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NEW YORK, Aug 11, 2002 -- American International Group, Inc. (AIG) has announced that it will expense the fair value of all stock options granted beginning January 1, 2003, in accordance with SFAS No. 123, Accounting for Stock-Based Compensation.

As previously disclosed in the AIG 2001 Annual Report on Form 10-K, as well as in AIG's second quarter 2002 earnings release, all applicable stock option compensation costs would have reduced AIG's 2001 net income by $0.05 per share had AIG been previously utilizing SFAS No. 123.

The impact in 2003 of adopting SFAS No. 123 is estimated at less than $0.01 per share. Assuming AIG follows its historic practice as to the number and terms of the stock options it grants, at the current stock price, AIG estimates an annual expense of approximately $0.05 per share by 2008.

AIG Chairman M. R. Greenberg said, "As we have disclosed for some time, the costs of our stock option plans are relatively modest. Historically, dilution as a result of stock option grants at AIG has been minimal, and we expect it will continue to be minimal in future years.

"The compensation programs for AIG employees have contributed to our success by enabling us to attract, retain and motivate our employees. AIG's executive compensation programs have always been structured to award outstanding performance that contributes meaningfully to AIG shareholder value as measured over the long term. Stock option programs have been an important element in our overall compensation strategy.

"The expensing of options is not an economic issue for AIG because it has never granted an excessive number of options. It would be unfortunate if the result of expensing options to address the abuses of some companies discourages the use of options as a tool to incent management performance. The accounting profession is still divided as to the best way to account for options. There is a legitimate concern that expensing options is economically punitive because it causes a company to pay two times -- once through the expense and again through dilution. Nevertheless, despite the substantive accounting issues as to whether companies end up paying twice, we believe that in today's market climate, it is in the best interest of our shareholders to expense the options AIG grants going forward."

AIG is the world's leading U.S.-based international insurance and financial services organization, the largest underwriter of commercial and industrial insurance in the United States, and among the top-ranked U.S. life insurers. Its member companies write a wide range of general insurance and life insurance products for commercial, institutional and individual customers through a variety of distribution channels in approximately 130 countries and jurisdictions throughout the world. AIG's global businesses also include financial services, retirement savings and asset management. AIG's financial services businesses include aircraft leasing, financial products, trading and market making, and consumer finance. AIG has one of the largest retirement savings businesses in the United States and is a leader in asset management for the individual and institutional markets, with specialized investment management capabilities in equities, fixed income, alternative investments and real estate. AIG's common stock is listed on the New York Stock Exchange, as well as the stock exchanges in London, Paris, Switzerland and Tokyo.

CONTACT: American International Group, Inc. Charlene Hamrah (Investment Community), 212/770-7074 Joe Norton (News Media), 212/770-3144