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                                                                    EXHIBIT 10.3

       AGREEMENT BETWEEN THE ATTORNEY GENERAL OF THE STATE OF NEW YORK AND
             AMERICAN INTERNATIONAL GROUP, INC. AND ITS SUBSIDIARIES
                   (COLLECTIVELY "AIG") DATED JANUARY 18, 2006

            WHEREAS, the New York Attorney General (the "Attorney General") and
the Superintendent of Insurance of the State of New York (the "Superintendent")
commenced an action against AIG pursuant to Executive Law Section 63 (12), the
Martin Act (Gen. Bus. Law Section 352-c), Insurance Law Sections 201, 327 and
the common law of the State of New York dated May 26, 2005 (the "Complaint");

            WHEREAS, the Attorney General has conducted an investigation related
to AIG's practices in the marketing, sale, renewal, placement or servicing of
insurance for its policyholders and its accounting and public reporting
practices, including those relating to nontraditional and finite insurance (the
"Attorney General's Investigation") and the Superintendent, pursuant to
Insurance Law Section 310, has conducted an examination of AIG (the
"Superintendent's Examination");

            WHEREAS, the Attorney General and the Superintendent have alleged
the following facts with respect to AIG's participation in schemes relating to
the rigging of bids for excess casualty insurance business and the use of
contingent commission agreements or placement service agreements to steer
business:

      a.    Since at least the mid-1990s AIG and other insurers have paid
            hundreds of millions of dollars in so-called "contingent
            commissions" to the world's largest insurance brokers, including
            Marsh & McLennan Companies, Inc. or Marsh Inc. (collectively
            "Marsh"), Aon Corporation ("Aon"), Willis Group Holding Ltd.

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            ("Willis") and Arthur J. Gallagher & Co. ("Gallagher"), as well as
            tens of thousands of smaller brokers and independent agents.

      b.    AIG entered into a number of contingent commission agreements (also
            known as "override" agreements) to pay compensation to Producers,(1)
            such as Marsh, Aon, Willis and Gallagher as a result of which they
            steered insurance policies to AIG to increase the volume of policies
            written by AIG, to keep retention levels of existing AIG policies
            above certain benchmarks, and to direct the most profitable policies
            to AIG. In most cases, steering took the form of Producers
            purporting to offer unbiased recommendations to their clients about
            the selection of insurers when in fact, in many cases, the
            Producers' recommendations were biased in favor of insurers who paid
            contingent commissions.

      c.    Under these agreements, when Marsh, for example, helped AIG retain
            its existing business at renewal time, AIG paid Marsh higher
            contingent commissions. Thus, in the 2002 placement service
            agreement between the two companies relating to excess casualty, AIG
            agreed to pay Marsh an aggregate percentage of gross written premium
            that varied from a minimum of 10% for one dollar of premium, to 15%
            for four hundred million dollars, to 15.75% of one billion dollars.

      d.    Further, when Willis steered business to AIG's Hartford Steam Boiler
            subsidiary, AIG, in turn, paid Willis higher contingent commissions.
            When Gallagher gave

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(1) For purposes of this Agreement, "Producer" shall mean any insurance broker
as that term is defined in Section 2101(c) of the Insurance Law of the State of
New York or any independent insurance agent as that term is defined in
Section 2101(b) of the Insurance Law of the State of New York and who offers
insurance for a specific product or line from more than one insurer or
affiliated group of insurers.

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            AIG first rights of refusal and made sure AIG got its fair share of
            business, AIG reimbursed Gallagher for some of its employees'
            salaries, another way to pay Gallagher higher fees.

      e.    In some cases AIG did not enter into formal contingent commission
            agreements with Producers, but agreed instead to subsidize certain
            of the Producers' expenses. For example, AIG rewarded Gallagher with
            "hiring subsidies" of $2 million in 2002 and $2.5 million in 2003,
            to pay for the salaries of certain Gallagher employees. In return,
            Gallagher agreed to give AIG an exclusive "first right of refusal"
            for prospective insurance business and to make sure that AIG was
            successful on a fair share of this business.

      f.    In the area of excess casualty insurance, which covers losses above
            the limits provided by policyholders' primary casualty insurance
            policies, and in which AIG is a major provider, Marsh, AIG and other
            insurers rigged the process of bidding for insurance policies and
            actively deceived clients. AIG underwrote the vast majority of
            umbrella excess casualty business that was placed through Marsh's
            Global Broking Excess Casualty Group, and was thus the "incumbent"
            on most business that came up for renewal. The bid manipulation that
            AIG and Marsh engaged in generally sought to protect AIG's
            incumbency and gave AIG an unfair competitive advantage, to the
            detriment of the insured, whose best interests Marsh was supposed to
            be serving.

      g.    When AIG was the incumbent carrier, or was otherwise chosen by Marsh
            to win a

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            client's business, Marsh set a target for AIG which included
            proposed premium and policy terms for AIG's bid as a part of the
            renewal process. If AIG met this target, or even if it provided a
            much less favorable bid from the client point of view, Marsh
            generally arranged for AIG to win the business, regardless of
            whether AIG, or any other insurance company, could have quoted
            better terms for the client.

      h.    In order to ensure that AIG won business it wanted, Marsh instructed
            other insurance companies to provide intentionally losing bids that
            were inferior to those provided by AIG. These losers were known,
            among other things, as "fake," "backup," "supportive," or
            "protective quotes." They were also known as "B Quotes" or simply
            "B's." Once it had secured such quotes, Marsh would present them to
            clients as bids obtained through a competitive process. This
            pretense of competition was intended to, and did, give clients the
            impression that AIG's bid was the best available. It also had the
            effect of throwing business to AIG, not at terms best for the
            client, but rather at terms advantageous to AIG. Certain employees
            of AIG were aware of this arrangement and of the "B Quotes" supplied
            by other insurers. Set forth below are specific examples:

            i.    In March 2002, Marsh set a target price of $690,000 to provide
                  AIG the renewal business for AIG's insured, "Client A." The
                  Marsh employee coordinating the renewal instructed colleagues
                  that "B Quotes" be obtained from Munich and St. Paul insurance
                  companies to ensure that

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                  AIG would win this "[g]ood account." Despite the target price
                  established, toward the end of the month AIG quoted the
                  account at a price of $825,000, or approximately 20% higher
                  than the price at which Marsh had intended AIG to obtain the
                  business. Nonetheless, once AIG quoted higher than the target
                  price, thereby rendering its bid far less attractive and more
                  vulnerable to competition, the Marsh employee sought greater
                  protection for AIG. On March 25, the Marsh employee circulated
                  an email seeking intentionally losing "B quotes" from two
                  additional insurance companies, Zurich and Liberty. With
                  "competitors" submitting losing quotes that made AIG's
                  increased price seem competitive, AIG obtained the client's
                  business at exactly the price AIG quoted.

            ii.   AIG's client, "Client B," had its insurance up for renewal in
                  October 2002. Marsh's broking plan, prepared in August 2002
                  without specifying any target price, called for AIG to win the
                  business and for other insurance companies to submit
                  intentionally losing quotes in support of AIG's quote. After
                  the plan was issued, AIG quoted $475,000, a 111% increase in
                  price over the previous year's premium. The Marsh employee
                  overseeing the placement noted to his Marsh colleagues on
                  September 18, 2003 that "[t]he client is not happy with this
                  price and we have asked AIG for consideration on the premium
                  due to the long term relationship." Despite the client's
                  dissatisfaction, on the very same day the Marsh employee

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                  instructed one Marsh colleague that "[w]e need Zurich to quote
                  . . . for something higher." On September 23, 2003, the Marsh
                  employee further directed another Marsh colleague to "have ACE
                  send an email stating they would quote . . . for $500,000 or
                  higher with a professional liability exclusion and an aircraft
                  products and grounding exclusion." These exclusions were not
                  included in the AIG quote. Just a day later, increasingly
                  concerned about AIG's high bid and the client's unhappiness,
                  the Marsh employee sent an email to colleagues soliciting
                  intentionally losing quotes from two additional insurers to
                  further support AIG's price increase:

                        Guys,

                        AIG quoted [the layer] for $475,000. Premium increase is
                        111% due to 3MM auto loss AIG paid on this account
                        recently. This is going to be a tough sale so I need
                        some help. Emails would be fine.

                        St. Paul . . .$525,000
                        Liberty Decline Lead
                        ACE . . .$500,000

                        All of these options should have the following
                        exclusions:

                        aircraft products and grounding
                        failure to supply
                        professional responsibility

                  AIG thereafter received the protection of these fake quotes
                  and bound the business at its chosen price, terms and
                  conditions.

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            iii.  For the October 2002 policy renewal of "Client C," AIG
                  submitted a bid 65% higher than what it had charged the
                  previous year. A Marsh employee then informed colleagues that
                  "AIG quoted . . . for $1,300,000 which is in line with the
                  client's expectations," and instructed them "[w]e need email
                  indications as follows: Zurich - 20 x 5 $1,500,000[;] ACE - 5
                  x 5 $1,100,000." In the same month, when AIG raised its quote
                  by 65% for a different policy, the Marsh employee in charge of
                  getting a purportedly competitive quote from Zurich wrote "AIG
                  has quoted the lead on ["Client D"] @ $320,000 (I am shocked
                  it's only a 65% premium increase), we need Zurich to quote a
                  supportive lead at $365,000. I will fax you our quote
                  confirmation." And also in the same month, a Marsh underwriter
                  sent the following message to a purported competitor of AIG
                  regarding the ["Client E"] account:

                        AIG has quoted:

                        25 x p=$525,000
                        50 x p=$675,000
                        GL attachments 2/4/4
                        AL attachments 2mm

                        Please over price your indications for 25 [x p] or 50
                        [x p] or both if you can. THIS IS A FAKE QUOTE BOTH
                        OF THEM ARE FAKE.

                  (Emphasis added).

            iv.   On December 17, 2002, an ACE assistant vice president of
                  underwriting sent Marsh a fax quoting an annual premium of
                  $990,000 for an excess

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                  casualty insurance policy for one of AIG's insureds, "Client
                  F." Later that day, ACE revised its bid upward to $1,100,000.
                  On the fax cover sheet with the revised bid, ACE's assistant
                  vice president wrote: "Per our conversation attached is
                  revised confirmation. All terms & conditions remain
                  unchanged." An email the next day from the ACE assistant vice
                  president to a superior explained the revision as follows:
                  "Original quote $990,000.... We were more competitive than AIG
                  in price and terms. Marsh requested we increase premium to
                  $1.1M to be less competitive, so AIG does not loose [sic] the
                  business...."

            v.    When the time came for "Client G" to renew its excess casualty
                  insurance in April 2003, Marsh set a target price of $470,000
                  for a particular layer. The target also included the provision
                  that AIG's proposed policy would "maintain silence" on whether
                  its insurance would cover claims for injury resulting from
                  EMF, or electromagnetic fields. AIG chose to provide a less
                  attractive bid from the insured's point of view: not only did
                  it quote $550,000 for the policy, approximately 20% higher
                  than the target at which it was the designated winner, but
                  AIG's quote also included an EMF exclusion. To support AIG's
                  quote, the Marsh employee coordinating the placement
                  nevertheless instructed a colleague, on March 26, 2003, to (1)
                  "get a B quote from Zurich for [Client G] with the EMF
                  exclusion" and (2) "have Zurich provide an e-mail indication
                  in the area of

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                  $650,000." With this supportive bid rigging, AIG obtained the
                  business.

            vi.   For one account, "Client H," with a May 2003 renewal, a Marsh
                  employee instructed the underwriter at one of AIG's purported
                  competitors: "Can you email me a protective indication on
                  this. It is an AIG renewal and AIG already quoted it so just
                  give me a bad price with higher per occ. attachment and then
                  we can be done with this."

      i.    In some situations where another carrier was the incumbent, or was
            chosen by Marsh to win a client's business, AIG provided Marsh with
            intentionally losing bids to present to the clients. For example, in
            October 2003, an underwriter at AIG described one such intentionally
            losing bid that AIG provided as follows: "This was not a real
            opportunity. Incumbent Zurich did what they needed to do at renewal.
            We were just there in case they defaulted. Broker...said Zurich came
            in around $750K & wanted us to quote around $900K."

            WHEREAS, based on these allegations and those contained in the
Complaint, the Attorney General and the Superintendent allege that AIG
unlawfully deceived its policyholders, regulators and other authorities and
shareholders by: (a) participating in schemes to steer business; (b)
participating in rigging of bids for excess casualty insurance through Marsh;
(c) underreporting to state insurance departments, taxing authorities and other
entities the amount of workers compensation premium it collected; (d) providing
false and misleading information and responses to regulators, including
misrepresentations concerning certain reinsurance

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arrangements; and (e) using fraudulent insurance transactions and "topside"
accounting adjustments to bolster the quality, quantity and stability of its
earnings;

            WHEREAS, AIG has been and is continuing to cooperate with the
Attorney General's Investigation and the Superintendent's Examination;

            WHEREAS, in the wake of the Complaint, the Attorney General's
Investigation and the Superintendent's Examination, AIG has adopted and under
this Agreement (the "Agreement") will continue to implement a number of business
reforms;

            WHEREAS, the Attorney General and AIG wish to enter into this
Agreement to resolve all issues related to AIG in the Complaint and the Attorney
General's Investigation (with the exceptions of any conduct or activity relating
to the Variable Annuity Life Insurance Company and any other AIG subsidiary
which sells variable annuities, and any conduct or activity relating to the
marketing, purchase, sale or negotiation of life settlements, including AIG's
dealings with life settlement brokers, agents, sellers and investors;
notwithstanding the above, this Agreement resolves the allegations relating to
the Coventry Life Settlement Trust contained in paragraphs 81-91 of the
Complaint);

            WHEREAS, nothing herein shall be construed to apply to any business
or operations involving group and individual: (1) fixed and variable life
insurance, (2) fixed and variable, immediate and deferred annuities, (3)
accidental death and dismemberment insurance, (4) short and long term disability
insurance, (5) long term care insurance, (6) accident and health insurance,
including vision and dental insurance, (7) credit insurance, (8) involuntary
unemployment insurance, (9) guaranteed investment contracts, and (10) funding
agreements

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(collectively "AIG's Life Insurance Operations");

            WHEREAS, the Superintendent and AIG simultaneously wish to enter
into a Stipulation to resolve all issues related to AIG in the Complaint and the
Superintendent's Examination (with the exception of any pending or future
examination of American International Group, Inc. and its insurer subsidiaries)
("the Stipulation");

            WHEREAS, AIG is entering into an agreement with the United States
Securities and Exchange Commission ("SEC") to provide a fund to compensate
investors for alleged injuries related to AIG's accounting and public reporting
practices;

            WHEREAS, the Attorney General finds the relief and agreements
contained in this Agreement appropriate and in the public interest, and is
willing to accept this Agreement as a settlement of the Complaint, and the
Attorney General's Investigation (with the exceptions noted above);

            WHEREAS, this Agreement is entered into solely for the purpose of
resolving the Complaint and the Attorney General's Investigation (with the
exceptions noted above) and is not intended to be used for any other purpose;
and

            WHEREAS, AIG neither admits nor denies the above allegations or the
allegations contained in the Complaint;

            NOW THEREFORE, AIG and the Attorney General hereby enter into this
Agreement with a statement of apology attached as Exhibit 1, and agree as
follows:

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                                 MONETARY RELIEF

      A. WORKERS COMPENSATION

      1. AIG shall pay a total of $343.5 million for alleged injury caused by
its underpayment of workers compensation premium taxes and all other related
fees and assessments including workers compensation residual market assessments
for and including tax years 1985 to 1996 but not including workers compensation
guaranty fund assessments and any monies owed relating to large deductible
policies and related taxes. The $343.5 million will be apportioned as detailed
in paragraphs 2, 3 and 4, below. The State of New York shall not consider any
portion of this amount to be a fine or penalty.

