American International Group, Inc. Financial Supplement First Quarter 2009

Transcription

1 Financial Supplement First Quarter 2009 This report should be read in conjunction with AIG's Quarterly Report on Form 10-Q for the quarter ended March 31, 2009 filed with the Securities and Exchange Commission. Revised on May 12, Page 6 - Redeemable noncontrolling interest in partially owned consolidated subsidiaries for December 31, 2008.

2 Financial Supplement Table of Contents Consolidated Consolidated Statement of Operations...1 Consolidated Statement of Segment Operations Significant Items, Affecting Adjusted Net Loss Summary of FAS 133 Effect...5 Consolidated Balance Sheet...6 Debt and Capital...7 Capital Structure...8 Book Value per Share...9 General Insurance General Insurance Operating Statistics...10 AIG Commercial Insurance Operating Statistics...11 AIG Commercial Insurance Gross Premiums Written by Line of Business...12 Personal Lines Insurance Operating Statistics...13 Mortgage Guaranty (UGC) Insurance Operating Statistics...14 Mortgage Guaranty (UGC) Insurance Product Statistics...15 United Guaranty Net Risk-in-Force and Delinquency...16 Transatlantic Holdings, Inc. Insurance Operating Statistics...17 Foreign General Insurance Operating Statistics...18 Foreign General Insurance Gross Premiums Written...19 General Insurance Notes...20 Life Insurance & Retirement Services Life Insurance & Retirement Services Operating Statistics...21 Domestic Life Insurance & Retirement Services Operating Statistics...22 Domestic Life Insurance Product Statistics Domestic Life Insurance Other Data...25 Domestic Life Insurance Deferred Policy Acquisition Costs, Sales Inducements and Value of Business Acquired Domestic Life Insurance Notes...28 Domestic Retirement Services Product Statistics Domestic Retirement Services Deposits...31 Domestic Retirement Services Spread Information Domestic Retirement Services Deferred Policy Acquisition Costs, Sales Inducements and Value of Business Acquired...34 Domestic Retirement Services Individual Variable Annuities Guaranteed Benefits Domestic Retirement Services Notes...37 Foreign Life Insurance & Retirement Services Operating Statistics...38 Foreign Life Insurance & Retirement Services Product Statistics Japan and Other Product Statistics Asia Product Statistics Foreign Life Insurance & Retirement Services Premium Statistics Foreign Life Insurance & Retirement Services Premiums, Deposits and Other Considerations Foreign Life Insurance & Retirement Services Reserves...49 Foreign Retirement Services Spread Information...50 Foreign Life Insurance & Retirement Services Deferred Policy Acquisition Costs, Sales Inducements and Value of Business Acquired Foreign Life Insurance & Retirement Services Notes...53 Life Insurance & Retirement Services Net Realized Capital Gains (Losses)...54 Financial Services Financial Services Operating Statistics...55 Consumer Finance Operating Statistics...56 Consumer Finance Other Data...57 Financial Services Notes...58 American General Finance Real Estate Portfolio...59 Asset Management Asset Management Operating Statistics...60 Asset Management Notes...61 Other Other...62 Other Notes...63 Parent Company Financial Statements Consolidated Net Realized Capital Gains (Losses)...67 Pre Tax Realized Gains (Losses) by Source by Business Segment..68 Investment and Credit Information Cash and Investments by Segment AIGFP Balance Sheet...73 Other Invested Assets by Segment...74 Return on Average Partnerships and Mutual Funds Assets by Segment.75 AIG Insurance Investment Portfolios Comment on Regulation G...79 American International Group, Inc. Investor Relations Teri L. Watson, Vice President (212)

3 Consolidated Statement of Operations (in millions, except per share data) March 31, March 31, Dec. 31, Sequential % Chg 2008 % Chg Revenues: Premiums and other considerations $ 18,820 $ 20,672 (9.0) % $ 20,016 (6.0) % Net investment income (loss) 2,283 4,954 (53.9) (2,406) NM Net realized capital losses (1) (2) (3,102) (6,089) NM (25,002) NM Unrealized market valuation losses on AIGFP super senior credit default swap portfolio (452) (9,107) NM (6,876) NM Other income (loss) (1)(2) 2,909 3,601 (19.2) (9,490) NM Total revenues (1) 20,458 14, (23,758) NM Benefits, claims and expenses: Policyholder benefits and claims incurred 16,043 15, , Policy acquisition and other insurance expenses 5,294 5,612 (5.7) 9,005 (41.2) Interest expense 2,845 1, ,105 (76.5) Restructuring expenses and related asset impairment and other expenses NM 758 (52.2) Other expenses 2,282 2,529 (9.8) 3,152 (27.6) Total benefits, claims and expenses 26,826 25, ,798 (27.1) Loss before income tax benefit (6,368) (11,264) NM (60,556) NM Income tax benefit (1,235) (3,537) NM 2,000 NM Net loss (5,133) (7,727) NM (62,556) NM Less: Net income (loss) attributable to noncontrolling interest (780) 78 NM (897) (13.0) Net loss attributable to AIG $ (4,353) $ (7,805) NM % $ (61,659) NM % Loss per common share attributable to AIG: (3) Basic $ (1.98) $ (3.09) NM % $ (22.95) NM % Diluted (1.98) (3.09) NM (22.95) NM Dividends declared per common share $ - $ 0.20 NM % $ - NM % Weighted average shares outstanding: Basic 2,705 2,528 2,704 Diluted 2,705 2,528 2,704 Notes: (1) Includes gains (losses) from hedging activities that did not qualify for hedge accounting treatment under FAS 133 "Accounting for Derivative Instruments and Hedging Activities" (FAS 133), including the related foreign exchange gains and losses. (Refer to page 5) (2) Includes other-than-temporary impairment charges. (Refer to page 68 ) (3) Calculation of EPS includes dividends on Series D Preferred Stock. 1

