After reporting a $2.4 billion net loss for the third quarter, Chartis, flagship property/casualty insurance arm of American International Group (AIG), says it plans to downsize two percent of its workforce.

The reported losses were mainly affected by restructuring and losses from sales of assets, yet the company reported overall operating income for Q3 2010 of $1.1 billion compared to $719 million in Q3 2009. AIG's continuing insurance operations earned $2.1 billion and $1.9 billion before tax in the third quarter of 2010 and the third quarter of 2009, respectively.

The net loss in the quarter is primarily attributable to the following:

Restructuring-related charges of $4.5 billion, as follows: a $1.3 billion deferred tax asset (DTA) valuation allowance charge in connection with a net decrease in underlying asset values supporting the DTA, as previously disclosed, a $1.9 billion loss on the pending sale of American General Finance, Inc. (AGF), and as previously disclosed, a $1.3 billion goodwill impairment charge in connection with the pending sale of AIG Star Life Insurance Co., Ltd. (AIG Star) and AIG Edison Life Insurance Company (AIG Edison). $1.2 billion amortization of the prepaid commitment fee asset, including $762 million of net accelerated amortization expense resulting from a $4.6 billion repayment and reduction in the maximum credit available under the Federal Reserve Bank of New York (FRBNY) Credit Facility, primarily from International Lease Finance Corporation (ILFC)'s previously announced repayment of loans from AIG. $465 million in impairment charges on certain aircraft in ILFC's fleet, reflecting management's outlook related to the future recovery of the airline industry which resulted in lower estimated future lease rates, as well as impairments related to sales and potential sales of aircraft.

As a result of the announced sales of ALICO, AGF, AIG Star and AIG Edison, the results of these entities are reported as discontinued operations. In addition, although the previously announced sale of Nan Shan was not approved by regulatory authorities in Taiwan, AIG is pursuing other opportunities to divest Nan Shan and believes a sale will be completed within twelve months. Therefore, AIG continues to report Nan Shan as a discontinued operation. Comparative periods have been revised accordingly and these companies' results are not included in the financial report issued by Chartis.

Discontinued operations loss before income taxes totaled $2.5 billion, including the loss on the pending sale of AGF and the AIG Star and AIG Edison goodwill impairment charge discussed above, compared to income before taxes of $312 million in the comparable 2009 period.

Commenting on the third quarter, AIG President and CEO Robert Benmosche said, "We were extremely pleased to announce a few weeks ago our plan to repay the U.S. government. We will continue with our aggressive plan to close pending transactions in order to repay the FRBNY in full, and provide for the exit of U.S. Treasury ownership over time. Repayment of the FRBNY Credit Facility, in full, will trigger an accelerated amortization of the balance of the prepaid commitment fee asset which stood at $4.7 billion at September 30. On October 29, we launched a successful IPO of AIA under the skillful leadership of Mark Tucker. On November 1, we closed on the sale of ALICO. We thank Rod Martin for his outstanding leadership and wish him success in his future endeavors. We expect to close on the sale of AGF later this year, and the sale of AIG Star and AIG Edison early next year.

"Importantly, however, as we accomplish these critical steps in the restructuring, AIG's continuing insurance operating results remain solid, with $2.1 billion of pre-tax operating income generated in the quarter by Chartis and SunAmerica Financial Group. Despite soft market conditions in the property casualty market and a low interest rate environment, these businesses have demonstrated their market leadership and are maintaining their discipline. We continue to focus on maintaining financial strength and underwriting discipline, improving efficiency and transparency, and better balancing risk and return. SunAmerica Financial Group is solidly profitable and making good progress in re-establishing distribution and sales momentum, although fixed annuity sales were slowed by the extraordinarily low interest rate environment.

"During the balance of this year, AIG will focus on the following priorities: completing the definitive documentation and executing the transactions contemplated by the Recapitalization Agreement in Principle, closing the pending sales transactions, and implementing plans to monetize securities received upon the sale of ALICO, developing plans to monetize additional shares of AIA, pursuing options for a sale of Nan Shan, and continuing to unwind AIGFP's exposure. Of utmost importance, however, is the continued stabilization and strengthening of AIG's continuing businesses."

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