      2. On or before March 1, 2006, AIG shall pay $87,801 to the State of New
York by wire transfer for alleged injury caused by AIG's underpayment of workers
compensation premium taxes and all other related fees and assessments including
workers compensation residual market assessments and guaranty fund assessments
for and including tax years 1985 to 1996.

      3. On or before March 1, 2006, AIG shall pay to each of the other
forty-nine states and the District of Columbia ("State," or collectively
"States") the total listed for that State on Schedule WC-A to this Agreement for
alleged injury caused by AIG's underpayment of workers compensation premium
taxes and all other related fees and assessments for and including tax years
1985 to 1996 but not including workers compensation residual market assessments
and guaranty fund assessments. The total amount to be paid to the States
pursuant to this paragraph shall be $42,280,740.

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      4. On or before March 1, 2006, AIG shall pay $301,216,234 into a fund
created by AIG for the settlement of claims with the States and workers
compensation residual market pools, including monopolistic or exclusive State
funds, competitive State funds, independent State assigned risk plans, the
National Workers' Compensation Reinsurance Pool administered by the National
Council on Compensation Insurance, Inc. ("NCCI"), State assigned risk plans
administered by the NCCI or another third-party administrator, or other workers
compensation residual market mechanisms in which one or more of the States
participates, for alleged injury caused by AIG's underpayment of workers
compensation residual market assessments for and including tax years 1985 to
1996, and additional amounts arising out of any claim for injury described in
paragraph 1, but not set forth in paragraphs 2 and 3 of this Agreement (the
"Workers Compensation Fund"). A calculation by State of such underpayments and
the interest thereon is attached as Schedule WC-B to this Agreement. In no event
shall any of the money in the Workers Compensation Fund be paid directly to an
insurance company.

      5. On or before March 1, 2006, AIG shall send a notice to the Attorney
General and Insurance Commissioner of each State (the "Workers Compensation
Notice"). The Workers Compensation Notice shall be accompanied by: (a) payment
owing, if any, pursuant to paragraph 3 above; (b) a copy of this Agreement, its
Exhibits and Schedules (including Schedules WC-A and WC-B); (c) a copy of the
Stipulation and exhibits; and (d) a cover letter stating that the Workers
Compensation Fund described in paragraph 4 above has been created for the
settlement of claims arising from AIG's underpayment of workers compensation
residual market assessments for and including tax years 1985 to 1996 and setting
forth the amount apportioned to

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the noticed State on Schedule WC-B.

      6. The form of the Workers Compensation Notice described in paragraph 5
above shall be subject to the prior approval of the Attorney General and the
Superintendent.

      7. The Workers Compensation Fund shall be held by AIG and invested in a
designated money market fund subject to the prior approval of the Attorney
General and the Superintendent.

      8. Each State which receives a Workers Compensation Notice and which
elects to receive a distribution from the Workers Compensation Fund in the
amount apportioned to it on Schedule WC-B (a "Participating State," or
collectively the "Participating States") shall tender a release in the form
attached to this Agreement as Exhibit WC-1 (the "Release") on or before March 1,
2007.

      9. For each Participating State that has tendered a Release pursuant to
the preceding paragraph, AIG shall pay the Participating State an amount equal
to the amount apportioned to the State on Schedule WC-B plus all investment or
interest income earned thereon, within ten business days of receiving the
Release.

      10. In the event that any State elects not to participate and does not
tender a Release as provided in paragraph 8 above, AIG may use the money
remaining in the Workers Compensation Fund as of but not before March 2, 2007 to
satisfy any claim for injury caused by AIG's underpayment of workers
compensation residual market assessments or workers compensation premium taxes
or any other related fees or assessments by a State, a monopolistic or exclusive
State fund, a competitive State fund, an independent State assigned risk plan,
the

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National Workers' Compensation Reinsurance Pool administered by the NCCI, a
State assigned risk plan administered by the NCCI or other third-party
administrator, or other workers compensation residual market mechanism in which
one or more of the States participates. In no event shall any money in the
Workers Compensation Fund be used to settle other claims before all
Participating States have been paid their full distribution from the Fund
pursuant to paragraph 9. In no event shall any of the money in the Workers
Compensation Fund be paid directly to an insurance company.

      11. If any money remains in the Workers Compensation Fund as of December
31, 2008, it shall be distributed on or before January 31, 2009 on a pro rata
basis to the Participating States pursuant to the Participating States'
apportioned shares on Schedule WC-B.

      12. The Attorney General shall not seek to impose on AIG any other
financial obligation or liability related to any injury caused by AIG's
underpayment of workers compensation premium taxes and all other related fees
and assessments including residual market assessments for and including tax
years 1985 to 1996, but not including any monies owed relating to large
deductible policies and related taxes.

      13. In no event shall any of the money in the Workers Compensation Fund,
or the investment or interest income earned thereon be used to pay or considered
in the calculation of attorneys fees.

      14. In no event shall any of the money in the Workers Compensation Fund,
or the investment or interest income earned thereon, be used to pay or
considered in the calculation of commissions, administrative or other fees to
AIG.

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      15. On or before March 20, 2007, AIG shall file an interim report with the
Attorney General and the Superintendent, certified by an officer of AIG, listing
all amounts paid from the Workers Compensation Fund to date.

      16. On or before March 1, 2009, AIG shall file a report with the Attorney
General and the Superintendent, certified by an officer of AIG, listing all
amounts paid from the Workers Compensation Fund including any amounts paid
pursuant to paragraph 11.

      B. BID RIGGING - EXCESS CASUALTY POLICYHOLDERS

      17. On or before March 1, 2006, AIG shall pay $375 Million into a fund
(the "Excess Casualty Fund") created and held by AIG to be paid to AIG's
policyholders who purchased or renewed AIG Excess Casualty policies, excluding
Excess Workers Compensation policies) through Marsh during the period from
January 1, 2000 through September 30, 2004 (the "Eligible Policyholders"). All
of the money paid into the Excess Casualty Fund and any investment or interest
income earned thereon shall be paid to Eligible Policyholders pursuant to this
Agreement. No portion of the Excess Casualty Fund shall be considered a fine or
a penalty.

      18. The Excess Casualty Fund shall be invested in a designated money
market fund subject to the prior approval of the Attorney General and the
Superintendent.

      19. AIG shall (a) by May 1, 2006 calculate the amount of money each of the
Eligible Policyholders paid for excess casualty insurance placed through Marsh
with inception or renewal dates during the period from January 1, 2000 through
September 30, 2004 (the "Eligible Policies"); (b) within ten days of completing
these calculations, file a report with the Attorney General and the
Superintendent, certified by an officer of AIG, setting forth: (i) each Eligible

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Policyholder's name and address; (ii) the Eligible Policyholder's Eligible
Policy(ies) purchased or renewed and policy number(s); (iii) the amount the
Eligible Policyholder paid in premiums for each such policy; and (iv) the amount
each policyholder is eligible to receive which shall equal each policyholder's
pro rata share of the Excess Casualty Fund as calculated by multiplying the
amount in the Excess Casualty Fund by the ratio of the policyholder's gross
written premium for Eligible Policies for the period from January 1, 2000
through September 30, 2004, divided by the total gross written premium for all
Eligible Policies; and (c) by May 22, 2006, send a notice to each Eligible
Policyholder, setting forth items (ii) through (iv), above, and stating that the
amount paid may increase if there is less than full participation by Eligible
Policyholders in the Excess Casualty Fund (the "Excess Notice"). The form of the
Excess Notice shall be subject to the prior approval of the Attorney General and
Superintendent.

      20. Eligible Policyholders who receive an Excess Notice and who
voluntarily elect to receive a cash distribution (the "Participating
Policyholders") shall tender a release in the form attached hereto as Exhibit 2
on or before October 23, 2006.

      21. On or before November 30, 2006, AIG shall pay each Participating
Policyholder the amount that that Participating Policyholder is eligible to
receive from the Excess Casualty Fund as set forth in paragraph 19(b)(iv) above,
and any interest or investment income earned thereon.

      22. On or before December 27, 2006, AIG shall file an interim report with
the Attorney General and the Superintendent, certified by an officer of AIG,
listing all amounts paid from the Excess Casualty Fund.

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      23. In the event that any Eligible Policyholder elects not to participate
or otherwise does not respond to the Excess Notice (the "Non-Participating
Policyholders"), the amount that such policyholder was eligible to receive from
the Excess Casualty Fund as set forth in paragraph 19(b)(iv) may be used by AIG
to satisfy any pending or other claims asserted by policyholders relating to the
excess casualty bid rigging or excess casualty steering allegations set forth in
this Agreement, provided that in no event shall a distribution be made from the
Excess Casualty Fund to any other policyholder until all Participating
Policyholders have been paid the full aggregate amount set forth in paragraph
19(b)(iv) above, and any interest or investment income earned thereon; nor shall
the total payments from the Excess Casualty Fund to any Non-Participating
Policyholder exceed 80% of the amount that Non-Participating Policyholder was
originally eligible to receive as set forth in paragraph 19(b)(iv).

      24. If any money remains in the Excess Casualty Fund as of October 1,
2007, any such funds shall be distributed by November 1, 2007 on a pro rata
basis to the Participating Policyholders.

      25. In no event shall any of the money in the Excess Casualty Fund or the
investment or interest income earned thereon be used to pay or considered in the
calculation of attorneys fees.

      26. In no event shall any of the money in the Excess Casualty Fund or the
investment or interest income earned thereon be used to pay or considered in the
calculation of commissions, administrative or other fees to AIG.

      27. On or before November 15, 2007, AIG shall file a report with the
Attorney

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General and the Superintendent, certified by an officer of AIG, listing all
amounts paid from the Excess Casualty Fund, including any payments subsequent to
the payments described in paragraph 22.

      C. FINE

      28. On or before March 1, 2006, AIG shall pay $100 million as a fine, by
wire transfer to the State of New York.

                                BUSINESS REFORMS

      29. Within 60 days of the date of this Agreement, AIG shall undertake the
following business reforms. AIG will not undertake any transaction for the
purpose of circumventing the prohibitions contained in this Agreement.

      30. For purposes of this Agreement, Compensation shall mean anything of
material value given to a Producer including, but not limited to, money,
credits, loans, forgiveness of principal or interest, vacations, prizes, gifts
or the payment of employee salaries or expenses, provided that Compensation
shall not mean customary, non-excessive meals and entertainment expenses. AIG
shall develop and implement policies for its employees explaining the provisions
of this paragraph as part of the Company-wide written standards described in
paragraph 42 below. Prior to June 30, 2006, AIG shall submit to the New York
Attorney General and the Superintendent a draft of the intended policies.

      31. For purposes of this Agreement, Contingent Compensation is any
Compensation contingent upon any Producer: (a) placing a particular number of
policies or dollar value of premium with AIG; (b) achieving a particular level
of growth in the number of policies placed or

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dollar value of premium with AIG; (c) meeting a particular rate of retention or
renewal of policies in force with AIG; (d) placing or keeping sufficient
insurance business with AIG to achieve a particular loss ratio or any other
measure of profitability; (e) providing preferential treatment to AIG in the
placement process, including but not limited to giving AIG last looks, first
looks, rights of first refusal, or limiting the number of quotes sought from
insurers for insurance placements; or (f) obtaining anything else of material
value for AIG. This definition does not include Compensation paid to employees
of AIG or to AIG's Producers that are captive or are exclusive to AIG with
respect to a specific line or product that is clearly and conspicuously
identified in marketing materials as AIG's line or product.

      32. COMPENSATION DISCLOSURE. Beginning six months from the date of this
Agreement, AIG offices, situated and issuing insurance policies in the United
States, shall send a notice accompanying the insured's policy, stating that the
insured can review and obtain information relating to AIG's practices and
policies regarding Compensation on either a website or from a toll-free
telephone number. The information on the website or available through the
toll-free number shall be sufficient to inform insureds of the nature and range
of Compensation, by insurance product, paid by AIG. No later than four months
from the date of this Agreement, AIG shall submit to the Attorney General the
proposed format and content of the notice, website and the information available
via the toll-free telephone number described in this paragraph. The form and
content of the notice, website and information available via the toll-free
telephone number shall be subject to the prior approval of the Attorney General.
AIG shall commence posting the website and operation of the toll-free telephone
number no later than six months after

                                       20
<PAGE>

the date of this Agreement.

      33. PROHIBITION ON CONTINGENT COMPENSATION FOR EXCESS CASUALTY. During the
period of 2006 through and including 2008, AIG offices situated and issuing
policies in the United States shall not pay any Producer Contingent Compensation
relating to the placement of any excess casualty insurance policy. In addition,
AIG offices situated and issuing policies outside the United States shall not
pay any Producer Contingent Compensation relating to the placement of any excess
casualty insurance policy issued or renewed to any insured domiciled in the
United States, which policy is principally associated with covering property or
operations situated in the United States. Subsequent to 2008, excess casualty
insurance shall be subject to the provisions of paragraph 39.

      34. AIG shall undertake the business reforms set forth in paragraphs 35-41
for AIG's offices situated and issuing policies in the United States.

