Dear Business Colleague,

This morning, AIG announced agreements with the U.S. Treasury and the Federal Reserve to establish a durable capital structure for AIG, and facilities designed to resolve the liquidity issues. Under the new plan:

• The size of the existing credit facility from the Federal Reserve Bank of New York (FRBNY) will be amended to reduce the capacity from $85 billion to $60 billion. Its term will be extended from 2 years to 5 years, and the interest rate and fee on undrawn portions will be significantly reduced.



• The U.S. Treasury will purchase $40 billion of newly issued AIG preferred stock, with a 10% coupon.



• AIG's agreements create two new financing entities in partnership with the Federal Reserve. The first new financing entity will acquire substantially all of the Residential Mortgage Backed Securities from AIG’s U.S. Securities Lending program. As a result of this transaction, AIG’s remaining exposure to losses from its U.S. securities lending program will be limited to declines in market value prior to closing and AIG’s $1 billion of funding. The second financing entity will purchase Multi-Sector Collateralized Debt Obligations (CDOs) on which AIG has written credit default swap contracts. Credit default swap contracts will be terminated on Multi-Sector CDOs that are purchased.

These developments should enhance the financial flexibility of our parent, as highlighted by the reaction of the major rating agencies.

AIG also announced third quarter 2008 earnings.  AIG Commercial Insurance (AIGCI) performed well given competitive market conditions, catastrophe losses from Hurricanes Ike and Gustav, and our parent’s ongoing issues, recording nearly $5.6 billion in net premiums written and $33 million in operating income before realized capital gains and losses.  AIGCI's combined ratio in the third quarter 2008, excluding catastrophe losses, was 89.13 percent.  Most notably our significant statutory policyholder surplus has not significantly changed from the second quarter and is greater than our US peers.

We are thankful for the trust you have shown our team through this challenging period, and we will continue to earn that trust by delivering to customers the benefits of our organization, including:

• Broad risk appetite and superior capacity for catastrophic risks
• Excellent financial strength and claims paying ability
• Proven commitment to served markets
• Innovative products and underwriting solutions
• Experienced underwriting / claims professionals
• Extensive global and national network
• Focus on service excellence

I am also confident that AIG’s new agreement will help us compete on the merits of this great franchise.

Thank you again for your continued support.

John Q. Doyle
President and CEO
AIG Commercial Insurance

For more information, see the attached Fact Sheet or contact your broker, local AIGCI representative or visit: www.aig.com/commercialinsurance

AIG Commercial Insurance is the marketing name for the domestic commercial property casualty insurance operations of American International Group, Inc. For additional information, please visit our website at www.aig.com.  All products are written by insurance company subsidiaries of AIG Commercial Insurance Group, Inc. Coverage may not be available in all jurisdictions and is subject to actual policy language.  As a surplus lines insurer, Lexington Insurance Company does not generally participate in state guaranty funds.  Non-insurance products and services may be provided by independent third parties.