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. As part of AIG's Risk Appetite Framework, AIG has defined, where relevant, a set of risk tolerances to ensure appropriate support of aggregate risk-taking. This includes identifying the appropriate set of metrics, and calibrating a specific tolerance level for each metric, as appropriate.

Risk Identification and Measurement

We conduct risk identification through multiple processes at the business entity 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 by us to support our subsidiaries and capital resources required to maintain consolidated company target capitalization levels.