Loans to borrowers with FICO scores less than 620 constituted about 8.4% of UGC''s domestic mortgage risk enforced and 70% of their net risk-in-force has FICO scores greater than 660.

- Furthermore, high risk products such as interest only and option ARMS remain less than 10% of the risk-in-force.
- The vintage exposure was driven by higher utilization of mortgage insurance in the overall mortgage market.
- However, market share of its traditional first lien flow business did decline by 1.2 percentage points quarter-over-quarter and 2.3 percentage points year-over-year.
- First lien net losses incurred however are starting to have a significant affect on operating results and some further deterioration is expected in 2008.

Future premiums are projected to exceed future losses on the existing domestic mortgage portfolio, despite an inherent mismatch in the timing of premium earnings and incurred losses.

- The decision to be only a minor participant in the higher risk bulk channel which is predominantly sub-prime, Alt-A, and option ARM business is the primary driver behind better delinquency performance on first-lien mortgages.
- The segment continues to implement key risk initiatives to improve the quality of new business production in both the first and second lien businesses, including tightening eligibility guidelines and increasing rates in select high-risk business segments.
- It employs risk-sharing arrangements or captive reinsurance with most of its major lender customers.
- It also purchases quarter share reinsurance on quotients of its sub-prime first lien business and segments of its second lien product.

Key questions and answers from the fourth quarter earnings call conducted by American International Group Inc. on February 29, 2008.

Jamminder Bhullar (J. P. Morgan Securities): Comment on the chance that you had to contribute additional capital to your dial-on business, because of higher capital requirement?

Edmund S.W. Tse: We have a very strong underlying performance in our life company in Taiwan. Nan Shan is making a operating income of like $900 million for the year, but there is some new capital requirement as regulated by the insurance commissioner and they had some capital charge to certain type of investments and as a result that our RBC, Risk Based Capital maybe in case of investment performance below the requirement of 200%.

In case, we are below that, then we may have a problem to increase our offshore investments as only if our RBC is above 200%, they will approve further increase in offshore investment from the 35% to 40%. But based on a current situation, we do not need an injection of capital to support our local operation there. It''s very profitable and the financial is very strong.

Jamminder Bhullar (J. P. Morgan Securities): On your economic loss language for the capital market business, how much of it is driven by the deterioration in the market?

Robert E. Lewis: Given the assumptions of delinquencies and losses and housing price appreciations that effect, we are quite comfortable with that stress really is a severe stress to our business and then that number is right now our current best estimate of a real severe stress loss.

Unidentified Analyst: Is the greatest area in your control to create value and make money in getting better rates in the property and casualty area?

Martin J. Sullivan: We continue to see rating pressures in the P&C environment and domestically in the United States overall rates were down around 9% and internationally in our commercial business rates were down about 11%.

Kristian P. Moor: Overall monetary that was 9%, but excluding the property and workers comp they were down 10% and for a whole year about down 8%. The property rates declined about 13%.

We are seeing similar in the first quarter so far overall rates are down about 10% and property rates are down about 12%, but we still feel that in almost all our lines the business set for a few that rates are plenty, adequate and there is a lot of opportunity out there for us.

The areas that we are watching very closely or looking at closely is the aviation area and also in some of the states for workers comp, but besides that we still see a lot of opportunity out there.

Nicholas C. Walsh: From a Foreign Gen standpoint, the comments on pricing are pretty much the same. But we have some terrific opportunities across the world. We have excellent growth in Latin America where there are some pricing opportunities because of reducing local capacity.

We are doing extremely well in Continental Europe, where we are primarily under scale, so there is lots of upside as well there.

Andrew Kligerman (UBS Securities): What led Price Waterhouse Coopers to the conclusion that you have a material weakness?

Martin J. Sullivan: Given the extreme dislocation in the markets, affecting obviously AIGFP''s Super Senior Credit Default Swaps, we were working during the fourth quarter of implement system and controls to accurately report financial results.

While we did not succeed, obviously because we have the material weakness that evolved during the close process in implementing an oversea and a sufficient valuation process before the end of the fiscal year, we obviously have addressed those issues in preparing our year-end numbers by obviously inserting compensating controls.