4 Consolidated Statement of Segment Operations (in millions, except per share data) March 31, March 31, Dec. 31, Sequential % Chg 2008 % Chg General insurance Net premiums written $ 9,967 $ 12,080 (17.5) % $ 9, % Net premiums earned 10,487 11,357 (7.7) 10,981 (4.5) Claims and claims adjustment expense 8,033 7, ,120 (11.9) Underwriting expenses 2,660 2,954 (10.0) 5,055 (47.4) Underwriting profit (loss) (1) (206) 405 NM (3,194) NM Net investment income 652 1,205 (45.9) Income (loss) before net realized capital gains (losses) 446 1,610 (72.3) (2,824) NM Net realized capital gains (losses) (2) (447) (273) NM (2,529) NM Operating income (loss) (1) 1,337 NM (5,353) NM Life insurance & retirement services Premiums and other considerations 8,335 9,318 (10.5) 9,038 (7.8) Deposits and other considerations not included in revenues under GAAP 6,201 16,314 (62.0) 6,209 (0.1) Premiums, deposits and other considerations 14,536 25,632 (43.3) 15,247 (4.7) Net investment income 3,630 3,803 (4.5) (1,628) NM Income before net realized capital gains (losses) 1,235 2,538 (51.3) Net realized capital gains (losses) (2) (3,108) (4,369) NM (18,627) NM Operating loss (1,873) (1,831) NM (17,885) NM Financial services Operating loss excluding FAS 133 and net realized capital gains (losses) (3) (4) (1,090) (8,545) NM (17,592) NM FAS 133 (2) 2 (76) NM (20) NM Net realized capital gains (losses) (2) (34) (151) NM (329) NM Operating loss (1,122) (8,772) NM (17,941) NM Asset management Operating income (loss) before net realized capital gains (losses) (481) 154 NM (705) NM Net realized capital gains (losses) (2) (152) (1,405) NM (5,773) NM Operating loss (633) (1,251) NM (6,478) NM Other before net realized capital gains (losses) (3,080) (503) NM (11,034) NM Other net realized capital gains (losses) (2) 732 (265) NM (1,122) NM Consolidation and elimination adjustments (2) (5) (391) 21 NM (743) NM Loss before income tax benefit (6,368) (11,264) NM (60,556) NM Income tax benefit (6) (1,235) (3,537) NM 2,000 NM Net loss (5,133) (7,727) NM (62,556) NM Less: Net income (loss) attributable to noncontrolling interest: Income (loss) before net realized capital gains (losses) (759) 81 NM (732) NM Net realized capital gains (losses) (21) (3) NM (165) NM Net loss attributable to AIG (4,353) (7,805) NM (61,659) NM Net realized capital gains (losses), net of tax (7) (2,631) (3,963) NM (21,552) NM FAS 133 gains (losses), excluding net realized capital gains (losses), net of tax (118) (281) NM (2,176) NM Adjusted net loss (8) $ (1,604) $ (3,561) NM % $ (37,931) NM % Loss per common share - diluted: Net loss attributable to AIG (1.98) (3.09) NM (22.95) NM Adjusted net loss (8) (0.97) (1.41) NM (14.17) NM Weighted average shares outstanding - diluted 2,705 2,528 2,704 Effective tax rates (6) (9): Loss before income tax and noncontrolling interest 19.4% 31.4% (3.3)% Net loss attributable to AIG 22.1% 31.3% (3.7)% Adjusted net loss (8) 31.3% 26.5% (20.9)% Return on equity attributable to AIG (10) (11.3)% (35.6)% (398.1) % (See Accompanying Notes on Page 3) 2

5 Consolidated Statement of Segment Operations Notes (1) Underwriting profit (loss) is statutory underwriting profit (loss) adjusted for changes in the deferral of policy acquisition costs that are necessary to present the financial statements in accordance with GAAP. (2) Includes gains (losses) from hedging activities that did not qualify for hedge accounting treatment under FAS 133, including the related foreign exchange gains and losses. Refer to page 5. (3) Includes $452 million, $9.11 billion and $6.88 billion of pre-tax net unrealized market valuation losses on Capital Markets super senior credit default swap portfolio in the three months ended March 31, 2009 and 2008, and December 2008, respectively. (4) Includes the pre-tax effect of changes in pre-tax credit spreads on the valuation of Capital Markets assets of $(738) million, $(2.6) billion and $(5.4) billion and liabilities of $2.4 billion, $2.6 billion and $(2.4) billion, (but excludes $106 million of gains, $65 million of gains, and $22 million of losses on the super senior credit default portfolio reported with the unrealized market valuation gains and losses), in the three months ended March 31, 2009 and 2008 and December 31, 2008, respectively. (5) Includes the income from certain AIG managed partnerships, private equity and real estate funds that are consolidated. Such income is offset in net loss attributable to noncontrolling interests, which is not a component of operating income, on the consolidated statement of income (loss). (6) Includes an increase in the valuation allowance of $1.6 billion, partially offset by $587 million of deferred tax benefits in the three months ended March 31, The three months ended March 31, 2008 includes increased reserves of $703 million for uncertain tax positions and discrete period tax items. The three months ended December 31, 2008 includes an increase in the valuation allowance of $17.2 billion to reduce tax benefits on losses and $1.9 billion of U.S. deferred tax benefits attributable to the potential sale of businesses and foreign earnings which are no longer considered permanently reinvested. (7) Includes an increase in the valuation allowance of $664 million and $4.3 billion to reduce tax benefits on capital losses in the three months ended March 31, 2009 and December 31, 2008, respectively. (8) Adjusted net loss excludes net realized capital gains (losses) and FAS 133, net of tax. (9) The calculation of the effective tax rates is as follows: March 31, 2009 Pre-tax Income Tax Net Effective Loss Benefits Loss Tax Rate Loss before income tax benefit $ (6,368) $ (1,235) $ (5,133) 19.39% Noncontrolling interest Net loss attributable to AIG (5,588) (1,235) (4,353) 22.09% Net realized capital gains (losses) (3,071) (440) (2,631) FAS 133 gains (losses) (182) (64) (118) Adjusted net loss $ (2,335) $ (731) $ (1,604) 31.30% (10) Return on equity is annualized net loss attributable to AIG, expressed as a percentage of average AIG shareholders' equity. Return on equity, as adjusted, is annualized adjusted net loss expressed as a percentage of average AIG shareholders equity, adjusted to exclude the effects of FAS 133 of $(224) million and accumulated other comprehensive income of $7.59 billion. March 31, 2009 Return on equity, GAAP basis (35.4)% Adjustments related to: FAS 133 and net realized capital gains (losses) 22.3% Accumulated other comprehensive income 1.8% Return on equity, as adjusted (11.3)% * Return on equity including noncontrolling interest was (36.0)% on a GAAP basis and (14.8)% on an adjusted basis. 3

