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NEW YORK, May 23, 2001 – American International Group, Inc. (AIG) has issued the following statement relating to a recent English court decision regarding the use of insurance policies in securitization transactions:

On May 21, 2001, the Court of Appeal in England validated the position of American International Group, Inc. (AIG) regarding the use of insurance policies issued in connection with certain securitization transactions. The Court ruled that the policy at issue did not provide for an unconditional guarantee of payment. The Court held that coverage defenses and breaches of warranty remain available to the insurer to assert as defenses.

This ruling makes a clear distinction between insurance policies that are the functional equivalent of a financial guarantee and the policies that were before the court. In contrast to the policies issued in that securitization transaction, AIG insurance subsidiaries do issue insurance policies that function as financial guarantees. In these circumstances, consistent with the requirements of the rating agencies, the policies explicitly provide that the obligations are unconditional, absolute and not subject to any defenses, except perhaps fraud by the insured. The AIG insurance companies will continue to issue insurance policies that unconditionally guarantee payment on a case-by-case basis.

Organizers of such securitizations receive fees and should be expected to know the differences between those policies that are and those that are not financial guarantees.

For further background on this matter, AIG has prepared a paper titled “The Use of Insurance in Film Finance Securitizations.” This paper can be found at: http://www.aigcorporate.com/corpsite/film_finance_paper.pdf

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AIG is the leading U.S.-based international insurance and financial services organization and the largest underwriter of commercial and industrial insurance in the United States. Its member companies write a wide range of commercial, personal and life insurance products through a variety of distribution channels in approximately 130 countries and jurisdictions throughout the world. AIG’s global businesses also include financial services and asset management, including aircraft leasing, financial products, trading and market making, consumer finance, institutional, retail and direct investment fund asset management, real estate investment management, and retirement savings products. American International Group, Inc.’s common stock is listed on the New York Stock Exchange, as well as the stock exchanges in London, Paris, Switzerland and Tokyo.

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