executive Officer of AIG. In that capacity, you will report directly (and only) to

the Board of Directors and have all ofthe customary authorities, duties and

responsibilities that accompany these positions.

3. Salary (Cash). Your initial cash salary will be $3,000,000 per year.

4. Salary (Stock). In addition to your cash salary, you will eligible to receive bimonthly awards ofstock or phantom stock units in AIG. These awards, which we

refer to as stock salary, will be at an initial rate of $4,000,000 per year and will be

subject to the following additional terms:

• Initially your stock salary will be in the form ofshares of AIG. Subject to the

approval ofthe Office ofthe Special Master for TARP Executive

Compensation, AIG's Compensation and Management Resources Committee

(in consultation with you) may change the specific form ofstock salary from

time to time;

• Stock will be immediately vested when delivered, tax will be withheld by AIG

in kind (unless otherwise directed by you) and remaining shares cannot be

sold until the 5th anniversary ofthe Effective Date;

• Phantom stock units will be immediately vested but will not be delivered until

the 2nd anniversary of grant, and units will be settled in cash or stock at the

election ofthe Committee (in consultation with you) and taxed on delivery

and, in the case ofstock delivered, may be subject to restrictions on transfer

up to the 5th anniversary ofthe Effective Date at the Committee's discretion

(phantom stock units will not be used without prior approval ofthe Office of

the Special Master); and

• The Committee will authorize early transferability of any stock salary you

have received on death or disability.
AlG is in the process of developing the specifics of your stock salary for 2009,

which will be retroactive to the Effective Date once finalized. AlG will make

these stock awards to you pursuant to a more detailed award agreement, which

will govern the awards.

5. Annual Long-Term Award. Each year you will be eligible to receive a long-term

incentive award of up to $3,500,000 in the form ofstock or phantom stock units in

AlG. The amount for 2009 will be prorated from the Effective Date. The

Committee will determine the form and amount annually based on its

performance assessment, subject to the following:

• Stock or phantom stock units would vest on the 2nd anniversary of grant (the

minimum time required by the applicable TARP Regulations) and will be

subject to transfer/payout restrictions as required by the applicable TARP

Regulations; and

• To the extent permitted by the applicable TARP Regulations, awards will

provide for early vesting on death or disability and early transferability on the

same events.

6. No Severance. You will not participate in AlG's Executive Severance Plan or

otherwise be entitled to any severance on termination of your employment for any

reason.

7. Benefits. Subject to the limits ofthis letter and the applicable TARP Regulations,

you will be entitled to benefits consistent with senior executives of AlG and

reimbursement ofreasonable business expenses, in each case in accordance with

applicable AlG policies as in effect from time to time. In connection with your

joining AlG, AlG will also promptly pay any reasonable legal fees incurred in

connection with your review ofthis letter and the negotiations contemplated in

Section 11.

8. Executive Compensation Standards. Any bonus or incentive compensation paid

to you is subject to recovery or "c1awback" by AlG ifthe payments were based on

materially inaccurate financial statements or any other materially inaccurate

performance metric criteria (all within the meaning of, and to the full extent

necessary to comply with, the applicable TARP Regulations). In addition, you

will not be entitled to any golden parachute payment or tax gross-up from AlG or

its affiliates to the extent prohibited by the applicable TARP Regulations.

Your compensation will be subject to formal review and approval by the Office of

the Special Master. In addition, as part ofAIG's agreements with the U.S.

Department ofthe Treasury, your compensation is subject to applicable

regulations that may be issued and in effect from time to time. You may receive

compensation from AIG only to the extent that it is consistent with those

regulations.
9. Indemnification and Cooperation. During and after your employment, AIG will

indemnify you in your capacity as a director, officer, employee or agent of AIG to

the fullest extent permitted by applicable law and AIG's charter and by-laws, and

will provide you with director and officer liability insurance coverage (including

post-termination/post-director service tail coverage) on the same basis as AIG's

other executive officers. AIG agrees to cause any successor to all or substantially

all ofthe business or assets (or both) of AIG to assume expressly in writing and to

agree to perform all ofthe obligations ofAIG in this paragraph.

You agree (whether during or after your employment with AIG) to reasonably

cooperate with AIG in connection with any litigation or regulatory matter or with

any govermnent authority on any matter, in each case, pertaining to AIG and with

respect to which you may have relevant knowledge, provided that, in connection

with such cooperation, AIG will reimburse your reasonable expenses and you

shall not be required to act against your own legal interests.

10. Tax Matters. To the extent any taxable expense reimbursement or in-kind

benefits under Section 7 or Section 9 is subject to Section 409A ofthe Internal

Revenue Code of 1986, the amount thereof eligible in one taxable year shall not

affect the amount eligible for any other taxable year, in no event shall any

expenses be reimbursed after the last day ofthe taxable year following the taxable

year in which you incurred such expenses and in no event shall any right to

reimbursement or receipt ofin-kind benefits be subject to liquidation or exchange

for another benefit. Each payment under this letter will be treated as a separate

payment for purposes of Section 409A ofthe Code.

11. Non-competition and non-solicitation. In connection with your joining AIG, you

agree to enter into non-competition arrangements (covering competing insurance

business) and non-solicitation arrangement (covering senior AIG employees) with

AIG. You and we agree to negotiate those arrangements reasonably and in good

faith. Receipt of your stock salary is conditioned on your entering into those

arrangements.

We look forward to your leadership.

Sincerely,

AMERICAN INTERNATIONAL GROUP, INC.