6 Significant items affecting the first quarter of 2009: American International Group, Inc. Significant Items, Affecting Adjusted Net Loss Life Insurance & Total Total General Retirement Financial Asset Company Company Insurance Services Services Management Other Pre-tax After-tax Fed credit line interest and amortization $ - $ - $ (827) $ - $ (703) $ (1,530) $ (994) Restructuring-related costs (primarily AIGFP wind down and other) (65) (55) (1,601) (15) (118) (1,854) (1,205) Market disruption-related: AIGFP credit valuation adjustment - - 1, ,681 1,093 AIGFP unrealized market valuation losses - - (452) - - (452) (294) Partnership and mutual fund losses (436) (357) (52) (265) - (1,110) (722) Losses related to retained interests in Maiden Lane II and Maiden Lane III - (235) - (26) (1,940) (2,201) (1,431) Other, net (433) 479 (203) (279) - (436) (284) Total market disruption - related activities (869) (113) 974 (570) (1,940) (2,518) (1,638) Tax benefits not obtained for losses incurred during the quarter and other discrete period tax items $ - $ - $ - $ - $ - $ - $ (382) Significant items affecting the fourth quarter of 2008: Fed credit line interest and amortization $ - $ - $ - $ - $ (10,593) $ (10,593) $ (6,885) Restructuring-related costs (primarily AIGFP wind down and other) (139) (68) (5,454) (69) (195) (5,925) (3,851) Market disruption-related: AIGFP credit valuation adjustment - - (6,657) - - (6,657) (4,327) AIGFP unrealized market valuation losses other - - (4,345) - - (4,345) (2,824) Partnership and mutual fund losses (760) (959) (176) (125) - (2,020) (1,313) Losses related to retained interests in Maiden Lane II and Maiden Lane III - (195) - (21) (900) (1,116) (725) Other, net (735) 1,485 (231) (234) Total market disruption - related activities (1,495) 331 (11,409) (380) (900) (13,853) (9,004) Accounting charges related to tax and intangible assets: (2,030) (1,219) (359) - - (3,608) (3,608) Tax benefits not obtained for losses incurred during the quarter and other discrete period tax items $ - $ - $ - $ - $ - $ - $ (16,978) 4

7 Summary of FAS 133 Effect (1) (in millions) FAS 133 effect on operating income (loss) before net realized capital gains (losses): March 31, March 31, Dec. 31, Financial Services $ 2 $ (76) $ (20) Intercompany Eliminations (2) (3) (298) 46 (3,413) Foreign Exchange Rates on Economically Hedged Debt Exposures for Financial Services (2): 114 (402) 86 Total pre-tax effect (182) (432) (3,347) Total after-tax effect (118) (281) (2,176) FAS 133 effect on net realized capital gains (losses): Financial Services (5) (128) (223) Asset Management 1,067 (444) (1,938) General Insurance (26) (22) 94 Life Insurance & Retirement Services (630) 90 (975) Other 589 (178) (1,444) Eliminations and Reclassifications (4) (99) 366 3,113 FAS 133 effect on total income: Note: Total pre-tax effect 896 (316) (1,373) Total after-tax effect 582 (205) (892) Total pre-tax effect 714 (748) (4,720) Total after tax-effect $ 464 $ (486) $ (3,068) (1) This schedule summarizes the effect of derivative gains and losses on operating income that are effective economic hedges of investments and borrowings that did not qualify for hedge accounting treatment under FAS 133. Since hedge accounting has not been applied to the periods presented, an offsetting gain or loss on the hedged exposure has not been recognized in operating income. The mismatch in the earnings recognition on the derivatives and the hedged exposures has resulted in increased volatility in the operating results that does not reflect properly the effectiveness of these hedging activities. (2) Represents the elimination of revenues reported in the Financial Services segment from intercompany hedging activities and the reclassification of foreign exchange rates on economically hedged exposures. (3) A large part of the net loss in the three months ended December 31, 2008 was due to the significant decrease in U.S. interest rates, resulting in a decrease in the fair value of the derivatives primarily hedging AIG s debt. To a lesser extent, the loss was due to the strengthening of U.S. dollar, primarily against British Pound and Euro, which decreased the fair value of the foreign currency derivatives hedging AIG s non-u.s. dollar denominated debt and foreign exchange transactions. (4) Represents the elimination of net realized capital gains (losses) from intercompany hedging activities and the reclassification of foreign exchange rates on economically hedged exposures. 5

8 Consolidated Balance Sheet (in millions) March 31, December 31, Assets: Investments Fixed maturity securities $ 385,104 $ 404,134 Equity securities 18,894 21,143 Mortgage and other loans receivable, net of allowance 33,367 34,687 Finance receivables, net of allowance 27,692 30,949 Flight equipment primarily under operating leases, net of accumulated depreciation 43,829 43,395 Other invested assets 45,770 51,978 Securities purchased under agreements to resell, at fair value 2,065 3,960 Short-term investments 53,410 46,666 Total investments 610, ,912 Cash 4,029 8,642 Investment income due and accrued 5,814 5,999 Premiums and insurance balances receivable, net of allowance 18,049 17,330 Reinsurance assets, net of allowance 21,672 23,495 Trade receivables 1,108 1,901 Current and deferred income taxes 14,812 11,734 Deferred policy acquisition costs 44,488 45,782 Real estate and other fixed assets, net of accumulated depreciation 5,346 5,566 Unrealized gain on swaps, options and forward transactions, at fair value 9,983 13,773 Goodwill 6,798 6,952 Other assets, including prepaid commitment asset 30,931 31,190 Separate account assets, at fair value 46,597 51,142 Total assets $ 819,758 $ 860,418 Liabilities: Liability for unpaid claims and claims adjustment expense $ 87,405 $ 89,258 Unearned premiums 24,691 25,735 Future policy benefits for life and accident and health insurance contracts 140, ,334 Policyholder contract deposits 218, ,700 Other policyholder funds 13,327 13,240 Commissions, expenses and taxes payable 4,987 5,436 Insurance balances payable 3,791 3,668 Funds held by companies under reinsurance treaties 2,106 2,133 Securities sold under agreements to repurchase, at fair value 3,413 5,262 Trade payables Securities and spot commodities sold but not yet purchased, at fair value 1,165 2,693 Unrealized loss on swaps, options and forward transactions, at fair value 3,196 6,238 Trust deposits and deposits due to banks and other depositors 4,093 4,498 Commercial paper and extendible commercial notes Federal Reserve Bank of New York commercial paper funding facility 12,242 15,105 Federal Reserve Bank of New York credit facility 47,405 40,431 Other long-term debt 127, ,054 Securities lending payable 1,620 2,879 Other liabilities 22,622 22,296 Separate account liabilities 46,597 51,142 Total liabilities 765, ,692 Commitments, contingencies and guarantees - - Redeemable noncontrolling interest in partially owned consolidated subsidiaries 1,013 1,921 AIG shareholders' equity: Preferred Stock, Series C 1 - Preferred Stock, Series D Common stock 7,370 7,370 Additional paid-in capital 72,316 72,466 Unrealized appreciation (depreciation) of investments, net of tax (6,461) (4,452) Cash flow hedging activities, net of tax (138) (191) Foreign currency translation adjustments, net of tax (803) (187) Retirement plan liabilities adjustment, net of tax (1,458) (1,498) Accumulated deficit (16,706) (12,368) Treasury stock, at cost (8,382) (8,450) Total AIG shareholders' equity 45,759 52,710 Noncontrolling interest 7,450 8,095 Total equity 53,209 60,805 Total liabilities and equity $ 819,758 $ 860,418 6

