A.M. Best Affirms Ratings of American International Group Inc.'s Life/Health Insurance Subsidiaries

Business Wire, Jan 21, 2005

OLDWICK, N.J. -- A.M. Best Co. has affirmed the financial strength rating of A (Superior) of American International Group, Inc.'s (AIG) (NYSE: AIG) (New York, NY) core life/health subsidiaries. (See list below.) A.M. Best has also affirmed the financial strength ratings of A (Superior) of Merit Life Insurance Company (Evansville, IN) and Pacific Union Assurance Company (San Francisco, CA). Concurrently, A.M. Best has assigned a financial strength rating of A (Superior) to American Life Insurance Company (Wilmington, DE), AGC Life Insurance Company (Jefferson City, MO) and AIG Assurance Canada (Toronto, Ontario). The outlook for all ratings is stable.

The ratings reflect the group's sound operating fundamentals, leading market positions in many of its product lines, diverse distribution channels, consistently strong profitability, conservative investment philosophy and prudent asset/liability management. The ratings also recognize AIG's position as one of the world's leading insurance and financial services organizations. AIG's life/health operations maintain leading market positions in the United States in individual life, structured settlements, association business and credit insurance issued through banks. In addition, AIG, through its subsidiaries, is the largest issuer of annuities and institutional spread-based products in the United States.

A.M. Best believes that the AIG life/health companies have demonstrated the ability to improve both the earnings levels and capital positions in a recovering economic environment. On a consolidated basis, AIG has historically been one of the most profitable insurance organizations in the industry. Its life/health subsidiaries benefit from being members of the group due to AIG's considerable financial flexibility, diverse operations and widely recognizable and respected brand.

Offsetting these positive factors is the interest sensitive nature of AIG's core annuity and guaranteed investment contract (GIC) businesses. Additionally, the organization has been exposed to negative press regarding multiple regulatory investigations. A.M. Best believes there is potential for future earnings volatility due to this combination of factors. This potential is somewhat mitigated by AIG's conservative investment philosophy, prudent asset/liability management and its numerous sources of liquidity. Moreover, in late 2004, AIG reached a settlement with the Securities and Exchange Commission and the Justice Department on two regulatory issues related to dealings with Brightpoint, Inc. and PNC Financial Services Group. A.M. Best will continue to monitor issues related to the industry wide contingency commission investigations and their impact on life insurers.

The financial strength rating of A (Superior) has been affirmed for the following life/health subsidiaries of American International Group, Inc.:

--AIG Annuity Insurance Company

--AIG Life Insurance Company

--AIG Life Insurance Company of Canada

--AIG Life Insurance Company of Puerto Rico

--AIG SunAmerica Life Assurance Company

--American General Assurance Company

--American General Life and Accident Insurance Company

--American General Life Insurance Company

--American International Life Assurance Company of New York

--Delaware American Life Insurance Company

--First SunAmerica Life Insurance Company

--SunAmerica Life Insurance Company

--The United States Life Insurance Company in the City of New York

--The Variable Annuity Life Insurance Company

The financial strength rating of A (Superior) has been affirmed for the following life/health subsidiaries of American International Group, Inc.:

--Merit Life Insurance Co

--Pacific Union Assurance Company

The financial strength rating of A (Superior) has been assigned to the following life/health subsidiaries of American International Group, Inc.:

--AGC Life Insurance Company

--AIG Assurance Canada

--American Life Insurance Company

For Best's Ratings, an overview of the rating process and rating methodologies, please visit http://www.ambest.com/ratings.> A.M. Best Co., established in 1899, is the world's oldest and most authoritative insurance rating and information source. For more information, visit A.M. Best's Web site at http://www.ambest.com.