AIG, American General Reach Agreement

May 14, 2001

American International Group Inc. and American General Corporation entered into a definitive agreement under which American General shareholders will obtain $46 per American General share in AIG common stock, subject to a collar mechanism.

The transaction, which has been approved by the boards of directors of both companies, will be a tax-free reorganization and will be treated as a “pooling of interests” for accounting purposes. The transaction values American General at approximately $23 billion.

American General shareholders will receive AIG common stock according to an exchange ratio that will be determined based on the 10-day average price of AIG’s common stock ending three days prior to closing. This exchange ratio will provide American General shareholders AIG common stock valued at $46 per American General share as long as AIG’s average price is between $76.20 and $84.22 during this pricing period. In the event that AIG’s price is equal to or less than $76.20 or equal to or more than $84.22, American General shareholders will receive 0.6037 or 0.5462 AIG shares, respectively.

Simultaneous with entering into this deal, American General canceled its prior merger agreement with Prudential plc, and paid Prudential the $600 million termination fee specified in that agreement. The transaction should be readily accretive to AIG’s earnings per share.

The transaction is subject to various regulatory approvals and other customary conditions, along with the approval of American General shareholders, and is expected to be completed by year’s end.

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