9 Debt and Capital Debt and Hybrid Capital Interest Expense (a) March 31, December 31, Inc. Twelve Months Ended (Dec.) March 31, 2009 December 31, 2008 Financial debt: FRBNY Facility $ 47,405 $ 40, % $ 1,530 $ 11,395 AIG notes and bonds payable 11,221 11,756 (4.6) AIG loans and mortgage payable (11.1) 3 18 AIG LH notes and bonds payable Liabilities connected to trust preferred stock 1,299 1,415 (8.2) AIG loans to financial services subsidiaries (1,856) (1,881) (1.3) -(b) -(b) Net (deposit) / loan with AIG Funding (4,168) (1,380) NM -(b) -(b) Total 55,069 51, ,704 12,217 Operating debt: AIG Funding commercial paper 5,509 6,856 (19.6) MIP matched notes and bonds payable 13,953 14,446 (3.4) Series AIGFP matched notes and bonds payable 4,296 4,660 (7.8) AIGFP borrowings (c) 24,239 30,200 (19.7) - - ILFC borrowings 30,344 32,794 (7.5) 317 1,557 AGF borrowings 22,536 23,626 (4.6) 265 1,238 AIGCFG borrowings 1,392 1,720 (19.1) Other Subsidiaries (4.6) 8 42 Borrowings of consolidated investments 5,802 5,850 (0.8) AIG loans to financial services subsidiaries 1,856 1,881 (1.3) -(b) -(b) Net (deposit) / loan with AIG Funding 4,168 1,380 NM -(b) -(b) Total 114, ,083 (7.5) 886 4,178 Hybrid - debt securities: Junior subordinated debt 11,520 11,685 (e) (1.4) Hybrid - mandatorily convertible units: Junior subordinated debt attributable to equity units 5,880 5,880 (d) (e) Total $ 187,203 $ 193,203 (3.1)% $ 2,886 $ 17,302 AIG capitalization: Total equity (f) $ 53,209 $ 60,805 (12.5)% Hybrid - debt securities 11,520 11,685 (e) (1.4) Hybrid - mandatorily convertible units 5,880 5,880 (d) (e) - Total consolidated equity and hybrid capital 70,609 78,370 (9.9) Financial debt 55,069 51, Total capital $ 125,678 $ 129,925 (3.3)% Ratios: Total equity / Total capital 42.3% 46.8% Hybrid - debt securities / Total capital 9.2% 9.0% Hybrid - mandatorily convertible units / Total capital 4.7% 4.5% Financial debt / Total capital 43.8% 39.7% (a) Includes $41 million and $295 million of interest expense in the three-month period ended March 31, 2009 and twelve-month period ended December 31, 2008 respectively, reported in Other Income (loss) and Policy acquisition and other insurance expenses on the Consolidated Statement of Income (Loss). (b) Amounts are eliminated in consolidation. (c) Borrowings are carried at fair value with fair value adjustments reported in Other income (loss) on the Consolidated Statement of Income (Loss). Contractual interest payments amounted to $140 million and $2.1 billion for the three-month ended March 31, 2009 and twelve months ended December 31, 2008, respectively. (d) The equity units consist of an ownership interest in AIG junior subordinated debentures and a stock purchase contract obligating the holder of an equity unit to purchase, and obligating AIG to sell, a variable number of shares of AIG common stock on three dates in (e) The equity units and junior subordinated debentures receive hybrid equity treatment from the major rating agencies under their current policies but are recorded as long-term borrowings on the consolidated balance sheet. (f) Includes unrealized appreciation / depreciation of investments. 7

10 AMERICAN INTERNATIONAL GROUP, INC. CAPITAL STRUCTURE Note that all obligations within the same level rank pari passu unless otherwise noted. Note that the Senior Preferred Stock will rank pari passu with the Junior Preferred Stock until such time as AIG effects an amendment to its certificate of incorporation which will permit the Senior Preferred Stock to rank senior to the Junior Preferred Stock as shown below. AIG will propose to amend its certificate of incorporation to accomplish this at its 2009 annual meeting of shareholders. LEVEL RANK LEVEL NAME DESCRIPTION OF OBLIGATION ONE SECURED FRBNY Facility o AIG Senior Debt Securities (including MIP and Series AIGFP ) TWO SENIOR UNSECURED o Guarantees by AIG of subsidiary indebtedness and payment obligations (1) o Series A-1 through A-8 junior subordinated debentures (aka hybrid securities ) THREE JUNIOR SUBORDINATED o Series B-1, B-2 and B-3 junior subordinated debentures (aka debt issued as part of Equity Units ) SENIOR PREFERRED STOCK FOUR o Series E Preferred Stock (2) Senior TARP Fixed Rate Perpetual Preferred Stock o Series F Preferred Stock (3) JUNIOR PREFERRED STOCK FIVE Perpetual Convertible Participating Preferred Stock o Series C Preferred Stock SIX COMMON STOCK Common Stock, par value $2.50 per share (1) Note that the guarantees by AIG of the American General (i.e., AIG Life Holdings (US), Inc.) trust preferred securities (American General Capital II, American General Institutional Capital A and American General Institutional Capital B) are subordinate only to the guarantees by AIG of the American General (i.e., AIG Life Holdings (US), Inc.) senior debt. (2) On April 17, 2009, AIG entered into an exchange agreement with the U.S. Department of the Treasury pursuant to which, among other things, the U.S. Department of the Treasury exchanged 4,000,000 shares of the Series D Preferred Stock for 400,000 shares of AIG s Series E Fixed Rate Non-Cumulative Perpetual Preferred Stock, par value $5.00 per share (the Series E Preferred Stock ). (3) On April 17, 2009, AIG also entered into a purchase agreement with the U.S. Department of the Treasury pursuant to which, among other things, AIG issued and sold to the U.S. Department of the Treasury 300,000 shares of Series F Fixed Rate Non-Cumulative Perpetual Preferred Stock, par value $5.00 per share (the Series F Preferred Stock ), each share with a zero initial liquidation preference, and a warrant to purchase up to 3,000 shares of AIG s common stock, par value $2.50 per share. Pursuant to the purchase agreement, the U.S. Department of the Treasury has committed for five years to provide immediately available funds in an amount up to $ billion so long as on the applicable drawdown date (i) AIG is not a debtor in a pending case under Title 11 of the United States Code and (ii) the AIG Credit Facility Trust and the U.S. Department of the Treasury in the aggregate beneficially own more than 50 percent of the aggregate voting power of AIG s voting securities. The liquidation preference of each share of the AIG Series F Preferred Stock will increase by the pro rata amount of any drawdown on the commitment. 8