      35. Except as set forth in paragraphs 39-41 below, in connection with its
issuance, renewal or servicing of insurance policies through a Producer, AIG
shall pay as Compensation only a specific dollar amount or percentage commission
on the premium set at the time of each purchase, renewal, placement or servicing
of a particular insurance policy.

      36. PROHIBITION ON PAY-TO-PLAY. AIG shall not offer to pay or pay,
directly or indirectly, any Producer any Compensation in connection with the
Producer's solicitation of bids for the Producer's clients.

      37. PROHIBITION ON BID RIGGING. AIG shall not directly or indirectly
knowingly offer or provide to any Producer any false, fictitious, artificial,
`B' or "throw away" quote or

                                       21
<PAGE>

indication. Nothing herein shall preclude AIG from offering to provide or
providing any bona fide quote or indication.

      38. PROHIBITION ON LEVERAGING. AIG shall not make any promise or
commitment to use any Producer's brokerage, agency, producing or consulting
services, including reinsurance brokerage, agency or producing services,
contingent upon any of the factors listed in paragraph 31 (a)-(f) above.

      39. ADDITIONAL LIMITATIONS ON CONTINGENT COMPENSATION. Within 30 days of
receipt of a notice from the Attorney General that the Attorney General has made
a determination, based on market share information available from the National
Association of Insurance Commissioners ("NAIC") or A.M. Best Company (or another
agreed upon third-party source of market share data if such data is not
available from NAIC or A.M. Best for a given insurance line (or
product/segment)), that(a) insurers who do not pay Contingent Compensation in a
given insurance line (or product/segment) including but not limited to direct
writers and insurers that employ only captive agents in the given insurance line
(or product/segment) and (b) insurers who have signed agreements with the
Attorney General containing this paragraph as applied to them, together
represent more than 65% of the national gross written premiums in the given
insurance line (or product/segment) in the calendar year for which market share
data is most recently available (the "Notice"), AIG shall stop paying Contingent
Compensation for such insurance line (or product/segment) beginning on January 1
of the next calendar year following the date of the Notice. If, in any given
calendar year after the date of the Notice described above, the market share
used in the Notice falls below 60%, AIG shall notify the Attorney General of

                                       22
<PAGE>

the change. If, within 60 days, the Attorney General does not object to AIG's
determination that the market share used in the Notice is below 60%, any
prohibition on Contingent Compensation described in the Notice shall cease. If
the Attorney General does object to AIG's determination, the Attorney General
shall set forth the reasons for such objections in a written notice to AIG
within 60 days of AIG's notification to the Attorney General. Resort to court
action to resolve a dispute related to the determination of market share or the
determination that a given insurer does not pay Contingent Compensation under
this paragraph shall not be deemed a violation of this Agreement.

      40. Except as provided in paragraph 33, in any insurance line or product
in which AIG paid Contingent Compensation for the 2004 calendar year or any part
thereof, AIG may continue to pay Contingent Compensation until the receipt of a
Notice from the Attorney General that the conditions described in paragraph 39
above have been met. Following receipt of a Notice, AIG may continue to pay any
Contingent Compensation accrued or accruing until the end of the calendar year.
In no event shall any provisions in paragraphs 39, 40 and 41 be construed to
require AIG to take any action that would cause AIG to be in breach of an
agreement that is in force as of the date of this Agreement.

      41. AIG agrees not to commence the paying of Contingent Compensation in
any insurance line (or product/segment) in which it did not pay Contingent
Compensation for the 2004 calendar year or any part thereof and where the
Attorney General has sent a Notice pursuant to paragraph 39 above. In the event
that AIG intends to enter into any agreement potentially obligating it to make
Contingent Compensation payments for any insurance line (or product/segment) in
which it did not pay Contingent Compensation for the 2004 calendar or any

                                       23
<PAGE>

part thereof, AIG agrees to give the Attorney General written notice and a copy
of the intended agreement at least 60 days prior to the execution of any such
agreement.

      42. STANDARDS OF CONDUCT AND TRAINING. AIG shall implement Company-wide
written standards of conduct regarding Compensation paid to Producers,
consistent with the terms of this Agreement, subject to approval of the Attorney
General and Superintendent, which implementation shall include, inter alia,
appropriate training of relevant employees, including but not limited to
training in business ethics, professional obligations, conflicts of interest,
antitrust and trade practices compliance, and record keeping.

      43. AIG agrees to support legislation and regulations to abolish
Contingent Compensation for insurance products or lines. AIG further agrees to
support legislation and regulations requiring greater disclosure of
Compensation.

      44. AIG shall not engage or attempt to engage in violations of Executive
Law Section 63 (12), the Donnelly Act (Gen. Bus. Law Section 340 et seq.), the
Martin Act (Gen. Bus. Law Section 352-c) and New York Insurance Law.

      45. This Agreement is contingent upon AIG reaching agreement with the SEC
to resolve the SEC's investigation of AIG's accounting and public reporting
practices. This Agreement will not be binding and will not go into effect unless
and until AIG reaches such agreement with the SEC. In any event, if AIG does not
reach such agreement with the SEC by February 24, 2006, this Agreement will be
null and void.

      46. RETENTION OF A CONSULTANT. Pursuant to the agreement with the SEC,
American International Group, Inc. will retain, pay for, and enter into an
agreement with a consultant, not

                                       24
<PAGE>

unacceptable to the SEC, in consultation with the Attorney General and
Superintendent, to conduct a comprehensive examination and review of the areas
specified below and to make recommendations to the Board of Directors of
American International Group, Inc., SEC, Attorney General and Superintendent
(the "Consultant"). The Consultant's compensation and expenses shall be borne
exclusively by American International Group, Inc. The agreement shall provide
that the Consultant examine:

            a.    American International Group, Inc.'s internal controls over
                  financial reporting (the Consultant may, if appropriate, rely
                  on American International Group, Inc.'s independent
                  accountant's attestation and report on management's assessment
                  of the effectiveness of American International Group, Inc.'s
                  internal control structure and procedures pursuant to Section
                  404 of the Sarbanes-Oxley Act);

            b.    The organization and reporting structure of American
                  International Group, Inc.'s internal audit department and
                  American International Group, Inc.'s disclosure committee
                  (which is described in Exhibit A to American International
                  Group, Inc.'s Consent and Undertakings to be entered with the
                  SEC);

            c.    The policies, procedures and effectiveness of American
                  International Group, Inc.'s regulatory, compliance and legal
                  functions, including the operations of any committees
                  established to review and approve transactions or for the
                  purpose of preventing the recording of transactions or
                  financial reporting results in a manner inconsistent with
                  Generally

                                       25
<PAGE>

                  Accepted Accounting Principles ("GAAP") and Statements of
                  Statutory Accounting Principles ("SSAP");

            d.    American International Group, Inc.'s records management and
                  retention policies and procedures;

            e.    The adequacy of whistleblower procedures designed to allow
                  employees and others to report confidentially matters that may
                  have bearing on the company's financial reporting obligations;

            f.    American International Group, Inc.'s training and education
                  program described below;

            g.    The reforms that American International Group, Inc. has
                  implemented that are set forth in Exhibit A to American
                  International Group, Inc.'s Consent to be entered into with
                  the SEC; and

            h.    The adequacy and effectiveness of the remediation plan
                  described below.

      47. CONSULTANT'S REPORTING OBLIGATIONS. The Consultant shall issue a
report to the SEC, Attorney General, Superintendent and American International
Group, Inc.'s Board of Directors within three months of appointment, provided,
however, that the Consultant may seek to extend the period of review for one or
more additional three-month terms by requesting such an extension from the SEC.
The SEC shall have discretion, after consultation with the Attorney General and
Superintendent, to grant such extensions as it deems reasonable and warranted.

            a.    The Consultant's report shall set forth the Consultant's
                  recommendations regarding best practices in the areas
                  specified in paragraph 46 (a)-(h)

                                       26
<PAGE>

                  above, including the Consultant's recommendations for any
                  changes in or improvements to American International Group,
                  Inc.'s policies and procedures that the Consultant reasonably
                  deems necessary to conform to the law and best practices, and
                  a procedure for implementing the recommended changes in or
                  improvements to American International Group, Inc.'s policies
                  and procedures.

            b.    American International Group, Inc. shall adopt all
                  recommendations contained in the report of the Consultant,
                  referred to in paragraph 47(a) above, provided, however, that
                  within forty-five days of receipt of the report, American
                  International Group, Inc. shall in writing advise the
                  Consultant, the SEC, the Attorney General and Superintendent
                  of any recommendations that it considers to be unnecessary or
                  inappropriate. With respect to any recommendation that
                  American International Group, Inc. considers unnecessary or
                  inappropriate, American International Group, Inc. need not
                  adopt that recommendation at that time but shall propose in
                  writing an alternative policy, procedure or system designed to
                  achieve the same objective or purpose.

            c.    As to any recommendation with respect to American
                  International Group, Inc.'s policies and procedures on which
                  American International Group, Inc. and the Consultant do not
                  agree, such parties shall attempt in good faith to reach an
                  agreement within ninety days of the issuance of the
                  Consultant's report. In the event American International
                  Group, Inc. and

                                       27
<PAGE>

                  the Consultant are unable to agree on an alternative proposal
                  acceptable to the SEC, after consultation with the Attorney
                  General and Superintendent, American International Group, Inc.
                  will abide by the determinations of the Consultant.

            d.    American International Group, Inc. shall retain the Consultant
                  for a period of three years from the date of appointment in
                  accordance with the provisions of paragraph 48 below. Once the
                  Consultant's recommendations become final, the Consultant
                  shall oversee the implementation of such recommendations and
                  provide a report to the SEC, Attorney General and
                  Superintendent and to American International Group, Inc.'s
                  Board of Directors every three months concerning the progress
                  of such implementation. If, at the conclusion of this
                  three-year period, less than all recommended reforms have been
                  substantially implemented for at least two successive
                  quarters, the SEC may, in its discretion, after consultation
                  with the Attorney General and Superintendent, direct American
                  International Group, Inc. to extend the Consultant's term of
                  appointment until such time as all recommended reforms have
                  been substantially implemented for at least two successive
                  quarters.

      48. TERMS OF RETENTION. American International Group, Inc. will submit to
the SEC a proposal setting forth the identity, qualifications, and proposed
terms of retention of the

                                       28
<PAGE>

Consultant. The SEC, within thirty days of such notice will either (1) deem
American International Group, Inc.'s choice of Consultant and proposed terms of
retention acceptable or (2) require American International Group, Inc. to
propose an alternative Consultant and/or revised proposed terms of retention
within fifteen days. This process will continue, as necessary, until American
International Group, Inc. has selected a Consultant and retention terms that are
not unacceptable to the SEC. American International Group, Inc. shall enter into
an agreement with the Consultant that shall contain the following terms:

            a.    The Consultant shall provide the SEC, Attorney General,
                  Superintendent and American International Group, Inc.'s Board
                  of Directors with such documents or other information
                  concerning the areas identified in paragraph 46 above, as any
                  of them may request during the pendency or at the conclusion
                  of the review.

            b.    The Consultant shall have reasonable access to all of the
                  books and records of American International Group, Inc. and
                  its subsidiaries and the ability to meet privately with
                  personnel of American International Group, Inc. and its
                  subsidiaries. American International Group, Inc. may not
                  assert the attorney-client privilege, the protection of the
                  work-product doctrine, or any privilege as a ground for not
                  providing the Consultant with contemporaneous documents or
                  other information related to the matters that are the subject
                  of the review. American International Group, Inc. shall
                  instruct and otherwise encourage its officers, directors, and
                  employees to cooperate fully with the review conducted by the
                  Consultant,

                                       29
<PAGE>

                  and inform its officers, directors, and employees that failure
                  to cooperate with the review will be grounds for dismissal,
                  other disciplinary actions, or other appropriate actions.

            c.    The Consultant shall have the right, as reasonable and
                  necessary in his or her judgment, to retain, at American
                  International Group, Inc.'s expense, attorneys, accountants,
                  and other persons or firms, other than officers, directors, or
                  employees of American International Group, Inc., to assist in
                  the discharge of his or her obligations under the
                  undertakings. American International Group, Inc. shall pay all
                  reasonable fees and expenses of any persons or firms retained
                  by the Consultant. To the extent the Consultant seeks to
                  retain an accounting firm, he or she shall choose an
                  accounting firm in consultation with the SEC.

            d.    The Consultant shall make and keep notes of interviews
                  conducted, and keep a copy of documents gathered, in
                  connection with the performance of his or her
                  responsibilities, and require all persons and firms retained
                  to assist the Consultant to do so as well.

            e.    The Consultant's relationship with American International
                  Group, Inc. shall not be treated as one between an attorney
                  and client. The Consultant will not assert the attorney-client
                  privilege, the protection of the work-product doctrine, or
                  any privilege as a ground for not providing any information
                  obtained in the review sought by the SEC, Attorney General or
                  Superintendent.

                                       30
<PAGE>

            f.    If the Consultant determines that he or she has a conflict
                  with respect to one or more of the areas described in
                  paragraph 46 or otherwise, he or she shall delegate his or her
                  responsibilities with respect to that subject to a person who
                  is chosen by the Consultant and who is not unacceptable to the
                  SEC.

            g.    For the period of engagement and for a period of two years
                  from completion of the engagement, the Consultant shall not
                  enter into any employment, consulting, attorney-client,
                  auditing or other professional relationship with American
                  International Group, Inc., or any of its present or former
                  subsidiaries or affiliates, directors, officers, employees, or
                  agents acting in their capacity as such; and shall require
                  that any firm with which the Consultant is affiliated or of
                  which the Consultant is a member, or any person engaged to
                  assist the Consultant in performance of the Consultant's
                  duties, without prior written consent of the SEC, not enter
                  into any employment, consulting, attorney-client, auditing or
                  other professional relationship with American International
                  Group, Inc., or any of its present or former subsidiaries or
                  affiliates, directors, officers, employees, or agents acting
                  in their capacity as such for the period of the engagement and
                  for a period of two years after the engagement. For the
                  purposes of this section, representation of a person or firm
                  insured by American International Group, Inc. shall not be
                  deemed a professional relationship with American International
                  Group, Inc.

