AMERICAN INTERNATIONAL GROUP INC

Risk Appetite Framework

Approved by our Board of Directors, AIG’s Risk Appetite Framework integrates stakeholder interests, strategic business goals and available financial resources. We balance these by seeking to take measured risks that are expected to generate repeatable, sustainable earnings and create long-term value for our shareholders. Our risk tolerances take into consideration regulatory requirements, rating agency expectations, and business needs.

Risk Limits

A key component of our Risk Appetite Framework is the establishment and maintenance of tolerances and limits on material risks to meet AIG’s objectives. To support the monitoring and management of material risks, ERM employs a three-tiered hierarchy consisting of Board-level risk tolerances, AIG management level limits, and Business Unit and Legal Entity level limits. Board-level risk tolerances define the minimum level of consolidated capital and liquidity we should maintain, which are approved by the Board of Directors and monitored by the Risk Committee. AIG management level limits are risk type specific limits at the AIG consolidated level, which are approved by the AIG CRO with consultation from the GRC. Business unit and legal entity level limits address key risks identified for the business units and legal entities.

Risk Identification and Measurement

We conduct risk identification through multiple processes at the business unit and corporate level focused on capturing our material risks. A key initiative is our integrated bottom-up risk identification and assessment process which is conducted down to the product-line level. In addition, we perform an annual top-down risk assessment to identify top risks and assign owners to ensure these risks are appropriately addressed and managed. These processes are used as critical input to enhance and develop our analytics for measuring and assessing risks across the organization.

The internal capital framework quantifies our aggregate economic risk at a given confidence interval, after considering diversification benefits between risk factors and business lines. The stress testing framework assesses our aggregate exposure to our most significant financial and insurance risks. We use this information to support the assessment of resources needed at the AIG Parent level to support our subsidiaries and capital resources required to maintain consolidated company target capitalization levels.