11 Book Value per Share Book Value Total AIG Total AIG Shareholders' Per Share Shareholders' Equity excluding Book Value excluding Equity URA (1) Per Share URA (1) (in millions) (in millions) December 31, 2000 $ $ $ 45,239 $ 45,320 December 31, ,881 47,790 December 31, ,303 52,154 December 31, ,230 60,159 December 31, ,673 69,347 March 31, ,608 72,561 June 30, ,613 76,509 September 30, ,333 77,729 December 31, ,317 77,969 March 31, ,390 81,541 June 30, ,709 84,851 September 30, ,154 88,658 December 31, ,677 91,594 March 31, ,055 92,121 June 30, ,330 94,959 September 30, ,067 97,148 December 31, ,801 91,426 March 31, ,703 82,257 June 30, ,088 83,259 September 30, ,182 80,295 December 31, ,710 57,162 March 31, 2009 $ (2) (3) $ $ 45,759 $ 52,220 Note: (1) Unrealized appreciation / depreciation of investments (URA), net of taxes. (2) Total AIG shareholders' equity Total common shares issued - treasury shares $45,759,363,622 2,948,038, ,244,118 =$17.01 (3) Book value per share assuming issuance of 11.3 billion shares related to the conversion of the Series C Preferred Stock and settlement of Equity Units was $3.28 calculated as follows: $45,759,363,622 14,205,406, ,244,118 =$3.28 9

12 General Insurance Operating Statistics March 31, March 31, Dec. 31, Sequential % Chg 2008 % Chg Gross premiums written $ 13,404 $ 16,038 (16.4) % $ 11, % Ceded premiums written 3,437 3,958 (13.2) 2, Net premiums written 9,967 12,080 (17.5) 9, Net premiums earned 10,487 11,357 (7.7) 10,981 (4.5) Paid losses 7,652 6, ,540 (10.4) Change in net loss reserves 91 1,331 (93.2) (1,031) NM Less foreign exchange effect (290) 70 NM (1,611) NM Claims and claims adjustment expense (1) (2) 8,033 7, ,120 (11.9) Statutory underwriting expenses (3) (4) 2,636 3,193 (17.4) 4,834 (45.5) Statutory underwriting profit (loss) (182) 166 NM (2,973) NM Change in deferred acquisition costs (24) 239 NM (221) NM Underwriting profit (loss) (206) 405 NM (3,194) NM Net investment income (5) Interest and dividends 1,148 1,266 (9.3) 1,199 (4.3) Partnership income (402) 66 NM (608) NM Mutual funds (34) (92) NM (152) NM Securities lending 9 1 NM (1) NM Other investment income (6) (34.2) Investment expense (117) (109) 7.3 (113) 3.5 Total 652 1,205 (45.9) Operating income (loss) before net realized capital gains (losses) 446 1,610 (72.3) (2,824) NM Net realized capital gains (losses) (5) (447) (273) NM (2,529) NM Operating income (loss) $ (1) $ 1,337 NM % $ (5,353) NM % Net loss and loss expense reserve (at period end) $ 72,562 $ 70, $ 72,763 - % GAAP Underwriting ratios: (7) Loss ratio (2) Expense ratio Combined ratio Combined ratio excluding significant current year catastrophe-related losses Foreign exchange effect on worldwide growth: Net premiums written Growth in original currency (8) (14.0)% Foreign exchange effect (3.5) Growth as reported in U.S. $ (17.5)% (See Accompanying Notes on Page 20) 10

13 AIG Commercial Insurance Operating Statistics March 31, March 31, Dec. 31, Sequential % Chg 2008 % Chg Net premiums written $ 4,175 $ 5,113 (18.3) % $ 4,401 (5.1) % Net premiums earned 5,201 5,417 (4.0) 5,287 (1.6) Claims and claims adjustment expense (1) 4,022 3, ,621 (13.0) Statutory underwriting expenses (4) 1,035 1,224 (15.4) 2,280 (54.6) Statutory underwriting profit (loss) (33.9) (1,614) NM Change in deferred acquisition costs (130) (3) NM (33) NM Underwriting profit (loss) (93.5) (1,647) NM Net investment income Interest and dividends (13.8) 730 (8.5) Partnership income (321) 38 NM (521) NM Mutual funds (12) (39) NM (49) NM Securities lending 9 - NM (2) NM Other investment income (6) (32.6) 44 (29.5) Investment expense (79) (77) 2.6 (75) 5.3 Total (60.2) Operating income before net realized capital gains (losses) (67.6) (1,520) NM Net realized capital gains (losses) (288) (173) NM (1,602) NM Operating income (loss) $ 22 $ 785 (97.2)% $ (3,122) NM% GAAP Underwriting ratios: Loss ratio Expense ratio Combined ratio Combined ratio excluding significant current year catastrophe-related losses (See Accompanying Notes on Page 20) 11