                                       31
<PAGE>

            h.    American International Group, Inc., including the Board of
                  Directors and committees of the Board of Directors of American
                  International Group, Inc., shall not assert, or permit its
                  subsidiaries to assert, the attorney-client privilege, the
                  protection of the work-product doctrine, or any privilege as a
                  ground for not providing to the Consultant any documents,
                  information, or testimony that American International Group,
                  Inc. provided to the SEC, Attorney General or Superintendent
                  which the Consultant has deemed necessary for his or her
                  review.

            i.    The Consultant shall treat and maintain information of
                  American International Group, Inc. and its subsidiaries as
                  strictly confidential and shall not disclose such information
                  other than to the SEC, Attorney General, and Superintendent
                  and to the Consultant's personnel, agents or representatives
                  who need to know such information for the purpose of the
                  review contemplated herein, or as otherwise required by law.

            j.    At the conclusion of the Consultant's engagement, subject to
                  the approval of the SEC, after consultation with the Attorney
                  General and Superintendent, the Consultant shall return to
                  American International Group, Inc. all documents reflecting or
                  referring to non-public business and financial information of
                  American International Group, Inc. and its subsidiaries.

                                       32
<PAGE>

49.   ADDITIONAL UNDERTAKINGS.

      a.    American International Group, Inc. will draft a remediation plan
            consisting of (i) steps to address and correct the causes of the
            material weaknesses in internal controls over financial reporting as
            identified in the 2004 Form 10-K; (ii) a program to test the
            operational effectiveness of new or enhanced controls; and (iii)
            completion of management's testing of the relevant significant
            controls.

      b.    American International Group, Inc. agrees that it will establish and
            maintain a training and education program, completion of which will
            be required for (i) officers, executives, and employees of American
            International Group, Inc. and its subsidiaries who are involved in
            the oversight of accounting and financial reporting functions; (ii)
            all employees in American International Group, Inc.'s legal division
            with responsibility for or oversight of American International
            Group, Inc.'s accounting, financial reporting or disclosure
            obligations; and (iii) other senior officers and executives of
            American International Group, Inc. and its subsidiaries, as proposed
            by American International Group, Inc. and approved by the Consultant
            (collectively, the "Mandatory Participants").

      c.    The structure and operation of the training and education program
            shall be reviewed and approved by the Consultant. The training and
            education program shall be designed to cover, at a minimum, the
            following: (i) the

                                       33

<PAGE>

            obligations imposed on American International Group, Inc. by federal
            and state securities law, including American International Group,
            Inc.'s financial reporting and disclosure obligations; (ii) the
            financial reporting and disclosure obligations imposed on American
            International Group, Inc. and its subsidiaries by New York state
            insurance law; (iii) proper internal accounting controls and
            procedures; (iv) discovering and recognizing accounting practices
            that do not conform to GAAP or SSAP or that are otherwise improper;
            and (v) the obligations assumed by, and responses expected of the
            Mandatory Participants upon learning of improper, illegal or
            potentially illegal acts relating to American International Group,
            Inc.'s accounting and financial reporting. The Board of Directors
            shall communicate to Mandatory Participants, in writing or by video,
            its endorsement of the training and education program.

      50. To the extent that any of the provisions of the SEC agreement
described in paragraph 45 conflict with the provisions in paragraphs 46 through
49 of this Agreement, the provisions of the SEC agreement will replace such
provisions in paragraphs 46 through 49 of this Agreement.

                        REINSURANCE REPORTING OBLIGATIONS

      51. For a period of five years beginning May 1, 2006, AIG will provide
annually by May 1 of each year to the Superintendent a report, in a format
approved by the Superintendent, that includes:

      a.    A review of ceded and assumed reinsurance of AIG's property/casualty

                                       34

<PAGE>

            insurers required to file statutory financial statements on the NAIC
            blanks (the "Property/Casualty Insurers") verifying that all
            contracts comply with SSAP 62 and 75 and the new NAIC disclosure and
            attestation requirements including the attestation that with respect
            to all reinsurance contracts for which the reporting entity is
            taking credit on its current financial statements, to the best of
            AIG's knowledge and belief, after diligent inquiry and unless noted
            as an exception under the attestation requirement:

            i.    Consistent with SSAP 62, there are no separate written or oral
                  agreements between the reporting entity (or its affiliates or
                  companies it controls) and the assuming reinsurer that would
                  under any circumstances, reduce, limit, mitigate or otherwise
                  affect any actual or potential loss to the parties under the
                  reinsurance contract, other than inuring contracts that are
                  explicitly defined in the reinsurance contract except as
                  disclosed;

            ii.   For each such reinsurance contract entered into, renewed or
                  amended on or after January 1, 1994, for which risk transfer
                  is not reasonably considered to be self-evident, documentation
                  concerning the economic intent of the transaction and the risk
                  transfer analysis evidencing the proper accounting treatment,
                  as required by SSAP 62 and 75, is available for review;

            iii.  The reporting entity complies with all the requirements set
                  forth in

                                       35

<PAGE>

                  SSAP 62 and 75, and any supporting documentation is available
                  for review;

            iv.   The reporting entity has appropriate controls in place to
                  monitor the use of reinsurance and adhere to the provisions of
                  SSAP 62 and 75.

      b.    A list of all its affiliated insurers, categorized by domicile,
            whether controlled through ownership or otherwise under the
            Insurance Law. The list shall include the percentage of ownership or
            other means by which AIG controls the affiliated insurer.

      c.    A list of its ownership of five percent or more of the voting shares
            of any non-affiliated insurer entities.

      d.    A list of non-affiliated insurers to whom AIG's Property/Casualty
            Insurers have ceded business during the preceding calendar year
            either directly, or through retrocession agreements if known,
            excluding those captive reinsurance entities that do not accept
            third party business, where the business ceded represents fifty
            percent or more of the entire direct and assumed premium written by
            the insurer, based upon such insurer's most recent publicly
            available financial statements.

      e.    A list disclosing any letter of credit for which an AIG insurer is
            the beneficiary and AIG or an AIG subsidiary is directly or
            indirectly guaranteeing or providing collateral for the letter of
            credit or incurring the cost, except for parental letters of credit
            in accordance with New York

                                       36

<PAGE>

            State Insurance Department ("Department") Regulation 20.

Such report shall be certified by the Chief Reinsurance Officer and the Chief
Executive Officer of American International Group, Inc. and a copy of such
report shall be submitted to the Audit Committee of AIG.

      52. The Chief Reinsurance Officer will maintain approved lists of
reinsurers. AIG will not cede insurance to any reinsurer not set forth on those
lists. Such lists will be available to the Superintendent upon examination. All
approved reinsurance relationships will be reviewed by the Chief Reinsurance
Officer and such review will include a written determination of whether the
reinsurance entity is affiliated or controlled (by ownership, by contract or
otherwise) by AIG.

      53. AIG agrees not to enter into any arrangement, transaction or
relationship with a reinsurer that has characteristics similar to those of Coral
Re, Union Excess or Richmond.

                       COOPERATION WITH THE SUPERINTENDENT

      54. AIG will maintain and provide to the Superintendent, upon the
Superintendent's request, complete underwriting files, including correspondence
and e-mails, and risk transfer analysis to the extent required by SSAP 62
relating to all reinsurance ceded or assumed by AIG. AIG will authorize its
independent auditors and direct its internal auditors to make available to the
Superintendent upon request all workpapers of its auditors, including but not
limited to all Schedules of Unadjusted Differences.

      55. AIG will file all holding company transactions in a timely manner in
compliance with Article 15 of the New York Insurance Law and Department
Regulation 52. The

                                       37

<PAGE>

Superintendent and AIG will agree upon a filing methodology that will recognize
efficiencies in such compliance.

      56. The Chairs of the Audit Committee and the Regulatory, Compliance and
Legal Committee of the Board will meet with the Superintendent and/or a
designated official of the Department on an annual basis or more frequently as
deemed necessary by the Department. The Chair of the Regulatory Compliance and
Legal Committee will serve as the Department's contact for all AIG examinations
and such meetings.

      57. AIG will cooperate fully on all examinations and on all other
regulatory requests and will respond to all Department inquiries in a prompt,
timely and complete manner. AIG will provide appropriate staff during
examinations in order to provide timely responses. Failure to respond to the
Department in a timely manner will constitute violations of this Agreement and
the Insurance Law. Any issues that relate to the timeliness of the responses
shall be reported to the Chief Financial Officer.

      58. AIG will provide the Superintendent with all copies of its remediation
plans and regular progress reports relating to its remediation plans to address
significant deficiencies in internal controls over financial reporting.

      59. AIG has taken appropriate remedial actions with respect to certain
employees in management and in the underwriting, accounting, auditing, actuarial
and financial reporting functions who were involved in the allegations of the
Complaint and has reviewed such actions with the Superintendent.

                      COOPERATION WITH THE ATTORNEY GENERAL

      60. AIG shall fully and promptly cooperate with the Attorney General with
regard to

                                       38

<PAGE>

his Investigation, and related proceedings and actions, of any other person,
corporation or entity, including but not limited to AIG's current and former
employees, concerning the insurance industry. AIG shall use its best efforts to
ensure that all its officers, directors, employees, and agents also fully and
promptly cooperate with the Attorney General in this Investigation and related
proceedings and actions. Cooperation shall include without limitation: (a)
production voluntarily and without service of subpoena of any information and
all documents or other tangible evidence reasonably requested by the Attorney
General, and any compilations or summaries of information or data that the
Attorney General reasonably requests be prepared; (b) without the necessity of a
subpoena, having AIG's officers, directors, employees and agents attend any
proceedings at which the presence of any such persons is requested by the
Attorney General and having such persons answer any and all inquiries that may
be put by the Attorney General (or any of the Attorney General's deputies,
assistants or agents) to any of them at any proceedings or otherwise
("proceedings" include but are not limited to any meetings, interviews,
depositions, hearings, grand jury hearing, trial or other proceedings); (c)
fully, fairly and truthfully disclosing all information and producing all
records and other evidence in its possession relevant to all inquiries
reasonably made by the Attorney General concerning any fraudulent or criminal
conduct whatsoever about which it has any knowledge or information; (d) in the
event any document is withheld or redacted on grounds of privilege, work-product
or other legal doctrine, a statement shall be submitted in writing by AIG
indicating: (i) the type of document; (ii) the date of the document; (iii) the
author and recipient of the document; (iv) the general subject matter of the
document; (v) the reason for withholding the document; and (vi) the Bates number
or range of the withheld document. The Attorney General may challenge such

                                       39

<PAGE>

claim in any forum of its choice and may, without limitation, rely on all
documents or communications theretofore produced or the contents of which have
been described by AIG, its officers, directors, employees, or agents; and (e)
AIG shall not jeopardize the safety of any investigator or the confidentiality
of any aspect of the Attorney General's Investigation, including sharing or
disclosing evidence, documents, or other information with others during the
course of the investigation, without the consent of the Attorney General.
Nothing herein shall prevent AIG from providing such evidence to other
regulators, or as otherwise required by law.

      61. AIG shall comply fully with the terms of this Agreement. If AIG
violates the terms of paragraph 60 in any material respect, as determined solely
by the Attorney General: (a) the Attorney General may pursue any action,
criminal or civil, against any entity for any crime it has committed, as
authorized by law, without limitation; (b) as to any criminal prosecution
brought by the Attorney General for violation of law committed within six years
prior to the date of this Agreement or for any violation committed on or after
the date of this Agreement, AIG shall waive any claim that such prosecution is
time barred on grounds of speedy trial or speedy arraignment or the statute of
limitations.

                                OTHER PROVISIONS

      62. AIG, the Board of Directors of AIG, and the Audit Committee will
review its relationship with AIG's independent outside auditors on a yearly
basis and will conduct a Request For Proposal procedure for its independent
auditors in connection with its 2008 fiscal year. Such review shall be made
available to the Superintendent.

      63. AIG will review its holding company structure with the goal to
reducing and simplifying the structure. A report detailing this review and its
conclusions shall be provided to

                                       40

<PAGE>

the Superintendent by June 1, 2006.

      64. AIG has agreed to restate its 2004 statutory financial statements to
properly account for the Union Excess and Richmond transactions identified in
the Complaint as well as additional transactions pursuant to its agreement with
the Superintendent and other state insurance regulators.

      65. AIG agrees to review all of its communications with state insurance
regulators to ensure full and complete disclosure.

      66. AIG shall not seek or accept, directly or indirectly, indemnification
pursuant to any insurance policy, with regard to any or all of the amounts
payable pursuant to this Agreement.

      67. None of the provisions of this Agreement shall apply to AIG's Life
Insurance Operations.

      68. None of the provisions of this Agreement shall apply to 21st Century
Insurance Group or Transatlantic Holdings Inc. AIG shall not enter into any
transaction with either of these entities, or engage in any conduct by virtue of
its ownership interests therein for the purpose of circumventing any provision
of this Agreement.

      69. The Attorney General will promptly file a Stipulation Discontinuing
Action with Prejudice, in the form attached hereto as Exhibit 3, voluntarily
dismissing the Complaint with prejudice as to American International Group,
Inc., and will not initiate a new case against AIG related to the matters set
forth in the Complaint and this Agreement or uncovered to date by the Attorney
General's Investigation, provided, however, that this Paragraph shall not be
construed to include any conduct or activity relating to the Variable Annuity
Life Insurance Company and

                                       41

<PAGE>

any other AIG subsidiary which sells variable annuities and any conduct or
activity relating to the marketing, purchase, sale or negotiation of life
settlements, including AIG's dealings with life settlement brokers, agents,
sellers and investors or any conduct or activity relating to AIG's Life
Insurance Operations. Notwithstanding the above, this Agreement resolves the
allegations relating to the Coventry Life Settlement Trust contained in
paragraphs 81-91 of the Complaint. The Attorney General shall not seek to impose
on AIG any other financial obligation or liability related to the allegations of
excess casualty bid rigging or steering contained in this Agreement.

      70. The Attorney General agrees that any prior approval required under the
terms of this Agreement shall not be unreasonably withheld.

      71. This Agreement is not intended to disqualify AIG, or any current
employees of AIG, from engaging in any business in New York or in any other
jurisdiction. Nothing in this Agreement shall relieve AIG's obligations imposed
by any applicable state insurance law or regulations or other applicable law.

      72. This Agreement shall not confer any rights upon any persons or
entities besides the Attorney General and AIG.

      73. AIG shall maintain custody of, or make arrangements to have
maintained, all documents and records of AIG related to this matter for a period
of not less than six years.

      74. The Attorney General of the State of New York may make such
application as appropriate to enforce or interpret the provisions of this
Agreement, or in the alternative, maintain any action, either civil or criminal,
for such other and further relief as the Attorney General may determine is
proper and necessary for the enforcement of this Agreement. If compliance with
any aspect of this Agreement proves impracticable, AIG reserves the right to

                                       42

<PAGE>

request that the parties modify the Agreement accordingly.