14 AIG Commercial Insurance March 31, 2009 Gross Premiums Written by Line of Business Management / Professional Liability 9.5% Aviation 1.4% Programs 4.9% Boiler and Machinery(14) 4.1% Multinational P&C 6.7% A&H Products 6.3% Environmental 2.3% All Other * 11.9% Commercial Umbrella / Excess 7.2% Workers Compensation 14.8% Property 16.2% General Liability / Auto Liability 14.7% Gross Premiums Written $5.6 billion * All Other includes $268 million of Personal Lines premiums. 12

15 Personal Lines Insurance Operating Statistics Net premiums written: March 31, March 31, Dec. 31, Sequential % Chg 2008 % Chg 21st Century (15) $ 570 $ 773 (26.3) % $ % Agency Auto (52.0) Private Client Group (2.3) Other - - NM 1 NM Subtotal 924 1,288 (28.3) Net premiums earned 983 1,199 (18.0) 1,088 (9.7) Claims and claims adjustment expense (1) (26.6) 885 (21.2) Statutory underwriting expenses (10) ,051 (69.8) Statutory underwriting profit (loss) (31) (63) NM (848) NM Change in deferred acquisition costs (8) 13 NM (26) NM Underwriting profit (loss) (39) (50) NM (874) NM Net investment income Interest and dividends (10.2) 54 (1.9) Partnership income (3) - NM (1) NM Mutual funds - - NM - NM Securities lending - - NM - NM Other investment income - - NM - NM Investment expense (1) (2) (50.0) 4 NM Total (14.0) 57 (14.0) Operating income before net realized capital gains (losses) (817) NM Net realized capital gains (losses) (8) (4) NM (15) NM Operating income (loss) $ 2 $ 3 (33.3) % $ (832) NM % GAAP Underwriting ratios: Loss ratio Expense ratio Combined ratio Combined ratio excluding significant current year catastrophe-related losses (See Accompanying Notes on Page 20) 13

16 Mortgage Guaranty (UGC) Insurance Operating Statistics March 31, March 31, Dec. 31, Sequential % Chg 2008 % Chg Net premiums written $ 269 $ 304 (11.5) % $ % Net premiums earned Claims and claims adjustment expense (2.4) Statutory underwriting expenses (3)(4) (178) 60 NM (171) NM Statutory underwriting loss (497) (407) NM (540) NM Change in deferred acquisition costs (28) 11 NM (3) NM Underwriting loss (525) (396) NM (543) NM Net investment income Interest and dividends (4.4) 47 (8.5) Partnership income - - NM - NM Mutual funds - - NM - NM Securities lending - - NM - NM Other investment income - - NM - NM Investment expense (1) (1) NM - NM Total (4.5) 47 (10.6) Operating loss before net realized capital gains (losses) (483) (352) NM (496) NM Net realized capital gains (losses) 3 (2) NM 11 (72.7) Operating loss $ (480) $ (354) NM % $ (485) NM % GAAP Underwriting ratios: Loss ratio excluding second-lien business Effect of second-lien business Loss ratio including second-lien business Expense ratio excluding second-lien business Effect of second-lien business (87.45) (3.36) (93.27) Expense ratio including second-lien business (55.15) (64.86) Combined ratio excluding second-lien business Combined ratio including second-lien business (See Accompanying Notes on Page 20) 14

17 Mortgage Guaranty (UGC) Insurance Product Statistics March 31, March 31, Dec. 31, Sequential % Chg 2008 % Chg Net premiums written: Domestic first-lien $ 163 $ 174 (6.3) % $ % Domestic second-lien (6.1) Student loan 6 15 (60.0) International (35.7) Other 2 4 (50.0) Total (11.5) Statutory underwriting profit (loss): Domestic first-lien (405) (196) NM (408) NM Domestic second-lien (45) (197) NM 23 NM Student loan (14) 4 NM (11) NM International (33) (18) NM (131) NM Other - - NM (13) NM Total $ (497) $ (407) NM % $ (540) NM % Loss ratio: Domestic first-lien Domestic second-lien Student loan International Other NM NM NM Total

18 United Guaranty Net Risk-in-Force and Delinquency March 31, 2009 Real Estate Portfolio Total Portfolio FICO (>= 660) FICO ( ) FICO (<620) Domestic Mortgage Net Risk-in-Force 60+ Day Delinquency 2009 Vintage $30.0 Billion 8.6% $414 Million $22.1 Billion 6.1% $409 Million $5.8 Billion 14.0% $4.3 Million $2.2 Billion 25.9% $ Day Delinquency 0.0% 0.0% 0.0% 0.0% 2008 Vintage $4.4 Billion $3.9 Billion $410 Million $72 Million 60+ Day Delinquency 4.3% 3.4% 10.1% 18.6% 2007 Vintage $8.6 Billion $6.0 Billion $1.8 Billion $792 Million 60+ Day Delinquency 11.2% 7.8% 17.2% 31.6% 2006 Vintage $5.2 Billion $3.5 Billion $1.1 Billion $530 Million 60+ Day Delinquency 10.7% 8.0% 15.8% 29.1% Loans > 95% $9.8 Billion $6.3 Billion $2.5 Billion $986 Million 60+ Day Delinquency Low Documentation 9.1% $6.1 Billion 5.3% $5.6 Billion 15.8% $415 Million 27.8% $92 Million 60+ Day Delinquency 10.9% 10.4% 14.5% 29.9% Interest Only & Option ARMs 60+ Day Delinquency $2.8 Billion 31.8% $2.3 Billion 30.6% $399 Million 36.1% $69 Million 43.9% Net Risk in Force (RIF) = Insurance risk on mortgages net of risk sharing and reinsurance Exposures may have home equity products with multiple risk factors. Loans with unknown FICO scores are included in the FICO ( ) based on similar performance characteristics. Delinquency figures on based on number of policies (not dollar amounts), as per mortgage industry practice. 16

19 Transatlantic Holdings, Inc. Insurance Operating Statistics Net premiums written: March 31, March 31, Dec. 31, Sequential % Chg 2008 % Chg Domestic $ 584 $ % $ % International (5.1) 482 (3.9) Subtotal 1,047 1, Net premiums earned 977 1,017 (3.9) 1,000 (2.3) Claims and claims adjustment expense (1) (0.7) 703 (4.7) Statutory underwriting expenses (4) (3.5) 401 (30.7) Statutory underwriting profit (loss) (46.3) (104) NM Change in deferred acquisition costs (1) NM Underwriting profit (loss) (23.3) (105) NM Net investment income Interest and dividends (2.6) 116 (2.6) Partnership income (1) 1 NM (12) NM Mutual funds - - NM (1) NM Securities lending - 1 NM 1 NM Other investment income (6) (10) NM Investment expense (2) (2) - (2) - Total (5.1) Operating income before net realized capital gains (losses) (11.3) (13) NM Net realized capital gains (losses) (49) (15) NM (196) NM Operating income (loss) $ 108 $ 162 (33.3) % $ (209) NM % GAAP Underwriting ratios: Loss ratio Expense ratio Combined ratio Combined ratio excluding significant current year catastrophe-related losses Foreign exchange effect on Transatlantic's growth: Net premiums written Growth in original currency (8) 8.6 % Foreign exchange effect (7.5) Growth as reported in U.S. $ 1.1 % (See Accompanying Notes on Page 20) 17

20 Foreign General Insurance Operating Statistics March 31, March 31, Dec. 31, Sequential % Chg 2008 % Chg Net premiums written $ 3,552 $ 4,339 (18.1) % $ 2, % Net premiums earned 3,054 3,468 (11.9) 3,347 (8.8) Claims and claims adjustment expense (1) (2) (11) 1,697 1,795 (5.5) 1,941 (12.6) Statutory underwriting expenses (12) 1,184 1,309 (9.5) 1,273 (7.0) Statutory underwriting profit (52.5) Change in deferred acquisition costs (41.0) (158) NM Underwriting profit (loss) (48.3) (25) NM Net investment income Interest and dividends Partnership income (77) 27 NM (74) NM Mutual funds (22) (53) NM (102) NM Securities lending - - NM - NM Other investment income (6) (38.5) Investment expense (34) (27) 25.9 (40) (15.0) Total (36.4) Operating income before net realized capital gains (losses) (44.7) 22 NM Net realized capital gains (losses) (105) (82) NM (727) NM Operating income (loss) (13) $ 347 $ 736 (52.9) % $ (705) NM % GAAP Underwriting ratios: Loss ratio (2) Expense ratio Combined ratio Combined ratio excluding significant current year catastrophe-related losses Foreign exchange effect on Foreign General's growth: Net premiums written Growth in original currency (8) (10.3)% Foreign exchange effect (7.8) Growth as reported in U.S. $ (18.1)% (See Accompanying Notes on Page 20) 18

21 Foreign General Insurance Gross Premiums Written March 31, 2009 Gross Premiums Written by Division Gross Premiums Written by Region Accident & Health 16.3% Personal Lines 9.7% Other / Service Business 3.6% Aviation 2.8% Marine and Energy 28.5% U.K. / Ireland 39.3% Africa / Middle East / Mediterranean / South Asia 2.9% Asia / Australasia 7.0% Lloyd's 5.0% Specialty Lines 16.0% Casualty 12.6% Property 5.5% Americas 5.7% Far East 15.1% Europe 30.0% Gross Premiums Written $6.2 billion 19

22 General Insurance Notes (1) Includes significant current year catastrophe-related losses and net reinstatement premiums as follows: (in millions) March 31, 2008 Dec. 31, 2008 AIG Commercial Insurance $83 $179 Personal Lines - 73 Transatlantic - 28 Foreign General - 5 Total $83 $285 (2) Total General Insurance and Foreign General both include changes in future policy benefits for certain accident and health insurance contracts. (3) Statutory underwriting expenses in the three months ended March 31, 2009 and December 31, 2008 include $(222) million and $(231) million, respectively, of (benefits) expenses related to UGC s premium deficiency reserve recorded on its second-lien business. (4) Statutory underwriting expenses in the three months ended December 31, 2008 includes $2.0 billion of goodwill impairment charges, of which $1.2 billion was recorded by AIG parent. The goodwill impairment charges by reporting unit for the three months ended are as follows: (in millions) Dec. 31, 2008 AIG Commercial Insurance $1,196 Personal Lines 696 UGC 11 Transatlantic 127 Total $2,030 (5) Total may not equal the sum of the individual group totals due to consolidating eliminations. (6) Other investment income is comprised principally of real estate income and changes in market value associated with trading portfolios. (7) The ratios for all periods include the underwriting results of the UGC second-lien business which was placed in run-off in September The expense ratio for the three month ended March 31, 2009 and December 31, 2008 was decreased by 80.9 and 89.2 points, respectively, due to the premium deficiency reserve noted above. (8) Computed using a constant exchange rate for each period. (9) Reflects the closing balance with respect to divestiture of Unibanco in (10) Statutory underwriting expenses include the results of wholly owned Personal Lines agencies and the amortization of advertising costs. (11) The three-month periods ended March 31, 2008 and December 31, 2008, include severe but non-catastrophic losses of $61 million and $25 million, respectively. (12) Statutory underwriting expenses include the results of wholly owned Foreign General agencies and the amortization of advertising costs. (13) Income statement accounts expressed in non-functional currencies are translated into U.S. dollars using average exchange rates. (14) On March 31, 2009, AIG closed the sale of HSB Group, Inc., the parent company of HSB, to Munich Re Group. (15) On April 16, 2009, AIG entered into a contract to sell 21st Century Insurance Group to Farmers Group, Inc. This sale is expected to close in the third quarter of