      75. In any application or in any such action, facsimile transmission of a
copy of any papers to current counsel for AIG shall be good and sufficient
service on AIG unless AIG designates, in a writing to the Attorney General,
another person to receive service by facsimile transmission.

      76. Facsimile transmission of a copy of this Agreement to counsel for AIG
shall be good and sufficient service on AIG.

      77. This Agreement shall be governed by the laws of the State of New York
without regard to conflict of laws principles.

      78. This Agreement may be executed in counterparts.

      WHEREFORE, the following signatures are affixed hereto on this 18th day
of January, 2006.

ELIOT SPITZER
Attorney General of the State of New York

/s/ Eliot Spitzer
_____________________________________________
Office of the New York State Attorney General
120 Broadway, 25th Floor
New York, New York 10271

AMERICAN INTERNATIONAL GROUP, INC.

By: /s/ Martin J. Sullivan
    ________________________________________
Martin J. Sullivan
President and Chief Executive Officer
American International Group, Inc.
70 Pine Street
New York, New York 10270

                                       43

<PAGE>

PAUL, WEISS, RIFKIND, WHARTON & GARRISON LLP

By: /s/ Martin Flumenbaum
    -------------------------------
Martin Flumenbaum
1285 Avenue of the Americas
New York, NY 10019
Attorneys for AIG

                                       44

<PAGE>

                                    EXHIBIT 1

      "AIG regrets and apologizes for the conduct that led to the action brought
by the New York Attorney General and the New York Superintendent of Insurance
and to today's settlement. Providing incorrect information to the investing
public and to regulators was wrong and is against the values of our current
leadership and employees.

      In response to these events, and to the guilty pleas of our own employees
and others, as part of today's settlement, we have and are continuing to
aggressively implement business reforms to prevent this conduct from recurring.
We are committed to business practices that provide transparency and fairness in
the insurance markets. As part of our commitment, among other things, we have
agreed not to pay contingent commissions for excess casualty insurance and will
support legislation to eliminate contingent commission payments."

                                       45

<PAGE>

                                  EXHIBIT W C-1

                                     RELEASE

            For good and valuable consideration, the receipt and sufficiency of
which is hereby acknowledged, [the undersigned] for [State], and on behalf of
[Workers Compensation Residual Market Pool(s)] and administrators thereof
("Releasors"), hereby releases and discharges American International Group, Inc.
("AIG") and its subsidiaries, agents, representatives, officers, predecessors
and each of its present and former officers, directors, and employees, and
attorneys, except for those individuals named as defendants in THE PEOPLE OF THE
STATE OF NEW YORK, by ELIOT SPITZER, Attorney General of the State of New York,
and HOWARD MILLS, Superintendent of Insurance of the State of New York v.
American International Group, Inc. et al., Index No. 05-401720 ("Releasees")
from and against any claims, liabilities, actions, causes of action whether
asserted or unasserted, suits, debts, dues, sums of money, accounting,
reckonings, bonds, bills, specialties, covenants, contracts, controversies,
agreements, promises, damages, judgments, penalties, claims and demands of any
and every character, kind and nature whatsoever in law, admiralty, or equity,
whether known or unknown, pending or not pending, and whether or not concealed
or hidden which against the Releasees the Releasors ever had, now have, or
hereafter can, shall, or may have with respect to:

            (1)   Alleged injury caused by AIG's underpayment of workers
                  compensation premium taxes and all other related fees and
                  assessments including workers compensation residual market
                  assessments for and including tax years 1985 to 1996 but not
                  including workers compensation guaranty fund assessments and
                  any monies owed relating to large deductible policies and
                  related taxes;

            (2)   Any breach or violation of any provision of any agreement,
                  including any reinsurance agreement, entered into between AIG
                  and [Workers Compensation Residual Market Pool(s)] or the
                  administrators thereof, relating to paragraph (1) above; and

            (3)   Any other claim relating to Releasee's participation in
                  [Workers Compensation Residual Market Pool(s)] relating to
                  paragraph (1) above.

            [The undersigned] hereby represents and warrants that s/he has all
requisite authority to execute this Release on behalf of [State] and [Workers
Compensation Residual Market Pool(s)] and the administrators thereof, and that
[Workers Compensation Residual Market Pool(s)] shall be deemed to have given
the release provided for herein to the same extent as if it was a signatory to
this agreement.

Dated:__________________________________

RELEASOR:_______________________________

By:_____________________________________

Print Name:_____________________________

Title:__________________________________

                                       46
<PAGE>

                                  SCHEDULE WC-A

                        WORKERS COMPENSATION PREMIUM TAX

<TABLE>
<CAPTION>
STATE                   UNDER (OVER) PAYMENT      INTEREST(1)    STATE TOTAL
-----                   --------------------      -----------    -----------
<S>                     <C>                       <C>            <C>
Alabama                ($       962,800)          $         0    $         0

Alaska                 ($        17,595)          $         0    $         0

Arizona                 $       976,663           $ 1,603,986    $ 2,580,649

Arkansas                $       262,797           $   457,323    $   720,120

California              $     3,084,036           $ 4,784,811    $ 7,868,847

Colorado                $       430,211           $   758,146    $ 1,188,357

Connecticut            ($       135,790)          $         0    $         0

Delaware                $        63,223           $    81,734    $   144,957

District of Columbia   ($        17,971)          $         0    $         0

Florida                 $     1,722,927           $ 3,234,446    $ 4,957,373

Georgia                 $       632,367           $ 1,271,093    $ 1,903,460

Hawaii                  $        99,176           $   272,458    $   371,634

Idaho                   $        13,911           $    86,693    $   100,604

Illinois               ($       394,200)          $         0    $         0

Indiana                ($       399,366)          $         0    $         0

Iowa                    $        18,869           $    31,767    $    50,636

Kansas                  $       143,304           $   267,294    $   410,598

Kentucky               ($         5,386)          $    19,104(2) $    13,718

Louisiana               $       357,044           $   732,476    $ 1,089,520

Maine                   $        42,823           $    93,828    $   136,651

Maryland                $       617,300           $ 1,162,300    $ 1,779,600

Massachusetts           $       283,678           $   572,275    $   855,953

Michigan                $     1,854,325           $ 3,425,159    $ 5,279,484

Minnesota               $       201,118           $   401,773    $   602,891

Mississippi             $        33,196           $    61,917    $    95,113

Missouri               ($         1,500)          $    21,635(2) $    20,135

Montana                 $         9,318           $    18,741    $    28,059
</TABLE>

                                       47
<PAGE>

<TABLE>
<S>                     <C>                       <C>            <C>
Nebraska                $        72,748           $   115,655    $   188,403

Nevada                 ($        50,476)          $         0    $         0

New Hampshire           $        65,374           $   120,117    $   185,491

New Jersey             ($       262,559)          $         0    $         0

New Mexico             ($        61,215)          $         0    $         0

New York                $        20,219           $    67,582    $    87,801

North Carolina          $       119,537           $   336,764    $   456,301

North Dakota           ($         5,541)          $         0    $         0

Ohio                   ($       730,792)          $         0    $         0

Oklahoma                $       379,230           $   535,686    $   914,916

Oregon                  $       100,050           $   261,851    $   361,901

Pennsylvania            $       700,445           $ 1,113,168    $ 1,813,613

Rhode Island            $     1,013,556           $ 1,950,194    $ 2,963,750

South Carolina          $        47,750           $    96,067    $   143,817

South Dakota           ($        63,019)          $         0    $         0

Tennessee              ($        58,574)          $         0    $         0

Texas                   $     1,399,131           $ 2,135,832    $ 3,534,963

US                     ($     5,520,088)          $         0    $         0

Utah                    $       327,625           $   628,903    $   956,528

Vermont                 $       188,176           $   332,375    $   520,551

Virginia               ($       877,159)          $         0    $         0

Washington             ($        18,573)          $         0    $         0

West Virginia           $        12,191           $    14,335    $    26,526

Wisconsin               $         5,334           $    10,287    $    15,621

Wyoming                ($        15,773)          $         0    $         0

                                                  TOTAL:         $42,368,541
</TABLE>

(1)   Interest applied at the average of the historical 30-Year Treasury Note,
      10-Year Treasury Note and Prime rates; interest begins 18 months after the
      first-year mid-point and was compounded.

(2)   Overall, AIG overpaid premium taxes in this State for the relevant period.
      However, interest on earlier underpayments is greater than the
      overpayment.

                                       48
<PAGE>

                                  SCHEDULE WC-B

                WORKERS COMPENSATION RESIDUAL MARKET ASSESSMENTS

<TABLE>
<CAPTION>
STATE                 UNDER (OVER) PAYMENT    INTEREST(1)   STATE TOTAL
-----                 --------------------    -----------   -----------
<S>                   <C>                   <C>             <C>
Alabama                 $  4,001,141        $  7,375,728    $ 11,376,869

Alaska                  $     86,828        $    136,648    $    223,476

Arizona                 $    387,245        $    810,904    $  1,198,149

Arkansas                $     70,642        $    103,275    $    173,917

California              $    427,511        $    866,356    $  1,293,867

Colorado                $      4,912        $     21,703    $     26,615

Connecticut             $    925,405        $  1,833,038    $  2,758,443

Delaware                $    112,621        $    200,426    $    313,047

District of Columbia    $     39,313        $     79,683    $    118,996

Florida                 $ 17,772,164        $ 35,067,156    $ 52,839,320

Georgia                 $  1,641,480        $  3,192,461    $  4,833,941

Hawaii                  $    126,836        $    354,919    $    481,755

Idaho                   $     45,319        $     99,698    $    145,017

Illinois                $    632,228        $  1,255,314    $  1,887,542

Indiana                 $    268,868        $    508,904    $    777,772

Iowa                    $    136,591        $    261,937    $    398,528

Kansas                  $  1,006,145        $  1,883,683    $  2,889,828

Kentucky                $  1,651,591        $  3,050,282    $  4,701,873

Louisiana               $ 10,623,535        $ 23,210,037    $ 33,833,572

Maine                   $  2,642,572        $  5,829,104    $  8,471,676

Maryland                $    175,903        $    354,474    $    530,377

Massachusetts           $ 10,841,027        $ 22,749,474    $ 33,590,501

Michigan                $    824,755        $  1,796,118    $  2,620,873

Minnesota               $    228,707        $    410,218    $    638,925

Mississippi             $    577,545        $  1,164,253    $  1,741,798

Missouri                $    754,892        $  1,463,353    $  2,218,245

Montana                 $        180        $        614    $        794
</TABLE>

                                       49
<PAGE>

<TABLE>
<S>                     <C>                 <C>              <C>
Nebraska                $    234,816        $     420,273    $    655,089

Nevada                  $     29,332        $      66,812    $     96,144

New Hampshire           $    600,781        $   1,138,476    $  1,739,257

New Jersey              $  4,201,737        $   7,809,105    $ 12,010,842

New Mexico              $    295,156        $     705,331    $  1,000,487

New York               ($    225,250)       $           0    $          0

North Carolina          $  1,502,567        $   2,687,353    $  4,189,920

North Dakota            $        535        $       1,013    $      1,548

Ohio                   ($     66,801)       $           0    $          0

Oklahoma                $     13,699        $      24,008    $     37,707

Oregon                  $     98,575        $     184,569    $    283,144

Pennsylvania            $    532,452        $   1,056,135    $  1,588,587

Rhode Island            $ 33,718,852        $  63,992,772    $ 97,711,624

South Carolina          $    241,465        $     485,009    $    726,474

South Dakota            $     21,159        $      48,000    $     69,159

Tennessee               $  2,114,618        $   3,589,079    $  5,703,697

Texas                  ($    393,790)       $           0    $          0

US                      $    467,709        $     656,462    $  1,124,171

Utah                    $     13,917        $      33,769    $     47,686

Vermont                 $  1,453,174        $   2,599,420    $  4,052,594

Virginia               ($  1,719,903)       $           0    $          0

Washington              $     18,125        $      45,429    $     63,554

West Virginia           $      9,991        $      13,924    $     23,915

Wisconsin              ($      4,095)       $           0    $          0

Wyoming                 $      1,564        $       3,355    $      4,919

                                            TOTAL:           $301,216,234
</TABLE>

(1)   Interest applied at the average of the historical 30-Year Treasury Note,
      10-Year Treasury Note and Prime rates; interest begins 18 months after
      the first-year mid-point and was compounded.

                                       50
<PAGE>

                                    EXHIBIT 2

                                     RELEASE

            This RELEASE (the "Release") is executed this ___ day of _______,
2006 by RELEASOR (defined below) in favor of RELEASEE (defined below).

                                   DEFINITIONS

            "RELEASOR" refers to [FILL IN NAME ___________] and any of its
affiliates, subsidiaries, associates, general or limited partners or
partnerships, predecessors, successors, or assigns, including, without
limitation, any of their respective present or former officers, directors,
trustees, employees, agents, attorneys, representatives and shareholders,
affiliates, associates, general or limited partners or partnerships, heirs,
executors, administrators, predecessors, successors, assigns or insurers acting
on behalf of RELEASOR.

            "RELEASEE" refers to American International Group, Inc. and any of
its subsidiaries, associates, general or limited partners or partnerships,
predecessors, successors, or assigns, including, without limitation, any of
their respective present or former officers, directors, trustees, employees,
agents, attorneys, representatives and shareholders, affiliates, associates,
general or limited partners or partnerships, heirs, executors, administrators,
predecessors, successors, assigns or insurers (collectively, "AIG").

            "AGREEMENT" refers to a certain agreement between AIG and the
Attorney General of the State of New York ("NYAG") dated January 18, 2006 and an
accompanying stipulation between AIG and the Superintendent of Insurance of the
State of New York ("NYSI") dated January 18, 2006, relating to (i) an action
commenced against AIG by the NYAG and NYSI dated May 26, 2005, captioned The
People of the State of New York v. American International Group, Inc., Maurice
R. Greenberg and Howard I. Smith, Index No. 401720/2005, and an investigation by
the NYAG and NYSI relating to same (the "COMPLAINT"), (ii) an investigation by
the NYAG and NYSI related to AIG's alleged use of contingent commission
agreements or placement service agreements to steer business; and (iii) an
investigation by the NYAG and NYSI related to AIG's alleged participation in bid
rigging schemes.

                                     RELEASE

            1. In consideration for the total payment of $___________ in
accordance with the terms of the AGREEMENT, RELEASOR does hereby fully release,
waive and forever discharge RELEASEE from any and all claims, demands, debts,
rights, causes of action or liabilities whatsoever, including known and unknown
claims, now existing or hereafter arising, in law, equity or otherwise, whether
under state, federal or foreign statutory or common law, and whether possessed
or asserted directly, indirectly, derivatively, representatively or in

                                       51

<PAGE>

any other capacity (collectively, "claims"), to the extent any such claims are
based upon, arise out of or relate to, in whole or in part, (i) any of the
allegations, acts, omissions, transactions, events, types of conduct or matters
that are the subject of the COMPLAINT, described in the AGREEMENT, or were
subject to investigation by NYAG and NYSI as referenced in the AGREEMENT;(ii)
any allegations, acts, omissions, transactions, events, types of conduct or
matters that are the subject of In re Insurance Brokerage Antitrust Litigation,
MDL No. 1663, or the actions pending in the United States District Court for the
District of New Jersey captioned In re: Insurance Brokerage Antitrust
Litigation, Civ. No. 04-5184 (FSH), and In re Employee Benefit Insurance
Brokerage Antitrust Litigation, Civ. No. 05-1079 (FSH) or any related actions
filed or transferred to the United States District Court for the District of New
Jersey that are consolidated into either of the preceding Civil Action dockets;
or (iii) any allegations of bid-rigging or of the use of contingent commission
agreements or placement service agreements to steer business; provided, however,
that RELEASOR does not hereby release, waive, or discharge RELEASEE from any
claims that are based upon, arise out of or relate to (a) the purchase or sale
of AIG securities; and (b) AIG's Life Insurance Operations (as defined by the
Agreement to which this Release is an exhibit).

            2. In the event that the total payment referred to in paragraph 1 is
not made for any reason, then this RELEASE shall be deemed null and void,
provided that any payments received by RELEASOR shall be credited to AIG in
connection with any claims that RELEASOR may assert against AIG, or that are
asserted on behalf of RELEASOR or by a class of which RELEASOR is a member,
against AIG.

            3. This RELEASE may not be changed orally and shall be governed by
and interpreted in accordance with the internal laws of the State of New York,
without giving effect to choice of law principles, except to the extent that
federal law requires that federal law governs. Any disputes arising out of or
related to this RELEASE shall be subject to the exclusive jurisdiction of the
Supreme Court of the State of New York or, to the extent federal jurisdiction
exists, the United States District Court for the Southern District of New York.

            4. Releasor represents and warrants that the claims have not been
sold, assigned or hypothecated in whole or in part.

Dated:___

RELEASOR:_____

By:_____

Print Name:_____

Title:

                                       52

<PAGE>

                                    EXHIBIT 3

SUPREME COURT OF THE STATE OF NEW YORK
NEW YORK COUNTY

THE PEOPLE OF THE STATE OF NEW YORK by
ELIOT SPITZER, Attorney General of the
State of New York, and HOWARD MILLS,
Superintendent of Insurance of the State
of New York,

                                                Index No. 401720/05
                          Plaintiffs,           (Ramos, J.)

                          v.                    STIPULATION DISCONTINUING ACTION
                                                WITH PREJUDICE

AMERICAN INTERNATIONAL GROUP, INC.,
MAURICE R. GREENBERG and HOWARD I.
SMITH,

                          Defendants.

            IT IS HEREBY STIPULATED AND AGREED, by and between plaintiffs and
defendant American International Group, Inc. that, pursuant to CPLR Section
3217(a) and the agreement annexed hereto, this action is hereby discontinued
with prejudice as to American International Group, Inc., as of this date without
costs to either party against the other.

Dated: New York, New York
       January __, 2006
                                       ELIOT SPITZER,
                                       Attorney General of the State of New York
                                       By:_______________________________
                                       David D. Brown, IV
                                       Assistant Attorney General
                                       120 Broadway
                                       New York, NY 10271

                                       53

<PAGE>

                                           (212) 416-8198
                                           Attorney for Plaintiffs

                                           PAUL, WEISS, RIFKIND, WHARTON
                                           & GARRISON LLP

                                           By:__________________________
                                           Martin Flumenbaum
                                           1285 Avenue of the Americas
                                           New York, NY 10019
                                           (212) 373-3000
                                           Attorneys for American International
                                           Group, Inc.

                                       54<PAGE>

                                                                    EXHIBIT 10.4
                                     [LOGO]

                                STATE OF NEW YORK
                              INSURANCE DEPARTMENT
                                25 BEAVER STREET
                            NEW YORK, NEW YORK 10004
----------------------------------------------- X
            In the Matter of

AMERICAN INTERNATIONAL GROUP, INC.                        STIPULATION
and its insurer subsidiaries authorized to                No. 2005-0262-S
transact insurance business in the State of
New York,

                                  Respondents.
----------------------------------------------- X
            WHEREAS, Respondent American International Group, Inc. is a Delaware
corporation with its principal place of business in New York, New York, and is a
holding company within the meaning of Article 15 of the New York Insurance Law
("Insurance Law") which owns and/or controls the following insurers authorized
to transact insurance business in the State of New York: AIG Centennial
Insurance Company, AIG Indemnity Insurance Company, AIG National Insurance
Company, Inc., AIG Preferred Insurance Company, AIG Premier Insurance Company,
AIU Insurance Company, American Home Assurance Company, American International
Insurance Company, Birmingham Fire Insurance Company of Pa., China America
Insurance Company Ltd., Commerce and Industry Insurance Company, Granite State
Insurance Company, The Hartford Steam Boiler Inspection and Insurance Company,
The Hartford Steam Boiler Inspection and Insurance Company of Ct., Illinois
National Insurance Company, Insurance Company of the State of Pa., Landmark
Insurance Company, National Union Fire Insurance Company of Pittsburgh, Pa., New
Hampshire Indemnity Company, Inc., New Hampshire Insurance Company, United
Guaranty Credit Insurance Company, United Guaranty Insurance Company, United
Guaranty Mortgage Indemnity Company, United Guaranty Mortgage Insurance Company
of North Carolina, United Guaranty Mortgage Insurance Company and United
Guaranty Residential Insurance Company (collectively referred to herein as "AIG"
or "Respondents");

            WHEREAS, the Attorney General of the State of New York (the
"Attorney General") and the Superintendent of Insurance of the State of New York
(the "Superintendent") commenced a civil action in the Supreme Court of the
State of New York, County of New York, entitled The People of the State of New
York, by Eliot Spitzer, Attorney General of the State of New York, and Howard
Mills, Superintendent of Insurance of the State of New York v. American
International Group, Inc., et al., against American International Group, Inc.
and two of its former officers pursuant to

<PAGE>

In the Matter of American International Group, Inc., et al.              Page 2

Executive Law Section 63 (12), the Martin Act (Gen. Bus. Law Section 352-c),
Insurance Law Sections 201 and 327 and the common law of the State of New York
(the "Complaint");

            WHEREAS, the Superintendent and the New York State Insurance
Department ("Department") have conducted an examination of American
International Group, Inc. and certain of the Respondents pursuant to Sections
309 and 310 of the Insurance Law (the "Superintendent's Examination") and the
Attorney General has conducted an investigation related to AIG's practices in
the marketing, sale, renewal, placement or servicing of insurance for its
policyholders and its accounting and public reporting practices, including those
relating to nontraditional and finite insurance (the "Attorney General's
Investigation");

            WHEREAS, the Attorney General and the Superintendent allege that AIG
unlawfully deceived its policyholders, regulators and other authorities and
shareholders by (a) participating in schemes to steer business; (b)
participating in rigging of bids for excess casualty insurance through Marsh &
McLennan, Inc. or Marsh Inc, (collectively, "Marsh"); (c) underreporting to
state insurance departments, taxing authorities and other entities the amount of
workers compensation premium it collected; (d) providing false and misleading
information and responses to regulators, including misrepresentations concerning
certain reinsurance arrangements; and (e) using fraudulent insurance
transactions and "topside" accounting adjustments to bolster the quality,
quantity and stability of its earnings;

            WHEREAS, Respondents have been and are continuing to cooperate with
the Superintendent's Examination and the Attorney General's Investigation;

            WHEREAS, in the wake of the Complaint, the Attorney General's
Investigation and the Superintendent's Examination, AIG has adopted and under
this Stipulation (the "Stipulation") will continue to implement a number of
business reforms;

            WHEREAS, the Attorney General and AIG have entered into an agreement
to resolve all issues related to AIG in the Complaint and the Attorney General's
Investigation (with the exceptions of any conduct or activity relating to the
Variable Annuity Life Insurance Company and any other AIG subsidiary which sells
variable annuities, and any conduct or activity relating to the marketing,
purchase, sale or negotiation of life settlements, including AIG's dealings with
life settlement brokers, agents, sellers and investors; notwithstanding the
above, the agreement resolves the allegations relating to the Coventry Life
Settlement Trust contained in paragraphs 81-91 of the Complaint) (the "Attorney
General's Agreement");

            WHEREAS, nothing herein shall be construed to apply to any business
or operations involving group and individual: (1) fixed and variable life
insurance, (2) fixed and variable, immediate and deferred annuities, (3)
accidental death and dismemberment insurance, (4) short and long term disability
insurance, (5) long term care insurance, (6) accident and health insurance,
including vision and dental insurance, (7) credit insurance, (8) involuntary
unemployment insurance, (9) guaranteed investment contracts, and (10) funding
agreements (collectively "AIG's Life Insurance Operations");

<PAGE>

In the Matter of American International Group, Inc., et al.              Page 3

            WHEREAS, the Superintendent and AIG wish to enter into this
Stipulation to resolve all issues related to AIG in the Complaint and the
Superintendent's Examination (with the exception of any pending or future
examination of American International Group, Inc. and its insurer subsidiaries);

            WHEREAS, the Superintendent finds the relief and agreements
contained in this Stipulation appropriate and in the public interest, and is
willing to accept this Stipulation as a settlement of the Complaint and the
Superintendent's Examination (with the exception noted above);

            WHEREAS, AIG is entering into an agreement with the United States
Securities and Exchange Commission ("SEC") to provide a fund to compensate
investors for alleged injuries related to AIG's accounting and public reporting
practices;

            WHEREAS, this Stipulation is entered into solely for the purpose of
resolving the Complaint and the Superintendent's Examination (with the exception
noted above) and is not intended to be used for any other purpose; NOW THEREFORE

            IT IS HEREBY STIPULATED AND AGREED by and between the Respondents
and the Department, subject to the approval of the Superintendent, as follows:

                              WORKERS COMPENSATION

            1. AIG shall pay a total of $343.5 million for alleged injury caused
by its underpayment of workers compensation premium taxes and all other related
fees and assessments including workers compensation residual market assessments
for and including tax years 1985 to 1996 but not including workers compensation
guaranty fund assessments and any monies owed relating to large deductible
policies and related taxes. The $343.5 million will be apportioned as detailed
in paragraphs 2, 3 and 4, below. The State of New York shall not consider any
portion of this amount to be a fine or penalty.

            2. On or before March 1, 2006, AIG shall pay $87,801 to the State of
New York by wire transfer for alleged injury caused by AIG's underpayment of
workers compensation premium taxes and all other related fees and assessments
including workers compensation residual market assessments and guaranty fund
assessments for and including tax years 1985 to 1996.

            3. On or before March 1, 2006, AIG shall pay to each of the other
forty-nine states and the District of Columbia ("State," or collectively
"States") the total listed for that State on Schedule WC-A to the Stipulation
and the Attorney General's Agreement for alleged injury caused by AIG's
underpayment of workers compensation premium taxes and all other related fees
and assessments for and including tax years 1985 to 1996 but not including
workers compensation residual market assessments and guaranty fund assessments.
The total amount to be paid to the States pursuant to this paragraph shall be
$42,280,740.

<PAGE>

In the Matter of American International Group, Inc., et al.              Page 4

            4. On or before March 1, 2006, AIG shall pay $301,216,234 into a
fund created by AIG for the settlement of claims with the States and workers
compensation residual market pools, including monopolistic or exclusive State
funds, competitive State funds, independent State assigned risk plans, the
National Workers' Compensation Reinsurance Pool administered by the National
Council on Compensation Insurance, Inc. ("NCCI"), State assigned risk plans
administered by the NCCI or another third-party administrator, or other workers
compensation residual market mechanisms in which one or more of the States
participates, for alleged injury caused by AIG's underpayment of workers
compensation residual market assessments for and including tax years 1985 to
1996, and additional amounts arising out of any claim for injury described in
paragraph 1, but not set forth in paragraphs 2 and 3 of this Stipulation and the
Attorney General's Agreement (the "Workers Compensation Fund"). A calculation by
State of such underpayments and the interest thereon is attached as Schedule
WC-B to this Stipulation and the Attorney General's Agreement. In no event shall
any of the money in the Workers Compensation Fund be paid directly to an
insurance company.

            5. On or before March 1, 2006, AIG shall send a notice to the
Attorney General and Insurance Commissioner of each State (the "Workers
Compensation Notice"). The Workers Compensation Notice shall be accompanied by:
(a) payment owing, if any, pursuant to paragraph 3 above, (b) a copy of this
Stipulation and the Attorney General's Agreement, their Exhibits and Schedules
(including Schedules WC-A and WC-B); and (c) a cover letter stating that the
Workers Compensation Fund described in paragraph 4 above has been created for
the settlement of claims arising from AIG's underpayment of workers compensation
residual market assessments for and including tax years 1985 to 1996 and setting
forth the amount apportioned to the noticed State on Schedule WC-B.

            6. The form of the Workers Compensation Notice described in
paragraph 5 above shall be subject to the prior approval of the Attorney General
and the Superintendent.

            7. The Workers Compensation Fund shall be held by AIG and invested
in a designated money market fund subject to the prior approval of the Attorney
General and the Superintendent.

            8. Each State which receives a Workers Compensation Notice and which
elects to receive a distribution from the Workers Compensation Fund in the
amount apportioned to it on Schedule WC-B (a "Participating State," or
collectively the "Participating States") shall tender a release in the form
attached to this Stipulation and the Attorney General's Agreement as Exhibit
WC-1 (the "Release") on or before March 1, 2007.

            9. For each Participating State that has tendered a Release pursuant
to the preceding paragraph, AIG shall pay the Participating State an amount
equal to the amount apportioned to the State on Schedule WC-B plus all
investment or interest income earned thereon, within ten business days of
receiving the Release.