23 Life Insurance & Retirement Services Operating Statistics (a) Premiums, deposits and other considerations Revenues: Premiums and other considerations Net investment income Interest and dividends (b) Partnership income (loss) excluding synfuels Partnership loss - synfuels Mutual funds Trading account losses (d) Other Investment expenses Net investment income before policyholder investment income and trading gains (losses) Net investment income related to policyholder investment income and trading gains (losses) Total net investment income Total revenues excluding net realized capital gains (losses) and policyholder investment income and trading gains (losses) Total revenues excluding net realized capital gains (losses) Benefits and expenses: Policyholder benefits and claims incurred before the effect of policyholder benefits and claims incurred related to policyholder investment income and trading gains (losses) Policyholder benefits and claims incurred related to policyholder investment income and trading gains (losses) Policyholder benefits and claims incurred Policy acquisition and other insurance expense Goodwill impairment Total benefits and expenses Operating income excluding net realized capital gains (losses) Net realized capital gains (losses) Operating income (loss) Foreign exchange effect on worldwide growth: Premiums, deposits and other considerations Growth in original currency (c) Foreign exchange effect Growth as reported in U.S. $ Premiums and other considerations Growth in original currency (c) Foreign exchange effect Growth as reported in U.S. $ Gross life insurance in force (at period end) March 31, March 31, Dec. 31, % Chg 2008 $ 14,536 $ 25,632 (43.3) % $ 15,247 (4.7) % $ 8,335 $ 9,318 (10.5) % $ 9,038 (7.8) % 4,312 4,734 (8.9) 4,481 (3.8) (284) 44 NM (769) NM - (4) NM (1) NM (55) (82) NM (191) NM (38) (88) NM (3) NM (11.6) 239 (52.3) (112) (145) (22.8) (130) (13.8) 3,937 4,588 (14.2) 3, (307) (785) NM (5,254) NM 3,630 3,803 (4.5) (1,628) NM 12,272 13,906 (11.8) 12,664 (3.1) 11,965 13,121 (8.8) 7, ,283 8,710 (4.9) 7, (307) (785) NM (5,254) NM 7,976 7, , ,754 2, ,937 (6.2) - - NM 1,219 NM 10,730 10, , ,235 2,538 (51.3) (3,108) (4,369) NM (18,627) NM $ (1,873) $ (1,831) NM % $ (17,885) NM % (43.3) % - (43.3) (10.9) 0.3 (10.6) % Sequential % Chg $ 2,381,395 $ 2,410,145 (1.2) % $ 2,378,315 (57.2) % (a) Certain amounts have been reclassified in 2008 to conform to the 2009 presentation. (b) Interest and dividends for March 31, 2009 and December 31, 2008 include losses of $235 million and $194 million, respectively, related to AIG's retained interest in Maiden Lane II. (c) Computed using a constant exchange rate for each period. (d) Consist of trading account losses associated with certain investment-linked products in the UK. 21

24 Domestic Life Insurance & Retirement Services Operating Statistics Premiums, deposits and other considerations Revenues: Premiums and other considerations Net investment income: Interest and dividends* Partnership income (loss) excluding synfuels Partnership loss - synfuels Mutual funds Other Investment expenses Net investment income before policyholder investment income and trading gains (losses) Net investment income related to policyholder investment income and trading gains (losses) March 31, March 31, Dec. 31, % Chg 2008 $ 5,030 $ 7,561 (33.5) % $ 5,085 (1.1) % $ 1,395 $ 1,871 (25.4) % $ 1,616 (13.7) % 2,106 2,355 (10.6) 2,110 (0.2) (269) 42 NM (657) NM - (4) NM (1) NM 1 (2) NM (19) NM (65.2) (31) (32) (3.1) (25) ,861 2,378 (21.7) 1, (12) (23) NM (68) NM Total net investment income 1,849 2,355 (21.5) 1, Total revenues excluding net realized capital gains (losses) and policyholder investment income and trading gains (losses) 3,256 4,249 (23.4) 3, Total revenues excluding net realized capital gains (losses) Sequential % Chg 3,244 4,226 (23.2) 3, Benefits and expenses: Policyholder benefits and claims incurred before the effect of policyholder benefits and claims incurred related to policyholder investment income and trading gains (losses) Policyholder benefits and claims incurred related to policyholder investment income and trading gains (losses) Policyholder benefits and claims incurred Policy acquisition and other insurance expense Goodwill impairment Total benefits and expenses Operating income (loss) before net realized capital gains (losses) Net realized capital gains (losses) Operating income (loss) 2,502 2,591 (3.4) 2,543 (1.6) (12) (23) NM (68) NM 2,490 2,568 (3.0) 2, NM - - NM 1,219 NM 3,372 3, ,716 (9.3) (128) 1,081 NM (605) NM (2,079) (3,647) NM (11,928) NM $ (2,207) $ (2,566) NM % $ (12,533) NM % Gross life insurance in force (at period end) $ 1,018,222 $ 998, % $ 1,025,762 (0.7) % *Interest and dividends for March 31, 2009 and December 31, 2008 include loss of $229 million and $190 million, respectively, related to AIG's retained interest in Maiden Lane II. 22

25 Domestic Life Insurance Product Statistics March 31, March 31, Dec. 31, % Chg 2008 Sequential % Chg Premiums, deposits and other considerations (1): Life insurance Home service Group life/health Payout annuities Individual fixed and runoff annuities Total premiums, deposits and other considerations Premiums and other considerations: Life insurance Home service Group life/health Payout annuities (2) Individual fixed and runoff annuities Total premiums and other considerations Net investment income (3): Life insurance Home service Group life/health Payout annuities Individual fixed and runoff annuities Net investment income before policyholder investment income and trading gains (losses) Net investment income related to policyholder investment income and trading gains (losses) (4) Total net investment income Policyholder benefits and claims incurred excluding amortization of sales inducement related to net realized capital gains (losses): Life insurance Home service Group life/health Payout annuities Individual fixed and runoff annuities Total policyholder benefits and claims incurred excluding amortization of sales inducements related to net realized capital gains (losses) before the effect of policyholder benefits and claims incurred to policyholder investment income and trading gains (losses) Policyholder benefits and claims incurred related to policyholder investment income and trading gains (losses) (4) Total policyholder benefits and claims incurred excluding amortization of sales inducements related to net realized capital gains (losses) Policy acquisition and other insurance expenses excluding amortization of deferred acquisition costs and VOBA related to net realized capital gains (losses) and goodwill impariment: Life insurance Home service Group life/health Payout annuities Individual fixed and runoff annuities Total policy acquisition and other insurance expenses excluding amortization of deferred acquisition costs and VOBA related to net realized capital gains (losses) and goodwill impairment $ 706 $ 799 (11.6) % $ 741 (4.7) % (2.4) 220 (7.7) (66.1) 476 (43.1) (14.8) 1,655 2,123 (22.0) 1,937 (14.6) (2.7) (1.5) 214 (6.1) (74.9) 334 (55.4) ,182 1,587 (25.5) 1,343 (12.0) (49.0) 323 (37.5) (11.1) ,007 (17.2) 904 (7.7) (12) (23) NM (68) NM (16.5) 836 (1.7) (4.1) (6.6) 149 (5.4) (49.7) 589 (30.9) ,384 1,754 (21.1) 1,581 (12.5) (12) (23) NM (68) NM 1,372 1,731 (20.7) 1,513 (9.3) (12.6) (8.5) (42.9) 21 (23.8) (9.1) 33 (39.4) $ 476 $ % $ 494 (3.6) % (See Accompanying Notes on Page 28) 23