<PAGE>

In the Matter of American International Group, Inc., et al.              Page 5

            10. In the event that any State elects not to participate and does
not tender a Release as provided in paragraph 8 above, AIG may use the money
remaining in the Workers Compensation Fund as of but not before March 2, 2007 to
satisfy any claim for injury caused by AIG's underpayment of workers
compensation residual market assessments or workers compensation premium taxes
or any other related fees or assessments by a State, a monopolistic or exclusive
State fund, a competitive State fund, an independent State assigned risk plan,
the National Workers' Compensation Reinsurance Pool administered by the NCCI, a
State assigned risk plan administered by the NCCI or other third-party
administrator, or other workers compensation residual market mechanism in which
one or more of the States participates. In no event shall any money in the
Workers Compensation Fund be used to settle other claims before all
Participating States have been paid their full distribution from the Fund
pursuant to paragraph 9. In no event shall any of the money in the Workers
Compensation Fund be paid directly to an insurance company.

            11. If any money remains in the Workers Compensation Fund as of
December 31, 2008, it shall be distributed on or before January 31, 2009 on a
pro rata basis to the Participating States pursuant to the Participating States'
apportioned shares on Schedule WC-B.

            12. The Superintendent shall not seek to impose on AIG any other
financial obligation or liability related to any injury caused by AIG's
underpayment of workers compensation premium taxes and all other related fees
and assessments including residual market assessments for and including tax
years 1985 to 1996, but not including any monies owed relating to large
deductible policies and related taxes.

            13. In no event shall any of the money in the Workers Compensation
Fund, or the investment or interest income earned thereon be used to pay or
considered in the calculation of attorneys fees.

            14. In no event shall any of the money in the Workers Compensation
Fund, or the investment or interest income earned thereon, be used to pay or
considered in the calculation of commissions, administrative or other fees to
AIG.

            15. On or before March 20, 2007, AIG shall file an interim report
with the Attorney General and the Superintendent, certified by an officer of
AIG, listing all amounts paid from the Workers Compensation Fund to date.

            16. On or before March 1, 2009, AIG shall file a report with the
Attorney General and the Superintendent, certified by an officer of AIG, listing
all amounts paid from the Workers Compensation Fund including any amounts paid
pursuant to paragraph 11.

                   BID RIGGING - EXCESS CASUALTY POLICYHOLDERS

            17. On or before March 1, 2006, AIG shall pay $375 Million into a
fund (the "Excess Casualty Fund") created and held by AIG to be paid to AIG's
policyholders who purchased or renewed AIG Excess Casualty policies (excluding

<PAGE>

In the Matter of American International Group, Inc., et al.              Page 6

Excess Workers Compensation policies) through Marsh during the period from
January 1, 2000 through September 30, 2004 (the "Eligible Policyholders"). All
of the money paid into the Excess Casualty Fund and any investment or interest
income earned thereon shall be paid to Eligible Policyholders. No portion of the
Excess Casualty Fund shall be considered a fine or a penalty.

            18. The Excess Casualty Fund shall be invested in a designated money
market fund subject to the prior approval of the Attorney General and the
Superintendent.

            19. AIG shall (a) by May 1, 2006 calculate the amount of money each
of the Eligible Policyholders paid for excess casualty insurance placed through
Marsh with inception or renewal dates during the period from January 1, 2000
through September 30, 2004 (the "Eligible Policies"); (b) within ten days of
completing these calculations, file a report with the Attorney General and the
Superintendent, certified by an officer of AIG, setting forth: (i) each Eligible
Policyholder's name and address; (ii) the Eligible Policyholder's Eligible
Policy(ies) purchased or renewed and policy number(s); (iii) the amount the
Eligible Policyholder paid in premiums for each such policy; and (iv) the amount
each policyholder is eligible to receive which shall equal each policyholder's
pro rata share of the Excess Casualty Fund as calculated by multiplying the
amount in the Excess Casualty Fund by the ratio of the policyholder's gross
written premium for Eligible Policies for the period from January 1, 2000
through September 30, 2004, divided by the total gross written premium for all
Eligible Policies; and (c) by May 22, 2006, send a notice to each Eligible
Policyholder, setting forth items (ii) through (iv), above, and stating that the
amount paid may increase if there is less than full participation by Eligible
Policyholders in the Excess Casualty Fund (the "Excess Notice"). The form of the
Excess Notice shall be subject to the prior approval of the Attorney General and
Superintendent.

            20. Eligible Policyholders who receive an Excess Notice and who
voluntarily elect to receive a cash distribution (the "Participating
Policyholders") shall tender a release in the form attached to this Stipulation
and the Attorney General's Agreement on or before October 23, 2006.

            21. On or before November 30, 2006, AIG shall pay each Participating
Policyholder the amount that that Participating Policyholder is eligible to
receive from the Excess Casualty Fund as set forth in paragraph 19(b)(iv) above,
and any interest or investment income earned thereon.

            22. On or before December 27, 2006, AIG shall file an interim report
with the Attorney General and the Superintendent, certified by an officer of
AIG, listing all amounts paid from the Excess Casualty Fund.

            23. In the event that any Eligible Policyholder elects not to
participate or otherwise does not respond to the Excess Notice (the "Non-
Participating Policyholders"), the amount that such policyholder was eligible to
receive from the Excess Casualty Fund as set forth in paragraph 19(b)(iv) may be
used by AIG to satisfy any pending or other claims asserted by policyholders
relating to the excess

<PAGE>

In the Matter of American International Group, Inc., et al.              Page 7

casualty bid rigging or excess casualty steering allegations set forth in the
Attorney General's Agreement, provided that in no event shall a distribution be
made from the Excess Casualty Fund to any other policyholder until all
Participating Policyholders have been paid the full aggregate amount set forth
in paragraph 19(b)(iv) above, and any interest or investment income earned
thereon; nor shall the total payments from the Excess Casualty Fund to any
Non-Participating Policyholder exceed 80% of the amount that Non-Participating
Policyholder was originally eligible to receive as set forth in paragraph
19(b)(iv).

            24. If any money remains in the Excess Casualty Fund as of October
1, 2007, any such funds shall be distributed by November 1, 2007 on a pro rata
basis to the Participating Policyholders.

            25. In no event shall any of the money in the Excess Casualty Fund
or the investment or interest income earned thereon be used to pay or considered
in the calculation of attorneys fees.

            26. In no event shall any of the money in the Excess Casualty Fund
or the investment or interest income earned thereon be used to pay or considered
in the calculation of commissions, administrative or other fees to AIG.

            27. On or before November 15, 2007, AIG shall file a report with the
Attorney General and the Superintendent, certified by an officer of AIG, listing
all amounts paid from the Excess Casualty Fund, including any payments
subsequent to the payments described in paragraph 22.

                                      FINE

            28. On or before March 1, 2006, AIG shall pay $100 million as a
fine, by wire transfer to the State of New York.

                                BUSINESS REFORMS

            29. This Stipulation is contingent upon AIG reaching agreement with
the SEC to resolve the SEC's investigation of AIG's accounting and public
reporting practices. This Stipulation will not be binding and will not go into
effect unless and until AIG reaches such agreement with the SEC. In any event,
if AIG does not reach such agreement with the SEC by February 24, 2006, this
Stipulation will be null and void.

            30. Pursuant to the agreement with the SEC, American International
Group, Inc. will retain, pay for, and enter into an agreement with a consultant,
not unacceptable to the SEC in consultation with the Attorney General and
Superintendent, to conduct a comprehensive examination and review of the areas
specified below and to make recommendations to the Board of Directors of
American International Group, Inc., SEC, Attorney General and Superintendent
(the "Consultant"). The Consultant's compensation and expenses shall be borne

<PAGE>

In the Matter of American International Group, Inc., et al.              Page 8

exclusively by American International Group, Inc. The agreement shall provide
that the Consultant examine:

                  (a) American International Group, Inc.'s internal controls
            over financial reporting (the Consultant may, if appropriate, rely
            on American International Group, Inc.'s independent accountant's
            attestation and report on management's assessment of the
            effectiveness of American International Group, Inc.'s internal
            control structure and procedures pursuant to Section 404 of the
            Sarbanes-Oxley Act);

                  (b) The organization and reporting structure of American
            International Group, Inc.'s internal audit department and American
            International Group, Inc.'s disclosure committee (which is described
            in Exhibit A to American International Group, Inc.'s Consent and
            Undertakings to be entered with the SEC);

                  (c) The policies, procedures and effectiveness of American
            International Group, Inc.'s regulatory, compliance and legal
            functions, including the operations of any committees established to
            review and approve transactions or for the purpose of preventing the
            recording of transactions or financial reporting results in a manner
            inconsistent with Generally Accepted Accounting Principles ("GAAP")
            and Statements of Statutory Accounting Principles ("SSAP");

                  (d) American International Group, Inc.'s records management
            and retention policies and procedures;

                  (e) The adequacy of whistleblower procedures designed to allow
            employees and others to report confidentially matters that may have
            bearing on the company's financial reporting obligations;

                  (f) American International Group, Inc.'s training and
            education program described below;

                  (g) The reforms that American International Group, Inc. has
            implemented, which are set forth in Exhibit A to American
            International Group, Inc.'s Consent to be entered into with the SEC;
            and

                  (h) The adequacy and effectiveness of the remediation plan
            described below.

            31. The Consultant shall issue a report to the SEC, Attorney
General, Superintendent and American International Group, Inc.'s Board of
Directors within three months of appointment, provided, however, that the
Consultant may seek to extend the period of review for one or more additional
three-month terms by requesting such an extension from the SEC. The SEC shall
have discretion, after consultation with the Attorney General and
Superintendent, to grant such extensions as it deems reasonable and warranted.

<PAGE>

In the Matter of American International Group, Inc., et al.              Page 9

                  (a) The Consultant's report shall set forth the Consultant's
            recommendations regarding best practices in the areas specified in
            paragraph 30 (a)-(h) above, including the Consultant's
            recommendations for any changes in or improvements to American
            International Group, Inc.'s policies and procedures that the
            Consultant reasonably deems necessary to conform to the law and best
            practices, and a procedure for implementing the recommended changes
            in or improvements to American International Group, Inc.'s policies
            and procedures.

                  (b) American International Group, Inc. shall adopt all
            recommendations contained in the report of the Consultant referred
            to in paragraph 31(a) above, provided, however, that within
            forty-five days of receipt of the report, American International
            Group, Inc. shall in writing advise the Consultant, the SEC, the
            Attorney General and the Superintendent of any recommendations that
            it considers to be unnecessary or inappropriate. With respect to any
            recommendation that American International Group, Inc. considers
            unnecessary or inappropriate, American International Group, Inc.
            need not adopt that recommendation at that time but shall propose in
            writing an alternative policy, procedure or system designed to
            achieve the same objective or purpose.

                  (c) As to any recommendation with respect to American
            International Group, Inc.'s policies and procedures on which
            American International Group, Inc. and the Consultant do not agree,
            such parties shall attempt in good faith to reach an agreement
            within ninety days of the issuance of the Consultant's report. In
            the event American International Group, Inc. and the Consultant are
            unable to agree on an alternative proposal acceptable to the SEC,
            after consultation with the Attorney General and Superintendent,
            American International Group, Inc. will abide by the determinations
            of the Consultant.

                  (d) American International Group, Inc. shall retain the
            Consultant for a period of three years from the date of appointment
            in accordance with the provisions of paragraph 32 below. Once the
            Consultant's recommendations become final, the Consultant shall
            oversee the implementation of such recommendations and provide a
            report to the SEC, Attorney General and Superintendent and to
            American International Group, Inc.'s Board of Directors every three
            months concerning the progress of such implementation. If, at the
            conclusion of this three-year period, less than all recommended
            reforms have been substantially implemented for at least two
            successive quarters, the SEC may, in its discretion, after
            consultation with the Attorney General and Superintendent, direct
            American International Group, Inc. to extend the Consultant's term
            of appointment until such time as all recommended reforms have been
            substantially implemented for at least two successive quarters.

<PAGE>

In the Matter of American International Group, Inc., et al.             Page 10

            32. American International Group, Inc. will submit to the SEC a
proposal setting forth the identity, qualifications, and proposed terms of
retention of the Consultant. The SEC, within thirty days of such notice, will
either (1) deem American International Group, Inc.'s choice of Consultant and
proposed terms of retention acceptable or (2) require American International
Group, Inc. to propose an alternative Consultant and/or revised proposed terms
of retention within fifteen days. This process will continue, as necessary,
until American International Group, Inc. has selected a Consultant and retention
terms that are not unacceptable to the SEC. American International Group, Inc.
shall enter into an agreement with the Consultant that shall contain the
following terms:

                  (a) The Consultant shall provide the SEC, Attorney General,
            Superintendent and American International Group, Inc.'s Board of
            Directors with such documents or other information concerning the
            areas identified in paragraph 30 above, as any of them may request
            during the pendency or at the conclusion of the review.

                  (b) The Consultant shall have reasonable access to all of the
            books and records of American International Group, Inc. and its
            subsidiaries and the ability to meet privately with personnel of
            American International Group, Inc. and its subsidiaries. American
            International Group, Inc. may not assert the attorney-client
            privilege, the protection of the work-product doctrine, or any
            privilege as a ground for not providing the Consultant with
            contemporaneous documents or other information related to the
            matters that are the subject of the review. American International
            Group, Inc. shall instruct and otherwise encourage its officers,
            directors, and employees to cooperate fully with the review
            conducted by the Consultant, and inform its officers, directors, and
            employees that failure to cooperate with the review will be grounds
            for dismissal, other disciplinary actions, or other appropriate
            actions.

                  (c) The Consultant shall have the right, as reasonable and
            necessary in his or her judgment, to retain, at American
            International Group, Inc.'s expense, attorneys, accountants, and
            other persons or firms, other than officers, directors, or employees
            of American International Group, Inc., to assist in the discharge of
            his or her obligations under the undertakings. American
            International Group, Inc. shall pay all reasonable fees and expenses
            of any persons or firms retained by the Consultant. To the extent
            the Consultant seeks to retain an accounting firm, he or she shall
            choose an accounting firm in consultation with the SEC.

                  (d) The Consultant shall make and keep notes of interviews
            conducted, and keep a copy of documents gathered, in connection with
            the performance of his or her responsibilities, and require all
            persons and firms retained to assist the Consultant to do so as
            well.

                  (e) The Consultant's relationship with American International
            Group, Inc. shall not be treated as one between an attorney and
            client. The Consultant will not assert the attorney-client
            privilege, the protection

<PAGE>

In the Matter of American International Group, Inc., et al.             Page 11

            of the work-product doctrine, or any privilege as a ground for not
            providing any information obtained in the review sought by the SEC,
            Attorney General or Superintendent.

                  (f) If the Consultant determines that he or she has a conflict
            with respect to one or more of the areas described in paragraph 30
            or otherwise, he or she shall delegate his or her responsibilities
            with respect to that subject to a person who is chosen by the
            Consultant and who is not unacceptable to the SEC.

                  (g) For the period of engagement and for a period of two years
            from completion of the engagement, the Consultant shall not enter
            into any employment, consulting, attorney-client, auditing or other
            professional relationship with American International Group, Inc.,
            or any of its present or former subsidiaries or affiliates,
            directors, officers, employees, or agents acting in their capacity
            as such; and shall require that any firm with which the Consultant
            is affiliated or of which the Consultant is a member, or any person
            engaged to assist the Consultant in performance of the Consultant's
            duties, without prior written consent of the SEC, not enter into any
            employment, consulting, attorney-client, auditing or other
            professional relationship with American International Group, Inc.,
            or any of its present or former subsidiaries or affiliates,
            directors, officers, employees, or agents acting in their capacity
            as such for the period of the engagement and for a period of two
            years after the engagement. For the purposes of this section,
            representation of a person or firm insured by American International
            Group, Inc. shall not be deemed a professional relationship with
            American International Group, Inc.

                  (h) American International Group, Inc., including the Board of
            Directors and committees of the Board of Directors of American
            International Group, Inc., shall not assert, or permit its
            subsidiaries to assert, the attorney-client privilege, the
            protection of the work-product doctrine, or any privilege as a
            ground for not providing to the Consultant any documents,
            information, or testimony that American International Group, Inc.
            provided to the SEC, Attorney General or Superintendent which the
            Consultant has deemed necessary for his or her review.

                  (i) The Consultant shall treat and maintain information of
            American International Group, Inc. and its subsidiaries as strictly
            confidential and shall not disclose such information other than to
            the SEC, Attorney General and Superintendent, and to the
            Consultant's personnel, agents or representatives who need to know
            such information for the purpose of the review contemplated herein,
            or as otherwise required by law.

                  (j) At the conclusion of the Consultant's engagement, subject
            to the approval of the SEC, after consultation with the Attorney
            General and the Superintendent, the Consultant shall return to
            American International Group, Inc. all documents reflecting or
            referring to non-public business

<PAGE>

In the Matter of American International Group, Inc., et al.             Page 12

            and financial information of American International Group, Inc. and
            its subsidiaries.

            33. Additional Undertakings.

                  (a) American International Group, Inc. will draft a
            remediation plan consisting of (i) steps to address and correct the
            causes of the material weaknesses in internal controls over
            financial reporting as identified in the 2004 Form 10-K; (ii) a
            program to test the operational effectiveness of new or enhanced
            controls; and (iii) completion of management's testing of the
            relevant significant controls.

                  (b) American International Group, Inc. agrees that it will
            establish and maintain a training and education program, completion
            of which will be required for (i) officers, executives, and
            employees of American International Group, Inc. and its subsidiaries
            who are involved in the oversight of accounting and financial
            reporting functions; (ii) all employees in American International
            Group, Inc.'s legal division with responsibility for or oversight of
            American International Group, Inc.'s accounting, financial reporting
            or disclosure obligations; and (iii) other senior officers and
            executives of American International Group, Inc. and its
            subsidiaries, as proposed by American International Group, Inc. and
            approved by the Consultant (collectively, the "Mandatory
            Participants").

                  (c) The structure and operation of the training and education
            program shall be reviewed and approved by the Consultant. The
            training and education program shall be designed to cover, at a
            minimum, the following: (i) the obligations imposed on American
            International Group, Inc. by federal and state securities law,
            including American International Group, Inc.'s financial reporting
            and disclosure obligations; (ii) the financial reporting and
            disclosure obligations imposed on American International Group, Inc.
            and its subsidiaries by New York state insurance law; (iii) proper
            internal accounting controls and procedures; (iv) discovering and
            recognizing accounting practices that do not conform to GAAP or SSAP
            or that are otherwise improper; and (v) the obligations assumed by,
            and responses expected of, the Mandatory Participants upon learning
            of improper, illegal or potentially illegal acts relating to
            American International Group, Inc.'s accounting and financial
            reporting. The Board of Directors shall communicate to the Mandatory
            Participants, in writing or by video, its endorsement of the
            training and education program.

            34. To the extent any of the provisions of the SEC agreement
described in paragraph 29 conflict with the provisions in paragraphs 30 through
33 of this Stipulation, the provisions of the SEC agreement will replace such
provisions in paragraphs 30 through 33 of this Stipulation.

                        REINSURANCE REPORTING OBLIGATIONS

<PAGE>

In the Matter of American International Group, Inc., et al.             Page 13

            35. For a period of five years beginning May 1, 2006, AIG will
provide annually by May 1 of each year to the Superintendent a report, in a
format approved by the Superintendent, that includes:

            (a)   A review of ceded and assumed reinsurance of AIG's
                  property/casualty insurers required to file statutory
                  financial statements on the National Association of Insurance
                  Commissioners ("NAIC") blanks (the "Property/Casualty
                  Insurers") verifying that all contracts comply with SSAP 62
                  and 75 and the new NAIC disclosure and attestation
                  requirements including the attestation that with respect to
                  all reinsurance contracts for which the reporting entity is
                  taking credit on its current financial statements, to the best
                  of AIG's knowledge and belief, after diligent inquiry and
                  unless noted as an exception under the attestation
                  requirement:

                  (i)   Consistent with SSAP 62, there are no separate written
                        or oral agreements between the reporting entity (or its
                        affiliates or companies it controls) and the assuming
                        reinsurer that would under any circumstances, reduce,
                        limit, mitigate or otherwise affect any actual or
                        potential loss to the parties under the reinsurance
                        contract, other than inuring contracts that are
                        explicitly defined in the reinsurance contract except as
                        disclosed;

                  (ii)  For each such reinsurance contract entered into, renewed
                        or amended on or after January 1, 1994, for which risk
                        transfer is not reasonably considered to be
                        self-evident, documentation concerning the economic
                        intent of the transaction and the risk transfer analysis
                        evidencing the proper accounting treatment, as required
                        by SSAP 62 and 75, is available for review;

                  (iii) The reporting entity complies with all the requirements
                        set forth in SSAP 62 and 75, and any supporting
                        documentation is available for review;

                  (iv)  The reporting entity has appropriate controls in place
                        to monitor the use of reinsurance and adhere to the
                        provisions of SSAP 62 and 75.

            (b)   A list of all its affiliated insurers, categorized by
                  domicile, whether controlled through ownership or otherwise
                  under the Insurance Law. The list shall include the percentage
                  of ownership or other means by which AIG controls the
                  affiliated insurer.

            (c)   A list of its ownership of five percent or more of the voting
                  shares of any non-affiliated insurer entities.

            (d)   A list of non-affiliated insurers to whom AIG's
                  Property/Casualty Insurers have ceded business during the
                  preceding calendar year either directly, or through
                  retrocession agreements if known, excluding those captive
                  reinsurance entities that do not accept third

<PAGE>

In the Matter of American International Group, Inc., et al.             Page 14

                  party business, where the business ceded represents fifty
                  percent or more of the entire direct and assumed premium
                  written by the insurer, based upon such insurer's most recent
                  publicly available financial statements.

            (e)   A list disclosing any letter of credit for which an AIG
                  insurer is the beneficiary and AIG or an AIG subsidiary is
                  directly or indirectly guaranteeing or providing collateral
                  for the letter of credit or incurring the cost, except for
                  parental letters of credit in accordance with Department
                  Regulation 20.

Such report shall be certified by the Chief Reinsurance Officer and the Chief
Executive Officer of American International Group, Inc. and a copy of such
report shall be submitted to the Audit Committee of AIG.

            36. The Chief Reinsurance Officer will maintain approved lists of
reinsurers. AIG will not cede insurance to any reinsurer not set forth on those
lists. Such lists will be available to the Superintendent upon examination. All
approved reinsurance relationships will be reviewed by the Chief Reinsurance
Officer and such review will include a written determination of whether the
reinsurance entity is affiliated or controlled (by ownership, by contract or
otherwise) by AIG.

            37. AIG agrees not to enter into any arrangement, transaction or
relationship with a reinsurer that has characteristics similar to those of Coral
Re, Union Excess or Richmond.

                         COOPERATION WITH SUPERINTENDENT

            38. AIG will maintain and provide to the Superintendent, upon the
Superintendent's request, complete underwriting files, including correspondence
and e-mails, and risk transfer analysis to the extent required by SSAP 62
relating to all reinsurance ceded or assumed by AIG. AIG will authorize its
independent auditors and direct its internal auditors to make available to the
Superintendent upon request all workpapers of its auditors, including but not
limited to all Schedules of Unadjusted Differences.

            39. AIG will file all holding company transactions in a timely
manner in compliance with Article 15 of the New York Insurance Law and
Department Regulation 52. The Superintendent and AIG will agree upon a filing
methodology that will recognize efficiencies in such compliance.

            40. The Chairs of the Audit Committee and the Regulatory, Compliance
and Legal Committee of the Board will meet with the Superintendent and/or a
designated official of the Department on an annual basis or more frequently as
deemed necessary by the Department. The Chair of the Regulatory Compliance and
Legal Committee will serve as the Department's contact for all AIG examinations
and such meetings.

            41. AIG will cooperate fully on all examinations and on all other
regulatory requests and will respond to all Department inquiries in a prompt,
timely and complete manner. AIG will provide appropriate staff during
examinations in order to provide timely responses. Failure to respond to the
Department in a timely manner

<PAGE>

In the Matter of American International Group, Inc., et al.              Page 15

will constitute violations of this Stipulation, the Attorney General's Agreement
and the Insurance Law. Any issues that relate to the timeliness of the responses
shall be reported to the Chief Financial Officer.

            42. AIG will provide the Superintendent with all copies of its
remediation plans and regular progress reports relating to its remediation plans
to address significant deficiencies in internal controls over financial
reporting.

            43. AIG has taken appropriate remedial actions with respect to
certain employees in management and in the underwriting, accounting, auditing,
actuarial and financial reporting functions who were involved in the allegations
of the Complaint and has reviewed such actions with the Superintendent.

            44. AIG, the Board of Directors of AIG, and the Audit Committee will
review its relationship with AIG's independent outside auditors on a yearly
basis and will conduct a Request For Proposal procedure for its independent
auditors in connection with its 2008 fiscal year. Such review shall be made
available to the Superintendent.

            45. AIG will review its holding company structure with the goal to
reducing and simplifying the structure. A report detailing this review and its
conclusions shall be provided to the Superintendent by June 1, 2006.

            46. AIG has agreed to restate its 2004 statutory financial
statements to properly account for the Union Excess and Richmond transactions
identified in the Complaint as well as additional transactions pursuant to its
agreement with the Superintendent and other state insurance regulators.

            47. AIG agrees to review all of its communications with state
insurance regulators to ensure full and complete disclosure.

                                OTHER PROVISIONS

            48. AIG shall not seek or accept, directly or indirectly,
indemnification pursuant to any insurance policy, with regard to any or all of
the amounts payable pursuant to this Stipulation and the Attorney General's
Agreement.

            49. None of the provisions of this Stipulation and the Settlement
Agreement shall apply to AIG's Life Insurance Operations.

            50. None of the provisions of this Stipulation and the Settlement
Agreement shall apply to 21st Century Insurance Group or Transatlantic Holdings
Inc. AIG shall not enter into any transaction with either of these entities, or
engage in any conduct by virtue of its ownership interests therein for the
purpose of circumventing any provision of this Stipulation.

            51. The Attorney General will promptly file a Stipulation
Discontinuing Action with Prejudice, in the form attached as Exhibit 3 to the
Attorney General's Agreement, voluntarily dismissing the Complaint as to
American International Group, Inc. with prejudice.

<PAGE>

In the Matter of American International Group, Inc., et al.              Page 16

            52. The Superintendent agrees that any prior approval required under
the terms of this Stipulation shall not be unreasonably withheld.

            53. This Stipulation is not intended to disqualify AIG, or any
current employees of AIG, from engaging in any business in New York or in any
other jurisdiction. Nothing in this Stipulation shall relieve AIG's obligations
imposed by any applicable state insurance law or regulations or other applicable
law.

            54. This Stipulation shall not confer any rights upon any persons or
entities besides the Superintendent, the Department and AIG.

            55. AIG shall maintain custody of, or make arrangements to have
maintained, all documents and records of AIG related to this matter for a period
of not less than six years.

            56. Respondents neither admit nor deny the allegations contained in
the Complaint or any of the allegations contained in the Attorney General's
Agreement or this Stipulation.

            57. This Stipulation shall in no way limit the statutory authority
of the Superintendent to take regulatory action to enforce this Stipulation, or
to examine, investigate and/or take regulatory action against Respondents or any
current or former licensee of the Department for any violations of the Insurance
Law or Department Regulations other than the specific matters resolved by this
Stipulation and the Attorney General's Agreement.

            58. The monetary obligations described in paragraphs 1-28 above in
this Stipulation are identical to the monetary payment obligations contained in
the Attorney General's Agreement and, as a result, AIG need only make one
payment with respect to each such obligation.

Dated: New York, NY
       January 18, 2006

                                         NEW YORK STATE INSURANCE DEPARTMENT

                                         By:    /s/ Jon G. Rothblatt
                                             _________________________________
                                                    Jon G. Rothblatt
                                                    Principal Attorney

<PAGE>

In the Matter of American International Group, Inc., et al.              Page 17

                                         AMERICAN INTERNATIONAL GROUP, INC.

                                         By: /s/ Martin J. Sullivan
                                             ---------------------------
                                             Name: Martin J. Sullivan
                                             Title: President and Chief
                                                    Executive Officer

STATE OF New York   )
                    )ss.:
COUNTY OF New York  )

            On this 18 day of January, 2006, before me personally came Martin J.
Sullivan, to me known, who, being by me duly sworn, did depose and say that he
is the President and C.E.O. of American International Group, Inc., the
corporation described in and which executed the above instrument; and that he
signed his name thereto by order of the board of directors of said corporation.

Andrew R. Holland                                  /s/ Andrew R. Holland
Notary Public, State of New York                   ---------------------
No. 02HO5057226                                         Notary Public
Qualified in New York County
Commission Expires March 18, 2006

                  THE FOREGOING STIPULATION IS HEREBY APPROVED.

Dated: New York, NY
       January 18, 2006

                                                          HOWARD MILLS
                                                 Superintendent of Insurance

                                 By:                  /s/ Audrey Samers
                                       -----------------------------------------
                                                        Audrey Samers
                                         Deputy Superintendent & General Counsel

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